Hometown Folks, LLC v. S & B WILSON, INC.
643 F.3d 520
6th Cir.2011Background
- Hometown Folks, LLC purchased 11 Burger King franchises from S & B Wilson, Inc.; BK consent was given, with escrow of $98,800 allegedly required at closing.
- Environmental issues surfaced during due diligence, delaying closing and prompting proposed adjustments and escrow/set-off considerations.
- S & B Wilson terminated the Agreement on March 21, 2006, invoking Section 9.1(g) and/or 9.1(d); dispute over whether termination breached contract duties.
- Jury found proper termination but breach of the duty of good faith and fair dealing occurred, awarding Hometown $190,907.27 for transaction-related damages.
- District court denied specific performance; awarded only $5,176.24 of $424,282.19 in litigation-related fees and expenses arising from the breach of good faith and fair dealing.
- On appeal, the majority reverses the district court on damages and on the fee award, remanding for recalculation; the district court’s denial of specific performance is left intact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty of good faith pre-termination was breached | Hometown argues S&B Wilson breached pre-termination duties | S&B Wilson contends proper termination forecloses breach | Affirmed denial of JMOL on breach; jury could find pre-termination breach |
| Damages support for breach of duty of good faith | Damages arise from breach of duty | No damages proximately caused by breach | Damages reversed; JMOL for damages entered in favor of S&B Wilson on remand |
| Attorneys' fees arising from breach of duty | Fees should be recoverable under indemnity for breach | Fees must arise from breach, not all litigation costs | Reversed and remanded for recalculation of fees consistent with breach-based recovery |
| Specific performance awarded or entered | Requests specific performance | Damages rendering specific performance unnecessary | Affirmed district court’s denial of specific performance (unchanged by remand on damages) |
Key Cases Cited
- K & T Enters., Inc. v. Zurich Ins. Co., 97 F.3d 171 (6th Cir. 1996) (standard for denial of renewed Rule 50(b) JMOL review)
- Holmes v. Wilson, 551 S.W.2d 682 (Tenn. 1977) (strongest view in opposition to JMOL when reasonable doubt exists)
- Hensley v. Eckerhart, 461 U.S. 424 (Supreme Court 1983) (most critical factor is degree of success in fee-shifting)