Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION —D.N.J.: Integration clauses barred defective equipment claim, (Aug 29, 2013)

By Edward L. Puzzo, J.D.

A franchisee was barred from raising claims of defective equipment against the franchisor due to the integration clauses of the franchise and sales agreements, the federal district court in Camden, New Jersey has ruled (McSweeney Enterprises v. Mister Softee, August 27, 2013, Kugler, R.).

McSweeney contracted with Mister Softee to purchase three franchises, described as mobile businesses offering frozen confections to the public. The franchise agreements required him to purchase or lease vehicles from Mister Softee in accordance with their specifications. In his complaint, McSweeney alleged numerous defects in the trucks and equipment, including undersized generators, which failed to compensate for the temperatures associated with warmer climates. Due to these defects, he alleged, he was unable to properly operate the franchised businesses. He alleged breach of contract, fraud, violation of the New Jersey Consumer Fraud Act (CFA) and breach of warranty. Mister Softee moved to dismiss these claims and the court granted the motion.

Integration clause. McSweeney alleged that Mister Softee knowingly made false promises and misrepresentations as to material facts during the negotiations of the Agreements, including representations that the trucks had the ability to operate properly.

In response, Mister Softee maintained that the integration clause in the Franchise and Sales Agreements were a bar to McSweeney's claims. The clauses stated that the agreements reflected the entire agreements between the parties and could not be changed except by a written document signed by both parties. The Franchise Agreement contained an acknowledgement by McSweeney that no warranties of any kind were made on behalf of Mister Softee. The Sales Agreement contained a provision that, other than assigned manufacturer's warranties, Mister Softee made no warranty, either express of implied, as to the merchantability of the truck or equipment or its fitness for any particular use or purpose.

In response, McSweeney, citing state precedent allowing admission of extrinsic evidence to clarify the parties’ intentions, even where the contractual language is otherwise clear, urged the court to review these contract terms to discern the parties' intent in entering into the contract. The court declined to do so.

McSweeney was not attempting to clarify a provision in the contract, nor assert that the parties intended some other agreement than the writing expresses, the court explained. Each of McSweeney's allegations was predicated upon purported representations which were not “wholly extraneous to the writing.” Instead, said the court, he was attempting to alter the parties’ obligations and responsibilities under the contract by voiding an agreed upon provision.

The court found that the integration clause barred further consideration of McSweeney allegations in the fraud, CFA, and breach of warranty counts. Further, McSweeney failed to plead the required elements for a breach of contract claim because he was unable to identify any obligation under the contract that Mister Softee failed to perform. Accordingly, the Court granted the motion to dismiss in its entirety.

The unpublished case is Civil Action No. 12-06332 (RBK/AMD).

Attorneys: Christina Lynn Saveriano (Hill Wallack, LLP) for Joseph McSweeney Enterprises, LLC. Jeffrey A. Zucker (Fisher & Zucker LLC) for Mister Softee Sales And Manufacturing, LLC.

Companies: Joseph McSweeney Enterprises, LLC; Mister Softee Sales And Manufacturing, LLC.

Cases: FranchisingDistribution StateUnfairTradePractices NewJerseyNews