Court Opinion

ID: 2671609
Source: CourtListenerOpinion
Date Created: 2014-04-30 00:00:28.300699+00
Date Added: 2024-06-11T13:18:05.517526
License: Public Domain

NOT PRECEDENTIAL

               UNITED STATES COURT OF APPEALS
                    FOR THE THIRD CIRCUIT
                         _____________

                       Nos. 13-2563 and 13-2564
                            _____________

                  RED ROOF FRANCHISING, LLC

                                  v.

                   ASVIN PATEL; ARUNA PATEL;
                        AA HOSPITALITY,

                               Appellants in No. 13-2563
                           _____________

                     RED ROOF FRANCHISING

                                  v.

                  ALPESH PATEL; ARUNA PATEL;
                       AA HOSPITALITY,

                               Appellants in No. 13-2564
                           _____________

             On Appeal from the United States District Court
                       for the District of New Jersey
           (Civil Action Nos. 1-10-cv-04065 & 1-10-cv-04120)
                District Judge: Honorable Noel L. Hillman
                               ___________

                 Submitted Under Third Circuit L.A.R. 34.1(a)
                              March 20, 2014

Before:   CHAGARES, GREENAWAY, JR., and VANASKIE, Circuit Judges

                        (Filed: April 29, 2014)
                             ___________
                                        OPINION
                                       ___________

VANASKIE, Circuit Judge.

       Before us are consolidated appeals from two breach-of-contract cases, both of

which stem from franchise agreements entered into by Appellants Aruna, Asvin, and

Alpesh Patel, their closely held companies, and franchisor Red Roof Inns, Inc. and its

corporate successor, Appellee Red Roof Franchising, LLC (“RRF”). In both cases RRF,

the plaintiff, claims that Appellants breached a franchise agreement by failing to remit

royalties. Appellants argue that RRF breached the franchise agreement first, thereby

excusing or mitigating their own nonperformance. Appellants now seek relief from the

District Court’s orders granting summary judgment in favor of RRF on all claims. In

both cases, we will affirm.

                                             I.

       We write primarily for the parties, who are familiar with the facts and procedural

history of these cases. Accordingly, we set forth only those details necessary to our

analysis.

       On August 23, 2002, Asvin and Aruna Patel entered into a 15-year franchise

agreement with Red Roof Inns, Inc., pursuant to which they opened and operated a Red

Roof Inn in Bellmawr, New Jersey. In 2005, Red Roof Inns, Inc. assigned its rights and

obligations under the franchise agreement to Accor Franchising North America, LLC

(“Accor”). In 2006, the Patels assigned their interest in the franchise agreement to their

                                             2
closely held corporation, AA Hospitality (“AAH”), and simultaneously executed a

personal guarantee as to AAH’s obligations under the agreement.1 On April 9, 2007,

Aruna and Alpesh Patel,2 operating by way of a second closely held corporation, AA

Hospitality Northshore, LLC (“AAHN”), entered into another franchise agreement with

Accor, this time for the operation of a Red Roof Inn in Duluth, Minnesota.3 Again, the

arrangement was bolstered by a personal guarantee. Later in 2007, Accor assigned its

rights and obligations under the franchise agreements to RRF.

       Under the franchise agreements, AAH and AAHN were required to pay monthly

royalty fees to RRF or face monetary penalties. The agreements permitted RRF to

terminate the relationship after providing notice of default and an opportunity to cure.

The agreements also provided for liquidated damages in the event of premature

termination.

       Over the course of 2009, AAH fell into arrears with respect to the monthly royalty

fees on the New Jersey location. On January 19, 2010, RRF mailed a “WRITTEN

NOTICE OF DEFAULT AND NOTICE OF TERMINATION” to AAH and to the

Patels. The letter offered an opportunity to cure the default by making full payment of

       1
       We will refer to Aruna and Asvin Patel, along with AA Hospitality, Inc., as the
“New Jersey Appellants.”
       2
        As noted by the District Court, it appears that Asvin Patel is the father of Alpesh
Patel, and “[i]t remains unclear whether Aruna Patel is the same individual in both
cases.” (App. 60.) Any ambiguity in this regard is immaterial to our analysis.
       3
        We will refer to Aruna and Alpesh Patel, along with AA Hospitality Northshore,
LLC, as the “Minnesota Appellants.”
                                          3
the claimed fees before March 26, 2010, and stated that in the absence of such action, the

franchise agreement would be terminated without further notice.

        On April 20, 2010, having received no further payments, RRF sent a “Notice of

Termination of Franchise Agreement,” which stated that AAH and the Patels had failed

to cure and that RRF considered the franchise agreement terminated. The notice

instructed the franchisees to cease use of all Red Roof Inn signage and proprietary

systems. RRF submitted evidence that even after the purported termination, AAH

continued to operate the New Jersey business as a Red Roof Inn in violation of the

terminated franchise agreement.

        The Minnesota Red Roof Inn operated by the Patels eventually foundered as well.

By the summer of 2010, AAHN had fallen behind with respect to royalty obligations for

that location, and instead rebranded the facility as an “America’s Best Value Inn.” On

July 2, 2010, RRF sent a letter stating it intended to terminate the agreement as of July 6,

2010.

        In August 2010, RRF filed two complaints in federal court, one addressing the

New Jersey franchise agreement, and the other, the Minnesota agreement. In both

complaints, Count One stated a claim for damages for breach of the respective franchise

agreements by the corporate franchisee; Count Two sought specific performance to

terminate any continuing use of Red Roof Inn’s intellectual property; and Count Three

stated a claim for damages for breach of the guarantee by the Patels.

                                             4
       In response, Appellants raised affirmative defenses and filed counterclaims, most

of which were predicated on allegations that RRF itself had breached the franchise

agreements prior to any nonpayment. In the New Jersey case, the counterclaims included

alleged violations of the New Jersey Franchise Practices Act (“NJFPA”), N.J. Stat. Ann.

§ 56:10-5, which sets forth, among other things, certain notice requirements for

termination of a franchise agreement.

       In October 2011, RRF sought partial summary judgment in both cases on its

breach of contract claims and on all counterclaims. In opinions and orders entered on

June 28, 2012, the District Court granted those motions. In opinions and orders dated

March 28, 2013, the District Court denied Appellants’ motions to reconsider and

finalized the calculation of damages. On May 2, 2013, the Court entered judgment

against the Minnesota Appellants in the amount of $208,794.05, App. 134, and against

the New Jersey Appellants in the amount of $198,818.91, App. 17.

                                            II.

       The District Court had diversity jurisdiction over both cases under 28 U.S.C. §

1332. We have jurisdiction under 28 U.S.C. § 1291.

       Our review of a District Court’s grant of summary judgment is plenary. Klein v.

Weidner, 729 F.3d 280, 283 (3d Cir. 2013). Summary judgment is appropriate where the

movant establishes “that there is no genuine dispute as to any material fact and the

movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a).

                                            III.

                                             5
       We first address the District Court’s grant of summary judgment in favor of RRF

and against the New Jersey Appellants in Case No. 13-2563. The parties agree that this

case is governed by New Jersey law.

                                             A.

       To prove a breach of contract under New Jersey law, “a plaintiff has the burden to

show that the parties entered into a valid contract, that the defendant failed to perform his

obligations under the contract and that the plaintiff sustained damages as a result.”

Murphy v. Implicito, 920 A.2d 678, 689 (N.J. Super. Ct. App. Div. 2007) (quoting

Murphy v. Implicito, No. A–3172–03, 2005 WL 2447776, at *8–10 (N.J. Super. Ct. App.

Div. Sept. 22, 2005)). The New Jersey Appellants conceded in the District Court that

AAH failed to pay royalties due under the franchise agreement, (App. 35 n.3), and at no

time have they challenged the validity of the personal guarantee.

       Instead, the New Jersey Appellants argue that RRF’s own material breaches of the

franchise agreement excuse nonpayment and serve as a complete affirmative defense.

We assume without deciding that a material breach by RRF, if proved, could give rise to

an affirmative defense against RRF’s own breach-of-contract claims.4 Our review of the

       4
         Relying on our holding in S & R Corp. v. Jiffy Lube Int’l, Inc., 968 F.2d 371 (3d
Cir. 1992), the District Court noted that where a franchisee alleges breach of contract by
a franchisor, the franchisee is entitled to terminate the agreement in its entirety, or bring
suit and continue performance; the franchisee may not, however, withhold royalties and
continue to operate as usual. Here, Appellants had neither terminated the agreement nor
sued for partial breach, and instead continued to hold their business out as a Red Roof Inn
while no longer paying for that privilege. The District Court thus concluded that RRF’s
                                               6
record, however, indicates that the New Jersey Appellants have not produced evidence

sufficient to create a genuine dispute of material fact on this point.

       Although the New Jersey Appellants’ submission is vague about which particular

clauses in the 60-page franchise agreement and addendum they believe were breached,

the essence of their claim is that RRF failed with respect to certain marketing obligations

and maintenance of an electronic reservations system. See Appellants’ Br. at 16–17.

Section 3.3 of the New Jersey Franchise Agreement states that the franchisor “shall

establish, maintain and administer an Accel Reservation System and a Marketing

Program, subject to the provisions of Section 10 hereof.” (Supp. App. 241). Section 4.3

provides that the franchisee is obligated to remit a monthly contribution for this purpose,

which under Section 10.1 shall be used by the franchisor “in its sole discretion to

alleged breaches, even if supported by the evidence, failed as a matter of law to excuse
Appellants’ nonpayment.

       Appellants contend that the holding of Jiffy Lube on this point was limited to the
proposition that where a franchisee fails to pay royalties under a franchise agreement, the
franchisor may be entitled to preliminary injunctive relief to prevent continuing abuse of
the franchisor’s mark. According to Appellants, Jiffy Lube took no position on whether
the franchisee, as the defendant in a suit for damages, might be entitled to raise an
affirmative defense based on the franchisor’s alleged breach. See Travelodge Hotels v.
Honeysuckle Enter., 357 F. Supp. 2d 788, 797–98 (D.N.J. 2005) (distinguishing Jiffy
Lube and holding that a material breach by the franchisor might excuse nonpayment of
royalties by the franchisee under New Jersey law).

       For the reasons stated below, we need not resolve this conflict to decide the cases
before us.
                                           7
develop, operate, support and/or enhance the Accel Reservation System” and “Marketing

Programs for the System.” (Supp. App. 252).

       The New Jersey Appellants’ only evidence that RRF failed to satisfy these

obligations consists of an affidavit from Asvin Patel. As to the reservations system, Patel

explains:

              The reservations system has been afflicted with defects and
              outages. During the last several years the system has been
              ‘down’ eight to nine times. The system simply failed. It was
              impossible for people to make and hotels to receive
              reservations during these outages. Some of these outages
              were for a day and a half at a time. The system became
              inconsistent and unreliable. Before the new franchisor took
              over, these problems did not occur.

(App. Vol. II 3.) Patel also alleges that RRF “failed to create any new advertising or

marketing programs that generated new customers for the hotel,” and failed to efficiently

operate “certain advertising and market programs . . . with the expertise necessary to keep

them vibrant and valuable.” (Id. at 2.)5

       We conclude that Patel’s affidavit, without more, does not create a genuine dispute

of material fact that would preclude summary judgment. An “affiant must ordinarily set

forth facts, rather than opinions or conclusions.” Maldonado v. Ramirez, 757 F.2d 48, 51

(3d Cir. 1985); see also Fed. R. Civ. P. 56(c)(4). “[C]onclusory, self-serving affidavits

are insufficient to withstand a motion for summary judgment.” Kirleis v. Dickie,

       5
         Appellants follow this affidavit with a series of unexplained and unreferenced
exhibits, (Supp. App. 344–83), none of which have any apparent connection to a
reservations system or the marketing efforts of RRF.
                                             8
McCamey & Chilcote, P.C., 560 F.3d 156, 161 (3d Cir. 2009) (quoting Blair v. Scott

Specialty Gases, 283 F.3d 595, 608 (3d Cir. 2002)). Here, Patel describes marketing

failures and intermittent system outages with a limited degree of factual detail. He

provides only broad conclusions, however, as to an equally crucial element of the New

Jersey Appellants’ defense—to wit, the requirement that they “sustained damages as a

result” of RRF’s alleged breach. Murphy, 920 A.2d at 689. The New Jersey Appellants

offer no firm data, or even estimates, regarding the total number or value of reservations

lost due to the system’s downtime, or the loss in revenue due to RRF’s alleged failure to

create new marketing programs. Without such facts it is impossible to discern whether

RRF’s alleged breaches were material, or instead merely de minimis.

       In sum, the record is devoid of evidence that the New Jersey Appellants in fact

suffered damages as a result of RRF’s alleged contractual breaches. RRF, by contrast,

has introduced uncontested evidence to satisfy its own burden regarding the breach-of-

contract claims.6 We therefore conclude that RRF is entitled to summary judgment on all

counts in Case No. 13-2563. Accordingly, we will affirm the District Court’s orders of

June 28, 2012, March 28, 2013, and May 2, 2013 to the extent reflected above.

                                            B.

       6
         Because the New Jersey Appellants make no particularized argument with
respect to the grant of summary judgment on Count Two, in which RRF sought specific
performance for compliance with the post-termination provisions of the New Jersey
franchise agreement, we will not address that topic separately.
                                            9
       The New Jersey Appellants also challenge the District Court’s grant of summary

judgment in favor of RRF as to their counterclaims for breach of contract. Even

assuming without deciding that these claims are cognizable under the circumstances, they

fail for the same reasons described above. The New Jersey Appellants have not provided

evidence upon which a reasonable juror could find that RRF breached its obligations

under the New Jersey franchise agreement and caused damages as a result. We will

therefore affirm the District Court’s orders of June 28, 2012 and May 2, 2013 to the

extent that they granted summary judgment in favor of RRF on the New Jersey

Appellants’ counterclaims for breach of contract.

                                               C.

       Also among the counterclaims upon which the District Court granted summary

judgment in Case No. 13-2563 were alleged violations of the NJFPA, N.J. Stat. Ann. §

56:10-5. On appeal the New Jersey Appellants claim that genuine disputes of material

fact exist regarding the sufficiency of the notice of termination provided by RRF.

       Section 56:10-5 of the NJFPA provides that, among other things, a franchisor may

not unilaterally terminate a franchise “without having first given written notice setting

forth all the reasons for such termination . . . to the franchisee at least 60 days in

advance” of such termination. N.J. Stat. Ann. § 56:10-5. Here, the record shows that

RRF mailed a letter to AAH and the Patels on January 19, 2010, describing both its intent

to terminate the New Jersey franchise agreement and its reasons for doing so. (Supp.

                                              10
Ohio App. 301–03.) On April 20, 2010, RRF mailed a second letter to AAH and the Patels

which formally terminated the New Jersey franchise agreement.

       The New Jersey Appellants submit that the January 19, 2010 letter was merely a

notice of default, and that because it provided a final opportunity to cure, it did not

constitute “written notice of termination” as required by § 56:10-5. Instead, according to

the New Jersey Appellants, the letter of April 20, 2010 was the first “notice of

termination,” and as a result, RRF was not entitled to terminate the franchise agreement

until June 2010.

       The New Jersey Appellants’ arguments on this point are meritless. RRF signaled

an unambiguous intent to terminate the franchise agreement in its letter of January 19,

2010. We find no support for the contention that extension of a final opportunity to cure

invalidates such notice for purposes of the NJFPA. Thus, by the time RRF formally

terminated the agreement in its letter of April 20, 2010, it had satisfied its notice

obligations under New Jersey law. We will therefore affirm the District Court’s orders of

June 28, 2012 and May 2, 2013 to the extent that they granted summary judgment in

favor of RRF on the New Jersey Appellants’ counterclaims for violations of the NJFPA.

                                             IV.

       We now consider the Minnesota Appellants’ challenge to the District Court’s

orders granting summary judgment in Case No. 13-2564, the second of these

consolidated actions. The entirety of Appellants’ legal argument in this regard consists of

the following statement: “In Alpesh Patel’s case, Civ. A. No. 1-10-cv-04120, the

                                              11
arguments are the same as presented in this brief, except that arguments regarding the

[NJFPA] do not apply.” Appellants’ Br. at 9.

       It is a bedrock rule of procedure that an appellant who appears before this Court

must submit a brief containing, among other things, “a concise statement of the case

setting out the facts relevant to the issues submitted for review,” as well as “citations to

the authorities and parts of the record on which the appellant relies[.]” Fed. R. App. P.

28(a); see also Kost v. Kozakiewicz, 1 F.3d 176, 182 (3d Cir. 1993). Here, Appellants’

“Statement of Facts” makes no reference to the purportedly material breaches of the

Minnesota franchise agreement by RRF—the material breaches that we presume are the

centerpiece of the Minnesota Appellants’ claims. Appellants’ Br. at 7. Nor do

Appellants discuss or even cite to the Minnesota franchise agreement, the affidavit of

Alpesh Patel, or any other item of evidence relating specifically to that case. Likewise,

although Case No. 13-2564 arose in Minnesota, Appellants make no reference to

Minnesota law.

       In consolidated cases presenting similar issues of fact and law, some degree of

incorporation by reference may well be justified in the interest of efficiency.

Nonetheless, where a party appeals from a district court order granting summary

judgment, some tailored discussion of the facts, or at least a bare reference to those facts,

will be necessary in all but the most unusual circumstances. Here we see no justification

for the cavalier presentation made by the Minnesota Appellants. Accordingly, we will

consider the Minnesota Appellants’ claims waived as to Case No. 13-2564.

                                              12
      In the alternative, to the extent that the Minnesota Appellants concede that there

are no material factual or legal differences between Cases No. 13-2564 and 13-2563, we

will affirm the orders of the District Court in Case No. 13-2564 for the same substantive

reasons articulated above with respect to Case No. 13-2563.

                                            V.

      For the foregoing reasons, we will affirm the District Court’s orders of June 28,

2012, March 28, 2013, and May 2, 2013.

                                            13