YAMIN v. MOE'S SOUTHWEST GRILL, LLC
85 A.D.3d 1381 (2011)
924 N.Y.S.2d 226
2011 NY Slip Op 4803
JEFFREY YAMIN et al., Appellants,
MOE'S SOUTHWEST GRILL, LLC, et al., Respondents,
et al., Defendants.
Appellate Division of the Supreme Court of New York, Third Department.
Decided June 9, 2011.
MERCURE, J.P., PETERS, MALONE Jr. and STEIN, JJ., concur.
Plaintiffs contend that the various defendants, among other things, breached and interfered with their contractual rights to open and operate a restaurant in Albany County. Defendant Moe's Southwest Grill, LLC1 was a Georgia-based restaurant chain that received support services in franchising its restaurants from defendant Raving Brands, Inc.2 In 2003, plaintiff Jeffrey Yamin and nonparty Derek Broyard entered into a Moe's market development agreement (hereinafter MDA), which authorized them to open three restaurants in Albany County in
accordance with a development schedule. They paid a $50,000 fee to Moe's for this right and thereafter opened one restaurant in the Town of Guilderland, Albany County. They otherwise failed to open any additional restaurants within the time allotted by the 2003 MDA. Accordingly, in early 2005, Moe's terminated the agreement, but, at the same time, offered to consider a new agreement. That offer led to plaintiffs in this action, Jeffrey Yamin and Michael Yamin, entering into an MDA in August 2005 that is disputed in this appeal.
The 2005 MDA referenced the franchise development fee as having been previously paid, granted plaintiffs the right to open two additional restaurants (for a total of three) and required that the first additional restaurant open by February 2006 and the second by December 2006. One site proposed by plaintiffs in 2005 for a restaurant on Wolf Road in the Town of Colonie, Albany County was not approved by Moe's. The first (and only) restaurant opened by plaintiffs under the 2005 MDA was on Central Avenue in Colonie, but it did not open until December 2006, which was after the deadline set in the 2005 MDA. Although the terms of the 2005 MDA provided that failure to comply with the development schedule would result in the agreement "automatically expir[ing]," Moe's nevertheless continued discussions with plaintiffs about a possible third restaurant after December 2006.
Moe's had also entered into an MDA in 2004 with a corporation controlled by defendant Jonathan Trager, under which restaurants had been opened in the Town of Clifton Park, Saratoga County and in the City of Saratoga Springs, Saratoga County. In March 2007, Moe's and Trager (through his corporation, defendant Jet Enterprises M4, LLC) entered into a new MDA (hereinafter 2007 Trager MDA). Significantly, unlike the prior MDAs of the parties, the 2007 Trager MDA included a grant to Trager of exclusive development rights for a five-mile radius around his area of responsibility, which included "Schenectady/Niskayuna, NY, Queensbury, NY, Wolf Road, Albany, NY, North/East Greenbush, NY." The exclusive rights did not apply to the two restaurants already operated by plaintiffs and also included an exception for Glenmont in Albany County. Trager did, however, open a restaurant on Wolf Road in Colonie, albeit at a different location on the road than plaintiffs had proposed in 2005.
Plaintiffs commenced this action in late 2007 asserting five causes of action. After extensive disclosure, defendants made motions for summary judgment. Supreme Court dismissed all causes of action as to Moe's, dismissed all but the fifth cause of
action (alleging tortious interference with contract) as to Raving Brands and, of the three causes of action asserted against the remaining defendants, dismissed one cause of action. Plaintiffs appeal, limiting their argument to their breach of contract causes of action against Moe's and Raving Brands that were dismissed.
Plaintiffs contend that they raised factual issues as to whether Moe's acted in good faith under the 2005 MDA. Specifically, they assert that Moe's breached the 2005 MDA by not approving locations they proposed for a third restaurant and also by granting an exclusive area to Trager in 2007 that foreclosed plaintiffs from adding a third restaurant in much of the greater Albany County area. Moe's counters that it had absolute discretion under the 2005 MDA to reject a proposed restaurant, and that even if good faith were required, it established such conduct. Regarding the exclusive area granted to Trager in 2007, Moe's asserts that the 2005 MDA had expired before it entered into the 2007 Trager MDA.
We consider first the issues of whether there was a requirement of good faith and, if so, whether Moe's established compliance therewith. We answer both issues in the affirmative. The parties agree that Georgia contract law controls. Under Georgia law, "[e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement" (Brack v Brownlee, 246 Ga. 818, 820, 273 S.E.2d 390, 392  [internal quotation marks and citation omitted]; see ULQ, LLC v Meder, 293 Ga Ct App 176, 179, 666 S.E.2d 713, 717 ). There is a recognized exception to this general principle in that "it is possible to so draw a contract as to leave decisions absolutely to the uncontrolled discretion of one of the parties and in such a case the issue of good faith is irrelevant" (Automatic Sprinkler Corp. of Am. v Anderson, 243 Ga. 867, 868, 257 S.E.2d 283, 284  [internal quotation marks and citations omitted]). This is a "rare exception" (Hunting Aircraft, Inc. v Peachtree City Airport Auth., 281 Ga Ct App 450, 451, 636 S.E.2d 139, 141 ). Although it may apply where the intent to grant absolute discretion is conveyed by the use of phrases such as "the sole judge," "entirely within the discretion of the corporation," and "complete and absolute discretion" (ULQ, LLC v Meder, 293 Ga Ct App at 179, 666 SE2d at 717), even the use of such phrases may not be dispositive since the language must be considered within the context of the entire contract (see Larkins, Georgia Contracts: Law and Litigation § 5-6 [b]).