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No. 09-2030
H.
BAJJANI;
MICHELLE
G.
BAJJANI,
Defendants - Appellees.
Appeal from the United States District Court for the Western
District of North Carolina, at Charlotte.
Robert J. Conrad,
Jr., Chief District Judge. (3:08-cv-00240-RJC-DSC)
Argued:
Decided:
Meineke
Car
Care
Centers,
Inc.
(Meineke)
summary
royalties
and
judgment
on
advertising
Meinekes
fund
claim
for
contributions
lost
future
following
the
I.
Meineke
is
nationwide
automotive
services
franchisor.
Joe Bajjani and his wife, Michelle, (the Bajjanis) are the
sole
owners
of
RLB,
an
entity
formed
for
the
purpose
of
entered
Agreements
(FTAs)
four
separate
related
to
four
Franchise
franchises
and
Trademark
(collectively
logo,
and
other
proprietary
marks.
The
Bajjanis
executed
personal
guaranties
as
part
of
each
shops
FTA,
Although the terms of the FTAs are not identical, they are
substantially
the
same,
primarily
using
Meinekes
boilerplate
Advertising
Fund
(advertising
fund
contributions),
but
One
RLB
such
did
not
have
circumstance
reciprocal
permitting
right
Meineke
to
to
terminate the FTAs was if RLB fail[ed] to have [its] Shop open
for
business
for
any
consecutive
days
after
[it]
open[ed]
RLB closed each of the shops well before the end of the
respective FTAs 15-year period. 4
prematurely
breach of contract.
would
be
(J.A. 352.)
deemed
an
abandonment
and
in
breach
of
contract,
RLB
had
three
options:
1)
continue operating [the shop]; 2) sell the shop to a buyer preapproved by Meineke who will continue to operate the shop as [a
Meineke franchise]; or 3) relocate the shop to another location
approved
by
Meineke.
(J.A.
352.)
Meineke
asked
RLB
to
the
[fund]
contractually
contributions
agreed
that
it
to
royalties
would
have
and
received
(J.A. 21.)
advertising
during
the
of
of
contract
and
breach
the
duty
of
good
faith
and
fair
dealing.
The parties then filed cross motions for summary judgment.
RLB sought partial summary judgment on Meinekes future damages
claims,
while
Meineke
sought
summary
judgment
on
all
of
its
Meinekes
claim
for
future
damages
for
any
prospective
noted
timely
judgment
appeal
related
of
to
the
its
portion
claim
for
of
the
district
courts
future
damages.
it, that portion of the district courts order is not before us.
Our sole inquiry concerns the district courts award of summary
7
of
lost
contributions.
future
royalties
and
advertising
fund
II.
We review the district courts grant of summary judgment de
novo.
Fed. R. Civ. P.
the
nonmoving
party,
that
being
Meineke
in
this
case.
Battle v. Seibels Bruce Ins. Co., 288 F.3d 596, 603 (4th Cir.
2002).
III.
The
grounds.
district
First,
courts
the
court
decision
relied
determined
that
on
two
Meineke
primary
was
not
Second,
(J.A. 829.)
It is
Mironescu
2007);
see
v.
also
Costner,
Fed.
R.
480
F.3d
664,
App.
Pro.
28(b).
677
n.15
(4th
Cir.
Accordingly,
for
closing
the
Shops
prior
to
the
end
of
their
A.
The first part of the district courts analysis examined
whether Meineke was entitled to future damages under the FTAs.
The district court held that [b]y the express terms of the
FTAs, Meinekes contract with [RLB] does not permit the recovery
of prospective damages.
(J.A. 830.)
stating
that
the
duty
of
paying
royalties
and
the
fact
Article
15.1
only
requires
RLB
to
pay
past
due
the
fact
that
contributions
do
payment
not
of
royalties
expressly
or
by
and
advertising
their
nature
fund
survive
imply
unless
that
damages.
Meineke
specific
could
FTA
not
recover
contractual
prospective
provision
damages
permitted
such
because
North
Meineke
contends
the
district
court
erred
Carolina law does not require that the written contract (the
FTAs)
provide
damages
in
for
the
future
event
of
damages
a
in
breach.
order
It
to
also
recover
these
maintains
the
Atl. States Bankcard Assn, 896 F.2d 1421, 1426 (4th Cir. 1990)
(citation omitted).
ambiguous,
the
express
language
of
the
contract
controls
in
omitted).
The
district
court
is
correct
that
the
FTAs
do
not
suggests
that
all
circumstances
contract
must
To the contrary,
Bldg. Supply Co., 234 S.E.2d 605, 607 (N.C. 1977); Perfecting
Serv. Co. v. Prod. Dev. & Sales Co., 131 S.E.2d 9, 21-22 (N.C.
1963); Builders Supply & Equip. Corp. v. Gadd, 111 S.E. 771,
772 (N.C. 1922); Storey v. Stokes, 100 S.E. 689, 690-92 (N.C.
1919); Pender Lumber Co. v. Wilmington Iron Works, 41 S.E. 797,
798
(N.C.
1902).
While
the
parties
were
certainly
free
to
condition
precedent
to
preserve
non-breaching
Article
of
the
15.1
FTAs,
[advertising
states
RLB
that
agree[s]
fund]
upon
to
payments,
termination
or
[Meineke]
all
pay
amounts
owed
for
of the FTAs.
after
(J.A.
termination.
By
expressly
12
providing
for
certain
in
addition
to
those
stated.
The
district
courts
the
intent
of
the
unambiguous language.
(N.C. 1930).
parties
is
expressed
in
clear
and
district
similarly
courts
mistaken.
construction
Article
15.5
of
Article
states:
All
15.5
is
obligations
nature
expire.
(J.A.
70.)
Although
the
right
to
the
expiration
or
termination
of
the
Agreement
as
sum,
the
FTAs
neither
specifically
provided
for
nor
In the absence of an
not
prohibit
the
recovery
of
those
damages
if
otherwise
holding otherwise.
B.
Meinekes ability to recover future damages thus depends on
whether
Carolina
it
adduced
common
law
sufficient
claim
evidence
for
lost
to
set
profits.
forth
North
Under
North
Carolina law,
the general rule is that a party who is injured by
breach of contract is entitled to compensation for the
7
14
loss
of
prospective
profits
where
the
loss
is
the
Builders, Inc. v. Landin Ltd., 361 S.E.2d 608, 613 (N.C. Ct.
App. 1987) (citing Perkins, 74 S.E.2d at 634.).
North Carolina
74
has
reasonable
S.E.2d
at
644).
duty
to
mitigate
care
and
In
diligence
addition,
its
to
damages
avoid
the
non-breaching
by
exercis[ing]
or
lessen
the
15
Based
on
these
principles,
in
order
to
survive
summary
establish
or
create
issues:
(1)
RLBs
potential
for
future
royalties
and
advertising
question
material
of
breach
damages
in
fund
fact
regarding
proximately
the
form
of
contributions;
these
caused
lost
(2)
the
future
there
is
lost
profits
can
be
ascertained
and
measured
with
profits
may
reasonably
be
supposed
to
have
been
within
1.
The district court held that Meineke failed to show that
RLBs breach proximately caused its prospective damages.
In the
[advertising]
fees,
irrespective
of
whether
[RLB]
had
sums]
were
based
on
[the
Shops]
Since
revenues,
the
(J.A. 830-31.)
district
its
court
cited
conclusion.
On
no
legal
appeal,
authority
the
directly
parties
cite
to
numerous cases from courts across the country, none of which are
binding on this court.
on point.
They
(collecting
and
discussing
cases
examining
whether
because
believe
17
the
proper
analysis
is
principles
of
North
Carolina
contract
law
Coast
Line
R.R.
(citations omitted).
Co.,
113
S.E.
606,
608
Johnson v.
(N.C.
1922)
terms
ended.
The
nature
of
this
breach
is
so
by
the
sole
decision
of
the
franchisee,
RLB. 9
RLBs
That decision in
would
no
longer
receive
royalties
and
advertising
fund
legal
subsequent
consequences
decision
to
impacting
terminate
the
the
FTAs
relationship
had
between
the parties, but it did not cause RLB to stop operating the
Shops and thereby stop generating revenues:
9
already
occurred.
royalties
and
As
result,
advertising
fund
Meineke
was
contributions
losing
it
future
would
have
2.
Closely linked to the causation analysis is the requirement
that
Meineke
had
to
show
that
it
was
reasonably
that
Meineke
had
not
made
certain
the
requisite
to
showing
(J.A.
evidence that the Shops would have been profitable had they
remained open.
(J.A. 832.)
(J.A. 832.)
As
the
non-breaching
party,
Meineke
was
entitled
to
as
position
near
[it]
performed.
FTAs
as
this
would
can
have
be
done
occupied
in
if
the
entitled
Meineke
to
money,
percentage
in
the
same
contract
had
been
the
Shops
gross
For
purposes
of
avoiding
RLBs
motion
for
summary judgment, Meineke did not have to show that the Shops
would
generate
income,
only
revenues.
a
that
particular
the
profit
Shops
would
or
have
have
particular
continued
to
net
have
(Appellees
Br.
43.)
However,
Meineke
was
not
Meineke was
forcing
Meineke
to
summary judgment.
adduce
evidence
to
the
contrary
to
avoid
could
operate
not
in
commercially
feasible
manner
for
particular period of time after RLB closed each shop, and the
district court made no finding to that effect.
The Shops, or
some of them, may or may not have been able to operate at the
time
of
their
closures
commercially feasible.
relevant
without
because
operation
was
no
longer
definition
of
profit
and
how
that
term
It
22
any
revenues
would
exist.
We
make
no
prediction
what
The
satisfied
its
burden
of
showing
with
reasonable
This
record,
and
the
district
court
erred
in
holding
otherwise.
3.
The district court also held Meinekes generic calculation
for
lost
profits
did
not
assess
[each
shops]
specific
(J.A.
833.)
The
court
specifically
noted
that
(J.A. 833.)
the
amount
of
damages
with
reasonable
certainty.
Olivetti Corp. v. Ames Bus. Sys., Inc., 356 S.E.2d 578, 586
(N.C. 1987) (citation omitted).
Consequently,
asserts
reasonable certainty.
its
lost
profits
were
calculated
with
RLB responds
every case and Meineke cannot say with certainty that every
franchise takes three years.
then
multiplying
that
amount
by
an
average
historical
similar
calculation
was
used
to
determine
lost
future
in
holding
Meinekes
calculations
were
too
remote
and
not
make
its
calculations
speculative.
Meineke
used
data
If
profits
are
conjectural,
remote,
or
speculative,
12
26
data
from
smaller
stores
of
plaintiffs
kind
or
To
the
contrary,
Meinekes
13
seeks,
including
the
three-year
period
for
which
it
unreasonably
speculative,
or
the
result
of
4.
The district court next held that [f]uture damages were
not reasonably within the contemplation of the parties at the
time of entering into the FTAs because [i]f they had been,
Meineke
834.)
FTAs
would
have
contractually
provided
for
them.
(J.A.
permitting
future
damages
when
the
words
[do
not]
(J.A. 834.)
28
it
was
reasonably
foreseeable
Moreover, Meineke
that
if
[RLB]
stopped
[fund]
contributions
due
to
Meineke
under
the
noted,
to
recover
future
damages,
such
to
contract
who
is
injured
by
anothers
breach
of
In
but
also
to
inquire
whether
such
circumstances
or
were
reasonably
supposed
to
have
been
within
the
the
parties
considered
such
terms
by
including
them
in
the district court nor RLB cite to any where North Carolina
courts
Indeed,
have
the
held
parties
principles
to
such
espoused
high
above
standard
clearly
of
negate
proof.
such
North Carolina
contrast
to
special
circumstances
that
may
lead
to
Perkins, 74 S.E.2d at
643-44.
The
requirement
that
lost
profits
be
reasonably
while
the
absence
of
such
an
express
lost
profits
cf.
evidence
relevant
Storey,
to
100
S.E.
at
691,
the
determination.
it
is
The
not
the
district
only
court
record
reflects
several
relevant
factors
that
could
and
Moreover,
binding
the
the
grant
entire
agreement
of
an
purpose
whereby
exclusive
of
RLB
the
FTA
paid
territorial
was
to
Meineke
right.
establish
royalties
and
at
the
time
they
31
entered
into
the
FTAs.
5.
Lastly, with respect to mitigation of damages, the district
court
concluded
attempted
to
franchising.
the
record
mitigate
its
(J.A. 834.)
held
no
damages
evidence
under
the
that
Meineke
FTAs
by
re-
(J.A. 834.)
The
The
32
1916);
see
also
United
S.E.2d
104,
108
(N.C.
Ct.
Labs.,
App.
Inc.
1991)
v.
Kuykendall,
(holding
an
403
injured
citation
omitted)).
To
avoid
denial
of
its
motion
for
contemporaneously
breach.
broadly
with
any
damages
arising
from
the
RLB did not offer any such proof, and instead more
claimed
that
Meineke
was
simply
not
entitled
to
the
responded
that
it
to
adequately
this
assertion
mitigated
its
with
damages
evidence
by
only
seeking damages for a three-year period rather than for the each
33
FTAs
remaining
term,
and
that
it
would
have
cost
more
to
rather
nationwide
than
continuing
franchises. 14
to
This
market
evidence
the
availability
creates
an
issue
of
of
IV.
For the aforementioned reasons, we conclude that the FTAs
do not bar Meineke from recovering future damages, that RLBs
breach proximately caused Meineke to incur prospective damages,
and that Meineke put forth sufficient evidence to create issues
of disputed fact on its claim for lost profits.
Accordingly,
the
issue
district
Meinekes
of
prospective
courts
future
grant
damages.
of
damages
summary
claim
We
therefore
judgment
and
remand
to
reverse
RLB
for
as
the
to
further
35