Printer Friendly

Defendant breached franchise agreement.

Byline: Virginia Lawyers Weekly

The plaintiff Precision Tune franchisor showed that the manner in which the franchisee sold assets and real property and its failure to make advertising expenditures breached the parties' franchise agreement.

Background

Plaintiff is the franchisor of the Precision Tune Auto Care system, engaged in the business of franchising independent business persons to operate automotive service centers identified with the Precision Tune Auto Care system. On Dec. 9, 2013, defendant

District Heights CCS LLC entered into a franchise agreement with PFL for the operation of the center in Maryland. DHCCS agreed to pay PLF advertising fees equal to 9% of its weekly gross sales. Section 16.1 of the franchise agreement stated that PFL's "express prior written consent is a necessary condition precedent to the sale, transfer, or conveyance of all or substantially all of the assets" of DHCCS, and section 16.4 gave PFL a right of first refusal. The franchise agreement was to expire on Dec. 9, 2023.

In May 2018, a representative for defendants informed PFL that they had ceased operation of the center and had sold the assets and real property to a competing auto repair business. On May 16, 2018, PFL sent defendants a notice of default and termination, thereby terminating the franchise agreement effective immediately, filed its complaint with this court. In a two-count complaint, plaintiff alleged that defendants breached the franchise agreement by 1) ceasing operation of the center and selling it to a competing auto repair business without obtaining PFL's prior written consent or affording it its right of first refusal and 2) by failing to make required marketing expenditures.

The magistrate judge issued a report and recommendation on Aug. 29, 2018, recommending that PFL's motion for default judgment be granted and that plaintiff be awarded $318,325.33 in damages jointly and severally against defendants. The parties were advised that any objections to the report had to be filed within 14 days and that failure to file a timely objection waived the right to appeal the substance of the report and any judgment based upon the report. As of Sept. 25, 2018, no party has filed an objection.

Analysis

The magistrate judge correctly determined that the court has subject matter jurisdiction over this action under 28 U.S.C. 1332 because it involves a dispute between citizens of different states and the amount in controversy exceeds $75,000.

The court has personal jurisdiction over defendants because they maintained sufficient minimum contacts with Virginia and entered into a franchise agreement by which they agreed to submit to the jurisdiction of this court. Venue is proper through 28 U.S.C. 1391(b) because a substantial part of the events giving rise to the claims resulted in harm to plaintiff in this district and defendants agreed to submit to the venue of this court in the franchise agreement. Process was served on defendant Alewine, the sole member and owner of DHCCS, by a private process server on May 24, 2018.

The court finds that the magistrate judge properly concluded that defendants have breached the franchise agreement. First, plaintiff has established that defendants owed plaintiff legally enforceable obligations under the franchise and guaranty agreements. Second, plaintiff has established that defendants breached those obligations by failing to sell their center in accordance with the franchise agreement and by failing to make the advertising expenditures required by the franchise agreement. Third, plaintiff has established that defendants' breaches caused it damage. For these reasons, the report recommends granting default judgment in favor of plaintiff for both breach of contract claims. This court agrees.

The magistrate judge properly calculated the amount of damages due to plaintiff to be $318,325.33. Plaintiff's damages consist of $181,469.82 in future lost profits and $136,855.52 in lost advertising expenditures. Damages for future lost profits were properly calculated in accordance with a liquidated damages clause in the franchise agreement. Damages for defendants' failure to make required advertising expenditures were properly calculated as the difference between what defendants were required to spend under the franchise agreement and what was actually spent. For all these reasons, the recommendation is accepted.

Motion for default judgment granted.

Precision Franchising Inc. v. District Heights CCS LLC, Case No. 18-cv-582, Sept. 25, 2018. EDVA at Alexandria (Brinkema). VLW No. 018-3-418, 5 pp.

Copyright {c} 2018 BridgeTower Media. All Rights Reserved.
COPYRIGHT 2018 BridgeTower Media Holding Company, LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 2018 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Title Annotation:Precision Franchising Inc. v. District Heights CCS LLC, U.S. District Court for the Eastern District of Virginia
Publication:Virginia Lawyers Weekly
Date:Oct 9, 2018
Words:729
Previous Article:Discipline and termination not retaliation.
Next Article:Crane company liable for damages.
Topics:

Terms of use | Privacy policy | Copyright © 2020 Farlex, Inc. | Feedback | For webmasters