In Dunkin’ Donuts v. Shetal Shah (March 2010) the plaintiff Dunkin’ franchisee (“Guirguis”) sued Dunkin’ over the alleged breach of his Store Development Area Agreement (“SDA”) entered into on February 11, 2003. Pursuant to the terms of the SDA, Guirguis was granted an exclusive right to open a Dunkin’ franchise within Old Bridge, New Jersey, or on Main Street in Milltown, New Jersey. Guirguis paid Dunkin’ $100,000 for the SDA, which obligated him to open a Dunkin’ store on or before February 11, 2006. If he failed to meet this deadline for opening a new store, under the terms of the SDA he would lose his exclusive rights to do so.
Guirguis then advised Dunkin’ that he wished to open a Dunkin’ Donuts store at 30 Main Street, Millstone, New Jersey. Dunkin’ rejected the location claiming it was too small. In turn, Guirguis failed to meet the deadline and lost his exclusive rights under the SDA. However, after Guirguis’ rights expired, Dunkin’ approved the same location as permissible for another franchisee. On July 22, 2009, Guirguis sued Dunkin’ for damages arising out of Dunkin’s wrongful refusal to have approved of the location when he had proposed it to Dunkin’.
Dunkin’ defended the case by arguing, inter alia, that the case was time-barred by the two-year contractual statute of limitations set forth in the SDA, which stated:
ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE RELATIONSHIP OF DEVELOPER AND [DUNKIN’ DONUTS] OR DEVELOPER’S OPERATION OF THE UNIT, BROUGHT IN ANY FORUM BY ANY PARTY HERETO AGAINST THE OTHER, MUST BE COMMENCED WITHIN TWO (2) YEARS AFTER THE DISCOVERY OF THE FACTS GIVING RISE TO SUCH CLAIM OR ACTION, OR SUCH CLAIM OR ACTION SHALL BE BARRED, EXCEPT FOR FINANCIAL OBLIGATIONS OF DEVELOPER.
Neither Dunkin’ nor the franchisee disputed the validity of the SDA. Instead, the battle focused upon when exactly the franchisee “discovered the facts giving rise to his claim.” This dispute was dispositive since if the franchisee had discovered Dunkin’s alleged wrongdoing more than two years before he filed suit, he would have lost his claims.
Dunkin’ argued that Guirguis discovered his claims in August 2006, and Guirguis argued that he discovered that the new franchisee had opened only at the end of 2008. Unfortunately, Dunkin’ produced a letter from the franchisee’s counsel representing that Guirguis knew that Dunkin’ had wrongfully denied approval back in August 2006. In ruling on Dunkin’s dismissal motion, the court stated that it could not ignore Guirguis’ prior admission that he discovered the alleged breach nearly three years before filing this suit; thus, he dismissed the franchisee’s claims because the action was time barred pursuant to the terms of the SDA.
Dunkin’ Donuts v. 330545 Donuts
In Dunkin’ Donuts v. 330545 Donuts (Jan. 2010) the District Court of Appeal for the Fourth District of the State of Florida reversed an arbitration award that initially was in favor of a Dunkin’ franchisee in a case in which the franchisee had initially been awarded $90,000. Apparently unhappy with the initial arbitration award of only $90,000, the franchisee appealed the arbitration award and pursued a trial de novo. After the trial in court, the judge found in favor of Dunkin’ and against the franchisee. Although the court awarded attorney’s fees to Dunkin’ against the corporate franchisee, it did not hold the individual franchisee liable for these fees since the individual had been dismissed from the case earlier by stipulation.
Barkan v. Dunkin’Donuts
In Barkan v. Dunkin’Donuts (2009) a Dunkin’ franchisee in Rhode Island entered into a settlement agreement with Dunkin’ to resolve its serious financial difficulties. Under the settlement agreement the franchisee, inter alia, agreed to sell its stores. Dunkin’ also agreed in that agreement to “work with” CIT to assist the franchisee in attempting to refinance its debt. CIT thereafter refused to refinance the franchisee’s debt, and Dunkin’ defaulted the franchisee under the settlement agreement’s financial terms.
The franchisee then sued Dunkin’ and Dunkin’ immediately moved to dismiss the case, which would have deprived the franchisee of a trial on his claims. The court rejected Dunkin’s motion to dismiss, stating that the franchisee had indeed provided some evidence that Dunkin’ had failed to cooperate in the franchisee’s efforts to refinance its debt. In this regard, the franchisee presented evidence that he was later told by a CIT employee that the refinancing was rejected because Dunkin’ never requested the refinancing from CIT and never provided CIT with the paperwork necessary to evaluate the application.
Riding the Circuit Courts
Attorney Jeffrey Goldstein
Riding the Circuit Courts is a new column at ddifo.mynewsitepreview.com that summarizes recent court cases and their relevance to Dunkin’ Donuts franchise owners. The following summaries were prepared by Attorney Jeffrey M. Goldstein, of Goldstein Counselors at Law, Leesburg, VA.
Dunkin’ Donuts v. Shetal Shah
In Dunkin’ Donuts v. Shetal Shah (March 2010) the plaintiff Dunkin’ franchisee (“Guirguis”) sued Dunkin’ over the alleged breach of his Store Development Area Agreement (“SDA”) entered into on February 11, 2003. Pursuant to the terms of the SDA, Guirguis was granted an exclusive right to open a Dunkin’ franchise within Old Bridge, New Jersey, or on Main Street in Milltown, New Jersey. Guirguis paid Dunkin’ $100,000 for the SDA, which obligated him to open a Dunkin’ store on or before February 11, 2006. If he failed to meet this deadline for opening a new store, under the terms of the SDA he would lose his exclusive rights to do so.
Guirguis then advised Dunkin’ that he wished to open a Dunkin’ Donuts store at 30 Main Street, Millstone, New Jersey. Dunkin’ rejected the location claiming it was too small. In turn, Guirguis failed to meet the deadline and lost his exclusive rights under the SDA. However, after Guirguis’ rights expired, Dunkin’ approved the same location as permissible for another franchisee. On July 22, 2009, Guirguis sued Dunkin’ for damages arising out of Dunkin’s wrongful refusal to have approved of the location when he had proposed it to Dunkin’.
Dunkin’ defended the case by arguing, inter alia, that the case was time-barred by the two-year contractual statute of limitations set forth in the SDA, which stated:
ANY AND ALL CLAIMS ARISING OUT OF OR RELATING TO THIS AGREEMENT, THE RELATIONSHIP OF DEVELOPER AND [DUNKIN’ DONUTS] OR DEVELOPER’S OPERATION OF THE UNIT, BROUGHT IN ANY FORUM BY ANY PARTY HERETO AGAINST THE OTHER, MUST BE COMMENCED WITHIN TWO (2) YEARS AFTER THE DISCOVERY OF THE FACTS GIVING RISE TO SUCH CLAIM OR ACTION, OR SUCH CLAIM OR ACTION SHALL BE BARRED, EXCEPT FOR FINANCIAL OBLIGATIONS OF DEVELOPER.
Neither Dunkin’ nor the franchisee disputed the validity of the SDA. Instead, the battle focused upon when exactly the franchisee “discovered the facts giving rise to his claim.” This dispute was dispositive since if the franchisee had discovered Dunkin’s alleged wrongdoing more than two years before he filed suit, he would have lost his claims.
Dunkin’ argued that Guirguis discovered his claims in August 2006, and Guirguis argued that he discovered that the new franchisee had opened only at the end of 2008. Unfortunately, Dunkin’ produced a letter from the franchisee’s counsel representing that Guirguis knew that Dunkin’ had wrongfully denied approval back in August 2006. In ruling on Dunkin’s dismissal motion, the court stated that it could not ignore Guirguis’ prior admission that he discovered the alleged breach nearly three years before filing this suit; thus, he dismissed the franchisee’s claims because the action was time barred pursuant to the terms of the SDA.
Dunkin’ Donuts v. 330545 Donuts
In Dunkin’ Donuts v. 330545 Donuts (Jan. 2010) the District Court of Appeal for the Fourth District of the State of Florida reversed an arbitration award that initially was in favor of a Dunkin’ franchisee in a case in which the franchisee had initially been awarded $90,000. Apparently unhappy with the initial arbitration award of only $90,000, the franchisee appealed the arbitration award and pursued a trial de novo. After the trial in court, the judge found in favor of Dunkin’ and against the franchisee. Although the court awarded attorney’s fees to Dunkin’ against the corporate franchisee, it did not hold the individual franchisee liable for these fees since the individual had been dismissed from the case earlier by stipulation.
Barkan v. Dunkin’Donuts
In Barkan v. Dunkin’Donuts (2009) a Dunkin’ franchisee in Rhode Island entered into a settlement agreement with Dunkin’ to resolve its serious financial difficulties. Under the settlement agreement the franchisee, inter alia, agreed to sell its stores. Dunkin’ also agreed in that agreement to “work with” CIT to assist the franchisee in attempting to refinance its debt. CIT thereafter refused to refinance the franchisee’s debt, and Dunkin’ defaulted the franchisee under the settlement agreement’s financial terms.
The franchisee then sued Dunkin’ and Dunkin’ immediately moved to dismiss the case, which would have deprived the franchisee of a trial on his claims. The court rejected Dunkin’s motion to dismiss, stating that the franchisee had indeed provided some evidence that Dunkin’ had failed to cooperate in the franchisee’s efforts to refinance its debt. In this regard, the franchisee presented evidence that he was later told by a CIT employee that the refinancing was rejected because Dunkin’ never requested the refinancing from CIT and never provided CIT with the paperwork necessary to evaluate the application.
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