HOEVELER, District Judge.
Pending before the Court is the Defendant's Motion to Reconsider Order Denying Summary Judgment.
In its reconsideration motion, Defendant Burger King Corporation asks this Court to reverse its earlier decision denying Burger King's Motion for Summary Judgment as to Count II of the Complaint (breach of the covenant of good faith and fair dealing).
Scheck v. Burger King Corp., 756 F.Supp. 543, 548-49 (S.D.Fla.1991) (citations and footnotes omitted).
After carefully considering the pertinent portions of the record, the relevant case law, and the arguments presented by counsel at the April hearing on this motion, the Court is unable to delineate any sound basis (either in law or policy) upon which to retreat from the above analysis. The Court is unequivocally convinced of the propriety of both the legal propositions articulated and the conclusions reached in the 1991 Order, and accordingly, finds unpersuasive Defendant's Motion to Reconsider.
To begin with, the Court remains certain that Florida contract law recognizes the implied covenant of good faith and fair dealing. See, e.g., First Nationwide Bank v. Florida Software Servs., Inc., 770 F.Supp. 1537, 1542 (M.D.Fla.1991); East Bay Ltd. Partnership v. American General Life & Accident Ins. Co., 744 F.Supp. 1118, 1122 (M.D.Fla.1990), aff'd without opinion, 937 F.2d 619 (11th Cir.1991); Green Cos., Inc. of Florida v. Kendall Racquetball Invs., Ltd., 560 So.2d 1208, 1210 (Fla.Dist.Ct.App.1990); Harrison Land Dev. Inc. v. R and H Holding Co., Inc., 518 So.2d 353, 355 (Fla.Dist.Ct.App. 1987); Brickell Bay Club Condominium Ass'n, Inc. v. Hernstadt, 512 So.2d 994, 997 (Fla.Dist.Ct.App.1987), review denied, 520 So.2d 584 (Fla.1988); Coira v. Florida Medical Ass'n, Inc., 429 So.2d 23, 23 (Fla. Dist.Ct.App.1983); Bowers v. Medina, 418 So.2d 1068, 1069 (Fla.Dist.Ct.App.1982).
See Transcript of the April 13, 1992 hearing on the Motion to Reconsider, at 30. The Court also remains confident that Florida law recognizes an independent cause of action for breach of this implied covenant of good faith. See, e.g., Coira, 429 So.2d at 23 (in finding that "there are no material issues of fact concerning the plaintiff's claim that defendant insurer breached" the implied covenant of good faith, court implicitly makes clear that a cause of action for breach of the covenant does exist).
With these issues settled, the Court's attention can next be directed at Defendant's principal argument in support of its Motion to Reconsider. Burger King contends that even if the covenant of good faith can generally be implied under Florida law, it nevertheless should not be implied here since the covenant cannot be invoked to override express contractual language. In effect, Burger King insists that the Franchise Agreement entered into between Plaintiff Scheck and itself expressly gave Burger King the right to undertake the very act complained of—specifically, authorizing the conversion of the Turnpike Howard Johnson's into a Burger King. Therefore, Burger King continues, this Court cannot imply a covenant of good faith into the Franchise Agreement.
Burger King points to the following language in the Franchise Agreement: "This license is for the described location only and does not in any way grant or imply any area, market or territorial rights proprietary to FRANCHISEE."
In the January 1991 Order, however, this Court was entirely unreceptive to Defendant's analytical approach, and the Court remains unmoved by Burger King's position. As the undersigned made clear in the January Order:
Scheck, 756 F.Supp. at 549. No justification exists for departing from the Court's interpretation of the Franchise Agreement. It is evident that although the language of the Franchise Agreement states that the franchisee cannot expect an exclusive territory, such language does not even mention the franchisor, let alone does the language provide that Burger King retains the unlimited right to establish Burger King franchises at any location desired.
That the Franchise Agreement does not address this subject is quite notable, for it thus becomes apparent that there exists no explicit contractual language that this Court is overriding by virtue of implying a covenant of good faith and fair dealing into the Agreement. Because there is no express language in the Franchise Agreement providing that Burger King can establish Burger King restaurants wherever it so pleases, and because Florida law recognizes the implied covenant of good faith and fair dealing,
Significantly, in denying the reconsideration motion, this Court does not issue a ruling that in any way challenges Defendant's oft-cited rule of law that the covenant of good faith cannot be implied in derogation of the express terms of a contract. Indeed, determining whether such a legal principle actually exists under Florida law is a determination this Court need not and has not made, for this Court has never once found that the express language of the Franchise Agreement gives Burger King the very right which Burger King argues it possesses—that is, the right to franchise other restaurants at any location desired. Clearly, this Court's decision to permit the Plaintiff to present to a jury his claim for breach of the implied covenant of good faith and fair dealing does not run contrary to established law or the Franchise Agreement entered into by the parties.
Also needing emphasis is the fact that this Court's Order does not grant the Plaintiff an exclusive territory in contravention of a contractual provision denying him such a right. Rather, the Court is merely finding that since the Franchise Agreement did not explicitly give Defendant an unfettered right to establish Burger King restaurants at any locale selected—indeed, did not even mention the rights of Burger King with respect to establishing franchises proximate to existing Burger King restaurants—Plaintiff can argue before a jury that Defendant breached the implied covenant of good faith when it sanctioned the Marriott Corporation's conversion of the Howard Johnson's restaurant into a Burger King.
As previously intimated, due to this Court's interpretation of the Franchise Agreement, much of the case law cited to by Burger King is simply inapplicable to this cause.
In essence, these cases spotlight one party attempting to invoke the implied covenant of good faith notwithstanding express contractual language authorizing the very acts alleged to have breached the covenant. Unlike these decisions, however, in the case at bar, Burger King did not pursue an act expressly and specifically authorized by the Franchise Agreement, as that Agreement is read by this Court. Consequently, most of the cases that Burger King argues are contrary to this Court's decision are not directly on point, and therefore, the precedent-setting value of the Court's decision today is not nearly as immense as Defendant suggests; this Court is simply not issuing a decision contravening the rule expressed in the case law holding that the implied covenant cannot override an explicit contractual term.
Defendant Burger King turns specifically to this body of case law in support of the argument that "[w]here a franchisee, in its franchise agreement, gives up all rights to an exclusive territory, it cannot thereafter claim breach of the implied covenant of good faith when the franchisor opens a competing store in the vicinity." D.E. # 71, at 9. Unlike Burger King, however, this Court does not read the previously mentioned cases as standing for so broad a proposition.
Admittedly, in each of these cases, there apparently existed contractual language denying an exclusive territory or an exclusive license or an exclusive distribution area to a franchisee or a licensee. See Domed Stadium, 732 F.2d at 483 n. 1; Carlock, 719 F.Supp. at 802-03; Patel, 496 N.E.2d at 1159; Rado-Mat, slip op. at 5; Super Valu, 431 N.W.2d at 723. However, as the preceding parentheticals illustrated, each of these contracts also contained explicit language granting the franchisor/licensor the right to establish competing franchises/businesses or to issue competing licenses or to pursue competing business opportunities. See Domed Stadium, 732 F.2d at 483 n. 1 (The agreement provided that "the Licensor has, and shall continue to have during the life of this license agreement ... the right to construct and operate one or more Holiday Inns at any place other than on the site licensed hereby."); Carlock, 719 F.Supp. at 819 ("[T]he franchisor and its parent companies explicitly reserved the right to distribute Haagen-Dazs ice cream by any method."); Patel, 496 N.E.2d at 1159 (The agreement stated that "`DUNKIN' DONUTS, in its sole discretion, has the right to operate or franchise other DUNKIN' DONUTS SHOPS under, and to grant other licenses in, and to, any or all of the PROPRIETARY MARKS, in each case on such terms and conditions as DUNKIN' DONUTS deems acceptable.'"); Rado-Mat, slip op. at 4 ("The Commitment Agreement and License Agreement contains precise language, reserving to itself the right to license any business activity at any location. ..."); Super Valu, 431 N.W.2d at 723 ("Super Valu retained the `right to choose and select its ... retailers and to enter into Super Valu Retailer Agreements with other parties at Super Valu's sole choice and discretion....'").
Clearly, the factual realities of these decisions demonstrate that this case law does not stand for the extremely broad rule of law propounded by Burger King. That is, contrary to Defendant's contention, these cases do not hold that if a contract has only denied an exclusive territory to a franchisee, the franchisee cannot thereafter claim breach of the implied covenant of good faith if the franchisor establishes additional franchises near the franchisee.
Although much of Defendant's case law is, therefore, not directly on point, the Court still must confront the Fickling decision. In that case, the Fourth Circuit apparently interpreted the exact same language contained in the Franchise Agreement entered into between Scheck and Burger King, and found that such contractual language barred a cause of action under Florida law for breach of the implied covenant of good faith in a case where Burger King had authorized two new Burger King franchises near Plaintiffs' franchises. See Fickling, [1987-1989 Transfer Binder] Bus. Franchise Guide (CCH) at 18,824-18,825. The Fickling court determined that the plaintiffs "failed to raise a genuine issue regarding Burger King's failure to comply with the enforceable unambiguous express terms of the contract." Id. at 18,825. This conclusion was reached not because the plaintiffs failed to submit sufficient evidence of Burger King's bad faith, but because "[u]nder Florida law, the obligation of good faith will not be implied in derogation of the express terms of a contract." Id. (citations omitted).
Naturally, being a Fourth Circuit decision, the Fickling case is at most persuasive authority. More importantly, however, this Court simply does not find Fickling persuasive, and thus, the Court does not accept the conclusions reached therein. In doing so, this Court is not in any way suggesting that the legal propositions articulated by the Fickling court are flawed, but rather, this Court is departing from the Fickling court's reading of the language of the Franchise Agreement. This Court, unlike the Fickling court, is simply not convinced that the language of the Franchise Agreement gives Burger King the unlimited right to establish Burger King restaurants at any location it so selects. Overall, this Court finds that neither the Fickling decision nor the other case law presented by Burger King justifies reconsidering the denial of summary judgment.
Concluding, it seems clear that Florida law recognizes the implied covenant of good faith which applies to most contractual relationships. Indeed, that concept can and should be read into the contract in question. Whether it applies to the specific provisions under consideration is the key question here. Because of the absence of language in this contract of adhesion which would preserve unto Defendant the clear right to do that which would be, under other circumstances, unreasonable, the implied covenant must be considered and a factual inquiry is mandated.
Defense counsel, properly recognizing that alternative, argued forcefully (as will be developed hereinafter) that the actions of Burger King were so clearly reasonable that summary judgment should be granted for that reason as well. The Court disagrees. If a franchise agreement gives the franchisor the right to build (or permit building) another store next door to the one earlier permitted, it had better say so in clear terms. If it does not—if the franchisor
Actually, and as indicated, oral argument on the instant motion only served to further confirm the propriety of denying summary judgment. Burger King's counsel commented as follows:
See Transcript of the April 13, 1992 hearing on the Motion to Reconsider, at 31-32; see also id. at 50 ("There may be a case where, under the wrong set of circumstances, where under true bad faith, as we know it really means, that somebody sets up a restaurant across the street, and they do so with the intention of driving the franchisee out of business. That's a different story. We do not have that here.").
These remarks are very revealing, for they suggest that Burger King is agreeing that a cause of action can in theory lie for breach of the implied covenant of good faith based on the instant Franchise Agreement. But of course, Burger King maintains, under the present facts, summary judgment is justified because the evidence so clearly presents a scenario different from the hypothetical discussed at oral argument. Nonetheless, it is significant that Burger King is seemingly admitting that if a factual scenario is presented similar to the hypothetical, a legitimate cause of action would exist.
It should further be noted that this Court agrees with Burger King that a factual scenario can certainly be imagined where it is unmistakably clear that the implied covenant of good faith has, in fact, been breached by a franchisor. Additionally, the Court agrees with Burger King's implicit notion that the specific factual circumstances of a case are critical to determining whether that case presents a scenario sufficiently similar to the hypothetical mentioned at oral argument such that the implied covenant can be said to have been breached. Yet, whereas Burger King argues that the facts here are so dissimilar to the hypothetical (and the Photovest decision) as to justify entry of summary judgment, this Court finds instead that given both the factual record and the governing summary judgment standards, see note 3 supra, jury questions remain, and so, summary judgment becomes inappropriate.
Lastly, it is necessary to address Burger King's contention that this Court's decision "will have an extremely negative effect on [Burger King's] administration of its nationwide franchise system." D.E. # 70, at 2. To such a suggestion, a few observations are warranted. First, the ruling now under reconsideration was first handed down in January of 1991, and still, more than a year later, the Burger King franchise system seems to have survived. Furthermore, the problem Burger King has created for itself is a readily remedied problem; rewrite the Franchise Agreement to more clearly, unequivocally and unquestionably grant to Burger King the specific rights which Burger King argues now exists under the present Franchise Agreement.
Third, and as already emphasized, neither the Court's Order today, nor the Order issued in January of 1991, represents a departure from established precedent, let alone do these Orders carve out some heretofore
ORDERED AND ADJUDGED that the Defendant's Motion to Reconsider is DENIED.
DONE and ORDERED.
Plaintiff's Motion for Leave to File Supplemental Opposition to Burger King's Motion to Reconsider Order Denying Summary Judgment is hereby GRANTED.
D.E. # 83, at 2 (quoting Moog Inc. v. United States, No. 90-215E, 1991 WL 255371, at *1, 1991 U.S.Dist. LEXIS 17348, at *2 (W.D.N.Y. Nov. 21, 1991)).
D.E. # 83, at 3-5.
For further discussions concerning the role of the implied covenant of good faith, see, e.g., Tidmore Oil Co., Inc. v. BP Oil Co./Gulf Products Div., 932 F.2d 1384, 1391 (11th Cir.) ("The covenant [of good faith] is designed to `preserve the spirit of the contract rather than the form' and to protect the reasonable expectations of the parties.") (citation omitted) (applying Alabama law), cert. denied, ___ U.S. ___, 112 S.Ct. 339, 116 L.Ed.2d 279 (1991); Hubbard Chevrolet Co. v. General Motors Corp., 873 F.2d 873, 876 (5th Cir.) ("Generally speaking, the implied covenant [of good faith] seeks to protect the contracting parties' reasonable expectations.") (citations omitted) (applying Michigan law), reh'g denied, en banc, 878 F.2d 1435 (5th Cir.), cert. denied, 493 U.S. 978, 110 S.Ct. 506, 107 L.Ed.2d 508 (1989); Restatement (Second) of Contracts § 205(a) (1979) ("Good faith performance or enforcement of a contract emphasizes faithfulness to an agreed common purpose and consistency with the justified expectations of the other party...."). See generally Arthur L. Corbin, 3A Corbin on Contracts § 654A (P.P.1991); Steven J. Burton, Breach of Contract and the Common Law Duty to Perform in Good Faith, 94 Harv.L.Rev. 369 (1980).
With respect to franchise agreements in general, it has been observed that:
62B Am.Jur.2d, Private Franchise Contracts § 348 (1990) (footnotes omitted).
Plaintiff's arguments, however, are not even reached by this Court, let alone embraced, for the Court did not in its January Order, and has not today, found that the contract explicitly gives Burger King the discretion to establish new Burger King franchises. In other words, this Court's decision does not rest on the position advanced by Plaintiff that the contract expressly gave Burger King the discretion to determine where to place new Burger King restaurants. As such, much of the case law cited to by Plaintiff is not directly on point, for these cases entail instances where courts confronted a contract actually granting one party some type of discretionary power. See, e.g., Carvel Corp. v. Diversified Management Group, Inc., 930 F.2d 228, 231 (2d Cir.1991) ("While the distributorship agreement gave Carvel considerable discretion. ..."); Junikki Imports, Inc. v. Toyota Motor Co., Ltd., 335 F.Supp. 593, 597 (N.D.Ill.1971) ("Article II, section 1 of the agreement provides that `Distributor may accept in whole or in part' any of the Dealer's orders for Toyota products."). Here, however, there existed no contractual language granting Burger King the discretionary power to establish new franchises in any manner it desired and at any location selected, and therefore, Plaintiff's case law is of little assistance.
Of course, however, the preceding comments are not meant to disclaim the reality that where the covenant of good faith and fair dealing is, in fact, implied into a franchise agreement, decisions by a franchisor as to where to establish new franchises must be made in good faith and in a reasonable manner so that a party's right to enjoy the fruits of the contract is not obviated.
Even assuming that the cases Burger King cites were directly on point, and supportive of the position articulated by the Defendant, see pp. 697-99 infra (distinguishing much of this case law), it still must be stressed that this Court will not blindly embrace the reasoning or analysis adopted by courts outside this Circuit merely because the implied covenant of good faith and fair dealing involves an intricate and amorphous legal construct. If anything, when a court confronts a significant and complex legal issue, a greater need arguably arises for thorough, exhaustive and independent analysis, and not merely jumping on the precedential bandwagon, as Defendant seems to urge. Moreover, and most importantly, as argued in the text infra, the Court's decision certainly does not turn established precedent on its head.
Regardless of which of these particular holdings is extracted from this case law, the Court is confident that given the contractual language emphasized and the arguments presented by the courts in these decisions, Burger King's case law does not endorse the principle that where a contract has only denied an exclusive territory to the franchises, a court cannot imply the covenant of good faith when the franchisor establishes competing franchises near existing ones.