Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—W.D. Pa.: Dunkin’ Donuts not liable for terminating supply plan, (Jul 1, 2014)

By Greg Hammond, J.D.

Dunkin’ Donuts Franchising L.L.C. defeated numerous promissory estoppel claims arising from its termination of a contractual relationship to establish a donut commissary in the Pittsburgh area. In awarding Dunkin’ summary judgment, the federal district court in Pittsburgh determined that there were no genuine issues of material fact about Dunkin’ making express promises to the plaintiffs or an intervenor’s reasonable reliance on any promise (Johnson v Dunkin’ Donuts Franchising L.L.C., June 30, 2014, Fischer, N).

Background. Derrick J. Johnson, Charles Thompson, F & J Holdings, Inc. (collectively, the plaintiffs), and Pittsburgh Baker’s Dozen, Inc. (PBD) allegedly made investments in a donut commissary in furtherance of a contractual relationship between PBD and Dunkin’. Under the relationship, PBD would become an approved supplier of fresh donuts for local Dunkin franchisees. The contractual relationship was purportedly part of the Pittsburgh Supply Plan (PSP), in which the city worked with Dunkin to locate the donut commissary in Pittsburgh. The plaintiffs and PBD argued that Dunkin unilaterally terminated the PSP after new frozen donut technology was introduced, thereby breaching various promises made to the plaintiffs and PBD. Dunkin filed a motion to strike and a motion for summary judgment, and the Plaintiffs filed a partial motion for summary judgment.

Sham affidavit. Dunkin moved to strike Thompson’s affidavit, which was submitted with the plaintiffs’ sur-reply brief for the first time and changed Thompson’s testimony on whether he believed the PSP would be completed. Specifically, Dunkin argued that Thompson’s affidavit was a sham and should therefore be stricken. The court agreed, finding that: (1) the statements in the affidavit squarely contradicted Thompson’s prior deposition testimony, stating that he knew Dunkin’ had no intention of following through with the PSP or that the PSP would otherwise come to fruition; (2) the statements involved “critical points in this litigation;” and (3) the timing of the affidavit was highly questionable, as it was submitted at the “eleventh hour” and the only reasonable inference that the court could make was that it was submitted for the sole purpose of avoiding summary judgment. Consequently, Dunkin’s motion to strike was granted.

Promissory estoppel. The parties’ motions for summary judgment turned on the sufficiency of the plaintiff’s Pennsylvania promissory estoppel claims. According to the court, to state a proper claim of promissory estoppel, the plaintiffs were required to show: “(1) misleading words, conduct or silence by the party against whom the estoppel is asserted; (2) unambiguous proof of reasonable reliance on the misrepresentation by the party seeking to assert the estoppel; and (3) no duty of inquiry on the party seeking to assert estoppel.”

The court first determined that the plaintiffs failed to present sufficient evidence to raise a genuine dispute of material fact that Dunkin made any express promises to them. Specifically, the court found that there was no direct evidence showing Dunkin made any promises to Thompson or Johnson individually regarding the business relationship to Dunkin. In addition, because F & J Holdings was not formed until after the period at issue, it could not have relied on any promises made by Dunkin to PBD or anyone else. Rather, evidence only demonstrated that there was a relationship between PBD and Dunkin. Consequently, Dunkin’s motion for summary judgment regarding the plaintiffs’ promissory estoppel claim was granted and the plaintiffs’ motion for partial summary judgment was denied.

The last issue the court determined was whether PBD, an intervening plaintiff, established that it reasonably relied on any promises made by Dunkin, such that summary judgment would not be appropriate. According to the court, the issue once again turned on Thompson’s deposition testimony, in which he stated his belief that Dunkin never intended to go through with the PSP. Applying principles of agency, the court found that the “knowledge of the agent is knowledge of the principal” and that PBD’s decision to move forward with the project were based on Thompson’s independent business judgment, not on any reasonable reliance on Dunkin’s promises. Therefore, the court granted Dunkin’s motion for summary judgment as to PBD’s third amended complaint.

The case number is 11-1117.

Attorneys: David Brumfield (AlpernSchubert, PC) for Derrick J. Johnson and F & J Holdings, Inc. James P. Thomas (Pepper Hamilton) for Dunkin' Donuts Franchising LLC.

Companies: F & J Holdings, Inc.; Dunkin' Donuts Franchising LLC

Cases: FranchisingDistribution PennsylvaniaNews