Husain v. Mcdonald's Corp.
140 Cal. Rptr. 3d 370
Cal. Ct. App.2012Background
- Husain and wife have owned McDonald’s franchises since the early 1980s; by 2005 they planned to purchase seven Marin County restaurants from the Magruders.
- Two assignment agreements between Husains, Magruders, and McDonald’s contemplated McDonald’s consent to the transfer; dispute centers on whether McDonald’s promised to rewrite three Marin franchises under Paragraph 17.
- McDonald’s offered 20-year rewrites for Novato, Fourth Street, and Merrydale under the Plan to Win in January 2006, requiring prorated initial fees (~$119,000).
- Husain contends he timely accepted the offers via a mailed certificate; McDonald’s disputed receipt and implied acceptance.
- By 2006–2007 Husains faced substantial arrearages and reinvestment delays; Rewrite Committee declined to rewrite the Novato franchise in Dec. 2008; Mill Valley franchising was rewritten; Hamilton was not rewritten.
- In December 2009 Husains filed suit; injunction proceedings led to a December 20, 2010 ruling preserving operation of three Marin stores during litigation, which McDonald’s appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the injunction may compel a rewrite of franchise terms (specific performance) | Husains—the Paragraph 17 promise to rewrite; plan to win offers create enforceable rewrite rights | McDonald’s argues the case involves a personal services contract not subject to specific performance | Not per se barred; the court held specific performance may be feasible and reviewed the merits. |
| Whether Husains have likelihood of success on the contract claim | Paragraph 17 constitutes McDonald’s promise to rewrite multiple locations | Paragraph 17 is limited to Corte Madera or not binding for all locations | Court found ambiguity in Paragraph 17 and substantial evidence supporting Husains. |
| Whether the balance of harms supports interim relief | Maintaining operation preserves revenue and brand integrity | Injunction harms McDonald’s by altering franchise control and potential losses | Balance favored Husains; strong likelihood of harm if relief denied. |
Key Cases Cited
- Woolley v. Embassy Suites, 227 Cal.App.3d 1520 (Cal.App.3d 1991) (personal services contract doctrine distinguishing franchise management)
- In re Sunrise Restaurants, Inc., 135 B.R. 149 (Bankr.M.D.Fla. 1991) (franchise agreements not per se personal services; sale/assignment considerations)
- Health Plan of the Redwoods, 286 B.R. 407 (Bankr.N.D.Cal. 2002) (not personal service where services are not sui generis, general obligations)
- Burger Chef Systems, Inc. v. Burger Chef of Florida, Inc., 317 So.2d 795 (Fla.Dist.Ct.App. 1975) (per se rule against specific performance for franchise/personal service contracts criticized)
- Thayer Plymouth Center, Inc. v. Chrysler Motors Corp., 255 Cal.App.2d 300 (Cal.App.2d 1967) (archaic doctrine on court-supervised contracts; modern feasibility of specific performance)
- Long Beach Drug Co. v. United Drug Co., 13 Cal.2d 158 (Cal. 1939) (historical stance on equitable relief for contracts)
- Jessen v. Keystone Savings & Loan Assn., 142 Cal.App.3d 454 (Cal.App.3d 1983) (standards for reviewing injunctions; substantial evidence)
- King v. Meese, 43 Cal.3d 1217 (Cal. 1987) (two-factor test for preliminary injunctions; likelihood of success and irreparable harm)
- Abrams v. St. John’s Hospital & Health Center, 25 Cal.App.4th 628 (Cal.App.4th Dist. 1994) (injunctions and irreparable harm; standard of review)
- Gallo v. Acuna, 14 Cal.4th 1090 (Cal. 1997) (standard appellate review of injunction rulings; deference to trial court)