850 F. Supp. 2d 251
D.D.C.2012Background
- Beresford defendants sold two Five Guys locations to B&H National Place and B&H International Square; Chos bought those entities’ operating rights and later assigned Covenants restricting non-compete/solicitation.
- Covenants prohibit sellers from engaging in similar business or soliciting trade within four blocks for five years post-sale.
- 1400 Eye Street, NW (Froda Intl.) opened November 2009, within the District of Columbia; plaintiffs allege this violated the Covenants.
- FGE is franchisor; agreements and releases among Beresford entities, Chos, and Froda define post-sale rights and remedies.
- Plaintiffs asserted multiple contract, veil-piercing/alter-ego, good faith, fraud, tortious interference, and conspiracy claims; summary judgment sought by multiple defendants.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 1400 Eye Street is within four blocks of plaintiffs’ restaurants | 1400 Eye Street falls within the four-block radius | 1400 Eye Street is more than four blocks away | Unambiguous Covenant; distance exceeds four blocks; Beresford granted |
| Whether defendants solicited trade within four blocks | Defendants solicited trade by opening near plaintiffs | Covenants do not extend to passive effects or unreasonable scope | No evidence of solicitation within four blocks; Beresford defendants granted |
| Whether individual defendants are bound by Covenants under integration/alter-ego theories | Individuals should be liable via alter-ego or merge with Purchase Agreement | Only Froda entities bound; integration clause precludes reliance on Purchase Agreement | Individuals not bound; integration merged Covenants; alter-ego claims rejected |
| Whether Beresford defendants breached the implied duty of good faith and fair dealing | Defendants concealed plans to open 1400 Eye Street in violation | No duty to disclose under Covenants; no breach shown | No breach; claim failed |
| Whether plaintiffs’ fraud claim survives given alleged intent to breach Covenants | Defendants intended to breach Covenants when signing | No clear and convincing evidence of intent to breach; no duty to disclose | Fraud claim rejected |
Key Cases Cited
- Independence Mgmt. Co., Inc. v. Anderson & Summers, LLC, 874 A.2d 862 (D.C. 2005) (contract interpretation is a question of law where language is unambiguous)
- Akassy v. William Penn Apartments Ltd. P'ship, 891 A.2d 291 (D.C. 2006) (ambiguity assessment lies with the court; plain meaning controls)
- Ozerol v. Howard Univ., 545 A.2d 638 (D.C. 1988) (integration clause precludes reliance on prior agreements)
- 1901 Wyoming Ave. Coop. Ass'n v. Lee, 345 A.2d 456 (D.C. 1975) (integration clause effect on merger and enforceability)
- Weishapl v. Sowers, 771 A.2d 1014 (D.C. 2001) (civil conspiracy requires underlying tort or unlawful act; no independent tort)