Opinion ID: 155491
Heading Depth: 2
Heading Rank: 1

Heading: Count V--Claim under Indiana franchise statutes

Text: 55 Count V is a claim by SRS against Enterprises for violation of the Indiana franchise statutes. The district court determined that there was no franchise relationship between SRS and Enterprises because, first, SRS had not paid a franchise fee, and second, because it found that SRS was not in the business of selling both automobiles and gas and/or oil. We agree with the district court's determination on the record before us. 56 Relevant to this case, there are two ways under Indiana law to show that a particular agreement is a franchise. After meeting two requirements not at issue here, a franchise exists if the alleged franchisee is required to pay a franchise fee, Ind.Code § 23-2-2.5-1(a)(3), or if the agreement relates to the business of selling automobiles and/or trucks and the business of selling gasoline and/or oil primarily for use in vehicles with or without the sale of accessory items. Id. at § 23-2-2.7-5. A franchise fee is defined as 57 any fee that a franchisee is required to pay directly or indirectly for the right to conduct a business to sell, resell, or distribute goods, services or franchises under a contract agreement, including, but not limited to, any such payment for goods or services. Franchise fee does not include: 58 ... 59 (3) the purchase or agreement to purchase goods at a bona fide wholesale price. 60 Id. at § 23-2-2.5-1(i). A franchise fee is a fee paid for the right to do business, and the evidence must therefore show the payment of an unrecoverable investment in the franchise. Continental Basketball Ass'n, Inc. v. Ellenstein Enters., Inc., 640 N.E.2d 705, 709 (Ind.Ct.App.1994), aff'd in relevant part, 669 N.E.2d 134 (Ind.1996). 61 SRS first argues that it paid a franchise fee because it purchased cars and parts from Enterprises at prices higher than Enterprises paid. However, as the district court correctly concluded, SRS has not met its burden of showing that the relationship between Enterprises and SRS was anything other than an ordinary wholesaler-retailer relationship, and there is no indication one way or the other whether Enterprises sold products at a bona fide wholesale price. The mere fact that a seller in an ordinary business relationship sells goods at prices exceeding what it pays does not create a reasonable inference that the seller charges more than bona fide wholesale prices. 62 SRS also contends that it paid an indirect franchise fee when it purchased its predecessor's business. It paid its predecessor $30,000 for franchise rights to be a CSR, and it contends that Enterprises approved this transaction. However, there is no indication that Enterprises received any of this payment or otherwise benefitted from it. The district court was correct in concluding that a payment to a third party that does not provide any apparent benefit to the alleged franchisor is not an indirect franchise fee under the statute. See Implement Serv., Inc. v. Tecumseh Prods. Co., 726 F.Supp. 1171, 1179 (S.D.Ind.1989). 63 Finally, SRS argues that the district court erred in granting summary judgment sua sponte on the alternate method of proving a franchise; i.e., whether the agreement relates to the business of selling automobiles and/or trucks and the business of selling gasoline and/or oil. § 23-2-2.7-5. The district court concluded that 64 both parties here misinterpret the statute. Both sides focus on the word automobile in the statute and look to various sources to come up with a definition of that word. But the statute is broader. In order for the exception to apply, the contract in question must meet three criteria, not two. It must (1) meet the requirements of clauses one and two of section 23-2-2.5-1, (2) be related to the business of selling automobiles and/or trucks, and (3) be related to the business of selling gas and/or oil. Since SRS was not in the business of selling gasoline or oil, the third element is missing. 65 District Court Order and Memorandum of Decision at 18. SRS contends that there was no evidence in the record on this issue because Enterprises did not contend in its summary judgment motion that SRS had to show it was in the business of selling gasoline or oil. 66 A court may grant summary judgment sua sponte so long as the losing party was on notice that [it] had to come forward with all of [its] evidence. Celotex Corp. v. Catrett, 477 U.S. 317, 326, 106 S.Ct. 2548, 2554, 91 L.Ed.2d 265 (1986). Though we find this a close question, we conclude that SRS had adequate notice that it should have produced any relevant evidence it had showing it sold gasoline or oil. In its summary judgment motion, Enterprises contended that [s]ince SRS did not sell trucks, gasoline, or oil, the only issue remaining is whether it sold 'automobiles' within the meaning of the Franchise Act. Appellants' App. at 59. SRS produced no evidence that it did sell gasoline or oil, but instead focused its argument on its claim that it sold automobiles. As the district court noted, both parties erroneously viewed the franchise statute as requiring either the sale of automobiles, gasoline or oil, not as requiring the sale of both automobiles and gasoline or oil. 67 Nonetheless, SRS was on notice that, even under its mistaken interpretation of the statute, it could defeat summary judgment by adducing evidence that it sold gasoline or oil. 16 Enterprises had categorically stated in its motion that SRS could not qualify under the statutory provision for sale of gasoline or oil. That was a premise for Enterprises' contention that the only issue remaining was whether SRS sold automobiles. Thus, while Enterprises focused its argument on automobiles, in doing so, it alerted SRS to the issue of whether SRS sold gasoline or oil as well. That distinguishes this case from those that hold to the effect that [w]hen a party moves for summary judgment on ground A, his opponent is not required to respond to ground B--a ground the movant might have presented but did not. Malhotra v. Cotter & Co., 885 F.2d 1305, 1310 (7th Cir.1989); see also Tavery v. United States, 32 F.3d 1423, 1427 n. 5 (10th Cir.1994). Enterprises' motion contended that SRS could not show either A or B--sale of gasoline/oil or automobiles--and SRS chose to respond only with respect to B. 17 We therefore reject SRS's contention and affirm the district court's grant of summary judgment on Count V. 68