Court Opinion

ID: 3018410
Source: CourtListenerOpinion
Date Created: 2015-10-13 22:19:07.687128+00
Date Added: 2024-06-11T12:52:48.301195
License: Public Domain

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                                No. 96-3233
                                __________

Charles J. Jensen; George Payne,    *
                                    *
      Plaintiffs/Appellants,        *
                                    *  Appeal from the United States
      v.                            *  District Court for the
                                    *  District of Minnesota.
Taco John’s International, Inc.,    *
                                    *
      Defendant/Appellee.           *
                               __________

                         Submitted:    March 13, 1997

                             Filed:    April 4, 1997
                                 __________

Before MAGILL and MURPHY, Circuit Judges, and GOLDBERG,1 Judge.
                               __________

MURPHY, Circuit Judge.

       Appellants Charles J. Jensen and George Payne hoped to obtain from
Taco John’s International, Inc. (Taco John’s) exclusive franchises in the
Rochester, Minnesota area.   The parties entered into negotiations, but they
disagree as to whether an enforceable agreement was ever reached.     After
Taco   John’s turned to another party to develop the Rochester area,
appellants sued for breach of contract, misrepresentation, and promissory
estoppel.    The district court2 granted summary judgment to Taco John’s.
We affirm.

       1
      The Honorable Richard W. Goldberg, Judge, United States
Court of International Trade, sitting by designation.
       2
      The Honorable Michael J. Davis, United States District
Judge for the District of Minnesota, presiding.
      Taco John’s operates a chain of Mexican-style restaurants and offers
two   kinds   of   arrangements   for   franchisees.   The   standard   Franchise
Agreement permits a franchisee to operate a single store for twenty years
on a non-exclusive basis.         Taco John’s also uses an Area Development
Agreement, which gives a franchisee the exclusive right to operate stores
in a designated area in return for a firm commitment to open a set number
of stores within a specific period of time.

      Appellants contacted Taco John’s in February of 1993 and expressed
interest in becoming franchisees.         After preliminary approval of their
financial statements, Taco John’s asked them to submit a business plan.
In a letter soliciting the business plan, Taco John’s indicated that
several parties were interested in developing the Rochester market and that
it would base its franchisee decision on the ability to operate and finance
a multi-unit business.

      On April 19, 1993, appellants met with Taco John’s officials in
Cheyenne, Wyoming.      Appellants presented a business plan that primarily
discussed the opening of a single store, but they also expressed their
belief that Rochester could support three stores.        Taco John’s stated it
would like to see four or five stores in the Rochester area.            Appellants
assured Taco John’s that they were willing to commit to four or five stores
and that plans for a second store would be “well underway” within 12 months
of the opening of the first store.       Appellants stated that they would open
all stores within a five year period.           At the time of this meeting,
appellants were not familiar with the specific terms of a Taco John’s Area
Development Agreement.
      Appellants were informed, by a letter dated April 20, 1993, that they
had been approved as franchisees.        The letter stated that

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in order to reach their goal of becoming “active” franchisees, appellants
would need to complete the site location process, finalize their scheduled
management training program, and begin negotiations for financing.   In his
deposition, Charles Jensen said appellants understood this letter to mean
that they “had been approved and would be granted the franchise.”      Jensen
also testified that “things” still had to be talked about, “details had to
be specified,” and “there was room for negotiation” concerning the specific
terms of the Area Development Agreement.      He admitted that he knew they
would not become franchisees if they did not obtain a site, pay the
franchise fees for a specific number of stores, attend training school, or
sign a written agreement.

       Over the next two months, appellants attempted unsuccessfully to
obtain a site for a store, and Taco John’s representatives traveled to
Rochester to tour sites with them.        Taco John’s indicated in a letter
reviewing potential sites, dated April 30, 1993, that it looked forward to
working with appellants to develop the Rochester market and to the opening
of their first store.    Appellants’ purchase bids on three sites were not
accepted, however, and another potential site was rejected by Taco John’s
as too small.   In June of 1993 appellants heard that Taco John’s had given
preliminary approval to another party to develop the Rochester area.    They
sued, and the district court granted summary judgment to Taco John’s.
       Summary judgment is appropriate when there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of
law.     Kopp v. Samaritan Health Sys., Inc., 13 F.3d 264, 268 (8th Cir.
1993).   Our review is de novo, applying the same standards as the district
court.   Unigroup, Inc. v. O’Rourke Storage & Transfer Co., 980 F.2d 1217,
1219 (8th Cir. 1992).   The moving party is entitled to judgment as a matter
of law where the

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nonmoving party has failed to make a significant showing on an essential
element of its claim to which it has the burden of proof.     Celotex Corp.
v. Catrett, 477 U.S. 317, 322-23 (1986).
        Appellants allege their communications with Taco John’s gave rise to
an enforceable contract granting them the exclusive rights to develop
restaurants in the Rochester area.    Although no written contract was ever
signed, appellants contend the terms of the contract include the standard
form Franchise Agreement, the standard form Area Development Agreement, and
the oral conversations between the parties.      Taco John’s, on the other
hand, contends that appellants have mistaken preliminary negotiations for
an enforceable contract.
        Under Minnesota law, an enforceable contract requires reasonable
certainty about the intent of the parties regarding the fundamental terms
of the contract.   Hill v. Okay Const. Co., Inc., 252 N.W.2d 107, 114 (Minn.
1977).    Appellants have not shown that the parties ever reached a firm
agreement on the number, timing, or location of the stores they were to
open.    A key feature of an Area Development Agreement is the franchisee’s
promise to open a fixed number of stores within a certain time frame.
Appellants’ business plan presented data for one store, but they also
suggested building three stores.     Taco John’s wanted four or five stores
in the development area.       The best appellants can argue is that the
discussion had narrowed to opening either four or five stores.   The parties
also never established a firm timetable for the opening of these stores.
Appellants only promised that plans for a second store would be well
underway within a year of the first, and that they would open all stores,
whatever the final number, within five years.   Appellants acknowledge that
the letter of April 20, 1993 states that their status as franchisees was
contingent on obtaining appropriate sites.      Although Taco John’s worked
with appellants to

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acquire sites, appellants were ultimately unsuccessful in this regard.
Even considering the facts in a light most favorable to appellants, they
have not made a significant showing that the fundamental terms of the
alleged contract were reasonably certain.   See Celotex, 477 U.S. at 322-23.

     Even if a contract had been created, it could not have been enforced
because Minnesota law requires any contract not capable of being performed
within one year to be in writing.    See Minn. Stat. § 513.01.   Appellants
do not claim a written contract, but argue that a writing was unnecessary.
Performance could theoretically be complete within a year, they say,
because Section 10.5 of the standard Franchise Agreement provides that Taco
John’s     need not transfer franchise rights to heirs and one of the
franchisees could possibly die within one year.   Appellants rely on Eklund
v. Vincent Brass & Aluminum Co., 351 N.W.2d 371 (Minn. Ct. App. 1984),
where an oral contract for permanent employment fell outside the statute
of frauds because it could have been performed within a year.        Eklund
distinguished an oral contract for permanent employment from an oral
contract for a limited period; the latter type is subject to the statute
of frauds even if a party were to die within a year.      Id. 351 N.W.2d at
375; see also Roaderick v. Lull Eng’g Co., 208 N.W.2d 761 (Minn. 1973)
(oral contract for two years of employment is subject to statute of
frauds).    Appellants claim an oral contract for a period of five years so
Eklund does not rescue them from application of the statute of frauds.
     Finally, appellants contend the district court erred in dismissing
their claims of misrepresentation and promissory estoppel.    To succeed on
a claim for fraudulent misrepresentation, appellants must show that Taco
John’s knowingly made a false representation of a past or present fact
susceptible to knowledge.    Hurley v. TCF Banking & Sav., 414 N.W.2d 584,
586 (Minn. Ct. App.

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1987).    Appellants believe the letters they received from Taco John’s
promised they would be exclusive franchisees in the Rochester area.   These
letters, however, never mention any exclusive rights, and while they do
declare appellants to be approved for a franchise of indeterminate scope,
“active” franchisee status is made contingent on the completion of the site
location process.   Appellants have not shown they ever obtained a site or
became “active” franchisees or that Taco John’s statements were knowingly
false.   The promissory estoppel claim is also deficient because appellants
have not shown a “clear and definite promise” made by Taco John’s.     See
Ruud v. Great Plains Supply, Inc., 526 N.W.2d 369, 372 (Minn. 1995).     In
sum, appellants failed to make a significant showing on each essential
element of either a misrepresentation or promissory estoppel claim.

     For these reasons, the judgment is affirmed.

A true copy.

     Attest:

           CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.

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