Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca8-07-02520/USCOURTS-ca8-07-02520-0/pdf.json

Nature of Suit Code: 196
Nature of Suit: Franchise
Cause of Action: 

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United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 07-2520

___________

Kevin Bores; Jennifer Huber; *

Christopher McCormick; Blue Earth *

Enterprises, Inc.; Mid America Pizza, *

LLC; Rising Dough, Inc.; RJ Inc.; *

Galleons Inc.; J Triple T, Inc.; FBN, *

Inc.; Try Our pizza Inc.; M&M Pizza, * Appeal from the United States

* District Court for the District of 

Plaintiffs - Appellees, * Minnesota.

*

v. *

*

Domino's Pizza, LLC, *

*

Defendant - Appellant. *

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Submitted: March 12, 2008

Filed: June 20, 2008

___________

Before BYE, SMITH, and COLLOTON, Circuit Judges.

___________

BYE, Circuit Judge.

Domino's Pizza, LLC, appeals the district court's grant of summary judgment

holding Domino's may not require franchisees to purchase Domino's custom-designed,

integrated computer system. We reverse. 

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I

Domino's is a national pizza franchise. The plaintiffs are owners of various

Domino's franchises located in Minnesota, Maine, Missouri, and Ohio. When they

became Domino's franchisees, the plaintiffs executed Domino's Standard Franchise

Agreement. Of relevance here is Section 8.2, which provides:

We will provide you with specifications for pizza, other authorized food

and beverage preparation, dispensing, storage and display equipment,

delivery and related motor vehicles, other equipment, fixtures, furniture,

computer hardware and software, exterior and interior signs and

decorating required by the Store. You may purchase items meeting our

specifications from any source.

(Emphasis supplied).

The present dispute concerns Domino's PULSE system, a "proprietary,

comprehensive computer system created specifically for Domino's Pizza stores" which

"allows better communication, service, . . . information gathering and reporting, and

coordination" among Domino's United States stores. Domino's created PULSE in the

1990s and began installing it in corporate stores in 2001. It has since advised all

franchisees they must purchase and install PULSE by June 30, 2008. PULSE

computer hardware can only be purchased from IBM, and PULSE computer software

can only be purchased from Domino's.

Plaintiffs argue Domino's mandated the purchase and use of its PULSE system

solely to generate additional revenue from franchisees. Plaintiffs have refused to

install PULSE, arguing under Section 8.2 of the franchise agreements Domino's must

provide the "specifications" for PULSE and allow them to purchase computer

hardware and software meeting those specifications "from any source," not solely

from Domino's.

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Plaintiffs have not cross-appealed the dismissal of their other claims and the

only claim before us on appeal is the contract claim. 

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The dispute over PULSE culminated in plaintiffs filing this litigation, alleging:

1) breach of contract; 2) fraud; 3) negligent misrepresentation; 4) breach of the

implied covenant of good faith and fair dealing; 5) violation of the Minnesota

Franchise Act; and 6) promissory estoppel. Domino's counterclaimed for breach of

contract and indemnification and sought declaratory relief allowing it to require

franchisees to purchase and install the PULSE system.

Plaintiffs moved for summary judgment and Domino's moved for dismissal of

plaintiffs' claims. The district court granted Domino's motion on five of plaintiffs' six

claims, but granted plaintiffs' motion for summary judgment on the claim for breach

of contract.1

 The court concluded the franchise agreements did not allow Domino's

to require franchisees to purchase the PULSE system. On appeal, Domino's argues

the district court misinterpreted the plain language of the franchise agreements.

II

We review a grant of summary judgment de novo, applying the same standard

as the district court. Jaurequi v. Carter Mfg. Co., Inc., 173 F.3d 1076, 1085 (8th Cir.

1999). Summary judgment is proper if there exists no genuine issue as to any material

fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.

56(c). When ruling on a summary judgment motion, a court must view the evidence

"in the light most favorable to the nonmoving party." Dush v. Appleton Elec. Co.,

124 F.3d 957, 962-63 (8th Cir. 1997). However, a "nonmovant must present more

than a scintilla of evidence and must advance specific facts to create a genuine issue

of material fact for trial." F.D.I.C. v. Bell, 106 F.3d 258, 263 (8th Cir. 1997). 

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This diversity action is governed by state substantive law, Erie R.R. Co. v.

Tompkins, 304 U.S. 64, 78 (1938), and we apply the law of Minnesota, Maine,

Missouri, and Ohio, respectively, to the breach of contract claims.

The interpretation of an unambiguous contract is a matter for the court.

Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004);

Hawkes v. Commercial Union Ins. Co., 764 A.2d 258, 266-67 (Me. 2001); J.E.

Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. 1973);

Saunders v. Mortensen, 801 N.E.2d 452, 454 (Ohio 2004). When interpreting a

contract, the goal is to divine the parties' intent. Travertine, 683 N.W.2d at 271;

Apgar v. Commercial Union Ins. Co., 683 A.2d 497, 500 (Me. 1996); J.E. Hathman,

491 S.W.2d at 264; Saunders, 801 N.E.2d at 454. If a contract is unambiguous, the

parties' intent is manifest from the terms of the contract itself. Travertine, 683 N.W.2d

at 271; Apgar, 683 A.2d at 500-01; J.E. Hathman, 491 S.W.2d at 264; Saunders, 801

N.E.2d at 454. The district court found the language of the franchise agreements

unambiguous. On appeal, the parties agree but advance different interpretations of

Section 8.2. See Bank Midwest v. Lipetzky, 674 N.W.2d 176, 179 (Minn. 2004)

(holding mere disagreement over the interpretation of contract language does not

render the contract ambiguous); Moody v. State Liquor & Lottery Comm., 843 A.2d

43, 49 (Me. 2004) ("Language is ambiguous when 'it is reasonably susceptible to

different interpretations.'") (emphasis supplied); Robbins v. McDonnell Douglas

Corp., 27 S.W.3d 491, 496 (Mo. Ct. App. 2000) ("An ambiguity does not exist merely

because the parties dispute the meaning of the contract."); Amdee, Inc. v. Jacobson,

No. 52800, 1987 WL 17914, *4 (Ohio Ct. App. October 1, 1987) (unpublished) ("In

deciding whether more than one reasonable interpretation renders the language

ambiguous, the court rules whether each proposed interpretation is reasonable."). 

Section 8.2 provides, in relevant part: "We will provide you with specifications

for . . . computer hardware and software . . . . You may purchase items meeting our

specifications from any source." (Emphasis supplied). The district court, relying on

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a partial dictionary definition of "specification," concluded Domino's was required to

provide franchisees with the information necessary to guide them through the process

of constructing a system comparable to Domino's PULSE computer system, and could

not specify they purchase the PULSE system. The district court held specifications

referred to the component parts and technology necessary to construct a product, e.g.,

a computer system and computer software program, and not to a finished product, i.e.,

Domino's PULSE system. In other words, the franchise agreement only allowed

Domino's to mandate a comparable computer system, not a specific computer system.

In addition, the district court noted Section 8.2 permitted franchisees to obtain

the specified computer hardware and software "from any source." It concluded "from

any source" only had meaning if the specified items could be obtained from multiple

sources. Because the computer hardware was only available from IBM, and the

PULSE software only from Domino's, the district court held the agreement had to be

interpreted as allowing franchisees the ability to construct a comparable system using

materials and technology available from multiple sources.

Domino's argues the district court relied on an unduly restrictive interpretation

of specification. According to Domino's, specification refers not only to a plan or

written description embodying the manner and process of making, constructing,

compounding, and using an item, but also to "[a] single item or article that has been

specified." Applying this broader definition, Domino's argues the franchise

agreements allow it to specify a computer system capable of performing specific

functions or to specify a single computer system – the PULSE system. Domino's

further argues its interpretation of specification is not affected by language allowing

franchisees to obtain specified items "from any source." It contends any source does

not mean the items have to be available from multiple sources. Instead, the American

Heritage Dictionary defines "any" to include "[o]ne, some, every, or all without

specification." American Heritage Dictionary 81 (4th ed. 2000). Thus, any source can

mean only one source. 

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We conclude the definition of specification applied by the district court was

unnecessarily narrow. The American Heritage Dictionary defines specification as:

1. The act of specifying. 2.a. specifications. A detailed exact statement

of particulars, especially a statement prescribing materials, dimensions,

and quality of work for something to be built, installed, or manufactured.

b. A single item or article that has been specified. 3. An exact written

description of an invention by an applicant for a patent.

Id. at 1669.

The Webster's Unabridged Dictionary definition of specification includes:

n. 1. the act of specifying. 2. Usually, specifications. a detailed

description or assessment of requirements, dimensions, materials, etc.,

as of a proposed building, machine, bridge, etc. 3. a particular item,

aspect, calculation, etc., in such a description. 4. something specified,

as in a bill of particulars; a specified particular, item, or article.

Webster's Unabridged Dictionary 1832 (2d ed. 1997).

Webster's Third International Dictionary defines specification, in part, as:

4: a detailed, precise, explicit presentation . . . of something or a plan or

proposal for something: as a: a written statement containing a minute

description or enumeration of particulars . . . : also: a single article, item,

or particular or an allegation of a specific act . . . .

Webster's Third International Dictionary 2187 (1986) (emphasis in original).

Plaintiffs contend specification, as used in the franchise agreements, can only

mean the list of the parts and technology from which Domino's PULSE system is

constructed. Applying the above definitions, however, it is apparent the plain and

ordinary meaning of specification includes both a list of the component parts

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necessary to construct or describe an item, as well as a single, finished, product. For

example, specification encompasses a detailed description of the particular

characteristics desired in an automobile or simply identifying a particular make and

model; in each instance specifications are provided. Thus, we conclude the plaintiffs'

arguments unreasonably focus on only one of the commonly understood definitions

of specification; nothing in the franchise agreements limits the meaning of

specification to a single usage. Applying the commonly understood definition of

specification, the agreements permit Domino's to specify a computer system with

comparable capabilities or the PULSE system. 

We further conclude Section 8.2's language permitting franchisees to obtain the

specified computer software and hardware "from any source" does not change the

meaning of specification. Plaintiffs argue "any" means multiple sources, and

interpreting specification to include items only available from one source would

render "from any source" meaningless. We disagree. From any source is necessarily

limited to available sources, and, as Domino's points out, the definition of "any"

includes "one, some, every or all." American Heritage Dictionary 81 (4th ed. 2000).

Thus, the franchise agreements merely allow plaintiffs to purchase the specified

computer system – PULSE – from any available sources, be they one or many.

Further, plaintiffs' assertion they are not permitted to purchase the PULSE system

from multiple sources is factually unsupported. Domino's is the most likely source

from which the PULSE system could be obtained, but not necessarily the only source.

For example, the franchise agreement would not preclude franchisees from obtaining

a used PULSE system from another franchisee. 

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III

Accordingly, we reverse the district court's grant of summary judgment in favor

of plaintiffs and remand with instructions to grant Domino's motion to dismiss and

enter judgment in its favor. 

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