Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca11-13-14996/USCOURTS-ca11-13-14996-0/pdf.json

Parties Involved:
Cactus Portable Storage, LLC
Appellee
Coyote Portable Storage, LLC
Appellee
Desert Portable Storage, LLC
Appellee
PODS Enterprises, Inc.
Appellant

Document Text:

[DO NOT PUBLISH]

IN THE UNITED STATES COURT OF APPEALS

FOR THE ELEVENTH CIRCUIT

_______________________

No. 13-14996

_______________________

D. C. Docket No. 1:09-cv-01152-AT

COYOTE PORTABLE STORAGE, LLC,

DESERT PORTABLE STORAGE, LLC, 

CACTUS PORTABLE STORAGE, LLC,

Plaintiffs – Appellees,

versus

PODS ENTERPRISES, INC.,

as successor in interest to PODS, Inc.,

Defendant – Appellant.

_______________________

Appeal from the United States District Court

for the Northern District of Georgia

________________________

(July 8, 2015)

Before MARTIN, Circuit Judge, and RESTANI,

∗ Judge, and HINKLE,∗∗ District 

Judge. 

 ∗ Honorable Jane A. Restani, Judge for the United States Court of International Trade, 

sitting by designation. ∗∗ Honorable Robert L. Hinkle, United States District Judge for the Northern District of 

Florida, sitting by designation.

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HINKLE, District Judge:

This is a dispute over the meaning of two royalty provisions in a series of 

franchise agreements. We conclude that the first disputed provision is ambiguous. 

The contemporaneous documentary evidence makes clear beyond dispute that the 

representatives who negotiated the provision on both sides had the same 

understanding of the provision’s meaning; we construe the provision as they 

understood it. The second disputed provision is clear, as both sides agree even 

now. We apply the provision as written, rejecting the franchisor’s contention that 

the provision was included in the agreements only through a scrivener’s error. 

Finally, we reject the franchisor’s assertion that the franchisees’ claims are barred 

by a release or lack of notice.

I

Some might say PODS, Inc. built a better mousetrap: a system for moving 

from one residence to another without the time constraints that ordinarily attend 

the process. A traditional moving van must be promptly loaded, driven to the 

destination, and promptly unloaded. Otherwise the customer incurs substantial 

extra charges; the van and its crew are the traditional moving company’s stock in 

trade and cannot be kept idle. If the new residence is not ready when the old one 

must be vacated, the customer’s furniture and household goods must be loaded, 

transported, unloaded, stored, and then loaded and unloaded again. A pod, in 

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contrast, can be left unattended at the customer’s location or stored. So a customer 

can have a pod loaded or can load it at the customer’s convenience over time, can 

have the pod stored (without unloading it) if the new residence is not ready when 

the old one must be vacated, and can have the pod unloaded or can unload it at the 

customer’s convenience. There is no need for a second loading and unloading.

“PODS” is an acronym for portable on demand storage. PODS, Inc., has 

now been succeeded by PODS Enterprises, Inc., the defendant in the district court 

and appellant here. This opinion uses “PODS” as a reference to either. 

When PODS began its business, the focus was on local moving and storage; 

moving from one city to another became a focus only later. PODS established 

franchises in local markets. The plaintiffs in the district court—the appellees 

here—are three franchisees under common ownership: Coyote Portable Storage, 

LLC (“Coyote”) with operations in Phoenix; Desert Portable Storage, LLC 

(“Desert”) with operations in Las Vegas; and Cactus Portable Storage, LLC 

(“Cactus”) with operations in Tucson.

PODS entered franchise agreements with Coyote and Desert on September 

29, 2003. The agreements were identical to one another and identical in most 

respects to PODS’s standard franchise agreement. But PODS did not insist that 

franchisees accept its standard agreement. Here there were negotiations that 

resulted in changes set out in an addendum to each agreement. PODS entered a 

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franchise agreement with Cactus on June 15, 2004, again with an addendum

altering the standard agreement as a result of arm’s length negotiations.

Under the agreements, PODS was entitled to royalties calculated as a 

minimum amount each month or, if greater, a specified percentage of the 

franchisee’s “net sales.” Customers ordinarily remitted payments to PODS, who 

withheld royalties (and other appropriate amounts) and remitted the balance to the 

franchisee. The first issue on this appeal is whether “net sales” included only 

revenues from local operations—the primary source of revenues at the time—or

also included revenues from moves between separate franchised territories. The 

parties have sometimes referred to revenues from nonlocal moves as “crosscountry,” “inter-franchise,” or “I-F” revenues. This opinion ordinarily refers to 

them as “cross-country revenues.”

PODS periodically evaluated its franchisees. The standard franchise 

agreement provided an incentive for satisfactory performance that became 

applicable only after the franchisee had been in operation for three years: the base 

royalty was 10% but a separate term provided a 2% rebate for a satisfactory rating. 

The Coyote, Desert, and Cactus addendums all changed the base royalty to 8% but 

allowed PODS to increase this to 10% for unsatisfactory performance. The Cactus 

addendum deleted the separate term providing a 2% rebate for satisfactory 

performance, so with satisfactory performance, Cactus’s royalty was 8%, as both 

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sides agree. The Coyote and Desert addendums did not delete the separate term 

providing a 2% rebate. The second issue on this appeal is whether that term 

remained applicable, that is, whether, with a satisfactory rating, the effective 

royalty for Coyote and Desert was 6% or 8%. The issue arose when the Cactus 

agreement was being negotiated—Cactus asked for the same 6% effective royalty 

Coyote and Desert had received, but PODS said that was a mistake.

In June 2007, the parties entered a second addendum to the Coyote and 

Desert franchise agreements changing PODS’s option to purchase the franchisee’s 

assets. Neither the option nor the change is at issue here. But each franchisee’s 

second addendum included a general release.

In January 2008, Coyote, Desert, and Cactus formally notified PODS of the 

claims they now assert: the claim to the return of royalties withheld based on crosscountry revenues and, for Coyote and Desert, the claim to a 2% rebate for 

satisfactory performance. Coyote and Desert asserted claims only from July 2007 

forward, recognizing that their general releases barred claims for earlier periods. 

PODS rejected the claims. 

The claims implicate two provisions of the franchise agreements not 

addressed to this point. First, the agreements include a choice-of-law provision: 

Florida law controls. All parties agree the provision is binding. Second, the 

agreements include a provision requiring a franchisee to give PODS notice within 

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12 months after it learns or should learn of a breach and, “except as otherwise 

prohibited or limited by applicable law,” barring any claim for which timely notice 

was not given.

II

On April 30, 2009, Coyote, Desert, and Cactus filed this action in the 

Northern District of Georgia based on diversity jurisdiction. The only claims still

at issue are common-law contract claims—claims for the return of the royalties 

PODS exacted based on cross-country revenues (count 1), for the disputed 2% 

rebates (count 2), for a declaratory judgment on these issues (count 9), and for 

attorney’s fees under the franchise agreements’ prevailing-party fee provisions

(count 12). The district court granted summary judgment for the franchisees and 

awarded damages and attorney’s fees. PODS brings this appeal.

We review de novo the district court’s summary-judgment ruling, see, e.g.,

Ellis v. England, 432 F.3d 1321, 1325 (11th Cir. 2005), and its interpretation of the 

franchise agreements, see, e.g., Bragg v. Bill Heard Chevrolet, Inc., 374 F.3d 1060, 

1065 (11th Cir. 2004). 

III

Each franchise agreement includes two back-to-back definitions of “net 

sales.” They could be exhibit A in a law-school class on bad drafting. The first 

definition is a 139-word sentence fragment. The second is a 58-word “which” 

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clause in the agreement’s next sentence. The fragment and the “which” clause 

each apparently attempts to set out a complete definition of “net sales” that could 

stand alone. The back-to-back definitions are set out here in their entirety:

“Net sales” – The aggregate amount of sales, revenues, fees, 

charges and other consideration actually received for services and 

products sold in connection with operations conducted by the 

Franchised Business including income derived from sales at or 

away from the Franchised Business but excluding: (a) all federal, 

state and municipal sales or service taxes collected from customers 

and paid to the appropriate authority; (b) all insurance billed to and 

collected from customers and paid to the appropriate insurance 

company; (c) the amount of all customer refunds and adjustments 

and pre-approved, in writing, promotional discounts; (d) any 

amounts written off as bad debt expense; (e) revenue from the sale 

of Containers as part of a long distance move program organized 

and managed by us; and (f) any other sale of Containers, Lifts or 

other assets that we have approved in advance between you and 

other franchisees or us. The royalties and MAF [“Marketing and 

Advertising Fund” fees] shall be calculated on the “Net Sales,” 

which is the total revenue as shown on the “Sales by Item 

Summary-Complete Summary,” excluding sales tax and insurance 

as explained above, less discounts, credit memos or adjustments 

and bad debt expense, and monies received as part of the cross 

country move program, which are distributed separately on a 

monthly basis and not included in this summary. 

(Emphasis added.) The provision is identical in the Coyote and Desert agreements. 

The Cactus provision omits one word—the second to last “and”—but that 

apparently was inadvertent, and neither side contends the omission makes a 

difference.

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The parties focus on the “which” clause. We begin our analysis there. The 

definition in that clause is repeated here with inserted letters A through G for use in 

the discussion that follows. The “which” clause says “net sales” means:

[A] the total revenue as shown on the “Sales by Item Summary –

Complete Summary,” excluding [B] sales tax and [C] insurance as 

explained above, less [D] discounts, [E] credit memos or 

adjustments and [F] bad debt expense, and [G] monies received as 

part of the cross country move program, which are distributed 

separately on a monthly basis and not included in this summary.

So the clause takes this form: A, excluding B and C, less D, E and F, and G. This 

might more clearly be written in one of two ways. The first is this: 

Net Sales = A – (B + C) – (D + E + F + G).

The second is this:

Net Sales = A – (B + C) – (D + E + F) + G.

The franchisees say the correct formula is the first, with G (cross-country 

revenues) one of the deductions from A (total revenue as shown on the referenced 

summary). PODS says the correct formula is the second, with G (cross-country 

revenues) added to A (total revenue as shown on the referenced summary). 

One cannot know, just from reading the clause, which of these readings is 

correct. The clause is ambiguous. Under Florida law, when a contract is 

unambiguous, it must be enforced as written. But when, as here, the contract is 

ambiguous—when its words could reasonably be accorded two different 

meanings—extrinsic evidence of the parties’ intent is properly considered. Both 

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sides agree with these principles, which are too well settled for argument. See, 

e.g., Hurt v. Leatherby Ins. Co., 380 So. 2d 432, 434 (Fla. 1980); Emergency 

Assocs. of Tampa, P.A. v. Sassano, 664 So. 2d 1000, 1002 (Fla. 2d DCA 1995).

Here there is extrinsic evidence that cuts each way. But overall, it cuts far 

more strongly in favor of the franchisees.

The object of considering extrinsic evidence is to discern the parties’ 

intent—to give effect to the actual agreement the parties believed they were 

entering, if that can be done consistently with the language the parties used in the 

agreement. On the question of the parties’ intent, the extrinsic evidence is 

overwhelming. This record establishes beyond any dispute that the representatives 

on both sides who negotiated these franchise agreements and attempted to commit 

their agreement to writing intended to exclude cross-country revenues from the 

definition of “net sales.”

The primary participants in the discussions that led to these agreements were 

the franchisees’ principal David Alan Quarterman, the franchisees’ attorney Scott 

Augustine, and PODS’s representative Jacquelyn Cosentino-Georges. All testified 

to the same facts; there was no dispute. Mr. Quarterman had a copy of a franchise 

agreement PODS had entered earlier with a different franchisee that excluded 

cross-country revenues from “net sales.” He asked for the same treatment. Ms. 

Cosentino-Georges knew PODS had agreed to do this more than once and made 

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the same agreement with Mr. Quarterman. Mr. Augustine sent an email to Ms. 

Cosentino-Georges confirming the status of negotiations and listing this as one of 

the items that would be included in the addendum PODS was preparing. Ms. 

Cosentino-Georges printed the email and added her own handwritten note, “We 

have done this b/4,” as a communication up the line, intending to head off 

resistance. Ms. Cosentino-Georges testified that she ordinarily reviewed all 

proposed changes to franchise agreements with her supervisor and that, to the best 

of her knowledge, she followed that practice here. In any event, the record gives 

not a hint that Mr. Quarterman or Mr. Augustine had any reason to doubt Ms. 

Cosentino-Georges’s authority to act on behalf of PODS. Nobody at PODS 

pushed back; the deal was done.

The participants decided that the best way to achieve their intended result 

was by editing the “which” clause quoted above. In the standard agreement, after 

the terms labeled A through F above, the clause continued, “plus monies received 

as part of the cross country move program, which are distributed separately on a 

monthly basis and not included in this summary.” (Emphasis added.) The 

participants decided to change “plus” to “and,” apparently on the view that this 

made it clear that “monies received as part of the cross country move program” 

were part of the deduction, not an addition to “total revenue.” On that view, using 

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“and” instead of “plus” moved the last parenthesis in the formula set out above—

that is, changed the meaning from the second formula set out above to the first. 

It is a curious theory. At least ordinarily, “plus” and “and” are synonyms. 

As PODS puts it, two plus two are four, just as two and two are four. Crosscountry revenues were not large at that time, but the issue was important enough to 

be discussed. Instead of just “and,” the parties easily could have said, “and also 

excluding.” They also could have rewritten the entire definition—and many other 

provisions—to make the entire agreement clearer. The issue before us, though, is 

not whether they could and should have said this better, but what they meant. The 

evidence is clear that what they meant—what they intended to signify by changing 

“plus” to “and”—was that cross-country revenues were excluded from “net sales.” 

The other extrinsic evidence does not change the result. As it turns out, the 

summary referred to in the “which” clause term labeled A above, the “Sales by 

Item Summary-Complete Summary,” does not include cross-country revenues, so 

treating them as excluded by the term labeled G is an odd formulation. In the 

absence of clear evidence of intent, this would cut against reading term G as we do. 

But because the evidence of intent is so clear, the better conclusion is that this is 

just another instance of bad drafting.

The agreement’s first definition of “net sales”—the sentence fragment that 

precedes the “which” clause—is worded differently, but if it is read to conflict with 

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the “which” clause, this merely highlights the ambiguity; a contract with two 

conflicting provisions is, almost by definition, ambiguous. Moreover, it is not 

clear that the sentence-fragment definition includes the disputed cross-country 

revenues at all. The fragment says “net sales” include only revenues “actually 

received for services and products sold in connection with operations conducted by 

the Franchised Business . . . .” (Emphasis added.) Cross-country revenues are 

received for operations conducted not just by the franchised business—the 

franchisee—but also by at least one other franchisee. The fragment does not say 

revenues received for services and products sold in connection with operations of 

“only” the franchised business, but the language can be read that way if necessary 

to avoid a conflict with the “which” clause and the parties’ clear intent. In short, 

standing alone, the sentence-fragment definition might be read to include crosscountry revenues, but the sentence-fragment definition did not stand alone, and it 

can bear a meaning consistent with the parties’ clear intent.

Extrinsic evidence also includes the parties’ own practical construction of 

their agreement. This is so because how parties contemporaneously apply an 

agreement sometimes shows what they meant. See Danforth Orthopedic Brace & 

Limb, Inc. v. Fla. Health Care Plan, Inc., 750 So. 2d 774, 776 (Fla. 5th DCA 

2000). Here, PODS did not begin charging royalties on cross-country revenues 

until September 2004, more than a year after entering the agreements with Coyote 

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and Desert, and even then, PODS set the royalty rate at just 4%. PODS explained 

its decision to begin charging the royalties in a memorandum to all franchisees. 

The memorandum casts substantial doubt on any claim that the agreements had 

required a 6% or 8% royalty all along:

As all of you will recall, it has also been our position that 1⁄2 of 

the royalty fees, or 4% of your gross collected revenues, would be 

used to support the call center and was not intended to be a profit 

center for Corporate. However, in that same spirit, it was never 

intended for the call center to be such a drastic drag on earnings for 

Corporate either. 

Given that same spirit, the only way we will be able to grow 

both the general call center and corporate development center is by 

initiating a royalty against cross country revenues. In an effort to 

remain consistent and be fair, I have instructed Tom to charge a 4% 

royalty fee against the distributed portions of the cross country 

revenues. This will begin with the distribution checks written in 

September of 2004. After plugging this formula into our ’05 budget, 

it appears as though the call center will have an opportunity to nearly 

break even for fiscal year 2005.

To be sure, the memorandum does not change the terms of the franchise

agreements and is not a waiver of the position PODS now asserts. The 

memorandum is, however, additional extrinsic evidence supporting the 

construction of the agreements that we adopt.

Finally, while parties are free to enter contracts that are fair or unfair, that 

make good sense or seem nonsensical, an ambiguous contract can more readily be 

construed in a way that makes sense than in a way that does not. Here, if 

excluding cross-country revenues from “net sales” cut PODS out of any return on 

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that line of business, we would hesitate before reading the franchise agreements 

that way. In fact, though, an analysis of what made sense cuts just the other way. 

For local business, the franchisee handled the whole transaction and got all the 

revenue, reduced only by PODS’s royalty and other amounts payable to PODS for 

things like advertising. For cross-country moves, in contrast, revenues were split 

one-third each to the initiating franchisee, the receiving franchisee, and PODS. So 

PODS received one-third of the revenue even when it charged no royalty. It thus is 

hardly surprising that in PODS’s early days, when local operations were 

paramount and the cross-country business had not taken off, PODS sometimes was 

content with one-third of cross-country revenues and did not charge an additional 

royalty on the franchisee’s one-third.

In any event, that is plainly what PODS agreed to do here. The district court 

properly granted summary judgment for the franchisees on this claim.

IV

In count 2, Coyote and Desert sought 2% rebates under § 6.4 of their 

franchise agreements. The section provided:

After the 3rd Anniversary of the Commencement of opening the 

Franchised Business we will rebate 2% of your Net Sales during 

each calendar quarter, within 60 days of each calendar quarter-end, 

if we determine that you have received a Satisfactory or Excellent 

Performance Rating for your most recent audit. If you have less 

than a Satisfactory Performance Rating, we will audit you again 

within the following 6-month period. If you receive less than a 

Satisfactory Performance Rating from the second audit, you will 

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not be reviewed again until 6 months after the date of the second 

audit. 

PODS admits that this section, by its terms, entitled Coyote and Desert to 

the 2% rebates. PODS says, though, that the section should have been deleted 

when, as part of the addendum, the base royalty rate was changed from 10% to 8%. 

PODS says the failure to delete the section was a scrivener’s error.

The assertion fails because the representatives who negotiated the addendum 

on both sides have testified that they intended to retain the 2% rebate provision. 

There is no contrary evidence. If, unbeknownst to the franchisees, some other 

PODS official did not notice the agreement’s actual terms, that does not change the 

agreement. This was not a scrivener’s error; it was a deliberate decision accurately 

recorded in the written agreement.

V

These rulings bring us to PODS’s procedural defenses. First, PODS says the 

claims of Coyote and Desert are barred by releases they executed in June 2007. 

Each release provided:

For value received, Franchisee . . . for itself and on behalf of its 

affiliates (collectively the “Releasing Parties”) agree to release 

Franchisor and all of its predecessors . . . (collectively the 

“Released Parties”) from any and all claims and causes of action of 

whatever nature or kind, in law or in equity, which the Releasing 

Parties now have or have ever had against the Released Parties, 

including without limitation, anything arising out of (i) the 

Franchise Agreement, as amended from time to time through the 

date of this Addendum; (ii) all contracts Franchisor has entered 

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into with Franchisee ancillary to the Franchise Agreement listed in 

subpart (i) of this Section 3, and (iii) any other relationship 

between the Releasing Parties and the Released Parties. . . . This 

release excludes any obligations Franchisor has to Franchisee 

accruing after the date of this release. . . . 

(Emphasis added.) 

Properly read, and by their plain terms, the releases looked back, not 

forward. The franchisee released claims for alleged royalty overcharges (and 

anything else) through the date of the release but did not release claims based on 

PODS’s obligation to pay amounts coming due in the future. So if PODS 

improperly withheld royalties on cross-country revenues in the past, or failed to 

credit the franchisee with a 2% rebate for satisfactory performance in the past, the 

franchisee could do nothing about it; any claim had been released. Even so, PODS 

was obligated to properly perform under the franchise agreements going forward. 

Coyote and Desert have made no effort to circumvent the releases. They 

demanded, and the district court awarded, only amounts due for periods after the 

date of the releases.

PODS says, though, that the releases looked forward as well as back. To get 

there, PODS says, in effect, that the reference to “obligations . . . accruing after the 

date of this release” should be construed to mean “claims . . . accruing after the 

date of this release,” and that when a claim accrues should be interpreted to mean 

when a claim accrues for statute-of-limitation purposes. The short answer is 

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twofold: when an “obligation” accrues is not necessarily the same as when a 

“claim” accrues, and the language of the releases should be given its ordinary 

meaning, not a technical meaning based on arcane legal principles the parties were 

unlikely to know or care about. See Crawford v. Barker, 64 So. 3d 1246, 1255-56

(Fla. 2011); Beans v. Chohonis, 740 So. 2d 65, 67 (Fla. 3d DCA 1999).

Moreover, even if the parties could be deemed to have intended a technical 

meaning, PODS’s argument would still fail. When an obligation accrues is an 

issue ordinarily confronted in financial accounting. For that purpose an obligation 

accrues when the events occur that give rise to the obligation. The relevant statuteof-limitations concept is not when an obligation accrues but when a “claim” 

accrues—a distinction that sometimes produces a different outcome. 

The Florida statute-of-limitations principles that PODS cites are wholly 

consistent with this analysis. Under Florida law, the limitations period for a claim 

on a written contract is five years. Fla. Stat. § 95.11(2)(b) (2013). The period 

runs from the date of the breach. When the issue is the interpretation or validity of 

a contractual provision, we can assume, without the necessity of deciding, that the 

limitations period runs from the first breach, that is, from the first application of 

the disputed provision. There is support for that view.

Thus, for example, in Dinerstein v. Paul Revere Life Insurance Co., 173 

F.3d 826 (11th Cir. 1999), the issue was whether an insured’s payments from his 

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disability insurer were properly reduced when he began receiving social-security 

benefits. The insured filed the lawsuit more than five years after the insurer 

reduced the benefits. He asserted that each reduced payment started a new fiveyear limitations period. We disagreed, reversing a judgment for the insured. We 

held that the limitations period ran from the date of the first reduced payment.

Similarly, in Garden Isles Apartments No. 3, Inc. v. Connolly, 546 So. 2d 38

(Fla. 4th DCA 1989), the issue was the validity of a rent-escalation clause in a 

long-term lease. The lessee filed a lawsuit challenging a recent rent escalation. 

But the lawsuit was filed more than five years after the first escalation under the 

clause. The Florida Fourth District Court of Appeal held that the action was 

barred, concluding that the limitations period ran from the first application of the 

escalation clause.

The scope of these decisions may be unclear; other decisions may point the 

other way. See, e.g., Holiday Furniture Factory Outlet Corp. v. Fla., Dep’t of 

Corr., 852 So. 2d 926, 928 (Fla. 1st DCA 2003); Bishop v. Fla., Div. of Ret., 413 

So. 2d 776 (Fla. 1st DCA 1982). Even assuming, though, that Dinerstein and 

Garden Isles apply to a franchise dispute like ours, the decisions do not help 

PODS, because the franchisees filed this action within five years after PODS first 

applied the disputed provisions. PODS gave notice in August 2004 of its intent to 

begin collecting royalties on cross-country revenues in September 2004. The 

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disputed 2% rebate provision, by its terms, became available to a franchisee three 

years after the franchisee began operating. Coyote and Desert became eligible in 

2006 at the earliest. The franchisees filed this action on April 30, 2009, less than 

five years after PODS first assessed cross-country royalties or failed to make a 2% 

rebate. 

PODS does not contend otherwise. It says, though, that Dinerstein and 

Garden Isles should inform the interpretation of the releases Coyote and Desert 

executed in June 2007. Not so. Those cases addressed when claims accrued, not 

when obligations accrued. The whole point of the decisions was that the statute of 

limitations began running when the claim at issue accrued—the claim that the 

defendant was improperly applying the disputed contractual provision—not when 

the defendant was obligated to make a disputed payment. 

In any event, the meaning of these releases turns on their plain meaning, not 

on the intricacies of the law governing statutes of limitations. Whatever might be 

said of when a claim accrues for limitations purposes, there is no reason to 

construe these releases as foreclosing the ability of Coyote and Desert to enforce 

the franchise agreements going forward. Coyote and Desert gave up their claims 

for back payments, but they did not give up their claims to future payments.

VI

Finally, PODS invokes the franchise agreements’ notice provision:

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[E]xcept as otherwise prohibited or limited by applicable law, any 

failure, neglect, or delay by you to assert any breach or violation of 

any legal or equitable right arising from or in connection with this 

Agreement shall constitute a waiver of such right and shall 

preclude the exercise or enforcement of any legal or equitable 

remedy arising therefrom, unless written notice specifying such 

breach or violation is provided to us within 12 months after the 

later of: (a) the date of such breach or violation; or (b) the date of 

discovery of the facts (or the date the facts could have been 

discovered, using reasonable diligence) giving rise to such breach 

or violation. 

The franchisees sent a letter giving notice of their claims in January 2008. 

PODS says claims for payments due more than 12 months before the date of the 

letter are barred. PODS apparently does not attempt to apply here its argument 

based on when a claim accrues under Dinerstein and Garden Isles, and PODS 

could not reasonably do so. By its terms, the notice requirement runs from the 

later of the date of the breach or violation or the date when the facts were or 

reasonably could have been discovered; that language cannot be read to turn on the 

date when a claim accrues for statute-of-limitations purposes.

The notice defense, even if valid, would not affect Coyote or Desert. Their 

claims go back only to July 2007 (the first month after the releases), so the January 

2008 notice was timely. The notice defense thus affects, at most, Cactus’s claim 

for a return of cross-country royalties for the period prior to January 2007.

The first issue raised by the notice defense is whether this kind of notice 

provision is valid at all. Cactus says the answer is no based on Florida Statutes 

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§ 95.03: “Any provision in a contract fixing the period of time within which an 

action arising out of the contract may be begun at a time less than that provided by 

the applicable statute of limitations is void.” We disagree.

The statute does not invalidate the notice provision because the notice 

provision is not a substitute for, and does not conflict with, the statute of 

limitations. Quite the contrary. The notice provision required only the giving of 

notice—an act that could be done without the effort and expense that attends filing 

a lawsuit. The notice provision did not shorten the time in which Cactus could file 

this action; Cactus still had the full five years. 

Moreover, Florida courts have enforced notice provisions in at least some 

circumstances. See, e.g., Bankers Ins. Co. v. Macias, 475 So. 2d 1216, 1218 (Fla. 

1985) (holding that a failure to give notice as required by an insurance contract 

bars an insured’s claim against the insurer only if the insurer suffers prejudice, that 

prejudice is presumed, and that an insured who fails to give notice thus cannot 

recover unless the insured proves lack of prejudice); Nat’l Gypsum Co. v. 

Travelers Indem. Co., 417 So. 2d 254 (Fla. 1982) (holding that a materialman’s 

claim against a surety was barred by the failure to give notice within 90 days as 

required and that no showing of prejudice was necessary); Tuttle/White 

Constructors, Inc. v. State Dep’t of General Servs., 371 So. 2d 1096 (Fla. 1st DCA 

1979) (holding that a construction contractor’s damages-for-delay claim against the 

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owner was barred by the failure to give notice within 20 days as required by the 

contract); see also Marriott Corp. v. Dasta Constr. Co., 26 F.3d 1057 (11th Cir. 

1994) (holding that a construction contractor’s damages-for-delay claim against the 

owner was barred by the failure to give notice within 7 days as required by the 

contract). Cactus’s assertion that § 95.03 invalidates notice provisions is flatly 

inconsistent with these cases.

The inapplicability of § 95.03 leaves to the common law the issue of the 

validity and effect of notice provisions like those at issue here. Florida courts have 

said more than once that notice provisions must be reasonable. See, e.g., W. F. 

Thompson Constr. Co. v. Se. Palm Beach Cnty. Hosp. Dist., 174 So. 2d 410, 414

(Fla. 3d DCA 1965) (“A provision to give notice of default is, of course, valid 

provided it is reasonable.”). 

There is nothing inherently unreasonable about a 12-month notice provision 

in a franchise agreement. It is true, as Cactus asserts, that PODS has cited cases 

only from the construction and insurance industries. Florida courts have enforced 

notice provisions primarily, if not exclusively, in those fields. Still, a franchisor 

and franchisee have an ongoing relationship. They deal with one another not just 

on a finite project but on a continuing basis. Any disagreement—any potential 

claim—may look not only back but forward. It makes sense to require notice so 

that a disagreement can be resolved promptly—so that any default can be cured 

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before damages mount up unnecessarily. We thus assume that a notice provision 

in a franchise agreement may be valid.

That does not, however, resolve the matter. The next issue is this: what 

consequence flows from a franchisee’s failure to give timely notice? That a 

requirement to give notice is reasonable does not mean it is reasonable to insist that 

a claim is foreclosed even when there is no prejudice. 

Here the franchise agreement says that, “except as otherwise prohibited or 

limited by applicable law,” the failure to give notice waives the claim. The better 

view is that the applicable Florida law imposes this limit: a claim is waived only if 

the failure to give notice prejudices the opposing party. Florida law imposes this 

limit in the insurance context; that was the Florida Supreme Court’s square holding 

in Macias. The court did not impose a prejudice requirement in National Gypsum, 

but the court said its holding was limited to surety contracts in the construction 

industry, where notice requirements are widespread and well known. Extending 

the holding to franchising would run counter to National Gypsum and would not 

square with its rationale. 

A more detailed review of National Gypsum confirms this conclusion. We 

start in the lower court. In Travelers Indemnity Co. v. National Gypsum Co., 394 

So. 2d 481 (Fla. 3d DCA 1981), the court held 2–1 that a materialman’s claim 

against a surety was barred by the failure to give notice, even in the absence of 

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prejudice. The three judges all wrote separately; no opinion garnered more than 

one vote. 

Judge Nesbitt, writing for himself alone, would have enforced the notice 

provision because parties may contract as they please and thus may provide that a 

claim is foreclosed unless notice is given—a rationale that would reach the 

franchise agreement here. 

Judge Schwartz concurred in the result on much narrower grounds. He 

acknowledged that for insurance policies in general, a failure to give notice 

precludes recovery only if the insurer suffers prejudice. But he said that notice 

provisions are common in the construction industry and that a lack of prejudice 

should not allow recovery on a construction-industry surety bond. Id. at 485 

(Schwartz, J., concurring specially). 

Judge Hendry dissented, citing insurance cases and concluding that a notice 

provision should be enforced only when there is prejudice.

On review, the Florida Supreme Court explicitly embraced Judge Schwartz’s 

view: “We find that Judge Schwartz’s special concurrence sets out the proper rule 

which best preserves the rights and expectations of the parties.” Nat’l Gypsum, 

417 So. 2d at 256. This was a clear repudiation of Judge Nesbitt’s view that notice 

provisions can be enforced outside the construction field without regard to 

prejudice. 

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Judge Nesbitt’s opinion was the only one that, if applied to the case at bar,

would allow PODS to enforce the notice provision without regard to prejudice. 

But the Supreme Court rejected that view. The only fair reading of National 

Gypsum is that any valid notice provision in a contract other than a constructionindustry surety bond can be enforced only when the failure to give notice causes 

prejudice to the opposing party.

Here there was no prejudice. In many circumstances, a timely notice may 

lead the defaulting party to change course. That is the primary purpose of a notice 

provision in a franchise agreement. (If the primary purpose was instead to 

foreclose claims, we would revisit our analysis of § 95.03, the statute precluding 

contractual provisions shortening a statute of limitations.) But here the only thing 

PODS could have done upon receiving an earlier notice was not to charge crosscountry royalty fees—in substance, to pay Cactus then what the judgment requires 

PODS to pay now. Enforcing the notice provision would give PODS an 

undeserved windfall. 

The notice provision does not foreclose these claims.

VII

For these reasons, the judgment is affirmed.

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