IN RE WAGSTAFF MINNESOTA, INC.
In re: Wagstaff Minnesota, Inc., et al., Chapter 11 Bankruptcy, Debtors.
KFC Corporation, Appellant,
Wagstaff Minnesota, Inc. et al., Official Committee of Unsecured Creditors of Wagstaff Minnesota, Inc. et al., General Electric Capital Corporation et al., Appellees.
Bankruptcy No. 11-43073.
United States District Court, D. Minnesota.
January 3, 2012.
Deborah C. Swenson, Esq., Lommen, Abdo, Cole, King & Stageberg, PA, appeared for Appellees Official Committee of Unsecured Creditors of Wagstaff Minnesota, Inc. et al.
Susan G. Boswell, Esq., Quarles & Brady LLP, and Ralph V. Mitchell, Jr., Esq., Lapp, Libra, Thomson, Stoebner & Pusch, Chartered, appeared for Appellees General Electric Capital Corporation et al.
ORDER Jointly Administered
JOAN N. ERICKSEN, District Judge.
KFC Corporation (KFCC) appeals a final order of the United States Bankruptcy Court for the District of Minnesota. Appellees (Debtors) join together in opposition. For the reasons set forth below, the Court reverses the decision of the bankruptcy court.I. BACKGROUND
Debtors own and operate 77 restaurants (Outlets) as KFCC franchisees. Debtors defaulted on their original franchise agreements, KFCC terminated the agreements, and the parties negotiated and executed a new set of documents that form the basis of the dispute on appeal. Specifically, the parties disagree as to whether this set of documents should be considered one indivisible contract.
Debtors defaulted on the original franchise agreements at various times prior to October 2009. On June 2, 2010, KFCC and Debtors entered into a Prenegotiation and Forbearance Agreement that provided for a time in which to negotiate reinstatement of the franchise agreements for the limited purpose of the sale of the Outlets. On August 13, 2010, the parties signed a Reinstatement Agreement, an Addendum to Reinstatement Agreement, and a Letter Agreement. The Addendum to Reinstatement Agreement provides that the Kentucky Fried Chicken Franchise Agreement signed pursuant to the Reinstatement Agreement will expire on August 1, 2011. On November 5, 2010, the parties signed new Kentucky Fried Chicken Franchise Agreements effective on August 13, 2010—the same day as the other reinstatement documents. The parties provided the Court with a sample set of these four documents for one of the Outlets. In each new Kentucky Fried Chicken Franchise Agreement, the phrase indicating that the expiration date was to be twenty years from the date of execution is crossed out and replaced with the date that each Outlet's original franchise agreement would have expired. For example, the sample New Franchise Agreement provided to the Court has an expiration date of June 6, 2022.
The four documents discussed below were executed for each individual Outlet. All of the documents have the same effective date of August 13, 2010.