Court Opinion

ID: 8213123
Source: CourtListenerOpinion
Date Created: 2022-10-11 17:01:19.045626+00
Date Added: 2024-06-11T16:42:19.934099
License: Public Domain

USCA11 Case: 21-10242     Date Filed: 10/11/2022   Page: 1 of 15

                                           [DO NOT PUBLISH]
                            In the
         United States Court of Appeals
                 For the Eleventh Circuit

                   ____________________

                         No. 21-10242
                   Non-Argument Calendar
                   ____________________

PETERBROOKE FRANCHISING OF AMERICA, LLC,
                           Plaintiff-Counter Defendant-Appellee,
versus
MIAMI CHOCOLATES, LLC,
CHARLES MCDONALD,
JUDY MCDONALD,
                      Defendants-Counter Claimants-Appellants.
                   ____________________

          Appeal from the United States District Court
              for the Southern District of Florida
             D.C. Docket No. 1:16-cv-20417-MGC
                   ____________________
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2                         Opinion of the Court                    21-10242

Before JORDAN, LUCK, and LAGOA, Circuit Judges.
PER CURIAM:
       Miami Chocolates, LLC, Charles McDonald, and Judy
McDonald appeal the district court’s omnibus order granting in
part and denying in part cross-motions for summary judgment in
favor of Peterbrooke Franchising of America, LLC (“Peterbrooke
of America”). After review of the parties’ briefs and the record, we
vacate and remand for further proceedings.1
                                      I
                                     A
       On August 24, 2007, Miami Chocolates entered into a fran-
chise agreement with franchisor Peterbrooke Franchising, Inc.
(“Peterbrooke Franchising”), for a chocolate shop to be located in
Coral Gables, Florida (the “Peterbrooke franchise”). In September
of 2010, the McDonalds purchased Miami Chocolates and assumed
the operation of the Peterbrooke franchise pursuant to the terms
of the franchise agreement. At the time the McDonalds assumed
the operation of the Peterbrooke franchise, the point-of-sale system
(“POS system”) in the shop was made by Iciniti Corp., which was
then approved by Peterbrooke Franchising.
      In January of 2012, Peterbrooke of America purchased Pe-
terbrooke Franchising’s rights and responsibilities under the

1Because we write for the parties, and assume their familiarity with the rec-
ord, we set out only what is necessary to explain our decision.
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21-10242               Opinion of the Court                       3

franchise agreement. It also obtained the “right to use the Peter-
brooke trademarks worldwide to operate chocolate stores and to
grant franchises and licenses to third parties to do the same.” D.E.
202 at 4.
        In the franchise agreement, Miami Chocolates had agreed
that it would “procure and install [a POS system and necessary
equipment] as [Peterbrooke of America] specif[ied].” D.E. 1-1 at
14. To that end, Miami Chocolates would “provide any assistance
required by [Peterbrooke of America] to bring [the POS] system
on-line with [its] system at the earliest possible time.” Id. Miami
Chocolates agreed that it understood “that it may become neces-
sary for [it] to replace or upgrade the entire [POS] system with a
larger system capable of assuming and discharging all the tasks and
functions specified by [Peterbrooke of America].” Id. Peterbrooke
of America was permitted to substantially modify the specifications
and could have “require[d] installation of entirely different [POS]
systems during the term of [the a]greement.” Id. at 14–15. Finally,
Miami Chocolates “agree[d] to install at [its] own expense such ad-
ditions, changes, modifications, substitutions and/or replacements
to [its] hardware, software, telephone lines, power lines and other
related facilities” as directed by Peterbrooke of America and within
its “sole and exclusive discretion.” Id. at 15.
                                 B
      Between November 4, 2013, and October 14, 2015, Peter-
brooke of America sent several letters to franchisees requiring
them to upgrade and/or replace their stores’ POS system—first to
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4                      Opinion of the Court                 21-10242

the Micros E7 System, then to the Micros Symphony System, and
finally to the NCR Silver/Simplebox System. The letters cited the
applicable franchise agreement provisions that mandated the
changes, and advised that failure to comply would result in en-
forcement of Peterbrooke of America’s contractual rights. See,
e.g., D.E. 20-1.
       Miami Chocolates objected to changing its POS system to
each of the systems Peterbrooke of America requested. It asserted
that the systems were not compliant with industry standards and
would not be beneficial to the franchise.
        Then, on January 1, 2016, Miami Chocolates implemented
the Square POS system. Miami Chocolates refused to implement
the new POS system required by Peterbrooke of America, stating
that Peterbrooke of America had not tested the new system and
that franchisees would not benefit from implementing it. Based on
the failure of Miami Chocolates and the McDonalds to implement
the new POS system, Peterbrooke of America terminated the fran-
chise agreement.
        Upon termination, the agreement required that the appel-
lants stop using Peterbrooke of America’s trademarks and remove
all signage or other items that would “suggest[ ] or indicate[ ] a
connection or association with [Peterbrooke].” D.E. 1-1 at 52–53.
The appellants were required to remove “all distinctive physical
and structural features associated with the [t]rade [d]ress of Peter-
brooke Chocolatier Shops . . . to distinguish the [s]ite of the [s]hop
so clearly from its former appearance and from other Peterbrooke
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21-10242                Opinion of the Court                         5

Chocolatier Shops as to prevent any . . . confusion created by such
association.” Id. at 53. The franchise agreement also included a
non-compete provision prohibiting the appellants from directly or
indirectly having any interest in a competing business within a 25-
mile radius for a period of two years.
                                  C
        Following their alleged noncompliance with the termina-
tion provisions of the franchise agreement, Peterbrooke of Amer-
ica filed suit against the appellants. It asserted Lanham Act infringe-
ment, Lanham Act false designations, common-law trademark in-
fringement, common law unfair competition, and breach of the
franchise agreement. Miami Chocolates and the McDonalds filed
a counterclaim asserting breach of contract, breach of the implied
covenant of good faith and fair dealing, and violation of the Florida
Deceptive and Unfair Trade Practices Act. They also submitted
two requests for declaratory relief.
      Eventually, both sides filed cross-motions for summary
judgment. The district court entered an omnibus order granting
both motions in part and denying them in part. The court granted
Peterbrooke of America’s motion for summary judgment on its
counts for unfair competition and breach of the franchise agree-
ment. And it granted summary judgment in favor of Peterbrooke
of America on the appellants’ counterclaim.
      The district court concluded that, despite the appellants’
contentions to the contrary, Peterbrooke of America had complied
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6                        Opinion of the Court                    21-10242

with the terms of the franchise agreement in asking franchisees to
implement the new POS systems. Thus, it held that Miami Choc-
olates and the McDonalds were not legally justified in their failure
to comply with Peterbrooke of America’s request that they imple-
ment a new POS system. The court also held that this failure con-
stituted a material breach of the franchise agreement’s terms, as
required by Florida law.
       Next, the district court concluded that the non-compete pro-
vision was enforceable because it was reasonable as to time, geo-
graphic limitation, and line of business, and because it protected a
legitimate business interest. Given the appellants’ breach of the
non-compete provision by operating a competing business in the
same location as the then-terminated Peterbrooke franchise, the
court concluded that Peterbrooke of America suffered damages of
$10,275.36 and was entitled to summary judgment on that claim.
    The court then entered a final judgment consistent with its
summary judgment order. This appeal followed. 2
                                    II
                                    A
       We review a grant of summary judgment de novo, “apply-
ing the same legal standards used by the district court.” Yarbrough

2 Only Miami Chocolates and the McDonalds have appealed the district
court’s orders. Peterbrooke of America has not filed any appeals on adverse
rulings in connection with the underlying litigation.
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21-10242               Opinion of the Court                         7

v. Decatur Hous. Auth., 941 F.3d 1022, 1026 (11th Cir. 2019) (inter-
nal quotations and citation omitted). We draw all facts and infer-
ences in the light most favorable to the nonmoving party. See Dyer
v. Lee, 488 F.3d 876, 878 (11th Cir. 2007). Summary judgment is
appropriate only where “there is no genuine dispute as to any ma-
terial fact and the movant is entitled to judgment as a matter of
law.” Fed. R. Civ. P. 56(a).
                                  B
        The appellants raise several arguments on appeal. First, they
assert that the district court erred in granting summary judgment
on the breach of contract claim because (1) Peterbrooke of America
failed to establish that it had tested the new POS system and deter-
mined it would be beneficial to franchisees; and (2) Peterbrooke of
America failed to establish that the failure to implement the new
POS system was a “material” breach of the franchise agreement.
Second, they contend the court erred in granting summary judg-
ment for Peterbrooke of America on its unfair competition claim
because it failed to establish that they had materially breached the
franchise agreement. Third, they argue that the district court erred
in granting summary judgment on their counterclaim because Pe-
terbrooke of America wrongfully terminated the franchise agree-
ment over their refusal to implement the new POS system.
        The appellants largely rely on § 4.6.4 of the franchise agree-
ment, which states: “Following [Peterbrooke of America’s] testing
and determination that it will prove beneficial to [Miami Choco-
lates], [Miami Chocolates] agree[s] to install at [its] own expense
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8                      Opinion of the Court                 21-10242

such additions, changes, modifications, substitutions and/or re-
placements to [the POS system].” D.E. 1-1 at 15. Based on this
provision, the appellants argue that they were not required to im-
plement the new POS system, as requested, because Peterbrooke
of America failed to perform the contractually-required testing of
the system to be implemented.
       Peterbrooke of America responds that the district court
properly granted summary judgment on its breach of contract
claim because the franchise agreement clearly “required [the
a]ppellants to comply with” its specifications for installation of the
new POS system. Appellee’s Br. at 2. The appellants failed to com-
ply when they refused to install the new POS system, and failed
show any bad faith on the part of Peterbrooke of America.
                                 III
                                  A
        “Under ordinary principles of contract interpretation, a
court must first examine the natural and plain meaning of a [con-
tract’s] language.” Key v. Allstate Ins. Co., 90 F.3d 1546, 1548–49
(11th Cir. 1996). The plain language of the franchise agreement
grants Peterbrooke of America broad and full discretion in deter-
mining whether a new POS system is appropriate and/or beneficial
to the franchises. See D.E. 1-1 at 14–15. The franchise agreement
states that, when instructed to do so by Peterbrooke of America,
the appellants were required to procure and install a POS system
as specified by Peterbrooke of America. See id. at 14. The franchise
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21-10242                Opinion of the Court                          9

agreement further states that Peterbrooke of America could re-
quire the appellants to replace or upgrade the entire POS system to
its specifications. See id. at 14–15. The appellants were to bear the
costs of any additions, substitutions, or replacements of the POS
system. See id. at 15. All of these provisions indicate that Peter-
brooke of America acted permissibly in asking the appellants to up-
date and change the franchise’s POS system.
        The appellants contend that the “testing” referenced in
§ 4.6.4 of the franchise agreement constituted a condition prece-
dent with which Peterbrooke of America was required to comply
before there could be a breach of a contractual duty. See Appel-
lant’s Br. at 11. Nothing in the franchise agreement, however, con-
ditions the implementation of a new POS system on any specific
type or amount of testing by Peterbrooke of America prior to im-
plementation.
        In our view, § 4.6.4 of the franchise agreement does not lend
support for the appellants’ arguments. Nor does any other provi-
sion. Reading the contractual provisions together, Peterbrooke of
America had the full and exclusive discretion to designate and
change the POS system franchisees were required to implement.
Additionally, as noted by the district court, “nothing in the [fran-
chise a]greement required [Peterbrooke of America] to share the
details of its testing, analysis, and selection process with [the appel-
lants].” D.E. 202 at 10.
      Assuming that Peterbrooke of America was required to per-
form some testing, see D.E. 1-1 at 15, it put forth undisputed
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10                      Opinion of the Court                  21-10242

evidence that it had done so. See D.E. 8 at 16 (affidavit of Peter-
brooke of America’s Chief Operating Officer explaining the testing
carried out on the new POS system before asking franchisees to
implement that same system). And, as stated, nothing in the fran-
chise agreement required any particular level or type of testing.
       The appellants do not point to any other provision of the
agreement that dictates the amount of testing or any evidence that
would show that Peterbrooke of America failed to test the new
POS system. Thus, the district court properly concluded that the
appellants breached their duty under the franchise agreement by
refusing to implement the POS systems required by Peterbrooke
of America. The remaining question is whether that breach was
material.
                                   B
       Under Florida law, “the materiality of a breach is relevant
when a party seeks to terminate or rescind a contractual relation-
ship.” Burger King Corp. v. Mason, 710 F.2d 1480, 1490 (11th Cir.
1983). Termination is only proper where the nonperforming party
has breached a material term because an immaterial breach does
not excuse continued performance. See id. “To constitute a vital
or material breach, a party’s nonperformance must ‘go to the es-
sence of the contract.’” MDS (Canada) Inc. v. Rad Source Techs.,
Inc., 720 F.3d 833, 849 (11th Cir. 2013) (quoting Beefy Trail, Inc. v.
Beefy King Int’l, Inc., 267 So. 2d 853, 857 (Fla. Dist. Ct. App. 1972)).
“A party’s ‘failure to perform some minor part of his contractual
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21-10242                Opinion of the Court                        11

duty cannot be classified as a material or vital breach.’” Id. (quoting
Beefy Trail, 267 So. 2d at 857).
       After considering the parties’ arguments, we conclude that
genuine issues of material fact remain as to whether the appellants’
breach of the franchise agreement concerning their obligation to
implement the required POS systems was material such that sum-
mary judgment was inappropriate on this record. Generally,
whether an alleged breach is material under Florida law is a ques-
tion of fact. See, e.g., Covelli Fam., L.P. v. ABG5, L.L.C., 977 So.
2d 749, 752 (Fla. Dist. Ct. App. 2008) (“The issue of whether an al-
leged breach is vital or material is reviewed as a question of fact.”);
Moore v. Chodorow, 925 So. 2d 457, 461 (Fla. Dist. Ct. App. 2006)
(“Whether a party’s failure to commit certain actions constitutes a
material breach of an agreement is reviewed as a question of fact.”).
And taking the facts in the light most favorable to the appellants (as
we must), Peterbrooke of America has not shown, as a factual mat-
ter, that Miami Chocolates’ failure to migrate to the NCR Sil-
ver/Simplebox POS system was material to the franchise relation-
ship.
        To begin with, where parties use different language in dif-
ferent provisions of a contract, courts presume that those provi-
sions have different meanings. See Aleman v. Gervas, 314 So. 3d
350, 352 (Fla. Dist. Ct. App. 2020) (“[T]he use of different language
in different contractual provisions strongly implies that a different
meaning was intended.” (citation omitted)); Nat’l R.R. Pass. Corp.
(Amtrak) v. Rountree Trans. & Rigging, Inc., 422 F.3d 1275, 1284
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12                      Opinion of the Court                 21-10242

(11th Cir. 2005) (explaining that “[e]very provision in a contract
should be given meaning and effect to avoid rendering any provi-
sion mere surplusage” (internal quotation marks and citation omit-
ted)). See also Penncro Assocs., Inc. v. Sprint Spectrum, L.P., 499
F.3d 1151, 1156–57 (10th Cir. 2007) (“When a contract uses differ-
ent language in proximate and similar provisions, we commonly
understand the provisions to illuminate one another and assume
that the parties’ use of different language was intended to convey
different meanings.”). The franchise agreement, which deals with
the POS system in § 4.6, is silent as to the materiality of Miami
Chocolates’ obligations as to the implementation of POS systems.
As the appellants note, numerous provisions of the franchise agree-
ment explicitly state that compliance with certain terms is material.
See, e.g., D.E. 1-1 at 18 (“Any unauthorized use of the Marks by
You shall constitute a material breach of this Agreement . . . .”); id.
at 22 (“Failure to procure execution of a Confidentiality and Non-
Competition Agreement shall be a material breach of this Agree-
ment.”). No such language, however, appears in § 4.6 of the fran-
chise agreement. Although Peterbrooke of America responds—
without citation to authority—that this fact “does not take away
from the materiality of Miami Chocolates’ obligations to install the
new POS system,” Appellee’s Br. at 6, this difference in language
amongst different provisions of the franchise agreement suggests
that the parties agreed that the failure to comply with POS system
requirements was not necessarily material.
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21-10242                Opinion of the Court                        13

       Beyond the difference of language in the franchise agree-
ment, other evidence in the record demonstrates that genuine is-
sues of material fact remain as to the materiality of the breach here.
For example, one of Peterbrooke of America’s corporate represent-
atives, Jeffrey Smith, testified that the company permitted fran-
chisees who had purchased a prior POS system to keep that system
and not convert to the new system “until they had it depreciated
or had paid off their equipment leases.” D.E. 139-1 at 9. Mr. Smith
also testified that at least half of the Peterbrooke franchises were
permitted to continue operating on a POS system other than NCR
Silver at the time when Miami Chocolates’ agreement was termi-
nated for refusing to upgrade their POS system. See D.E. 163-6 at
77. This indicates that franchises could, in fact, operate on different
POS systems, meaning that the POS system may not be a term es-
sential to the franchise agreement. And Peterbrooke of America
has not provided evidence demonstrating that its franchisees were
not being permitted to continue using other POS systems in those
situations.
        Further, Miami Chocolates provided affidavits stating that
their Square POS system has at least the same functionality with
respect to reporting and monitoring of sales as the systems required
by Peterbrooke of America—something which Peterbrooke of
America did not contest. And it gave Peterbrooke of America the
username and password to access Miami Chocolates’ weekly sales
activities on the Square POS system. See D.E. 21-1 at ¶ 14. There
is no evidence in the record that Peterbrooke of America was
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14                       Opinion of the Court                    21-10242

denied access to this information or that Miami Chocolates failed
to make any payments to it. See id. at ¶ 13.
       Given that other franchises were using different POS sys-
tems at the time Peterbrooke of America terminated Miami Choc-
olates’ franchise agreement, that their Square system had the same
functionalities, and that they gave Peterbrooke of America full ac-
cess to their sales information, genuine issues of material fact re-
main as to whether the breach was material. Summary judgment
on Peterbrooke of America’s breach of contract claim was there-
fore inappropriate. 3
        Because we vacate the grant of summary judgment on Pe-
terbrooke of America’s breach of contract claim, we also vacate the
district court’s grant of summary judgment on the unfair competi-
tion claim. The court’s ruling in favor of Peterbrooke of America
on that latter claim was based upon the appellants’ “continued use
of [its] phone numbers, social media pages, and the [Peterbrooke
franchise] location after termination of the [f]ranchise [a]gree-
ment.” D.E. 202 at 17. Unless Miami Chocolates’ breach of the
franchise agreement was material, Peterbrooke of America would
not have been justified in its termination of that agreement—a fact
that formed the basis for its unfair competition claim. Further,

3 We recognize that Peterbrooke of America first requested that Miami Choc-
olates change its POS system in 2013 and that Miami Chocolates unilaterally
changed its system to the Square system in 2016. We express no view as to
how these facts play out in the materiality calculus.
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21-10242              Opinion of the Court                      15

because issues of fact remain as to the materiality of Miami Choc-
olates’ breach, the court could not have properly concluded that
Peterbrooke of America was entitled to summary judgment in its
favor on the appellants’ counterclaim for breach of contract.
                                V
       We vacate the district court’s grant of summary judgment
in favor of Peterbrooke of America on its claims for breach of con-
tract and unfair competition, and on the appellants’ counterclaim
for breach of contract, and remand for further proceedings.
      VACATED and REMANDED.