Wright et al v. Century 21 Real Estate LLC et al, No. 2:2010cv02846 - Document 32 (E.D. Cal. 2012)

Court Description: MEMORANDUM and ORDER signed by Judge William B. Shubb on 8/7/12 ORDERING Century 21s motion for summary adjudication of its claim for breach of contract be, and the same hereby is, GRANTED IN PART with respect to Century 21's claim for breach of contract, actual damages totaling $195,454.90, and future lost profits totaling $575,001.57, and DENIED IN PART with respect to Century 21's request for $1,500.00 in actual damages; Century 21's motion for summary adjudicati on of its claim for breach of guaranty be, and the same hereby is, GRANTED; Century 21's motion for summary adjudication of its claims for trademark infringement and unfair competition be, and the same hereby is, GRANTED and Century 21 is awarde d treble damages in the amount of $86,022.00; Century 21's motion for summary adjudication of all of All Professional and the Wrights' claims be, and the same hereby is, GRANTED; and Steve Wright, Carol Wright, and All Professional are HEREBY PERMANENTLY ENJOINED from further unauthorized use of Century 21's Marks, as defined in the franchise agreements. This matter shall remain on calendar for a pretrial conference on September 17, 2012, and bench trial on October 30, 2012, on Century 21's remaining claims, including Century 21's $1,500.00 damages request for breach of contract. If Century 21 files a written statement within 15 days from the date of this Order, dismissing its remaining claims and agreeing to accept judgment in accordance with this Order, the court will vacate the pretrial conference and trial dates enter final judgment in accordance with this Order.(Matson, R)

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Wright et al v. Century 21 Real Estate LLC et al Doc. 32 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 EASTERN DISTRICT OF CALIFORNIA 10 ----oo0oo---11 12 13 14 CENTURY 21 REAL ESTATE LLC, a Delaware Limited Liability Company formerly known as Century 21 Real Estate Corporation, NOS. CIV. 15 2:10-2751 WBS GGH 2:10-2846 WBS GGH 2:11-2497 WBS GGH CONSOLIDATED Plaintiff, 16 MEMORANDUM & ORDER RE: CENTURY 21’S MOTION FOR SUMMARY ADJUDICATION v. 17 20 ALL PROFESSIONAL REALTY, INC., a California corporation doing business as CENTURY 21 ALL PROFESSIONAL; STEVEN M. WRIGHT, an individual; and CAROL WRIGHT, an individual, 21 Defendants. 18 19 / 22 ----oo0oo---23 24 Century 21 Real Estate LLC (“Century 21”) filed an 25 action against All Professional Realty, Inc. (“All 26 Professional”), Steven M. Wright, and Carol Wright arising from 27 All Professional’s continued use of Century 21’s trademarks 28 following the terminations of real estate brokerage franchise 1 Dockets.Justia.com (No. 2:10-2751.) Steve Wright,1 1 agreements for unpaid fees. 2 Carol Wright, and All Professional filed a related action against 3 Century 21 arising from the franchise agreements. 4 2:10-2846.) 5 Professional Hawaii Realty Inc. (“All Professional Hawaii”), John 6 Sherman, Steve Wright, and Carol Wright arising from All 7 Professional Hawaii’s allegedly wrongful use of Century 21’s 8 trademarks following the termination of another real estate 9 brokerage franchise agreement. (No. Century 21 filed a third action against All (No. 2:11-2497.) All three of 10 these cases have been consolidated. Presently before the court 11 is Century 21’s motion for summary adjudication pursuant to 12 Federal Rule of Civil Procedure 56. 13 I. Factual and Procedural Background 14 In 1994, Steve and Carol Wright formed All 15 Professional, a real estate brokerage company. (Compendium of 16 Exhibits Ex. 42 (“Steve Wright Dep. I”) at 12:13-22 (Docket No. 17 106)2; Steve Wright Decl. in Opp’n to Century 21’s Mot. for 18 Prelim. Injunction (“Steve Wright Decl.”) ¶ 2 (Docket No. 18-2).) 19 All Professional signed its first franchise agreement with 20 Century 21 in 1995, which allowed it to operate an office under 21 the name “Century 21 All Professional.” 22 20:3-23; Steve Wright Decl. ¶ 3.) 23 real estate brokerages. (Steve Wright Dep. I at Century 21 is a franchisor of (Bertet Decl. ¶ 3 (Docket No. 88-4).) 24 25 26 27 28 1 The parties use “Steve Wright” and “Steven M. Wright.” Because he is captioned as Steve Wright in the action initiated by him, the court will use Steve Wright. 2 Except where otherwise noted, all citations to the docket refer to case number 10-2751, into which all three cases were consolidated. 2 1 A. Franchise Agreements All Professional3 operates multiple offices and each 2 3 office is governed by a separate franchise agreement with Century 4 21. 5 franchise agreements with Century 21 for two offices in 6 Sacramento4 and one office in Folsom, California, with an 7 effective date of December 1, 2005, for each franchise agreement. 8 (Bertet Decl. Exs. A-C §§ 1.5, 1.7.) 9 personal guaranty of All Professional’s obligations under the 10 In November of 2005, All Professional signed three ten-year three California franchise agreements. The Wrights also signed a 11 (Id. Exs. A-C at 43-44.) Shortly after signing the franchise agreements for the 12 California franchises, the Wrights and their business partner 13 John Sherman, on behalf of All Professional Hawaii, signed a ten- 14 year franchise agreement with Century 21 for the operation of an 15 office in Honolulu, Hawaii. 16 together with Sherman, again signed a personal guaranty for All 17 Professional Hawaii’s obligations under the Hawaii franchise 18 agreement. 19 (Id. ¶ 6, Ex. D.) The Wrights, (Id. Ex. D at 43-44.) All four franchise agreements include the same relevant 20 language. Section 4.1 of the franchise agreements granted All 21 Professional a nonexclusive license to use Century 21’s “Marks” 22 and “System.” 23 trademarks, service marks, and trade dress. (Id. Exs. A-D § 4.1.) “Marks” meant Century 21’s (Id. Exs. A-D 24 25 26 27 28 3 The court will refer to All Professional, All Professional Hawaii, Steve Wright, and Carol Wright collectively as “All Professional.” 4 When referring to the Sacramento franchise agreements individually, the court will reference the franchise by the street on which it is located -- River Park and Florin Road. 3 1 § 3.1.8.) 2 techniques designed to enable [] offices to compete more 3 effectively in the real estate sales market.” 4 § 3.1.14.) 5 promotion of certain Marks, copyrights, trade secrets, 6 centralized advertising programs, recruiting programs, referral 7 programs and sales management training programs.” (Id.) 8 9 “System” meant, inter alia, “policies, procedures, and (Id. Exs. A-D Century 21’s “system” also included “common use and Century 21 has numerous registered trademarks. Iuliano Decl. ¶ 3, Ex. A (Docket No. 88-3).) (See According to 10 Century 21, it uses the trademarks on goods and in 11 advertisements, education, training manuals, newsletters, global 12 computer networks, and residential, commercial, and mortgage 13 brokerage services. 14 recognized because of advertisements and promotions of goods and 15 services offered by Century 21. 16 (Id. ¶ 5.) The trademarks have become well (Id.) In exchange for the rights granted under the franchise 17 agreements, All Professional agreed to pay royalty fees of six 18 percent of gross revenue, with an initial monthly minimum fee of 19 $500.00. 20 agreed to pay two percent of its gross revenue to a National 21 Advertising Fund (“NAF”) for advertising expenses, with an 22 initial monthly minimum fee of $562.00. (Bertet Decl. Exs. A-D §§ 7-8.) All Professional also 23 Section 16.2.3 of the franchise agreements provided 24 that Century 21 could terminate the agreement for good cause, 25 including curable and non-curable defaults by All Professional. 26 (Id. Exs. A-D § 16.2.3.) 27 for curable defaults, provided that Century 21 could terminate 28 the agreement with 30 days notice of the “proposed termination Section 16.2.4, governing termination 4 1 and the opportunity to cure the breach during the entire notice 2 period, or such longer or shorter notice as is required or 3 permitted by the law of the state where the Office is located,” 4 if the curable breach was the failure to pay financial 5 obligations. 6 that Century 21 could terminate the agreement without notice if 7 termination was based on any non-curable defects. 8 § 16.2.5.) 9 demonstrated by, among other things, a franchisee’s failure to 10 operate at an approved location for five consecutive business 11 days. (Id. Exs. A-D § 16.2.4.) Section 16.2.5 provided (Id. Exs. A-D Non-curable defects included abandonment of an office (Id. Exs. A-D § 16.2.5.4.) 12 The agreements also contained language stating that 13 they were integrated agreements and that the franchisee should 14 not sign the agreement if any representative of Century 21 15 promised something that was not part of the agreement, an 16 attached addendum, or the offering circular. 17 § 22.15.) 18 franchise was dependant on the efforts of the franchise owners 19 and that neither Century 21 nor any other person “guaranteed or 20 warranted that you will succeed in the operation of the 21 Franchise, or has provided any sales or income projections of any 22 kind to you.” 23 provided that Century 21 would “have no right to regulate or 24 participate in the recruitment, selection, engagement, retention, 25 discipline or termination of your sales associates or employees, 26 except as may be necessary to protect the Marks and goodwill” and 27 that defendants were “solely responsible for the conduct of the 28 Business operated under this Agreement according to [their] own (Id. Exs. A-D The agreements further stated that the success of the (Id. Exs. A-D § 23.9.) 5 Finally, the agreements 1 judgment, and in accordance with the provisions of this Agreement 2 and the P&P Manual . . . .” 3 B. 4 (Id. Exs. A-D § 21.2.) Development Advance Promissory Note In addition to entering into the California franchise 5 agreements in November of 2005, All Professional borrowed 6 $75,000.00 from Century 21 pursuant to a Development Advance 7 Promissory Note (“DAN” or “Note”) for which the Wrights signed a 8 personal guaranty. 9 a long-term, annual repayment plan and provided that if All (Bertet Decl. Ex. D.) The Note provided for 10 Professional was not in breach of its franchise agreements, the 11 yearly amount due would be forgiven if All Professional reached 12 certain gross revenue annual thresholds. 13 thresholds were not met, the Note stated that “an amount of 14 Principal equal to the Yearly Principal shall become due and 15 payable.” 16 its business or defaulted on “any other agreement or note” 17 between the parties, the DAN provided for an acceleration of the 18 unpaid principal. 19 Professional and the Wrights signed a Security Agreement in which 20 they granted Century 21, as security for the prompt payment of 21 the Note, a security interest in certain specifically described 22 collateral. 23 (Id.) (Id.) If the revenue In the event that All Professional terminated (Id.) In addition to the Note, All (Id. ¶ 20, Ex. F.) The Wrights state that they executed the Note relying 24 on statements by Dale Omer, Century 21’s Western Regional Vice 25 President, that “everything would be wonderful.” 26 Dep. I at 62:1-6.) 27 to worry” about repaying the DAN because the new “tools and 28 systems” that Century 21 would provide would “revolutionize (Steve Wright According to the Wrights, Omer told them “not 6 1 [Century 21] offices compared to the competition” and make All 2 Professional more profitable. 3 Despite these representations, Steve Wright concedes that he does 4 not “believe they ever said that we would be profitable. They 5 said we would be more productive and sell more houses.” (Id. at 6 67:11-15.) 7 C. 8 9 (Id. at 59:19-60:2; 62:13-15.) Addenda to Franchise Agreements and Waiver of Claims All Professional signed an addendum to the River Park franchise agreement, effective January 3, 2006, which amended the 10 franchise agreement to include section 25.4 pertaining to the 11 DAN. 12 that “in the event of any termination of this agreement for any 13 reason prior to the expiration of the Term . . . any and all sums 14 due and owing (and/or not otherwise previously forgiven) under 15 the Development Advance Note may be accelerated (at Franchisor’s 16 discretion) and shall be immediately payable.” (Bertet Decl. ¶ 22, Ex. G § 25.4.) The addendum provided (Id.) 17 All Professional also signed addenda to the other two 18 California franchise agreements that did not relate to the DAN. 19 All three addenda contained a limited waiver of claims from which 20 All Professional and the Wrights agreed to expressly release 21 Century 21 from, and forever waive and relinquish, any and all 22 claims they might have against Century 21, as well as a waiver of 23 All Professional and the Wrights’ rights under section 1542 of 24 the California Civil Code. 25 Professional and the Wrights also signed an addendum to the 26 Hawaii franchise, effective February 1, 2006, which contains a 27 similar waiver of claims. 28 D. (Id. ¶ 22, Ex. G at 115.) (Id. ¶ 24, Ex. H at § 5.) Improper Recruiting Practices 7 All 1 Beginning in late 2006, All Professional argues that 2 Century 21 All Islands, another Century 21 franchise office 3 located in Hawaii, was engaged in an aggressive campaign to 4 recruit All Professional Hawaii’s agents in violation of Century 5 21’s “Code of Conduct.”5 6 Century 21’s Regional Director assigned to Hawaii, about All 7 Islands’ recruiting violations in an email dated December 19, 8 2006. 9 104).)6 Steve Wright informed Sandy Persky, (Compendium of Exhibits Ex. 16 at CENT002539 (Docket No. On July 20, 2007, Steve Wright sent a second email to 10 Persky, Omer, and Bob Popp at Century 21 complaining about All 11 Islands’ recruiting practices.7 12 This second email specified that All Professional did not expect 13 Century 21 to take any actions based on the complaint. 14 The email chain following Steve Wright’s second complaint 15 suggests that as of July 25, 2007, Century 21 had not done (Id. Ex. 16 at CENT002538.) (Id.) 16 17 5 18 19 20 21 22 23 24 25 Century 21’s Policies and Procedures Manual stated that franchisees “should avoid” recruiting sales associates of other franchisees and “advised that aggressive sales associates recruiting practices may subject the broker involved to claims of business interference by other brokers under applicable state law.” (Steve Wright Decl. Ex. 2.) 6 The court notes that although All Professional did inform Century 21 about the alleged recruiting violations, the email also stated that All Professional was “OK with [the recruiting violation] being ‘OK’,” that it did not expect the practice to stop given All Islands’ past recruiting practices, and that All Professional would be “actively recruiting All Island agents” in retaliation. (Compendium of Exhibits Ex. 16 at CENT002539.) 7 26 27 28 Although this email contained complaints regarding All Islands practices, it also specifically stated that All Professional would “remove any restrictions Century 21 All Professional has against All Island’s [sic] recruiting [its] agents” and had “added All Island agents into our recruiting pool.” (Compendium of Exhibits Ex. 16 at CENT002538.) 8 1 anything regarding All Islands’ alleged recruiting violations. 2 (Id.) 3 On April 18, 2008, Steve Wright sent Persky an 4 additional email with attachments documenting All Islands’ 5 recruitment efforts. 6 to Popp. 7 suggested that he stop recruiting All Professional Hawaii’s 8 agents. 9 60:18 (Docket No. 108).) (Id.) (Id. Ex. 17.) Persky forwarded the email Popp contacted the All Islands broker and (Compendium of Exhibits Ex. 46 (“Popp Dep. I”) at 59:9On May 7, 2008, Steve Wright notified 10 Persky and Popp that he was resigning from the Hawaii Broker 11 Counsel because of All Islands’ recruitment practices. 12 (Compendium of Exhibits Ex. 18 (Docket No. 104).) 13 Beginning in 2008, a number of All Professional’s 14 agents from its California franchises left to work at Century 21 15 Select. 16 conversations with the agents, Steve Wright believed that Select 17 was improperly recruiting his agents, in part by offering them 18 commissions that would result in a net loss to Select. 19 146:11-147:18; see also Compendium of Exhibits Ex. 40 (agent 20 compensation information from Century 21 Select).) 21 also claims that at least two of All Professional’s former agents 22 stole commission checks from All Professional and cashed them 23 after they transferred to Select. 24 16, 157:5-22.) 25 franchisees were “openly competing with All Professional and 26 stealing its business and employees” in violation of Century 21’s 27 “Code of Conduct.” 28 receipt of an email from All Professional complaining about (Steve Wright Dep. I at 142:21-143:14.) Based on (Id. at Steve Wright (Steve Wright Dep. I at 155:5- Steve Wright informed Century 21 that other (Steve Wright Decl. ¶ 9.) 9 Popp acknowledges 1 stolen commissions, but did not take any action regarding the 2 complaint. 3 (Popp Dep. I at 72:16-73:3.) On August 4, 2008, Steve Wright informed Century 21 4 that he would no longer participate in Broker Council activities 5 for the Sacramento area due to Century 21’s “policy of allowing 6 Select, All Islands, Homefinders to recruit our agents/staff 7 . . . .” 8 E. 9 (Compendium of Exhibits Ex. 19 (Docket No. 104).) Protection of Century 21 Trademark All Professional also argues that Century 21 allowed 10 other businesses to dilute the Century 21 trademark in All 11 Professional’s area when two real estate offices not affiliated 12 with Century 21, moved into the Folsom area operating as “21st 13 Century Realty” and “First Century.” 14 116:6-117:16, 234:14-235:23.) 15 petitioned Popp to have Corporate take action against the 16 trademark infringement in 2004 or 2005.8 17 Steve Wright reports that Popp responded that “there was nothing 18 he was going to be able to do, that we just had to deal with it.” 19 (Id. 116:17-23.) (Steve Wright Dep. I at Steve Wright states that he (Id. at 235:13-25.) 20 All Professional argues that Century 21 took no 21 substantive action on the trademark issue until after All 22 Professional moved out of the Folsom office and Century 21 Select 23 24 25 26 27 28 8 Popp states that he was not working for Century 21 in 2004 or 2005, but actually began his position as Vice President with Century 21 in 2006. (Rudin Decl. Ex. F. (“Popp Dep. II”) at 9:4-25, 17:14-16 (Docket No. 88-10).) Popp does not recall meeting the Wrights until 2007. (Id. at 23:19-23.) In Steve Wright’s second deposition, held six months after the first, he clarifies that he probably first spoke with Popp regarding the trademark issue in 2006. (Compendium of Exhibits Ex. 43 (“Steve Wright Dep. II”) at 33:20-22 (Docket No. 107).) 10 1 moved into the office. 2 All Professional’s franchise was terminated on October 8, 2010, 3 Century 21’s legal counsel sent Henry Ung from 21st Century 4 Network, one of the non-affiliated offices, written notification 5 that 21st Century Network was in violation of Century 21’s 6 trademark and demanded that it cease using the marks or face 7 further legal action. 8 105).) 9 F. (Steve Wright Dep. I at 235:2-12.) After (Compendium of Exhibits Ex. 39 (Docket No. 10 Folsom Office In late August 2009, All Professional ceased doing 11 business out of its Folsom office. (Steve Wright Dep. I at 201:6- 12 11.) 13 foreclosed upon, either due to a partnership break-up between All 14 Professional and a separate entity, (Steve Wright Dep. II at 15 27:14-29:5), or because All Professional was struggling 16 financially after agents left and its income dropped, (Steve 17 Wright Dep. I at 201:12-21). 18 approval from Century 21 prior to closing the Folsom office. 19 (Id. at 201:22-202:2.) The office closure occurred after the building was 20 All Professional did not seek On October 27, 2009, Century 21 inquired as to the 21 status of All Professional’s Folsom office. 22 Exhibits Ex. 24 (Docket No. 104).) 23 that it was relocating the Folsom office and “expect to be fully 24 operational the first of the year.” 25 stated that it would advise Century 21 when the new address was 26 finalized. 27 28 (Compendium of All Professional responded (Id.) All Professional also (Id.) In February 2010, Mike Bainbridge, a Century 21 business consultant, suggested that All Professional merge its 11 1 Folsom office with its Sacramento office in order to avoid paying 2 minimum monthly fees on the Folsom office that was not currently 3 operating. 4 106:16-107:8 (Docket No. 110); Steve Wright Dep. I at 203:19- 5 204:13.) 6 offices. (Compendium of Exhibits Ex. 48 (“Bainbridge Dep.”) at 7 All Professional did not elect to consolidate the On February 5, 2010, Dan Jacuzzi, the owner of Century 8 21 Select, emailed Marc Fischman at Century 21 about opening up a 9 Century 21 Folsom office at the same location that All 10 Professional had abandoned. 11 CENT004385 (Docket No. 104).) 12 location, however, Jacuzzi wanted to “insure [sic] that the prior 13 (now closed) franchise of All Professional be terminated.” 14 On February 11, 2010, Bainbridge sent Jacuzzi an application for 15 the new Folsom office and stated that he was “working on the 16 other half of the request and will keep you posted as to how that 17 progresses.” 18 (Compendium of Exhibits Ex. 25 at Before opening up a Folsom (Id.) (Id. at CENT004275.) On May 24, 2010, Century 21 sent All Professional 19 notice that it had terminated All Professional’s Folsom office on 20 the grounds of abandonment. 21 (Docket No. 105).) 22 Jacuzzi’s application to open an office in Folsom using the 23 building that All Professional had vacated. 24 Exhibits Ex. 47 (“Popp Dep. III”) at 13:24-14:15, 22:5-10 (Docket 25 No. 109).) 26 of its Folsom office was the result of Century 21 favoring Select 27 over All Professional. 28 G. (Compendium of Exhibits Ex. 31 On May 26, 2010, Century 21 approved (Compendium of All Professional argues that Century 21’s termination Failure to Pay Century 21 Franchise Fees 12 1 Beginning in May of 2009, All Professional stopped 2 paying many of its franchise fees. (Bertet Decl. ¶ 25.) All 3 Professional was aware that it had failed to pay the fees. 4 Century 21’s online system provides its franchisees with 5 “detailed summaries of their account balances owed to Century 21, 6 including specific information detailing the amounts owed by that 7 franchisee, when the amounts are due, and the type of amount due 8 (i.e., royalty fee, national advertising fee fund fee, 9 Development Advance Note, etc.)[.]” (Id. ¶ 30.) 10 During and prior to this period, All Professional also 11 failed to meet its annual thresholds requirement and thus annual 12 DAN payments for 2007, 2008, and 2009 were not forgiven. 13 Century 21 approached All Professional regarding payment of the 14 DAN fees, Century 21 offered to waive the payment in exchange for 15 a one-year extension of each franchise agreement and a general 16 release of claims. 17 104).) 18 instead offered a counterproposal of a 15-day extension of the 19 franchise agreement. 20 that Century 21 have “Select fire the 8 agents he [Jacuzzi] has 21 bought and Homefinders fire the 5 agents they have allowed John 22 Sherman to recruit.” 23 counteroffers. 24 make any payments on the Note. 25 26 H. When (Compendium of Exhibits Ex. 23 (Docket No. All Professional rejected Century 21’s proposal and (Id.) (Id.) (Id.) Steve Wright later also proposed Century 21 rejected the Thereafter, All Professional failed to Termination of Franchises In four separate letters dated April 5, 2010, Century 27 21 notified All Professional of its intent to terminate the four 28 franchise agreements and of All Professional’s opportunity to 13 1 cure. 2 River Park Drive office stated in pertinent part: 3 4 5 6 7 (Bertet Decl. Exs. I-L.) The notice pertaining to the Century 21 has advised you on numerous occasions that you are delinquent in the payment of your account. Upon review, we have determined that you are in default of the above-referenced Agreement for failing to pay fees when due. Your default constitutes a material breach of the Agreement, for which Century 21 may terminate the franchise. As of February 24, 2010, your account balance for this office was $59,327.41. 8 9 In order to avoid termination, you must pay the balance in full no later than May 10, 2010. 10 (Id. Ex. I.) 11 Jacqueline Bertet, Century 21’s Senior Director of Financial 12 Services, and informed All Professional that failure to pay the 13 balance would result in immediate termination of the franchise, 14 which would require All Professional to pay the amount past due 15 at the time of termination, sums assessed in a post-termination 16 audit, the remaining balance of the Note, and lost profits. 17 (Id.) 18 office contained similar language and stated that the balance was 19 $23,492.69 as of February 24, 2010. 20 pertaining to the Folsom office contained similar language and 21 stated that the balance was $13,274.34 as of February 24, 2010. 22 (Id. Ex. J.) 23 contained similar language and stated that the balance was 24 $14,813.76. 25 May 10, 2010. 26 The notice also provided contact information for The notice pertaining to the Florin Road, Sacramento, (Id. Ex. K.) The notice The notice pertaining to the Honolulu office (Id. Ex. L.) All four notices required payment by In the month following receipt of the April 5, 2010, 27 notices, neither Steve nor Carol Wright called representatives of 28 Century 21. Carol Wright initially called Shalina Rodriguez, a 14 1 Director of Financial Services for Century 21, on May 6, 2010. 2 (Compendium of Exhibits Ex. 44 (“Carol Wright Dep.”) at 201:22- 3 203:21, 206:4-16 (Docket No. 107).) 4 the telephone call she asked for an accounting and “disputed 5 certain discrepancies I saw in the notices of default.” 6 Wright Decl. ¶ 12.) 7 be required to resolve the claimed default”: 8 9 10 11 12 Carol Wright states that in (Carol Carol Wright “specifically asked what would [Rodriguez] informed me that we would need to pay $124,432.20 and that Corporate would want a promissory note since the figure was greater than $100,000. Our discussion revealed that Corporate was including the outstanding amount allegedly owed under [the Note], even though payment was not required under any of the Franchise Agreements. The pay-off amount included the Hawaii office even though that franchise was owned by a separate entity. 13 (Suppl. Carol Wright Decl. in Supp. Of Pls.’ Mot. for P.I. 14 (“Suppl. Carol Wright Decl.”) ¶ 4 (No. 2:10-2846, Docket No. 15 13).) 16 The day after the phone conversation, Carol Wright 17 emailed a letter to Rodriguez identifying the following “items we 18 need to address before proceeding”: (1) removing minimum royalty 19 and NAF fees from the Folsom office account balance because it 20 had been closed since August 31, 2009; (2) determining the cutoff 21 date for “final payment calculations,” with a possible date of 22 March 31, 2010;9 (3) “handling” the Hawaii office separately; (4) 23 removing minimum royalty and NAF fees from January, February, and 24 March of 2010; (5) separating the Note amount owed because of a 25 “separate issue” as to why All Professional was not paying it; 26 27 28 9 This appears to be in reference to a possible payment plan for the amounts owed, with March 31, 2010, being the cutoff date for determining the total amount owed under the payment plan. 15 1 and (6) crediting $304.50 because of a Century 21 error. 2 (Compendium of Exhibits Ex. 29 (Docket No. 104).) 3 Wright stated that the “totals will obviously have to be 4 recalculated before we can talk about payment arrangements,” and 5 said that she would make payments on “April 2010 transactions to 6 start anew.”10 7 Lastly, Carol (Id.) Century 21 accounting guidelines allowed for account 8 managers and directors to arrange alternative payment plans with 9 Century 21 franchisees who were behind on their payments. 10 (Compendium of Exhibits Ex. 45 (“Bertet Dep.”) at 26:17-28:14 11 (Docket No. 108).) 12 than $100,000 in debt could be offered a deal point agreement (a 13 type of note) and franchises with over $100,000 in debt could be 14 offered an interest bearing note to help them pay off their 15 debts. 16 with Century 21, the Wrights believed that they would be offered 17 a payment plan to cure their default. 18 200:7-201:4.) Under these guidelines, franchises with less (Id. at 26:17-28:25.) Based on their course of dealings (Carol Wright Dep. at 19 On June 16, 2010, the Wrights participated in a 20 conference call with account managers Rodriguez and Shawn 21 Holland. 22 discussed changing the official closing date for the Folsom 23 office in order to reduce minimum fees during that period. 24 at 222:5-8.) (Id. at 22:4-14.) During the call, the parties (Id. In an email dated June 17, 2010, Holland reported 25 26 27 28 10 While All Professional may have resumed paying royalty fees on current transactions beginning in April of 2010, it still continued to fail to pay NAF fees on current transactions. (Carol Wright Dep. at 208:17-25.) Thus, All Professional continued to fall behind on its franchise fee payments. 16 1 that during the call “we managed to resolve her dispute except 2 for the DAN money. 3 prepare 2 separate Deal Point Agreements (one for the Hawaii 4 office).” 5 agreement on DAN payments was never reached and Deal Point 6 Agreements were not issued. 7 We are hoping to resolve that matter soon and (Compendium of Exhibits Ex. 32 (Docket No. 105).) An In letters dated July 7, 2010, Century 21 terminated 8 the franchise agreements governing the two Sacramento offices and 9 the Hawaii office, effective July 9, 2010.11 (Bertet Decl. Exs. 10 N-P.) The letter regarding the River Park Drive office stated 11 that the account balance was $72,407.97 as of July 6, 2010, an 12 additional $41,667.00 was owed under the Note, and an additional 13 $250,029.34 was owed for lost profits, pursuant to calculations 14 prescribed by the franchise agreement. 15 regarding the Florin Road office stated that the account balance 16 was $33,934.30 as of July 6, 2010, and an additional $155,671.48 17 was owed for lost profits. 18 the Hawaii office stated that the account balance was $21,898.08 19 as of July 6, 2010, and an additional $80,541.98 was owed for 20 lost profits. 21 follow post-termination procedures and cease using Century 21’s 22 trademarks. 23 described in section 16.4 of the franchise agreements.12 (Id. Ex. P.) (Id. Ex. O.) (Id. Ex. N.) The letter The letter regarding All Professional was instructed to (See id. Exs. N-P.) The procedures were more fully Upon 24 11 25 26 27 28 The Folsom franchise had previously been terminated for abandonment pursuant to Century 21’s May 24, 2010, letter. (Compendium of Exhibits Ex. 31.) 12 Section 16.4 requires, inter alia, that franchises (1) return Century 21’s property, (2) discontinue use of Century 21’s Marks, (3) discontinue use of signs or cross arm signposts displaying Century 21’s logo, colors, color patterns and designs 17 1 termination of the franchise agreements, Century 21 denied All 2 Professional access to Century 21’s server, email accounts, 3 databases, and the Preferred Client Club. 4 ¶ 14; Carol Wright Decl. ¶ 13.) 5 (Steve Wright Decl. The Wrights claim not to have anticipated the 6 terminations. 7 communications with Rodriguez and Holland of Century 21: 8 9 10 11 Carol Wright states that, based on her I was lead [sic] to believe that we would receive an accounting of the actual amounts owed and that we would be able to work out a payment plan. I was ready to cure any default once we were provided with a proper accounting. I waited for this accounting. However, I never received an accounting or an adjustment of the amounts owed as I had requested. 12 (Carol Wright Decl. ¶ 13.) Steve Wright claims that they were 13 prepared to pay off their debts with Century 21 as soon as a 14 number was finalized. 15 Wrights’ willingness to pay off their account balance appears 16 limited to their willingness to sign a new promissory note with 17 Century 21. (See, e.g., id. at 222:14 (“We were prepared to sign 18 a Note.”).) During the court’s January 11, 2011, evidentiary 19 hearing on a preliminary injunction for this matter, both Carol 20 and Steve Wright stated that they did not have the cash on hand 21 to pay off their account balance. 22 at 61:1-3, 70:11-14 (“THE COURT: And the reason you didn’t pay 23 for those earlier months is because you didn’t have that kind of 24 money, right? (Steve Wright Dep. at 222:10-223:7.) The (See, e.g., Jan. 11, 2011, Tr. THE WITNESS: Not in that volume, no sir.”), 80:10- 25 26 27 28 or Marks, (4) take any affirmative action necessary to remove any use of Century 21’s Marks, (5) “de-identify[]” from Century 21 in a manner that does not confuse the public about the fact that they are no longer associated with Century 21, and (6) remove Century 21’s Marks from their web pages. 18 1 81:17.) All Professional now presents bank statements suggesting 2 that it had approximately $150,000 in its bank accounts in May 3 2010. (Compendium of Exhibits Ex. 30 (Docket No. 104).) 4 All Professional also argues that the termination of 5 its franchises took Century 21 employees by surprise. 6 2010, email from Popp states that he “thought we were getting 7 close on a deal.” 8 105).) 9 close on a deal if we’re willing to forgive the DAN payments due 10 A July 12, (Compendium of Exhibits Ex. 34 (Docket No. In response, however, Bainbridge replied, “We’re only because he lost those agents to Select.” (Id.) 11 Following receipt of the July 7, 2010, termination 12 letters, the Wrights sent Century 21 a letter dated July 16, 13 2010, asking that Century 21 reconsider the termination. 14 letter stated “It was never our intention not to pay Century 21 15 the royalty fees and NAF fees due. 16 contention was the repayment of the Development Advance Note. 17 And it was at that point that communications failed.” 18 35.) 19 for reinstatement in a letter dated July 29, 2010. 20 In an August 2, 2010, letter, the Wrights wrote that they were 21 “perplexed” by the denial of their request for reinstatement and 22 were “curious as to what this denial of [their] reinstatement was 23 based on since our message to [Rodriguez] was that we were 24 willing to pay what was due Century 21 and that we were willing 25 to sign [Century 21’s] note.” (Steve Wright Decl. Ex. 5.) 26 27 28 The The only part that was in (Id. Ex. Century 21 subsequently denied All Professional’s request I. (Id. Ex. 38.) Continuing Use of Century 21 Trademarks In late August, Century 21 conducted inspections of the Sacramento offices to determine whether All Professional had 19 1 complied with what it believed were All Professional’s post- 2 termination obligations under the franchise agreements. 3 reports indicated that All Professional continued to use Century 4 21’s trademarks. 5 2010, letter, Century 21’s counsel informed Steve and Carol 6 Wright of the results of the post-termination inspections and 7 demanded that they comply with the post-termination franchise 8 agreement obligations, (Steve Wright Decl. Ex. 6), to which the 9 Wrights responded with a September 21, 2010, letter, proposing (Bertet Decl. Exs. V-X.) The In a September 17, 10 terms under which All Professional would continue to be a 11 franchisee of Century 21. 12 (Id. Ex. 7.) All Professional continued to use Century 21’s trade 13 dress until after the court issued its preliminary injunction 14 order on January 24, 2011. 15 Professional filed a Notice of Appeal of the court’s order. 16 (Docket No. 34.) 17 Professional’s Request for Stay and in open court encouraged the 18 parties to agree to a time table for All Professional to de-mark 19 its offices. 20 2011, the parties agreed that All Professional would have until 21 April 1, 2011, to cease using Century 21’s marks on buildings and 22 would cover up Century 21’s marks on yard signs by May 1, 2011. 23 (Compendium of Exhibits Ex. 41 (Docket No. 105).) 24 25 J. On February 11, 2011, All On February 23, 2011, the court denied All (Docket No. 41.) In a stipulation dated March 8, Present Litigation On September 30, 2010, Steve Wright, Carol Wright, and 26 All Professional filed an action in state court against Century 27 21 for violation of a termination provision of the California 28 Franchise Relations Act (“CFRA”), Cal. Bus. & Prof. Code § 20020, 20 1 violation of California’s Unfair Competition Law (“UCL”), Cal. 2 Bus. & Prof. Code §§ 17200-17210, intentional interference with 3 business advantage, breach of contract, breach of the implied 4 covenant of good faith and fair dealing, fraud, negligent 5 interference with business advantage, and interference with 6 contract. 7 1).) 8 Carol Wright, and All Professional’s ex parte application for a 9 temporary restraining order. (Notice of Removal Ex. A (No. 2:10-2846, Docket No. On October 6, 2010, the state court denied Steve Wright, (Id. Ex. J.) With a pending motion 10 for a preliminary injunction against it, Century 21 removed the 11 action to federal court on October 21, 2010. 12 On October 12, 2010, Century 21 filed a separate action 13 in this court against All Professional, Steve Wright, and Carol 14 Wright for claims of federal trademark infringement, 15 U.S.C. 15 § 1114, common law trademark infringement, federal unfair 16 competition, 14 U.S.C. § 1125, California statutory trademark 17 infringement, Cal. Bus. & Prof. Code § 14340, violation of the 18 UCL, breach of contract, breach of guaranty, breach of promissory 19 note, account stated, quantum meruit, and accounting. 20 No. 1.) 21 (Docket On December 22, 2010, Century 21 filed an additional 22 action against Steve Wright, Carol Wright, and All Professional 23 Hawaii in Morris County, New Jersey, for claims of trademark 24 infringement, 15 U.S.C. § 1114, false designation of origin/ 25 false advertising, 15 U.S.C. § 1125(a), trademark dilution, 15 26 U.S.C. § 1125(c), common law unfair competition, breach of 27 contract, breach of guaranty, accounting, and unjust enrichment. 28 (No. 11-2497, Docket No. 1-1.) All Professional removed the 21 1 action to federal court on the basis of diversity jurisdiction 2 and Century 21 later stipulated to transferring the matter to 3 this court. 4 issued on April 6, 2011, and October 11, 2011. 5 Nos. 49, 62.) 6 The court consolidated all three actions in orders (See No. Docket On November 1, 2010, Century 21 filed a motion for a 7 preliminary injunction requesting that the court enforce All 8 Professional’s post-termination obligations under the franchise 9 agreements. (Docket No. 8.) Prior to issuing a ruling on the 10 preliminary injunction motion, the court held an evidentiary 11 hearing in which it heard testimony from the parties on January 12 11, 2011. 13 motion for preliminary injunction and enjoined All Professional 14 from further unauthorized use of Century 21’s marks. 15 28.) 16 On January 24, 2011, the court granted Century 21’s (Docket No. Presently before the court is Century 21’s motion for 17 summary judgment on its trademark infringement/unfair 18 competition, breach of contract, and breach of guaranty claims, 19 as well as all of All Professional’s claims.13 20 II. Requests for Judicial Notice/Evidentiary Objections 21 Century 21 requests that the court take judicial notice 22 of a number of documents previously filed in this case as well as 23 the transcript from the court’s January 11, 2011, evidentiary 24 hearing. All Professional additionally requests that the court 25 26 27 28 13 Century 21 represents that if the present motion for summary adjudication is granted in its entirety, it will dismiss its remaining claims against All Professional. (Mem. of P. & A. in Supp. of Pl.’s Mot. for Summ. Adjudication at 1 n.1 (Docket No. 88-2).) This would effectively render the present motion for partial summary adjudication a motion for summary judgment. 22 1 take judicial notice of a filed stipulation and agreement in the 2 California Department of Real Estate matter In re: Idalia 3 Lizzette Lombera & Franki Halloran, No. H-5325 SAC, and its 4 notice of appeal from the court’s order granting Century 21’s 5 preliminary injunction motion. 6 summary judgment, the court may consider these documents without 7 taking judicial notice of them. 8 9 Because this is a motion for On a motion for summary judgment, “[a] party may object that the material cited to support or dispute a fact cannot be 10 presented in a form that would be admissible in evidence.” 11 R. Civ. P. 56(c)(2). 12 does not necessarily have to produce evidence in a form that 13 would be admissible at trial, as long as the party satisfies the 14 requirements of Federal Rules of Civil Procedure 56.” 15 Goodale, 342 F.3d 1032, 1036-37 (9th Cir. 2003) (quoting Block v. 16 City of Los Angeles, 253 F.3d 410, 418-19 (9th Cir. 2001)) 17 (internal quotation marks omitted). 18 party’s evidence is presented in a form that is currently 19 inadmissible, such evidence may be evaluated on a motion for 20 summary judgment so long as the moving party’s objections could 21 be cured at trial. 22 433 F. Supp. 2d 1110, 1119-20 (E.D. Cal. 2006). 23 Fed. “[T]o survive summary judgment, a party Fraser v. Even if the non-moving See Burch v. Regents of the Univ. of Cal., All Professional raises eight objections to portions of 24 two declarations submitted by Century 21 on the grounds of lack 25 of personal knowledge, improper opinion testimony, lack of 26 foundation, improper legal conclusions, and inadmissible hearsay. 27 Century 21 raises eleven objections to portions of Steve Wright’s 28 Declaration, (Docket No. 112-3), and twenty objections to 23 1 portions of All Professional’s Statement of Additional Material 2 Facts, (Docket No. 112-2), on the grounds of lack of foundation, 3 relevance, speculation, lack of personal knowledge, inadmissible 4 hearsay, and that the statements are conclusory. 5 Objections to evidence on the ground that the evidence 6 is irrelevant, speculative, argumentative, vague and ambiguous, 7 or constitutes an improper legal conclusion are all duplicative 8 of the summary judgment standard itself. 9 2d at 1119-20. See Burch, 433 F. Supp. A court can award summary judgment only when 10 there is no genuine dispute of material fact. 11 irrelevant facts, and thus relevance objections are redundant. 12 Instead of objecting, parties should argue that certain facts are 13 not material. 14 improper legal conclusions, personal knowledge, or argumentative 15 statements are not facts and can only be considered as arguments, 16 not as facts, on a motion for summary judgment. 17 challenging the admissibility of this evidence, lawyers should 18 challenge its sufficiency. 19 are superfluous, and the court will overrule them. 20 It cannot rely on Similarly, statements based on speculation, Instead of Objections on any of these grounds In the interest of brevity, as the parties are aware of 21 the substance of their objections and the grounds asserted in 22 support of each objection, the court will not review the 23 substance or grounds of the individual objections here. 24 parties’ objections are all overruled. 25 III. Choice of Law 26 The As an initial matter, the parties dispute whether New 27 Jersey or California law applies to this dispute. 28 at issue each contain a choice of law provision stating: 24 The contracts “This 1 Agreement will be governed by the laws of the state of New 2 Jersey, except that the New Jersey Franchises Practice Act shall 3 not apply to agreements with the Offices located outside of New 4 Jersey.” 5 Professional argues that the court should hold that the choice of 6 law provision is unenforceable and instead apply California law 7 in this case. 8 (Bertet Decl. ¶ 17, Exs. A-D § 22.7, at 35.) 9 All Both parties agree that California choice of law analysis should govern the enforcement of the choice of law 10 provision. Under California law, the enforceability of choice of 11 law provisions is governed by the Restatement of Conflicts of 12 Laws and the California Supreme Court’s decision in Nedlloyd 13 Lines B.V. v. Superior Court, 3 Cal. 4th 459 (1992). 14 Lunch Int’l v. Polar Bear, Inc., No. Civ. 03-2485, 2004 WL 15 3406117, at *2 (S.D. Cal. Apr. 29, 2004). 16 enforceability of arm’s-length, contractual choice-of-law 17 provisions, California courts shall apply the principles set 18 forth in Restatement section 187, which reflects a strong policy 19 favoring enforcement of such provisions.” 20 at 464-65. It’s Just “In determining the Nedlloyd, 3 Cal. 4th 21 Under Nedlloyd, California will apply the law indicated 22 by the choice of law provision where: “(1) the chosen state has a 23 substantial relationship to the parties or their transaction,” or 24 where “(2) there is any other reasonable basis for the parties’ 25 choice of law.” 26 that is the end of the inquiry, and the court need not enforce 27 the parties’ choice of law.” 28 court proceeds to the second step and “determine[s] whether the Id. at 466. “If neither of these tests is met, Id. 25 Where either test is met, the 1 chosen state’s law is contrary to the fundamental policy of 2 California.” 3 choice of law provision must be enforced. 4 Id. If there is no conflict of this nature, the Id. Where “there is a fundamental conflict with California 5 law,” the court proceeds to the third step and “determine[s] 6 whether California has a materially greater interest than the 7 chosen state in the determination of the particular issue. 8 California has a materially greater interest than the chosen 9 state, the choice of law shall not be enforced, for the obvious If 10 reason that in such circumstance we will decline to enforce a law 11 contrary to this state’s fundamental policy.” 12 citations and quotations marks omitted). 13 A. 14 Id. (internal Substantial Relationship Applying the Nedlloyd test here, the court must first 15 determine “whether the chosen state has a substantial 16 relationship to the parties or their transaction . . . .” 17 This requirement is satisfied because Century 21 has a 18 substantial relationship with New Jersey because it is a limited 19 liability company with its principal place of business and 20 headquarters in New Jersey. 21 (citing Restatement of Conflicts of Laws § 187 cmt. f); It’s Just 22 Lunch Int’l LLC v. Island Park Enter. Grp., Inc., No. EDCV 08- 23 367-VAP, 2008 WL 4683637, at *2 (C.D. Cal. Oct. 21, 2008). 24 Id. See Nedlloyd, 3 Cal. 4th at 467 Moreover, Century 21’s New Jersey residence provides a 25 “reasonable basis” for a contractual provision requiring 26 application of New Jersey Law. 27 the chosen state, the parties have a reasonable basis for their 28 choice.” “If one of the parties resides in Consul Ltd. v. Solide Enters., Inc., 802 F.2d 1143, 26 1 2 1147 (9th Cir. 1986). B. 3 Fundamental Policy The court next considers whether application of New 4 Jersey law would be contrary to “a fundamental policy” of 5 California. 6 policy.” 7 fundamental policy must be “substantive,” and “may be embodied in 8 a statute which makes one or more kinds of contracts illegal or 9 which is designed to protect a person against the oppressive use 10 There is no bright-line definition of a “fundamental Restatement of Conflict of Laws § 187 cmt. g. of superior bargaining power.” 11 A Id. Here, All Professional’s eighth cause of action is 12 based on the CFRA, which “serves to protect California 13 franchisees, typically small business owners and entrepreneurs, 14 from abuses by franchisors in connection with the nonrenewal and 15 termination of franchises.” 16 Court, 189 Cal. App. 4th 500, 516 (2d Dist. 2010). 17 required to construe “the CFRA broadly to carry out legislative 18 intent, that intent . . . is to protect franchise investors, i.e. 19 those who ‘pay for the right to enter into a business.’” 20 v. U-Haul Int’l, Inc., 144 Cal. App. 4th 664, 673 (1st Dist. 21 2006). 22 either the franchisee is domiciled in this state or the 23 franchised business is or has been operated in this state.” 24 Bus. & Prof. Code § 20015. 25 1-800-Got Junk? LLC v. Superior Courts are Thueson The CFRA’s provisions “apply to any franchise where Cal. The legislature was so concerned that the CFRA 26 statutory protections be provided to all franchisees that it 27 created an antiwaiver provision, which states that “[a]ny 28 condition, stipulation or provision purporting to bind any person 27 1 to waive compliance with any provision of this law is contrary to 2 public policy and void.” 3 Section 20010 though “only voids a choice of law provision which 4 requires a franchisee to ‘waive compliance’ with the protections 5 of the CFRA.” 6 critical inquiry is therefore whether the enforcement of the New 7 Jersey choice of law provision would diminish the rights that All 8 Professional would otherwise have under the CFRA. 9 Cal. Bus. & Prof. Code § 20010. 1-800-Got Junk?, 189 Cal. App. 4th at 518. The In this case, All Professional brings a claim under the 10 CFRA provision that prohibits termination of a franchise without 11 good cause and requires that the franchisee be given a reasonable 12 opportunity to cure. 13 true that there is similar New Jersey statute, but it would not 14 provide such protections in this case because the New Jersey 15 Franchise Act does not cover franchisees that do not maintain a 16 franchise location in New Jersey. 17 Application of New Jersey law, however, would not effectuate a 18 waiver of All Professional’s protections under the CFRA because 19 the CFRA provision’s good cause and opportunity to cure 20 requirements are incorporated into All Professional’s franchise 21 agreements with Century 21. 22 § 16.2.4.) 23 protection of All Professional than the franchise agreements 24 themselves. 25 diminish All Professional’s rights because any claims that All 26 Professional may have under the CFRA can be pursued as breach of See Cal. Bus. & Prof. Code § 20020. It is See N.J. Stat. 56:10-4. (See Bertet Decl. Exs. A-D Application of the CFRA would thus provide no greater Application of New Jersey law would therefore not 27 28 28 1 contract claims under the franchise agreements.14 2 the choice of law provision is enforceable and the court will 3 apply the laws of New Jersey.15 4 IV. Accordingly, Discussion 5 Summary judgment is proper “if the movant shows that 6 there is no genuine dispute as to any material fact and the 7 movant is entitled to judgment as a matter of law.” 8 P. 56(a).16 9 of the suit, and a genuine issue is one that could permit a 10 reasonable jury to enter a verdict in the non-moving party’s 11 favor. 12 (1986). Fed. R. Civ. A material fact is one that could affect the outcome Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 The party moving for summary judgment bears the initial 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 14 All Professional additionally claims, without providing any analysis or authority, that the limited waivers in the 2006 addenda violate the antiwaiver provision in the CFRA. These limited waivers do not serve to reduce any of All Professional’s rights under the CFRA, however, because the CFRA provisions remain incorporated in the franchise agreements so breach of contract claims may still be brought. Furthermore, the only claims that All Professional raises under the CFRA, namely regarding the termination of the franchises, occurred after All Professional signed the limited waivers. 15 All Professional does not suggest that application of New Jersey law would violation a fundamental California public policy for any claims other than its CFRA claim. Absent interference with a fundamental public policy, “[t]he mere fact that the chosen law provides greater or lesser protection than California law would, are not reasons for applying California law.” Medimatch Inc. v. Lucent Techs. Inc., 120 F. Supp. 2d 842, 862 (N.D. Cal. 2000). Application of New Jersey law will undermine All Professional’s statutory claim under California’s UCL, however, courts have held that application of a choice-oflaw provision that bars a UCL claim does not violate a fundamental California public policy. See, e.g., Abat v. Chase Bank USA, N.A., 738 F. Supp. 2d 1093, 1096 (C.D. Cal. 2010); It’s Just Lunch, 2008 WL 4683637, at *4. 16 Federal Rule of Civil Procedure 56 was revised and rearranged effective December 1, 2010. However, as stated in the Advisory Committee Notes to the 2010 Amendments to Rule 56, “[t]he standard for granting summary judgment remains unchanged.” 29 1 burden of establishing the absence of a genuine issue of material 2 fact and can satisfy this burden by presenting evidence that 3 negates an essential element of the non-moving party’s case. 4 Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). 5 Alternatively, the moving party can demonstrate that the 6 non-moving party cannot produce evidence to support an essential 7 element upon which it will bear the burden of proof at trial. 8 Id. 9 Once the moving party meets its initial burden, the 10 burden shifts to the non-moving party to “designate ‘specific 11 facts showing that there is a genuine issue for trial.’” 12 324 (quoting then-Fed. R. Civ. P. 56(e)). 13 the non-moving party must “do more than simply show that there is 14 some metaphysical doubt as to the material facts.” 15 Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). 16 “The mere existence of a scintilla of evidence . . . will be 17 insufficient; there must be evidence on which the jury could 18 reasonably find for the [non-moving party].” 19 at 252. Id. at To carry this burden, Matsushita Anderson, 477 U.S. 20 In deciding a summary judgment motion, the court must 21 view the evidence in the light most favorable to the non-moving 22 party and draw all justifiable inferences in its favor. 23 255. 24 and the drawing of legitimate inferences from the facts are jury 25 functions, not those of a judge . . . ruling on a motion for 26 summary judgment . . . .” 27 28 Id. at “Credibility determinations, the weighing of the evidence, A. Id. Century 21’s Claims 1. Breach of Contract 30 1 To state a claim for breach of contract under New 2 Jersey law, there must be proof of “(1) a contract between the 3 parties, (2) a breach of that contract, (3) damages flowing 4 therefrom; and (4) that [the plaintiff] performed its own 5 contractual obligations.” 6 203 (3d Cir. 2007). 7 contract on the basis that All Professional and All Professional 8 Hawaii defaulted under the terms of the franchise agreements by 9 failing to pay their franchise fees. Frederico v. Home Depot, 507 F.3d 188, Century 21 brings its claim for breach of All Professional does not 10 dispute that it failed to pay franchise fees pursuant to the 11 franchise agreements, but argues that it was excused from fully 12 performing in the face of Century 21’s breaches of the 13 agreements. 14 agreements and then will consider each of Century 21’s alleged 15 breaches in turn. 16 a. 17 The court will address the terms of the franchise Interpreting the Franchise Agreement “The primary standard governing the interpretation of 18 an integrated agreement is to use ‘the meaning that would be 19 ascribed to it by a reasonably intelligent person who was 20 acquainted with all the operative usages and circumstances 21 surrounding the making of the writing.’” 22 v. Cliff, 419 N.J. Super. 1, 11 (App. Div. 2011) (quoting 23 Deerhurst Estates v. Meadow Homes, Inc., 64 N.J. Super. 134, 149 24 (App. Div. 1960)). 25 properly interpret a contract as a matter of law only if the 26 meaning of the contract is unambiguous. 27 Prods., Inc., 454 F.3d 975, 990 (9th Cir. 2006) (citation 28 omitted). YA Global Invs., L.P. On a motion for summary judgment, a court may 31 Miller v. Glenn Miller 1 Under New Jersey law, “[e]vidence of the circumstances 2 is always admissible in aid of the interpretation of an 3 integrated agreement. 4 face is free from ambiguity.” 5 840 (3d Cir. 1999) (quoting Alt. N. Airlines v. Schwimmer, 12 6 N.J. 293, 301 (1953)). 7 to determine the meaning of contractual terms, after the meaning 8 of the contract is discerned the parol evidence rule “prohibit[s] 9 the introduction of extrinsic evidence to vary the terms of the This is so even when the contract on its Halper v. Halper, 164 F.3d 830, Although extrinsic evidence is permitted 10 contract.” 11 270 (2006). 12 cannot determine the parties’ intent at the time of contracting 13 without judging the credibility of the extrinsic evidence. 14 City of Hope Nat. Med. Ctr. v. Genentech, Inc., 43 Cal. 4th 375, 15 395 (2008). 16 Conway v. 287 Corporate Ctr. Assocs., 187 N.J. 259, Summary judgment is inappropriate if the court See In this case, All Professional does not dispute that 17 the franchise agreements are integrated agreements. 18 Decl. Exs. A-D § 22.15.) 19 that All Professional suggests is ambiguous is section 4.1, which 20 states, in pertinent part: 21 22 23 24 25 26 27 28 (See Bertet The only provision of the agreements License, Policy and Procedure Manual. As of the Effective Date, we grant you a nonexclusive license (I) to use the Marks for the Business at and from the Office and to hold the Business out to be a participant in the System, and (ii) to use the System for the operation of the Business at and from the Office. You accept the nonexclusive license granted by us, subject to the terms and conditions of this Agreement and the P&P Manual as amended from time to time. . . . The P&P Manual contains our recommended methods, specifications and procedures relating to the use and protection of the System. (Id. Exs. A-D § 4.1.) The agreements define “System” to mean the business format and methods developed or licensed by 32 1 2 3 4 5 6 7 us for the promotion and assistance of independently owned and operated real estate brokerage offices, including policies, procedures, and techniques designed to enable such offices to compete more effectively in the real estate sales market. The System includes common use and promotion of certain Marks, copyrights, trade secrets, centralized advertising programs, recruiting programs, referral programs and sales and management training programs. We may update the System at any time and expect to continue to do so as we deem advisable in our sole judgment and discretion. (Id. Exs. A-D § 3.1.14.) 8 9 All Professional contends that Century 21’s use of the term “System” is ambiguous and argues that “[a] reasonable 10 interpretation of the Century 21 drafted Agreement is that the 11 ‘System’ includes a promise to prevent intra family recruiting, 12 preserve the financial privacy of a franchisee and to protect the 13 Century 21 service mark.” 14 28:1 (Docket No. 93).) 15 application of the definition provided in the agreements for the 16 term “System” would produce an ambiguous result, nor why its 17 proposed interpretation is reasonable. (Opp’n to Summ. Adjudication at 27:27- All Professional does not explain why 18 The plain and clear language of section 4.1 grants the 19 franchisee a non-exclusive license to use Century 21’s marks and 20 system. 21 which encompasses use of Century 21’s marks, copyrights, trade 22 secrets, and advertising programs, is consistent with the plain 23 purpose of section 4.1. 24 of “System,” which would obligate Century 21 to prevent intra 25 family recruiting, preserve financial privacy, and protect 26 Century 21’s service mark, is inconsistent with the plain meaning 27 of section 4.1 in defining the scope of the non-exclusive license 28 because it places affirmative obligations upon Century 21, rather The definition of “system” provided in the agreements, All Professional’s proposed definition 33 1 than defining All Professional’s rights under the non-exclusive 2 license. 3 All Professional’s proposed definition of “System” also 4 contradicts other provisions in the franchise agreements. 5 Section 4.4.1 provides that “You shall be responsible for, and 6 supervise all of your Affiliates in order to assure, the proper 7 use of the Marks and the System in compliance with this 8 Agreement.” 9 further provides that Century 21 has “no right to regulate or (Bertet Decl. Exs. A-D § 4.4.1.) Section 21.2 10 participate in the recruitment, selection, engagement, retention, 11 discipline, or termination of your sales associates or 12 employees.” 13 obligation to enforce compliance with Century 21’s proposed 14 recruiting practices on All Professional and suggest that 15 inserting an obligation into the term “System” for Century 21 to 16 manage a franchisee’s employment practices is inconsistent with 17 other terms in the agreement. 18 (Id. Exs. A-D § 21.2.) These terms place the Finally, nothing All Professional has submitted 19 regarding the circumstances surrounding the franchise agreements 20 supports their proposed definition or claims that the agreements 21 are ambiguous. 22 the franchise agreements is not susceptible to more than one 23 meaning and is therefore not ambiguous. 24 interpret the contracts as a matter of law. 25 Based on the evidence submitted, section 4.1 of b. The court can thus All Professional’s Allegations that Century 26 21 Breached the Contract and Excused All 27 Professional’s Performance Under the 28 Franchise Agreements 34 1 All Professional submits a number of ways in which it 2 alleges that Century 21 breached the franchise agreements in a 3 manner that excused its performance.17 4 each alleged breach in turn. 5 1. The court will address Improper Recruiting 6 The Century 21 Code of Conduct states that “[t]he 7 Franchisee and its Office Personnel should avoid recruiting 8 (which shall include, but shall not be limited to, personal 9 solicitations, mass mailings, personal mailings, and/or 10 advertising), other CENTURY 21 Franchisees’ Sales Associates 11 unless the other CENTURY 21 Franchisee first consents to such 12 recruiting activities.” 13 Conduct”) at 24 (Docket No. 103).) 14 Century 21 breached the franchise agreements when it failed to 15 stop other franchises from recruiting its agents. 16 this breach, All Professional claims that its revenues dropped, 17 rendering it unable to, and therefore excused from, paying its 18 franchise fees. 19 (Compendium of Exhibits Ex. 15 (“Code of All Professional argues that As a result of With respect to Steve Wright’s complaints to Century 20 21, Century 21 had no obligation under the agreements to prevent 21 other franchisees from recruiting All Professional’s agents. 22 the contrary, Century 21 did not have the right to do so. To As 23 24 25 26 27 28 17 Of the eight ways that All Professional stated in its interrogatory responses that Century 21 breached the franchise agreements, All Professional does not discuss three alleged breaches in its opposition. (See Rudin Decl. ¶¶ 5-6, Exs. D-E.) Specifically, All Professional does not address Century 21’s alleged failure to: (1) utilize NAF fees to promote All Professional, (2) provide relocation referrals, or (3) prevent All Professional Hawaii partner John Sherman from leaving All Professional and joining a competing franchise. The court accordingly does not address these claims. 35 1 2 3 4 5 discussed above, section 21.2 provided: [Century 21] will have no obligation to pay your commissions, taxes, wages or other expenses, and will have no right to regulate or participate in the recruitment, selection, engagement, retention, discipline or termination of your sales associates or employees, . . . except as may be necessary to protect the Marks and goodwill. 6 (Bertet Decl. Exs. A-D § 21.2.) This provision applied to all of 7 Century 21’s franchise agreements, and therefore also governed 8 its relationship with Select and All Islands. 9 this court explained previously, was for All Professional to sue The remedy, as 10 Select, the Century 21 franchisee that allegedly recruited All 11 Professional’s agents and moved into the same Folsom office that 12 All Professional vacated.18 13 Century 21 did not have the right to run either All 14 Professional’s or Select’s business. It was at best in the 15 position of mediator, with no authority to enforce sanctions 16 against either party. 17 Select’s alleged recruiting of All Professional’s agents was no 18 excuse for All Professional to stop paying fees to Century 21. Regardless of Century 21’s actions, 19 20 21 22 23 24 25 26 27 28 18 All Professional suggests that under section 10.3 of the franchise agreements, Century 21 had the discretion to terminate franchises that engaged in unethical recruiting behavior. (See Bertet Decl. Exs. A-D § 10.3.) As an initial matter, it is unclear whether this provision applies to recruiting violations based on Century 21’s Code of Conduct, which is discussed in section 10.2. Section 10.3 discusses compliance with the Code of Ethics of the National Association of Realtors, local, state, and federal law. A reasonable interpretation of the termination provision is that Century 21’s discretion to terminate franchises is limited to transactions violating these provisions, and not Century 21’s internal code. Even if Century 21 had the discretion to terminate franchises for violations of recruiting practices, the provision does not obligate Century 21 to take any action, rather it may do so “at [its] option.” (Id.) All Professional’s reliance on this provision therefore fails to demonstrate a material fact suggesting breach of contract. 36 1 2. 2 Divulging of Confidential Information All Professional alleges that Century 21 released 3 confidential information regarding its finances that undermined 4 its agents’ confidence in the franchise and encouraged other 5 franchises to recruit All Professional’s agents.19 6 Wright Dep. II at 72:16-73:24.) 7 franchise agreements that addresses Century 21’s obligations 8 regarding All Professional’s confidential information is section 9 13.5. (See Steve The only provision in the Section 13.5 provides that “no information supplied to us 10 shall be considered confidential by the parties.” 11 Exs. A-D § 13.5.) 12 (Bertet Decl. All Professional argues instead that the term “System” 13 in section 4.1 should be construed to place an obligation on 14 Century 21 to protect All Professional’s information from 15 disclosure. 16 is inconsistent with the plain meaning of section 4.1 and would 17 flatly contradict section 13.5. 18 to protect All Professional’s confidential information under the 19 franchise agreements, any information allegedly divulged cannot 20 be used to establish a breach of contract or as an excuse for All 21 Professional to stop paying its franchise fees. 22 As the court discussed above, such an interpretation 3. Because Century 21 had no duty Failing to Protect the Century 21 Name 23 24 25 26 27 28 19 The only evidence supporting All Professional’s claim that its confidential information was divulged by Century 21 is hearsay testimony in the form of Steve Wright’s uncorroborated deposition. Steve Wright acknowledged that he never heard any Century 21 agent reveal the information nor did he ever see the statements in writing, but stated that it must have been Bainbridge who divulged the information. (Rudin Decl. Ex. A (“Steve Wright Dep. III”) at 254:23-259:17 (Docket No. 88-9).) Bainbridge denied having shared All Professional’s financial information. (Bainbridge Dep. at 191:20-195:23.) 37 1 All Professional alleges that Century 21’s failure to 2 protect its name and marks violated the franchise agreement and 3 that the resulting consumer confusion caused All Professional to 4 lose business. 5 attention to any provision in the franchise agreements that 6 imposes an obligation on Century 21 to protect the Century 21 7 name from infringement by third parties. 8 Professional relies on its reinterpretation of the term “System” 9 in section 4.1 to impose such an obligation on Century 21. 10 Section 4.1 cannot be reasonably interpreted to impose an 11 affirmative obligation on Century 21 to initiate third-party 12 lawsuits based on All Professional’s complaints. 13 All Professional fails to direct the court’s Once again, All Instead, section 4.4.2 provides that Century 21 14 “reserve[s] the right to approve any and all public uses of the 15 Marks . . . . At our sole option, we or an affiliate will obtain 16 and maintain its registrations for the Marks and exercise the 17 rights against infringement or unauthorized use of the Marks.” 18 (Id. Exs. A-D § 4.4.2.) 19 that Century 21 retains the discretion to decide when to take 20 action against infringers. 21 section 4.1 contradicts the discretion that Century 21 is given 22 under section 4.4.2 and would therefore be an unreasonable 23 interpretation. 24 prosecute entities that infringe upon its Mark, Century 21’s 25 alleged inaction cannot be used to establish that it breached the 26 franchise agreements. 27 28 The language of section 4.4.2 suggests All Professional’s interpretation of Because Century 21 has no affirmative duty to 4. Facilitating Select’s Move to Folsom Section 5.2 of the franchise agreements provides that 38 1 “during the term of this agreement, [Century 21] shall not grant 2 another franchised CENTURY 21 office at a location which is 3 within .25 mile . . . of [All Professional’s] Office.” 4 A-D § 5.2.) 5 franchise agreement when it allowed Select to move into the 6 Folsom office that All Professional had previously used.20 7 the time that Century 21 approved Select’s application to move to 8 Folsom, All Professional’s Folsom franchise had already been 9 terminated on the grounds of abandonment. (Id. Exs. All Professional argues that Century 21 breached the At Therefore, Century 21 10 did not violate section 5.2 of the franchise agreement. 11 Professional points to no other provisions in the franchise 12 agreements that suggest that Century 21 was barred from 13 permitting Select’s move to Folsom. 14 5. 15 All Failing to Provide the “Tools and Systems” Promised 16 All Professional alleges that Century 21’s failure to 17 provide “tools and systems” excused All Professional’s 18 performance under the franchise agreements. 19 court what “tools and systems” All Professional is referring to, 20 but it appears that All Professional believes that the “tools and 21 systems” would increase its productivity. 22 Professional fails to cite the provision of the franchise 23 agreement it is relying on for this claim. 24 25 It is unclear to the Once again, All Section 23.9 of the franchise agreements states that All Professional “acknowledge[s] that neither [Century 21], nor 26 27 28 20 The court addresses below whether Century 21’s termination of All Professional’s Folsom franchise was proper under the franchise agreement. 39 1 any other person has guaranteed or warranted that you will 2 succeed in the operation of the Franchise . . . .” 3 section 23.10 of the franchise agreements states that All 4 Professional acknowledges that Century 21 “neither orally or in 5 writing represented any specified level of sales or profit.” 6 discussed above, reading a obligation into section 4.1 that 7 Century 21 provide “tools and systems” to ensure profitability is 8 incompatible with the section’s clear meaning and other 9 provisions of the agreement. 10 Similarly, As Assuming that the franchise agreements did require 11 Century 21 to provide All Professional with “tools and systems,” 12 All Professional has failed to raise a genuine issue of material 13 fact showing that Century 21 failed to provide the required 14 “tools and systems.” 15 evidence relies on the circular reasoning that because it was not 16 profitable, Century 21 must have failed to provide it will 17 sufficient “tools and systems.” 18 defeat a motion for summary adjudication. 19 evidence that All Professional was provided with various tools 20 and systems, such as the lead router, which All Professional 21 found important enough to move this court for a preliminary 22 injunction requiring Century 21 to allow it continued access to 23 the Century 21 system. 24 6. 25 26 Rather, All Professional’s argument and Such tautology is not enough to It is clear from the Preventing All Professional from Curing its Defaults All Professional argues that Century 21 prevented it 27 from curing its defaults by not properly accounting for All 28 Professional’s overdue fees, failing to provide it with a payment 40 1 plan, and then terminating the franchises without notice. 2 All Professional’s Folsom franchise was terminated 3 under the franchise agreement’s abandonment clause, section 4 16.2.5.4, for failure to operate the office for more than five 5 consecutive business days. 6 for which Century 21 can terminate a franchise without notice. 7 (Bertet Decl. Exs. A-D § 16.2.5.) 8 could have acted to prevent All Professional from curing its 9 breach since it was within All Professional’s sole control to Abandonment is a non-curable default It is unclear how Century 21 10 reopen its Folsom office -- Century 21 did not own the premises 11 or evict All Professional. 12 months to terminate All Professional’s Folsom franchise, Century 13 21 gave All Professional more time to cure its abandonment breach 14 than it was required to under the franchise agreement. 15 If anything, by waiting more than six The Sacramento and Hawaii franchises were terminated 16 after All Professional failed to cure its defaults by the May 10, 17 2010, deadline set in the April 5, 2010, notice of default 18 letters. 19 order, All Professional’s negotiations with Century 21 to create 20 an alternative payment plan did not relieve All Professional of 21 its obligation to pay its default in full by the cure date.21 22 Century 21 was under no obligation to enter into such discussions 23 or provide a payment plan. As the court discussed in its preliminary injunction 24 25 26 27 28 21 The fact that the Wrights did not even attempt to contact Century 21 until May 6, 2010, four days before the cure date, to set up a payment plan and dispute the account totals is further evidence that All Professional’s failure to act before the cure date is its own fault. With the exception of the Wrights’ initial discussions with Century 21 on May 6 and May 7, all of the discussions that All Professional relies upon occurred after the cure date. 41 1 Since the preliminary injunction hearing All 2 Professional has provided additional details regarding the terms 3 of its negotiation with Century 21. 4 suggests that All Professional ever reached a deal with Century 5 21 regarding a payment plan or that Century 21 made any 6 representations to All Professional that it should wait to pay 7 off any portion of its default until after an agreement was 8 reached. 9 overdue franchise fees were undisputed and that All Professional 10 None of this evidence though The evidence does suggest that the majority of the failed to pay even the undisputed fees. 11 It was unequivocally clear from the testimony of the 12 Wrights during the evidentiary hearing on the preliminary 13 injunction motion that the primary reason they did not pay the 14 franchise fees they owed to Century 21 was that they did not have 15 the money to do so. 16 know the amount to pay nor was it because Century 21 had 17 defaulted on its obligations. 18 It was not because All Professional did not The Wrights now present evidence that suggests that 19 they did have adequate funds to pay the franchise fees that they 20 owed. 21 directly contradicts the Wrights’ repeated sworn assertions 22 during the evidentiary hearing that they did not have the funds 23 available to pay off their default and their claim that the 24 Folsom office was closed due to cash flow problems. 25 of this new evidence, All Professional provides no evidence 26 showing that Century 21 prevented it from paying off its accounts 27 directly with cash. 28 material facts suggesting that Century 21 prevented it from (Compendium of Exhibits Ex. 30.) This new evidence Regardless All Professional has failed to provide any 42 1 curing its breach and excusing its obligation to perform under 2 the franchise agreements. 3 7. 4 Terminating Franchise Agreements in Bad Faith 5 Finally, All Professional argues that Century 21 6 terminated the franchise agreements in bad faith because the 7 terminations for non-payment and abandonment were actually 8 “pretext” for Century 21’s ulterior motives. 9 argument appears to be premised on the assumption that if Century All Professional’s 10 21 terminated the contracts in bad faith, Century 21 was in 11 breach of contract. 12 otherwise excuse All Professional’s performance under the 13 franchise agreements. 14 termination of a franchise agreement pursuant to its express 15 terms is invalid if there is some pretextual motive, All 16 Professional cites section 20020 of the CFRA22 and JRS Products, 17 Inc. v. Matushita, Electric Corp. of America, 115 Cal. App. 4th 18 168, 173 (2004). 19 It is not clear how this would function to In support of its argument that Section 20020 of the CFRA prohibits termination of a 20 franchise without good cause and requires that the franchisee be 21 given a reasonable opportunity to cure. 22 Code § 20020. 23 interpretation of “good cause” as including a “good faith,” as See Cal. Bus. & Prof. All Professional’s argument appears to rely on the 24 25 26 27 28 22 Application of New Jersey law in this case technically bars consideration of claims under the CFRA. However, the protections in section 20020 of the CFRA also appear in sections 16.2.3 and 16.2.4 of the franchise agreements. Interpretation of All Professional’s argument based on the specific provisions in the franchise agreements would therefore produce the same analysis and conclusion. 43 1 opposed to “bad faith,” requirement. 2 section 20020 of the CFRA to “include, but not be limited to, the 3 failure of the franchise to comply with any lawful requirement of 4 the franchise agreement after being given notice thereof and a 5 reasonable opportunity, which in no event need be more than 30 6 days, to cure the failure.” 7 “good faith” requirement and All Professional fails to cite any 8 caselaw suggesting such a requirement. 9 Century 21’s termination of All Professional’s franchises was in 10 good faith because Century 21 provided All Professional with more 11 than 30 days to cure its default. 12 JRS Products is similarly of no help as the decision does not 13 discuss pretextual termination at all. 14 Id. “Good cause” is defined in The CFRA makes no mention of a Under section 20020, All Professional’s reliance on “If a party has a legal right to terminate the contract 15 . . . , its motive for exercising that right is irrelevant. 16 party can seize on a ground for termination given it by the 17 contract to terminate the contract for an unrelated reason.” 18 Racing Prods., Inc. v. Am. Suzuki Motor Corp., 223 F.3d 585, 589 19 (7th Cir. 2000). 20 Professional’s relationship with Century 21 had been better, 21 Century 21 may have been inclined to work harder to maintain or 22 restore All Professional’s franchises. 23 21’s motives leading up to the termination of All Professional’s 24 franchises, though, the terminations were properly conducted 25 under the franchise agreements and therefore Century 21’s motive 26 is irrelevant. 27 28 The Tuf It is entirely possible that if All Regardless of Century All Professional further claims that the termination of its Folsom franchise was “patently a pre-text” because the 44 1 termination violated the terms of the franchise agreement’s 2 abandonment clause. 3 29:13-14.) 4 that: 5 6 7 (Opp’n to Mot. for Summ. Adjudication at Section 16.2.5 of the franchise agreements provides Abandonment of your Office(s), demonstrated by removal of the Marks or by your not operating the Business for five consecutive business days or any shorter period when, under the facts and circumstances, it would not be unreasonable for use to conclude that you do not intend to continue to operate the Business. 8 9 (Bertet Decl. Exs. A-D § 16.2.5.) All Professional argues that 10 it was not reasonable for Century 21 to conclude that they no 11 longer intended to operate the Folsom office and therefore they 12 did not abandon the franchise. 13 All Professional interprets section 16.2.5 to require 14 proof that the franchisee does not intend to continue to operate 15 the business when the office has not been operational for five 16 business days or more. 17 requires a determination of whether the franchise intends to 18 continue operation of the business where the office has not been 19 operational for less than five days. 20 stating otherwise would render the provision’s distinction 21 between a business that has not operated for five consecutive 22 business days and one that has not operated for a shorter period 23 meaningless because Century 21 would always be required to 24 undergo analysis of the “facts and circumstances.” 25 Professional’s interpretation thus fails to give meaning to the 26 entirety of the provision and is not reasonable. 27 28 A plain reading of section 16.2.5 only To interpret the section as All Century 21 properly terminated the Folsom franchise after All Professional failed to conduct business out of the 45 1 office, or any other Folsom office, for over six months. 2 termination was therefore not “patently a pre-text.” 3 The The court further notes that even if the termination of 4 All Professional’s Folsom franchise was improper under the 5 franchise agreement’s abandonment clause, the termination would 6 have been proper had Century 21 relied on All Professional’s 7 failure to cure its default on the Folsom franchise. 8 5, 2010, notice of default on the Folsom franchise specified a 9 cure date of May 10, 2010. (Bertet Decl. Ex. J.) The April Century 21 did 10 not terminate All Professional’s Folsom office on abandonment 11 grounds until May 24, 2010, (Compendium of Exhibits Ex. 31), well 12 after the cure date. 13 All Professional has failed to demonstrate that Century 14 21 was in breach of the franchise agreement in any manner. 15 Professional’s performance under the agreements was therefore not 16 excused. 17 for summary adjudication of its claim that All Profession was in 18 breach of contract with respect to the four franchise agreements. 19 20 All Accordingly, the court will grant Century 21’s motion c. Breach of the DAN Agreement Century 21’s breach of contract claim also includes 21 breach of the DAN agreement by All Professional for failure to 22 make required payments. 23 Professional received a $75,000 loan, repayment of which would be 24 waived in each year that All Professional reached a minimum 25 threshold in gross revenues. 26 minimum threshold in gross revenue for three separate years, yet 27 it never made any of the required payments under the DAN. 28 Professional does not dispute these facts, but instead argues Under the DAN agreement, All All Professional did not reach the 46 All 1 that its failure to make the required payments under the DAN 2 should be excused or were otherwise not required. 3 Under New Jersey law, a written contract is considered 4 integrated “when the parties intend it to constitute the complete 5 and final expression of their agreement. 6 an express integration clause the district court must determine 7 whether the parties intended their agreement to be an integrated 8 contract by reading the writing in light of the surrounding 9 circumstances.” When a contract lacks Rite Aid of N.J., Inc. v. United Food & 10 Commercial Workers, Civ. No. 11-00374, 2011 WL 5920939, at *6 11 (D.N.J. Nov. 28, 2011) (quoting Starter Corp. v. Converse, Inc., 12 170 F.3d 286, 295 (2d Cir. 1999)). 13 The parties dispute whether the DAN is an integrated 14 contract. The agreement does provide that All Professional 15 “acknowledges and agrees that neither [Century 21] nor any of its 16 affiliates has made any representations or warranties, nor 17 furnished any information to them concerning any aspect of the 18 Franchise Agreements or [All Professional’s] business.” 19 Decl. Ex. E at CENT000294.) 20 in a paragraph that begins by limiting its applicability to 21 situations where the “Note is being executed in connection with 22 the acquisition or consolidation (by merger, acquisition or 23 otherwise) of a real estate brokerage business.” 24 CENT000293-CENT000294.) 25 Century 21 relies upon does not specifically contain this 26 limitation, it appears at the end of a paragraph that repeatedly 27 limits its contents to DANs signed in connection with an 28 acquisition or consolidation. (Bertet This provision, however, is included (Id. Ex. E at Although the specific sentence that The DAN agreement in this case was 47 1 not signed in connection with the acquisition or consolidation of 2 a franchise, therefore it would be reasonable to read the 3 limitation on the effect Century 21’s representations as not 4 applying in this case. 5 surrounding circumstances.23 6 The court will thus consider the All Professional points to statements made by Omer, 7 Century 21’s Western Regional Vice President, at the time it 8 signed the DAN suggesting that the Wrights were “not to worry” 9 about repaying the DAN because of the new “tools and systems” 10 that Century 21 was developing. All Professional argues that 11 after it signed the DAN, Century 21 began to provide less 12 support, never provided the “tools and systems” promised, and 13 began to allow other franchises to steal All Professional’s 14 agents. 15 Century 21 met its obligations under the franchise agreements and 16 did not guarantee that All Professional would be profitable. 17 Steve Wright himself conceded, Omer never “said that we would be 18 profitable. 19 houses.” The court has already addressed these complaints -- As They said we would be more productive and sell more (Steve Wright Dep. I at 67:11-15.) 20 Aside from All Professional’s evidence regarding Omer’s 21 representations, the surrounding circumstances support the direct 22 application of the DAN provision that failure to meet gross 23 revenue thresholds would require DAN payments. 24 All Professional and the Wrights signed the DAN agreement, they 25 also executed a Security Agreement and an Amendment to the River At the time that 26 27 28 23 As the court noted above, even if the DAN were an integrated agreement, review of the surrounding circumstances would be appropriate under New Jersey law. See Halper, 164 F.3d at 840-41. 48 1 Park franchise agreement that contained provisions specifically 2 pertaining to repayment of the DAN. 3 contain integration clauses, and the plain language in the DAN 4 agreement regarding the circumstances under which DAN payments 5 would be required suggest that there would be circumstances under 6 which a franchise would not meet its gross revenue threshold and 7 would be required to repay a portion of the DAN. 8 Professional’s proposed interpretation of the DAN as placing an 9 affirmative obligation on Century 21 to provide “tools and These agreements, which do All 10 systems” so that All Professional would always meet the gross 11 revenue threshold, or to waive the DAN payments, is inconsistent 12 with this evidence. 13 ensure that All Professional never had to repay the DAN, All 14 Professional’s failure to perform under the DAN agreement is not 15 excused. 16 Because Century 21 had no obligation to Accordingly, the court will grant Century 21’s motion 17 for summary adjudication for its claim that All Professional was 18 in breach of contract with respect to the DAN agreement. 19 20 d. Actual Damages Consideration of damages is appropriate because the 21 court has found that All Professional was in breach of contract 22 of both the franchise agreements and the DAN and has granted 23 Century 21’s motion for summary adjudication. 24 dispute the amount of damages that Century 21 is entitled to in 25 compensation for All Professional’s breach of the franchise 26 agreements. 27 owes past due franchise and advertising fees totaling 28 $196,954.90. The parties Century 21 claims that All Professional currently All Professional raises a number of objections to 49 1 the charges. 2 The court will address each objection in turn. First, All Professional objects to Century 21’s 3 accounting for the River Park, Florin Road, and Hawaii franchises 4 because it alleges that it was prevented from paying past due 5 service fees after Century 21 terminated support services. 6 (Steve Wright Decl. in Supp. of Defs.’ Opp’n to Mot. for Summ. 7 Adjudication (“Steve Wright Decl. II”) ¶¶ 4, 6-7 (Docket No. 8 95).)24 9 Century 21’s online payment system after its franchises were The fact that All Professional no longer had access to 10 terminated neither excuses its failure to pay its past-due 11 franchise fees nor constitutes a disputed material fact regarding 12 the amount ultimately due. 13 All Professional next objects to any portion of the DAN 14 being due on account of Century 21 “withholding services 15 essential to maintain production.” 16 already dismissed this objection above. 17 18 (Id. ¶ 4.) The court has Third, All Professional disputes the accounting for NAF advertising fees for the River Park franchise. Specifically, All 19 20 21 22 23 24 25 26 27 28 24 Century 21 objects to the evidence presented by All Professional to dispute the amounts owed under the franchise agreements. The only evidence submitted by All Professional is paragraphs four through seven of Steve Wright’s July 16, 2012, declaration. (Docket No. 95.) In Steve Wright’s June 11, 2012, deposition testimony he stated that other than All Professional’s objection to the DAN charges, he did not know which accounting charges All Professional disputed but that Carol Wright might know about the specific charges All Professional contested. (Rudin Decl. in Supp. of Century 21’s Reply Ex. C (“Steve Wright Dep. IV”) at 38:1-39:12 (Docket No. 112-1).) Although it is true that a party may not create an issue of fact by submitting an affidavit contradicting prior deposition testimony, see Kennedy v. Allied Mut. Ins. Co., 952 F.2d 262, 266-67 (9th Cir. 1991), that does not appear to be the case here. It is a perfectly reasonable inference to draw that after his deposition, Steve Wright talked to Carol Wright and learned of the specific additional accounting disputes. 50 1 Professional argues that it was overcharged by $1,359 in 2 advertising fees that were first charged in January 2007 and 3 previously waived by Century 21 as an erroneous charge. 4 The only evidence that All Professional presents in support of 5 this disputed charge is Steve Wright’s conclusory deposition 6 statement that the charge had been waived. 7 alleged waiver of the charge appears to be connected to its 2008 8 proposal to waive All Professional’s 2007 DAN and NAF fees in 9 exchange for All Professional signing a one-year extension on its (Id.) (Id.) Century 21’s 10 franchise fees. 11 159:16-161:8.) 12 proposal, Century 21’s offer to waive the NAF fees is not 13 binding. 14 is not sufficient.25 15 evidence establishing a materially disputed fact regarding this 16 charge. 17 (Rubin Decl. Ex. B (“Carol Wright Dep. II”) at Because All Professional did not agree to the Steve Wright’s conclusory statement arguing otherwise All Professional has thus failed to present Fourth, All Professional disputes a $1,500 charge for a 18 lead router charged to the River Park franchise’s account. 19 (Steve Wright Decl. II ¶ 4.) 20 Professional never agreed to pay for the router. 21 oral arguments, Century 21 was unable to point to any evidence According to Steve Wright, All (Id.) During 22 23 24 25 26 27 28 25 In All Professional’s response to Century 21’s statement of undisputed facts, it also states that in a June 16, 2010, phone conversation the parties reached an agreement to waive $304.50 in advertising fees. (Defs.’ Resp. to Statement of Undisputed Facts ¶ 63 (Docket No. 95).) That agreement, however, was part of the parties’ negotiations that were never finalized. Moreover, the evidence submitted by All Professional to support this claim does not discuss the advertising fees at all. All Professional does not rely on this evidence to support its dispute on the $1,359 charge and given the deficiencies in the evidence the court will not do so either. 51 1 disputing this claim. 2 which the lead router was provided to All Professional, the court 3 is unable to determine whether the charge is proper. 4 Professional has thus presented evidence sufficient to establish 5 a materially disputed fact regarding this charge. 6 Without knowing the circumstances under All Fifth, All Professional disputes the minimum royalty 7 fees and advertising fees assessed after August 31, 2009, when it 8 closed its Folsom office. 9 provision of the franchise agreement that permits a franchise to 10 unilaterally close its franchise office and not pay the minimum 11 royalty fees, while still technically retaining its status as a 12 Century 21 franchise. 13 Professional was required to pay the minimum royalty fees until 14 the franchise agreement was terminated. 15 that All Professional’s argument discussed above that Century 21 16 was not entitled to terminate the Folsom franchise because All 17 Professional still intended to reopen the office directly 18 contradicts its claim that it should not be responsible for any 19 fees during that period. 20 a materially disputed fact suggesting that it was not responsible 21 for the minimum royalty fees assessed on the Folsom franchise 22 after August 31, 2009. (Id.) All Professional cites to no Under the contract, therefore, All The court also notes All Professional thus fails to provide 23 Finally, All Professional objects to Century 21’s 24 accounting for the Florin Road and Hawaii franchises on the 25 grounds that it “disputes the accuracy of the fees claimed by 26 Century 21.” 27 insufficient to create a genuine issue of material fact as to the 28 amounts owed under either franchise agreement. (Id. ¶¶ 6, 7.) This conclusory statement is 52 See Anheuser- 1 Busch, Inc. v. Natural Beverage Distribs., 69 F.3d 337, 345 (9th 2 Cir. 1995) (noting that “conclusory or speculative testimony is 3 insufficient to raise a genuine issue of fact to defeat summary 4 judgment”). 5 Accordingly, with respect to the damages that All 6 Professional owes Century 21 for breach of the franchise 7 agreements, the court finds that there is no genuine dispute as 8 to $195,454.90 of the $196,954.90 Century 21 claims. 9 however, a genuine dispute as to the remaining $1,500.00 claimed 10 11 There is, by Century 21. e. Future Lost Profits 12 Section 16.7.2 of the franchise agreements provides 13 that in the event of early termination of the agreements, All 14 Professional shall immediately become obligated to pay Century 21 15 “lost future profits” that “shall be equal to the combined 16 monthly average of Royalty Fees, NAP contributions, and any other 17 fees under this Agreement . . . payable from the Effective Date 18 of this Agreement through the date of early termination, 19 multiplied by the number of months (or partial months) remaining 20 in the term of this Agreement” discounted to present value at a 21 rate of eight percent. 22 result of the early termination of All Professional’s franchises, 23 Century 21 claims that All Professional owes it lost future 24 profits in the amount of $250,029.34 on the River Park franchise, 25 $88,757.77 on the Folsom franchise, $155,671.48 on the Florin 26 Road franchise, and $80,541.98 on the Hawaii franchise. 27 ¶¶ 42-45, Exs. R-U.) 28 (Bertet Decl. Exs. A-D § 16.7.2.) As a (Id. “Generally, a liquidated damage clause is enforceable 53 1 in New Jersey where actual damages which would be sustained upon 2 a breach are difficult to project and are not readily susceptible 3 of proof under the rules of evidence. 4 not, however, be disproportionate to the presumable loss.” 5 Steel Drum Co. v. Gold Cooperage, Inc., 491 A.2d 49, 54 (N.J. 6 App. Div. 1985), overruled on other grounds by Kutzin v. Pirnie, 7 591 A.2d 932 (N.J. 1991). 8 damages clause bears the burden of proving its unreasonableness. 9 See id. The agreed upon sum must Cent. The party challenging a liquidated “Thus, the party challenging a stipulated damages clause 10 ‘must establish that its application amounts to a penalty.’” 11 Wasserman’s Inc. v. Twp. of Middletown, 137 N.J. 238, 253 (1994) 12 (quoting Haromy v. Sawyer, 98 Nev. 544, 654 (1982)). 13 The purpose of a stipulated damages clause is to 14 compensate the promisee for non-performance, and not to compel 15 the promisor to perform. 16 liquidated damages are enforceable only if “the amount so fixed 17 is a reasonable forecast of just compensation for the harm that 18 is caused by the breach.” 19 N.J. Super. 200, 206 (App. Div. 1964). 20 clause is therefore unreasonable if “it does more than compensate 21 plaintiffs for their approximate actual damages caused by the 22 breach.” 23 the time of contracting, the liquidated damages calculation in 24 the franchise agreements, basing Century 21’s expected lost 25 profits on an average of All Professional’s monthly revenue 26 appears reasonable. 27 28 Id. Accordingly, provisions for Westmount Country Club v. Kameny, 82 A liquidated damages Wasserman’s Inc., 137 N.J. at 254. When considered at The New Jersey Supreme Court has suggested that consideration of the reasonableness of a liquidated damages 54 1 clause at the time of breach, or actual damages, is also 2 appropriate in determining the reasonableness of the parties’ 3 prediction of damages.26 4 hindsight is frequently better than foresight, and that, in 5 passing judgment upon the honesty and genuineness of the 6 pre-estimate made by the parties, the court cannot help but be 7 influenced by its knowledge of subsequent events.” 8 Corbin on Contracts § 1063 (1951)). 9 consider the circumstances at the time of termination to Id. at 252. “It is to be observed that Id. (quoting The court will therefore 10 determine whether the liquidated damages clause is enforceable in 11 this case. 12 Here, All Professional presents evidence that it argues 13 suggests that at the time Century 21 terminated All 14 Professional’s three franchises in Sacramento in Hawaii, it did 15 not expect that it would suffer any significant loss of profits. 16 In an email sent July 12, 2010, Bainbridge, a Century 21 business 17 consultant, told Popp, “I believe if we terminate we would get 18 most of the producing agents who are loyal to C21 . . . .” 19 (Compendium of Exhibits Ex. 34.) 20 second email sent August 3, 2010, Bainbridge told Popp, 21 “Fortunately, we will more than replace [All Professional’s] 22 production in this area with the Select ERA conversion this month After the terminations, in a 23 24 25 26 27 28 26 In this respect, consideration of liquidated damages claims under New Jersey law differs from California law, which requires the party seeking to invalidate a liquidated damages clause to show that the provision is “unreasonable under the circumstances existing at the time the contract was made.” Cal. Civ. Code § 1671(b). 55 1 . . . .”27 2 least Bainbridge did not believe that Century 21 would suffer 3 major losses after terminating All Professional, it falls far 4 short of establishing that the liquidated damages clause would be 5 disproportionate with Century 21’s actual losses. 6 Professional continues to operate offices at all three locations 7 which would otherwise have resulted in franchise and advertising 8 fees for Century 21. 9 concerning it or Century 21’s past or current revenues in these (Id. Ex. 36.) While these emails suggest that at All All Professional presents no evidence 10 locations. 11 the two emails presented by All Professional is insufficient to 12 establish that Century 21 suffered no actual damages or that the 13 liquidated damages clause would be disproportionate with Century 14 21’s losses. 15 As the party with the burden of proof on this issue, The court is more sympathetic to All Professional’s 16 arguments concerning the unfairness of applying the liquidated 17 damages clause to the Folsom franchise because All Professional 18 no longer operates an office at that location. 19 nevertheless may not substitute its own intuition for the lack of 20 evidence presented by All Professional in this case, but must 21 instead look to the evidence presented by the parties. 22 Professional pointed out in oral arguments, the emails from 23 Bainbridge were sent after the Folsom franchise was terminated 24 and therefore were not in reference to Century 21’s profits in The court As All 25 26 27 28 27 Read in context, this second email only suggests that a new franchise was moving into the area and that because of this Century 21’s net commissions would remain the same, not that Century 21 suffered no lost profits as a result of All Professional’s termination. 56 1 Folsom. 2 21’s losses in connection with the Folsom location. 3 All Professional presents no evidence regarding Century Citing California law, All Professional further argues 4 that application of the liquidated damages clause would be 5 inappropriate in this case because Century 21 was the party that 6 chose to terminate the franchise agreement. 7 Summ. Adjudication at 42:7-10 (citing Postal Instant Press, Inc. 8 v. Sealy, 43 Cal. App. 4th 1704, 1711 (2d Dist. 1996).) 9 California appellate court in Sealy found that where termination 10 of the franchise agreement was for failure to pay franchise fees, 11 the breach did not proximately cause the lost future profits and 12 therefore the liquidated damages provision was unenforceable.28 13 Sealy, 43 Cal. App. 4th at 1713. 14 analysis has since been persuasively challenged in Radisson 15 Hotels Int’l, Inc. v. Majestic Towers, Inc., 488 F. Supp. 2d 953, 16 963 n.10 (C.D. Cal. 2007). 17 authority on the matter, the court will apply New Jersey’s 18 presumption in favor of liquidated damages clauses. 19 Steel Drum, 491 A.2d at 54.29 20 (Opp’n to Mot. for The Sealy’s proximate cause Absent compelling New Jersey See Cent. Because there is not sufficient evidence showing that 21 22 23 24 25 26 27 28 28 Sealy is not applicable to the liquidated damages clause for the Folsom franchise because that franchise agreement was terminated based on abandonment, not merely for failure to pay franchise fees. 29 Even if the Sealy holding were applicable under New Jersey law, Sealy is distinguishable from the facts of the current case because the franchise agreement in Sealy only vaguely stated that the franchisor would be entitled to the “benefit of the bargain.” In this case, the franchise agreements expressly make All Professional liable for lost future profits when early termination is “for cause,” which includes failure to pay franchise fees. See Radisson, 488 F. Supp. 2d at 962. 57 1 the liquidated damages provision will compensate Century 21 far 2 in excess of its actual damages, the court finds that the 3 provision is enforceable. 4 Century 21’s motion for summary damages as it relates to its 5 liquidated damages request in the amount of $575,001.57. Accordingly, the court will grant 6 2. Breach of Guaranty 7 “The liability of a guarantor is measured by that of 8 the principal, unless the agreement explicitly provides 9 otherwise.” Nat’l Westminster Bank N.J. v. Lomker, 277 N.J. 10 Super. 491, 498 (App. Div. 1994). The Wrights signed guarantees 11 on all four franchise agreements that cover all of All 12 Professional and All Professional Hawaii’s obligations under the 13 franchise agreements. 14 Because the court found that All Professional breached the 15 franchise agreements and because no payments have been made by 16 the Wrights, it follows that the Wrights are also in breach of 17 the guarantees. 18 motion for summary adjudication with respect to its breach of 19 guaranty claim. (See Bertet Decl. Exs. A-D at 43-44.) Accordingly, the court will grant Century 21’s 20 3. Trademark Infringement and Unfair Competition 21 A federal claim for trademark infringement pursuant to 22 section 32 of the Lanham Act requires (1) ownership of a 23 registered trademark; (2) use of that mark beginning before the 24 alleged infringer’s use; (3) the alleged infringer’s use without 25 the alleged owner’s consent; and (4) that the alleged infringer’s 26 use is likely to cause confusion, or to cause mistake, or to 27 deceive. 28 Sandlin, 846 F.2d 1175, 1178 (9th Cir. 1998); Intel Corp. v. See 15 U.S.C. § 1114(a); Century 21 Real Estate v. 58 1 Americas News Intel Pub., LLC, No. C 09-05085, 2010 WL 2740063, 2 at *2 (N.D. Cal. July 12, 2010). 3 unfair competition claim for false designation of origin of 4 services under section 43(a) of the Lanham Act is identical to 5 the federal trademark infringement claim, with the exception that 6 the trademark need not be registered. 7 Intel Corp., 2010 WL 2740063, at *2. 8 parties dispute are whether the agreements were properly 9 terminated and whether Century 21 has met its burden to show 10 The elements of a federal See 15 U.S.C. § 1125(a); The only elements the likelihood of confusion. 11 The merits of Century 21’s claims depend in part on 12 whether Century 21 properly terminated the franchise 13 agreements.30 14 1308 (11th Cir. 1998) (“[W]e find that the Lanham Act’s 15 requirement that a franchisor demonstrate that unauthorized 16 trademark use occurred to prevail on the merits of a trademark 17 infringement claim against a franchisee necessitates some type of 18 showing that the franchisor properly terminated the contract 19 purporting to authorize the trademarks’ use, thus resulting in 20 the unauthorized use of trademarks by the former franchisee.”); S 21 & R Corp. v. Jiffy Lube Int’l, Inc., 968 F.2d 371, 375 (3d Cir. 22 1992) (“Once a franchise is terminated, the franchisor has the 23 right to enjoin unauthorized use of its trademark under the 24 Lanham Act. See McDonald’s Corp. v. Robertson, 147 F.3d 1301, Thus, Jiffy Lube will merit preliminary injunctive 25 26 27 28 30 Because All Professional was no longer operating the Folsom office, and therefore did not continue to use Century 21’s trademarks at that office, the court does not consider whether Century 21 properly terminated All Professional’s Folsom franchise under this claim. 59 1 relief if it can adduce sufficient facts indicating that its 2 termination of Durst’s franchises was proper.”); see also Re/Max 3 N. Cent., Inc. v. Cook, 272 F.3d 424, 430 (7th Cir. 2001). 4 Termination of a franchise agreement may be improper under either 5 the terms of the agreement or state franchise laws. 6 N. Cent., 272 F.3d at 430. 7 a. See Re/Max Use of Trademark Without Consent 8 As the court previously found, the evidence establishes 9 that Century 21 properly terminated All Professional’s franchises 10 under the terms of the franchise agreements. 11 All Professional of its intent to terminate the franchise 12 agreements and the opportunity to cure in April 5, 2010, letters, 13 following prior informal notices of failure to pay amounts due 14 that All Professional had ignored. 15 of even the undisputed fees, Century 21 terminated the Sacramento 16 office agreements effective July 9, 2010. 17 properly waited more than 30 days after the notices of default 18 were sent as required under section 16.2.4 before it terminated 19 the agreements for All Professional’s failure to cure. 20 21 b. Century 21 notified Having not received payment Century 21 thus Likelihood of Confusion The court previously found that All Professional’s 22 continued use of the Century 21 marks was sufficient to establish 23 a likelihood of confusion. 24 24:27 (Docket No. 28).) 25 21 has failed to show “actual confusion” by an appreciable number 26 of people and that its holdover infringement was not “willful” 27 because it desired to remain a Century 21 franchise and 28 subsequently de-marked after the court’s preliminary injunction (See Jan. 24, 2011, Order at 22:21- All Professional now argues that Century 60 1 order. 2 Evidence of actual confusion is not required to prevail 3 on a motion for summary judgment of a trademark infringement 4 claim. 5 187, 191 n.5-6 (9th Cir. 1975) (“Although the trial court found 6 no evidence of actual confusion, this fact does not preclude this 7 Court from concluding that there is a ‘likelihood of confusion’, 8 as actual confusion is merely one factor to be considered by the 9 Court when it makes its determination.”). See J.L. Williams Co. v. Le Conte Cosmetics, 523 F.2d All Professional’s 10 reliance on the decisions in Entrepreneur Media Inc. v. Smith, 11 279 F.3d 1135 (9th Cir. 2002), and KP Permanent Make-Up, Inc. v. 12 Lasting Impression I, Inc., 543 U.S. 111 (2004), to establish 13 that Century 21 has the burden to present proof of actual 14 confusion is misplaced. 15 Century 21 bears the burden of proving likelihood of confusion 16 for an appreciable number of people, not actual confusion. 17 KP Permanent Make-Up, 543 U.S. at 121-22; Entrepreneur Media, 279 18 F.3d at 1151. 19 preliminary injunction order, Century 21 has met this burden. 20 (Jan. 24, 2011, Order at 22:21-24:27.) 21 presented no new facts suggesting that the court’s prior order 22 was mistaken. 23 These decisions only establish that See As the court described in detail in its All Professional has All Professional’s underlying intent when it used the 24 Century 21 marks without authorization is irrelevant to the 25 question of willfulness. 26 was informed upon termination that it needed to de-identify. 27 fact that “All Professional desired to avoid disrupting their 28 relationships with their clients and their agents while this It is undisputed that All Professional 61 The 1 dispute was litigated,” 2 45:2-3), does not excuse its violation of Century 21’s trademark. 3 There is no recognized exception to the Lanham Act that allows 4 infringers to continue using a mark during a legal dispute. 5 Professional has thus failed to provide material facts suggesting 6 that its infringement was not willful. 7 if it believed that its franchises were wrongfully terminated was 8 to sue for damages and seek a preliminary injunction, not to 9 continue to use Century 21’s marks without paying franchise fees. 10 (Opp’n to Mot. for Summ. Adjudication at All All Professional’s remedy All Professional’s infringement of Century 21’s marks 11 began in July 2010, when it failed to de-identify after its 12 franchises were terminated. 13 is not liable for trademark infringement because it de-marked 14 after the court issued its preliminary injunction order in 15 January 2011, lacks legal support. 16 longer authorized to use Century 21’s trademarks after its 17 franchises were terminated, and the fact that the court did not 18 issue a preliminary injunction for several months after the 19 termination did not give All Professional the right to use 20 Century 21’s marks without Century 21’s authorization. 21 Professional has thus failed to present material facts suggesting 22 that it did not violate Century 21’s trademark. 23 All Professional’s argument that it All Professional was no All In conjunction with its trademark claims, Century 21 24 also requests injunctive relief. The Lanham Act gives courts the 25 “power to grant injunctions, according to the principles of 26 equity and upon such terms as the court may deem reasonable, to 27 prevent the violation” of a registrant’s rights. 28 § 1116(a). 15 U.S.C. Injunctions are especially appropriate where the 62 1 infringing use is for a similar service. See Century 21 Real 2 Estate Corp. v. Sandlin, 846 F.2d 1175, 1181 (9th Cir. 1988). 3 The standard for a permanent injunction is essentially the same 4 as for a preliminary injunction, with the exception that the 5 plaintiff must show actual success, rather than a likelihood of 6 success. 7 531, 546 n.12 (1987). 8 trademark infringement claim, it is entitled to a permanent 9 injunction. See Amoco Prod. Co. v. Village of Gambell, 480 U.S. Since Century 21 has succeeded on its Accordingly the court will grant Century 21’s motion 10 for summary adjudication of its trademark infringement and unfair 11 competition claims and will permanently enjoin All Professional 12 from further use of Century 21’s marks. 13 c. 14 Damages Having found that All Professional infringed upon 15 Century 21’s trademarks, the court next determines the 16 appropriate damages. 17 states: 18 19 20 21 The damages provision of the Lanham Act When a violation of any right of the registrant of a mark . . . shall have been established in any civil action arising under this chapter, the plaintiff shall be entitled . . . to recover (1) defendant’s profits, (2) any damages sustained by the plaintiff, and (3) the costs of the action. 22 15 U.S.C. § 1117(a). 23 $86,022.00. 24 Century 21 requests treble damages of Century 21 claims that it was damaged in an amount 25 equal to the minimum franchise fees that All Professional would 26 have been required to pay to continue using Century 21’s marks 27 for its three operational offices under the franchise agreements. 28 The minimum franchise fees total $3,186.00 per month for the 63 1 three franchises. 2 because it represents the minimum amount that Century 21 would 3 have received if All Professional had been authorized to use 4 Century 21’s marks, and, if anything, Century 21’s actual damages 5 could have been higher than this figure. 6 Professional continued to take advantage of the franchise 7 agreements’ benefits, enforcement of All Professional’s 8 obligations under the agreements is appropriate. 9 This estimation of damages is reasonable Because All As the court discussed above, All Professional’s use of 10 Century 21’s mark was willful. 11 counterfeit mark is willful, section 1117(b) requires the court 12 to award treble damages unless the court finds extenuating 13 circumstances. 14 extenuating circumstances in this case. 15 infringement was willful and it refused to de-mark until the 16 court issued an order enjoining its use of the marks. 17 When the infringer’s use of a 15 U.S.C. § 1117(b). There are no such All Professional’s All Professional argues that treble damages may only be 18 applied to provide compensation and not punishment, however the 19 cases that it relies upon discuss the award of treble damages 20 under § 1117(a) and not § 1117(b). 21 enhance actual damages to a level, not to exceed three times 22 actual damages, when the award of actual damages would not be 23 sufficient to adequately compensate the trademark holder. 24 § 1117(a). 25 unless there are extenuating circumstances, suggesting that the 26 purpose of § 1117(b) is punishment and not compensation. 27 court is therefore not prohibited from awarding treble damages 28 under § 1117(b) that may serve primarily to punish All Under § 1117(a), a court may Id. Under § 1117(b), the court shall award treble damages 64 The 1 Professional. 2 All Professional continued to use Century 21’s marks 3 for more than nine months after it was informed of the 4 termination of its franchises and instructed to discontinue use 5 of the marks. 6 suggesting that an award of actual damages equal to its minimum 7 franchise fees is not proper. 8 that All Professional’s use of Century 21’s marks was willful 9 during this period. All Professional has presented no material facts It is additionally beyond dispute Accordingly, the court will grant Century 10 21’s motion for summary adjudication of damages on its trademark 11 infringement and unfair competition claims in the amount of 12 $86,022.00. 13 B. All Professional’s Claims 14 1. Breach of Contract 15 All Professional relies on the same arguments to 16 support its breach of contract claim as it did in defense of 17 Century 21’s breach of contract claim. 18 above, All Professional fails to raise a genuine issue of 19 material fact suggesting that Century 21 breached the franchise 20 agreements or the DAN. 21 Century 21’s motion for summary adjudication as to All 22 Professional’s claims for breach of contract. As the court discussed Accordingly, the court will grant 23 2. Unfair Competition 24 All Professional and the Wrights assert a claim for 25 violation of California’s Unfair Competition Law (“UCL”). 26 Cal. Bus. & Prof. Code § 17200, et seq. 27 however, that New Jersey law is applicable in this action and 28 the parties have not suggested that New Jersey has an analogous 65 See The court has found, 1 UCL claim. See Medimatch, Inc. v. Lucent Techs., Inc., 120 F. 2 Supp. 2d 842, 861-62 (N.D. Cal. 2000) (dismissing California UCL 3 claim on basis that claim fell within scope of New Jersey 4 choice-of-law provision). 5 Century 21’s motion for summary adjudication with respect to All 6 Professional’s UCL claim. Accordingly, the court will grant 7 3. 8 Under New Jersey law, there is an implied covenant of 9 Implied Covenant of Good Faith and Fair Dealing good faith and fair dealing in every contract. Onderdonk v. 10 Presbyterian Homes, 85 N.J. 171, 182 (1981). 11 covenant prohibits a party to the contract from doing anything 12 that “will destroy or injure the right of the other party to 13 receive the fruits of the contract.” 14 Commc’ns Co., 714 F. Supp. 727, 731 (D.N.J. 1989). 15 “function of the court is to enforce the [agreement] as written, 16 not to write for the parties a different or a better contract.” 17 Liqui–Box Corp. v. Estate of Elkman, 238 N.J. Super. 588, 18 599–600 (App. Div. 1990). 19 good faith and fair dealing cannot override an express term in a 20 contract, a party’s performance under a contract may breach that 21 implied covenant even though that performance does not violate a 22 pertinent express term.” 23 236, 244 (2001) (citing Sons of Thunder, Inc. v. Borden, 148 24 N.J. 396, 419 (1997)). 25 cautioned, however, that “an allegation of bad faith or unfair 26 dealing should not be permitted to be advanced in the abstract 27 and absent an improper motive.” 28 The implied Feldman v. U.S. Sprint However, the “Although the implied covenant of Wilson v. Amerada Hess Corp., 168 N.J. The New Jersey Supreme Court has Id. at 251. All Professional argues in conclusory fashion that 66 1 Century 21 breached the implied covenant of good faith and fair 2 dealing for the same reasons that it alleges Century 21 breached 3 the franchise agreements. 4 adopting All Professional’s interpretation of the franchise 5 agreements would be either inconsistent with or contrary to the 6 express provisions of the agreements. 7 no justification for why any of these alleged breaches should be 8 considered differently under the implied covenant than under All 9 Professional’s breach of contract claim.31 10 As the court discussed above, All Professional provides In addition to the alleged contract breaches that All 11 Professional presented, All Professional argues two additional 12 ways in which Century 21 breached the implied covenant. 13 first claim is that Century 21 engineered the termination of All 14 Professional’s franchises because of pressure from competing 15 Century 21 brokers. 16 any explanation of how Century 21 was able to engineer the 17 terminations. 18 decision to close its Folsom franchise, stop paying its 19 franchise fees, and not cure its defaults during the cure period 20 it would seem unlikely that Century 21 would have been able to 21 do so. 22 authority in support of its claim. 23 The All Professional fails, though, to provide Indeed, given that it was All Professional’s All Professional similarly fails to provide any Second, All Professional argues that Century 21 24 25 26 27 28 31 All Professional additionally argues that under California law, Century 21 was obligated to exercise its discretion in good faith. (See Opp’n to Mot. for Summ. Adjudication at 32:19-26.) It is unclear to the court what discretionary decision All Professional refers to. As the court has found throughout its order, there is no evidence that Century 21 acted outside the authority granted to it under the franchise agreements or that its actions were taken in bad faith. 67 1 breached the implied covenant of good faith and fair dealing 2 when it disregarded its own policy by terminating All 3 Professional’s franchises despite its “good faith attempts to 4 pay the service fees and restructure the DAN note.” 5 Mot. for Summ. Adjudication at 33:13-14.) 6 not obligated to provide All Professional a payment plan, nor 7 was it obligated to continue negotiations with All Professional 8 on reaching a payment agreement when the cure date had passed 9 over two months before. (Opp’n to Century 21 though was All Professional has not produced any 10 evidence other than the franchise agreements that would suggest 11 that All Professional had a legitimate reason to expect that its 12 good faith efforts should have forestalled termination. 13 All Professional presented any authority suggesting that 14 franchisors may not terminate franchises for failure to meet 15 financial obligations when franchisees act in good faith under 16 the implied covenant of good faith and fair dealing. 17 Nor has All Professional’s laundry list of Century 21’s 18 alleged violations of the implied covenant of good faith and 19 fair dealing fails to establish any material facts suggesting 20 that Century 21 acted in a manner that injured All 21 Professional’s right to receive the benefits of the franchise 22 agreements. 23 motion for summary adjudication on All Professional’s claim for 24 breach of the implied covenant of good faith and fair dealing. Accordingly, the court will grant Century 21’s 25 4. Fraud 26 Under New Jersey law, the essential elements of fraud 27 are (1) a material representation pertaining to a presently 28 existing or past fact; (2) made with knowledge of the falsity of 68 1 the representation and with an intention that the other party 2 rely on the representation; and, (3) justifiable reliance on the 3 representation which results in actual damage. 4 Weichert Co. Realtors, 148 N.J. 582, 610 (1997) (citing Jewish 5 Ctr. of Sussex Cnty. v. Whale, 86 N.J. 619 (1981)). 6 Professional identifies two alleged misrepresentations that it 7 argues are actionable under its fraud claim: (1) Omer’s comment 8 that Century 21 would provide “tools and systems” to increase 9 All Professional’s productivity; and (2) Popp’s representation Gennari v. All 10 that he would “take care of the issues” with Corporate after All 11 Professional defaulted under its franchise agreements.32 12 Under New Jersey law, “[t]he fraud must be in the 13 original contract or transaction and not in the nonfulfillment 14 of the contract.” 15 (citing Ebert v. Givas, 158 A. 412, 413-14 (N.J. Err. & App. 16 1931)). 17 upon statements which are promissory in their nature at the time 18 they are made and which relate to future actions or conduct. 19 Thus fraud cannot be predicated upon the mere non-performance of 20 a promise.” 21 Super. 302, 310 (1990). 22 constitute a breach of contract, but it is not fraud and the 23 non-performance of that promise does not make it so. Anderson v. Modica, 4 N.J. 383, 392 (1950) “It is the general rule that fraud cannot be predicated Barry by Ross v. N.J. State Highway Auth., 245 N.J. A failure to fulfill a promise may Anderson, 24 25 26 27 28 32 In its interrogatory response regarding this claim, All Professional actually identified eleven separate representations that it would rely upon for its fraud claim. In its motion for summary adjudication Century 21 addressed all eleven claims. All Professional only mentioned one of these alleged misrepresentations in its opposition papers and acknowledged during oral arguments that it was not pursuing claims under the representations that it did not address. 69 1 4 N.J. at 392. 2 promisor knew when he made it that the promise could not or 3 would not be fulfilled.” 4 Ocean Cape Hotel Corp. v. Masefield Corp., 63 N.J. Super. 369, 5 380-81 (App. Div. 1960). 6 “Such conduct is a misrepresentation only if the Barry by Ross, 245 N.J. at 310 (citing First, All Professional argues that in 2005, at the 7 time it was signing franchise renewals and the DAN, Omer falsely 8 represented that Century 21 was going to develop tools and 9 systems that would keep All Professional productive so that they 10 would not have to pay back the DAN. This representation is not 11 actionable under New Jersey law because it does not relate to a 12 past or present fact, but is rather a prediction about what 13 Century 21 would do in the future. 14 92. 15 that when Omer made these representations he knew that Century 16 21 would not be developing such tools and systems. See Anderson, 4 N.J. at 391- 17 All Professional does not present any evidence suggesting All Professional additionally fails to demonstrate 18 that it reasonably relied on Omer’s statements and would have 19 acted differently had the alleged misrepresentations not been 20 made. 21 alleged misstatement is contradictory of any of the undertakings 22 expressly dealt with by the written contract.” 23 v. BP Prods. N. Am., Inc., No. 08-CV-3947, 2009 WL 1873583, at 24 *5 (D.N.J. June 29, 2009) (citing Winonka Village, Inc. v. Tate, 25 16 N.J. Super. 330, 334 (App. Div. 1952)). 26 representation that repayment would not be required contradicts 27 the repayment provision in the DAN, the Security Agreement 28 setting forth collateral to secure the DAN, and the addendum to “Reliance is not reasonable where the substance of the 70 Luso Fuel, Inc. Here, the alleged 1 the River Park franchise agreement. Given the terms of these 2 contracts, any reliance on Omer’s statements was unreasonable. 3 All Professional thus fails to establish material facts 4 suggesting that Omer’s statement was a fraudulent 5 misrepresentation. 6 Second, All Professional argues that while it was 7 negotiating an alternate payment plan for its default, Popp 8 affirmatively represented that he would “take care of the 9 issues” with Century 21’s corporate team.33 As an initial 10 matter, the only evidence that All Professional relies upon to 11 suggest that this representation was actually made is Steve 12 Wright’s declaration that was attached to All Professional’s 13 opposition papers. 14 18, 2010 until July 9, 2010, I spoke with Mr. Popp several times 15 where he repeatedly assured me that he was working out the 16 payment terms with ‘New Jersey’ (Century 21’s executive 17 team).”).)34 (See Steve Wright Decl. II, ¶ 13 (“From June The fact that Popp was “working out the payment 18 33 19 20 21 22 23 24 25 26 27 28 Century 21 objects to All Professional’s reliance on this representation because it was not listed in All Professional’s interrogatory response as one of the misrepresentations that All Professional intended to rely upon. The court will nonetheless consider All Professional’s argument on the matter. 34 During Steve Wright’s deposition, he also talked about two phone calls that he had with Popp that Steve Wright described as “his assurances that this would all work out.” (Steve Wright Dep. I at 213:6-7.) When asked to discuss these phone calls in greater detail, Steve Wright described the first call as Popp giving him a “one sentence spiel: I’ll talk to Corporate, and we’ll see if we can work it out. Just give me a couple of days, click.” (Id. at 213:21-23.) In the second phone call, Popp “said he was going to call Corporate, and he would call us back, and he never did.” (Id. at 214:4-5.) Neither of these phone calls support All Professional’s argument that Popp said that he would “take care of issues” with Corporate or provide an assurance that “this will all work out.” 71 1 terms” is a far cry from All Professional’s interpretation of 2 this statement as being that Popp “would take care of issues.” 3 Assuming that All Professional did have sufficient 4 evidence to prove that this representation was made, All 5 Professional’s claim still fails as a matter of law. 6 clear that the purported statement is a misrepresentation of 7 fact, rather than an ambiguous statement regarding a future 8 action that Popp would take. 9 (stating that a misrepresentation must be about past or present 10 It is not See Anderson, 4 N.J. at 391-92 fact). 11 All Professional additionally fails to present 12 evidence that Popp knew that this representation was false at 13 the time he spoke with the Wrights. 14 Professional presents actually establishes the opposite -- in an 15 email sent by Popp to Bainbridge on July 12, 2010, he states 16 that he “thought we were getting close on a deal.” 17 of Exhibits Ex. 34.) 18 after All Professional argues the alleged misrepresentation was 19 made, strongly suggests the Popp did not know that All 20 Professional’s attempt to negotiate an alternative payment plan 21 would be unsuccessful. 22 The only evidence All (Compendium This statement, made at least three days Finally, All Professional’s fraud claim fails because 23 it is unable to show reliance on Popp’s statement to its 24 detriment. 25 Professional’s missed cure date of May 10, 2010, so reliance on 26 a statement made in either June or July fails to explain why All 27 Professional did not cure its default. 28 Any alleged statement by Popp was made after All There are no material facts supporting All 72 1 Professional’s claim for fraud against Century 21. 2 the court will grant Century 21’s motion for summary 3 Accordingly, adjudication as to All Professional’s fraud claim. 4 5. Interference with Business Advantage/Contract 5 All Professional brings three causes of action related 6 to Century 21’s alleged interference with its business: (a) 7 Intentional Interference with Business Advantage; (b) Negligent 8 Interference with Business Advantage; and (c) Interference with 9 Contract. All of these claims are based on All Professional’s 10 allegations that Century 21 deliberately disrupted All 11 Professional’s relationships with its own agents, customers, and 12 potential customers in retaliation for Steve Wright’s complaints 13 about Century 21’s favorable treatment of Century 21 Select. 14 15 a. Intentional Interference Although torts for interference with contract are 16 separate from interference with business advantage, see Printing 17 Mart–Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 750 (1989) 18 (stating “[t]he separate cause of action for the intentional 19 interference with a prospective contractual or economic 20 relationship has long been recognized as distinct from the tort 21 of interference with the performance of a contract”), the 22 elements of each claim are the same. 23 Hous. Corp., 306 N.J. Super. 258, 265 (App. Div. 1997) (“Whether 24 the tort is denominated as an intentional interference with 25 contractual advantage, or future economic advantage, the import 26 is the same.”). 27 interference, a plaintiff must prove: “(1) a protected interest, 28 not necessarily amounting to an enforceable contract; (2) See Jenkins v. Region Nine To recover under a claim for tortious 73 1 defendant[s’] intentional interference without justification; 2 (3) a reasonable likelihood that the benefit plaintiff 3 anticipated from the protected interest would have continued but 4 for the interference; and (4) resulting damage.” 5 Id. To succeed on its claims for intentional tortious 6 interference, All Professional must show that Century 21’s 7 alleged conduct constituting interference was intentional and 8 with “malice.” 9 complaint of tortious interference “must allege facts claiming See Printing Mart, 116 N.J. at 751 (stating a 10 that the interference was done intentionally and with 11 ‘malice’”). 12 without justification or excuse. 13 must focus on a defendant’s action as presented by the unique 14 facts of each individual case. 15 [a] defendant[’]s[ ] motive and purpose be proper but so also 16 must be the means.” 17 (internal quotation marks and citation omitted). 18 “[c]onduct admittedly spurred by spite and ill-will is not 19 necessarily sufficient to sustain an action for tortious 20 interference with an economic advantage.” 21 v. Walters, 167 N.J. 285, 307 (2001). 22 drawn at conduct that is fraudulent, dishonest, or illegal and 23 thereby interferes with a competitor’s economic advantage.” 24 Id.; see also Shebar v. Sanyo Bus. Sys. Corp., 218 N.J. Super. 25 111, 118 (App. Div. 1987) (finding an employee who was fired 26 after his employer used deceit to induce him to revoke 27 acceptance of an outside employment offer until a replacement 28 was found satisfied the malicious interference requirement). Malice is defined as intentionally inflicted harm Id. A determination of malice Id. at 756–57. “Not only must Id. at 757 (alterations in original) 74 However, Lamorte Burns & Co. “The line clearly is 1 All Professional fails to specifically address the 2 malice requirement. Instead, it suggests that Century 21’s 3 wrongful conduct, engineering the terminations of All 4 Professional’s franchises, was motivated largely because of 5 Steve Wright’s continuous, unresolved complaints about Select 6 and Century 21’s preference toward Select. 7 then proceeds to repeat the same laundry list of complaints that 8 this court has repeatedly addressed and found not to be breaches 9 of contract or fraudulent.35 All Professional Although Steve Wright’s contentious 10 behavior may have contributed to feelings of ill will between 11 the parties, in order to show that Century 21’s actions rise to 12 the level of malice, All Professional must show that the actions 13 lacked justification or excuse. 14 751. 15 See Printing Mart, 116 N.J. at “A party’s actions in its own interest and for its own 16 financial benefit will not rise to the level of malice.” 17 Cargill Global Trading v. Applied Develop. Co., 706 F. Supp. 2d 18 563, 575 (D.N.J. 2010). 19 can justify a party’s actions, so long as the business-related 20 explanation justifies not only the defendant’s motive and 21 purpose, but also the means that it employed. 22 & Co., 167 N.J. at 307. Instead, a business-related explanation See Lamorte Burns In Ideal Dairy Farms, Inc. v. Farmland 23 24 25 26 27 28 35 All Professional also argues that “Century 21’s sharing of All Professional’s business methods to Select was a violation of California Trade Secrets Act.” (Opp’n to Mot. for Summ. Adjudication at 38:11-13 (citing Cal. Civ. Code § 3426.1).) Other than alleging that Century 21 shared information regarding All Professional’s financial difficulties, there is no evidence that Century 21 shared information regarding All Professional’s “business methods.” All Professional does not explain how these undefined methods might qualify as trade secrets or violate the Trade Secrets Act. 75 1 Dairy Farms, Inc., 282 N.J. Super. 140, 205 (App. Div. 1995), 2 the New Jersey Appellate Division reversed a trial court’s 3 finding of tortious interference, noting that even if the 4 defendant’s behavior had been motivated by spite and was 5 directly aimed at hurting the plaintiff’s business, this did not 6 rise to the level of tortious interference because defendant had 7 a “legitimate business reason to ‘target’ [the plaintiff] . . . 8 regardless of any other motivation.” 9 Ridge Trailer Sales, Inc. v. Nat’l Cmty. Bank of N.J., 312 N.J. Id. at 201; see also Cedar 10 Super. 51, 67 (App. Div. 1998) (“At worst, the Bank was 11 advancing its ‘own interest and financial position,’ which is 12 not enough to establish tortious interference.”). 13 The court finds that the undisputed evidence shows 14 that Century 21’s actions were motivated by a genuine business 15 concern and therefore did not rise to the level of malice 16 required to bring a claim for intentional tortious interference. 17 Accordingly, the court will grant Century 21’s motion for 18 summary adjudication of All Professional’s claims for 19 intentional interference with business advantage and 20 interference with contract. 21 22 23 b. Negligent Interference with Business Advantage All Professional additionally brings a claim for 24 negligent interference with business advantage, although it 25 fails to address the application of New Jersey law to this 26 27 28 76 1 claim.36 2 addressing negligent interference claims, the court has located 3 two cases that rely on People Express Airlines to suggest that 4 negligent interference with prospective advantage claims may be 5 brought under New Jersey law. 6 5248, 2010 WL 2483318, at *9 (D.N.J. June 4, 2010) (citing 7 People Express Airlines Inc. v. Consol. Rail Corp., 100 N.J. 8 246, 263 (1985)); Reed Elsevier, Inc. v. Inherent.com, Inc., 9 Civ. No. 05-4048, 2006 WL 3827414, at *7 (D.N.J. Dec. 27, 2006) Although there is very little New Jersey caselaw See Eaton v. Tosti, Civ. No. 09- 10 (citing People Express Airlines, 100 N.J. at 263). 11 Express Airlines court, however, only held that purely economic 12 loss caused by negligence is compensable in tort, not that there 13 is a cause of action for negligent interference. 14 Express Airlines, 100 N.J. at 263. 15 The People See People The vast majority of New Jersey precedent instead 16 discusses claims for tortious interference, as opposed to 17 intentional or negligent interference. 18 Mart, 116 N.J. at 751; Cargill, 706 F. Supp. 2d at 575; Jenkins, 19 306 N.J. Super. at 265. 20 to state a claim for tortious interference, the plaintiff must 21 demonstrate that the defendant acted with malice. 22 706 F. Supp. 2d at 575. 23 element of a negligent interference claim, thus, these cases 24 suggest that plaintiffs may not bring a claim for negligent See, e.g., Printing These decisions suggest that in order See Cargill, Malice is traditionally not a required 25 26 27 28 36 It is interesting to note that when All Professional answered the complaint that Century 21 filed in New Jersey state court, All Professional’s counterclaim alleged a cause of action for tortious interference and not intentional or negligent interference. 77 1 interference under New Jersey law. 2 majority of New Jersey cases only discuss claims for tortious 3 interference, this court finds that there is no cause of action 4 under New Jersey law for negligent interference with business 5 advantage. 6 Given that the overwhelming Even if the court were to find that All Professional 7 could bring a claim for negligent interference under New Jersey 8 law, neither of the New Jersey cases applying the claim suggest 9 what the elements of negligent interference would be. 10 both cases quote language from People Express Airlines 11 discussing the duty of care that a defendant owes to a 12 plaintiff. 13 Express Airlines, 100 N.J. at 263); Reed Elsevier, 2006 WL 14 3827414, at *7 (citing People Express Airlines, 100 N.J. at 15 263). 16 Jersey’s intentional interference claim, with the exception that under 17 the second element -- intentional interference without justification - 18 - All Professional would need only show that Century 21’s interference 19 was negligent. 20 Professional to demonstrate that Century 21 violated a duty of care 21 that it owed to All Professional. 22 N.J. at 263. 23 Instead, See Eaton, 2010 WL 2483318, at *9 (citing People The court would therefore apply the four part test from New A showing of negligence further requires All See People Express Airlines, 100 In support of its claim, All Professional merely asserts 24 the same laundry list of reasons why it believes that Century 21’s 25 conduct was wrongful. 26 Century 21 owed to it or how Century 21’s actions or inactions 27 constituted a breach of this duty (but not a breach of contract). 28 Century 21’s termination of All Professional’s franchises may have All Professional does not discuss what duties 78 1 interfered with its business interests, but the court has already held 2 that the termination was proper and not wrongful. 3 other claims largely stem from complaints regarding Century 21’s 4 inaction, however All Professional has not suggested that Century 21 5 had a duty to act. 6 establishing a claim for negligent interference. 7 All Professional’s All Professional fails to raise material facts Accordingly, the court will grant Century 21’s motion for 8 summary adjudication as to All Professional’s claim for negligent 9 interference with business advantage. 10 6. 11 Finally, All Professional alleges that Century 21 violated Violation of Franchise Investment Laws 12 California’s Franchise Investment Law, Cal. Bus. & Prof. Code § 20000, 13 et seq., and Hawaii’s Franchise Investment Law, Haw. Rev. Stat. 14 § 482(E), by terminating the franchise agreements without cause. 15 an initial matter, application of either California’s or Hawaii’s 16 statutory franchise provisions is inappropriate given the franchise 17 agreements’ valid New Jersey choice-of-law provision. 18 consideration of All Professional’s claim were proper, the court has 19 rejected All Professional’s allegation that Century 21 lacked good 20 cause to terminate its franchises. 21 Century 21’s motion for summary adjudication as to All Professional’s 22 claim for violation of franchise investment laws. As Even if Accordingly, the court will grant 23 IT IS THEREFORE ORDERED that: 24 (1) Century 21’s motion for summary adjudication of its 25 claim for breach of contract be, and the same hereby is, GRANTED IN 26 PART with respect to Century 21’s claim for breach of contract, actual 27 damages totaling $195,454.90, and future lost profits totaling 28 $575,001.57, and DENIED IN PART with respect to Century 21’s request 79 1 for $1,500.00 in actual damages; 2 3 (2) Century 21’s motion for summary adjudication of its claim for breach of guaranty be, and the same hereby is, GRANTED; 4 (3) Century 21’s motion for summary adjudication of its 5 claims for trademark infringement and unfair competition be, and the 6 same hereby is, GRANTED and Century 21 is awarded treble damages in 7 the amount of $86,022.00; 8 9 10 (4) Century 21’s motion for summary adjudication of all of All Professional and the Wrights’ claims be, and the same hereby is, GRANTED; and 11 (5) Steve Wright, Carol Wright, and All Professional are 12 HEREBY PERMANENTLY ENJOINED from further unauthorized use of Century 13 21’s Marks, as defined in the franchise agreements. 14 This matter shall remain on calendar for a pretrial 15 conference on September 17, 2012, and bench trial on October 30, 2012, 16 on Century 21’s remaining claims, including Century 21’s $1,500.00 17 damages request for breach of contract. 18 statement within 15 days from the date of this Order, dismissing its 19 remaining claims and agreeing to accept judgment in accordance with 20 this Order, the court will vacate the pretrial conference and trial 21 dates enter final judgment in accordance with this Order. 22 DATED: August 7, 2012 23 24 25 26 27 28 80 If Century 21 files a written

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