Riedlinger v. Steam Bros., Inc.
826 N.W.2d 340
N.D.2013Background
- Steam Brothers, Inc. operates carpet cleaning and related services under a service mark and franchised independently owned licensees in ND, SD, and MN.
- In 1991, five licensees signed new license agreements converting from prior franchise relationships, with no ongoing franchise fee but a lump-sum termination fee and certain conduct requirements.
- The 1996 Vetter agreement and others share a similar framework; the new agreements removed some marketing, training, and operational supports.
- In 2008, Adam Leier sold Steam Brothers to Jerry Thomas, who operated a related cleaning business; by 2009 Steam Brothers sought information from licensees about services, customers, and methods.
- Licensees refused to provide requested information; Steam Brothers terminated at least one licensee’s agreement in 2010 and filed suit for declaratory relief, asserting termination rights and branding concerns; the district court granted summary judgment to licensees, finding the current agreements unambiguous and not allowing unilateral termination or information demands.
- Steam Brothers appeals, contending the agreements are ambiguous about information disclosure and termination rights, and that discovery should have been allowed to explore intent and implied terms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are the current license agreements ambiguous about licensees’ obligation to disclose business information? | Steam Brothers—ambiguous; requires disclosure to monitor service mark use. | Licensees—silent on disclosure; no implied obligation. | Ambiguous; remand for fact-finding. |
| May extrinsic evidence be used to interpret the current agreements? | Extrinsic evidence clarifies intent given ambiguity. | If unambiguous on its face, extrinsic evidence not admissible. | Extrinsic evidence may be used due to ambiguity; to be resolved on remand. |
| Can the licensees be unilaterally terminated for breach under the current terms? | Steam Brothers entitled to terminate for breach; remedies language supports termination. | Termination requires mutual consent or is restricted by language. | Ambiguity exists; termination issue must be resolved on remand. |
| Should Steam Brothers be allowed additional discovery on intent and breach issues? | Yes; ambiguity and discovery needed to resolve. | No, current language is clear; discovery unnecessary. | Entitled to limited, in-camera discovery on intent and potential breaches. |
Key Cases Cited
- Langer v. Bartholomay, 2008 ND 40 (ND 2008) (ambiguous contracts permit extrinsic evidence; interpretation is law unless ambiguous)
- Burris Carpet Plus, Inc. v. Burris, 2010 ND 118, 785 N.W.2d 164 (ND 2010) (summary judgment standards; proof required for genuine issues)
- Williston Educ. Ass’n v. Williston Pub. Sch. Dist., 483 N.W.2d 567 (ND 1992) (contract interpretation factors and use of circumstances at contracting time)
- Langer v. Bartholomay, 745 N.W.2d 649 (ND 2008) (contract interpretation; ambiguity governs extrinsic evidence use)
- Heitkamp v. Milbank Mut. Ins. Co., 383 N.W.2d 834 (ND 1986) (interpretation of contract terms and implied usages)