Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—M.D. Fla.: Ex-franchisee failed to raise issue of fact on breach of guaranty, default claims, (May 6, 2015)

By Linda O’Brien, J.D., LL.M.

A former heating and air conditioning services franchisee failed to present evidence creating a genuine issue of material fact to preclude the grant of the franchisor’s motion for summary judgment in an action against the franchisee for breach of the franchise agreement guaranty and default of an installment payment note, the federal district court in Tampa, Florida has decided (One Hour Air Conditioning Franchising, L.L.C. v. Jerry’s Comfort Experts, Inc., May 5, 2015, Kovachevich, E.).

One Hour Air Conditioning Franchising, L.L.C. grants franchise opportunities for time-conscious heating and air conditioning (HVAC) home service businesses. In September 2008, One Hour entered into a franchise agreement with Jerry’s Comfort Experts for a ten-year term ending in September 2018. Brent Rackham and Jason Rackham, owners of Jerry’s Comfort Experts, signed a guaranty, agreeing to be personally liable for the breach of the franchise agreement. Jerry’s Comfort Experts and the two guarantors also executed an installment payment note payable to One Hour. The note provided that, in the event of a default, the franchisees owed One Hour all costs and expenses incurred in the enforcement of payment and collection of the balance of the note.

From 2008 to 2013, Jerry’s Comfort operated the franchise. In September 2013, One Hour notified Jerry’s Comfort Experts of certain defaults under the franchise agreement. When Jerry’s failed to cure all of the deficiencies, One Hour notified the franchisee of its termination of the franchise agreement.

One Hour filed suit against Jerry’s Comfort Experts, Brent Rackham, and Jason Rackham for breach of the guaranty and installment note. Subsequently, One Hour filed a motion for summary judgment.

In granting the summary judgment motion, the court noted that the defendants failed to present affidavits or other evidence to designate specific facts, showing there was a genuine issue for trial. Adopting One Hour’s arguments, the court found that the guaranty and installment note were enforceable contracts, the installment note was not paid, and One Hour had elected to accelerate payment on the note under its terms. Consequently, the guarantors were in breach of the guaranty and note.

Additionally, One Hour’s request for damages was supported by evidence presented and undisputed by the defendants. Thus, One Hour was awarded damages for lost continuing franchise fees and marketing fund contributions pursuant to the terms of the franchise agreement, unlicensed use of One Hour’s registered trademarks, and unpaid principal and interest on the installment note.

The case is No. 8:14-CV-994-T-EAK-TGW.

Attorneys: John H. Dannecker (Shutts & Bowen, LLP) for One Hour Air Conditioning Franchising, LLC. Brent A. Rackham, pro se. Jason A. Rackham, pro se.

Companies: One Hour Air Conditioning Franchising, LLC; Jerry's Comfort Experts, Inc.

Cases: FranchisingDistribution FloridaNews