America's Favorite Chicken Co. v. Cajun Enterprises, Inc.America's Favorite Chicken Co. v. Cajun Enterprises, Inc.
Appellants Cajun Enterprises, Inc. (“CEI“) and Harriet Anaya1 appeal the district court‘s dismissal of their counterclaims and third party demands. We affirm.
BACKGROUND
In the mid-1980s, Appellee America‘s Favorite Chicken Company (“AFC“) licensed four Popeye‘s Fried Chicken Franchises to CEI, a California corporation, for operation in the San Francisco area. The franchise agreements required CEI, inter alia, to pay royalties to AFC and to make contributions to an advertising fund that would serve the entire Popeye‘s nationwide franchise system. AFC sued CEI in 1989 to recover past due royalties and advertising contributions.
CEI filed a series of counterclaims against AFC, alleging various fraud, breach of contract, and state statutory claims under both Louisiana and California law. CEI also made third party demands against Alvin C. Copeland, Sr., New Orleans Spice Company (“NOSC“), and My Favorite Year, Inc. (“MFY“), alleging intentional interference with contract.
The district court granted in part AFC‘s motions for summary judgment, dismissing CEI‘s claims under the California Franchise Investment Law (“CFIL“), the Louisiana Unfair Trade Practices Act (“LUTPA“), and several fraud and breach of contract claims. The court also dismissed all third party claims against NOSC and MFY. Several fraud and breach of contract claims went to the jury, however, as well as the tortious interference claim against Copeland. The jury found in favor of AFC on its claims and in favor of AFC and Copeland on all of CEI‘s counterclaims and third party claims. CEI now appeals.
Before GARWOOD, DUHÉ and DeMOSS, Circuit Judges.
DISCUSSION
I.
CEI claims that AFC breached the franchise agreements by failing to allocate
II.
The district court granted AFC‘s motion for summary judgment on CEI‘s claim that AFC breached the franchise agreements by failing to provide “continuing advisory assistance” in the operation of the franchises. Again, we agree with the district court that the franchise agreement vested complete discretion in AFC over this matter. The agreements provide that AFC “will make available such continuing advisory assistance ... as [AFC] may deem appropriate.” (emphasis added).
We also reject CEI‘s contention that AFC‘s deficient advisory assistance violated the “implied covenant of good faith and fair dealing” implied in every Louisiana contract. See
III.
The district court dismissed CEI‘s claim under the CFIL,
We note initially that the parties’ choice of law clause does not mandate application of Louisiana law to this issue. The choice of law clause in the franchise agreements provides that the “Franchise Agreement[s] shall be interpreted and construed under the laws of the State of Louisiana, which shall prevail in the event of any conflict of laws.” On its face, the choice of law clause is restricted to the interpretation or construction of the franchise agreements. Caton v. Leach Corp., 896 F.2d 939, 943 & n. 3 (5th Cir. 1990); AAA Delivery, Inc. v. Airborne Freight Corp., 646 So. 2d 1113, 1116 (La. App. 5th Cir. 1994). See also Dollar Systems, Inc. v. Avcar Leasing Systems, Inc., 890 F.2d 165, 171 (9th Cir. 1989). Since the CFIL claims do not implicate the interpretation or construction of the franchise agreements, they are not governed by the narrow choice of law clause present here. See Cottman Transmission Systems, Inc. v. Melody, 869 F. Supp. 1180, 1188 n. 4 (E.D. Pa. 1994).
CEI seeks damages and rescission of the franchise agreements under
We find that, even if allowed to proceed under the CFIL, CEI could not prevail. The posture in which CEI presents its CFIL claims shows that they are largely a recapitulation of the Louisiana fraud claims already presented to the jury. The jury specifically found that AFC‘s failure to disclose franchise-related litigation was not material to CEI. Further, as the district court found, the disclaimer clause in the franchise agreements states that CEI was not induced to execute the agreements by any extra-contractual representations. The misrepresentations and omissions upon which CEI bases its CFIL claims thus could not have been “material.”
We therefore affirm the district court‘s dismissal of the CFIL claims, albeit for different reasons.
IV.
CEI argues the district court erred when it applied Louisiana law to CEI‘s intentional interference with contract claims and when it dismissed third-party defendants NOSC and MFY on finding that Louisiana does not recognize an intentional interference claim against corporate defendants. CEI alleged that Al Copeland, NOSC and MFY engaged in a scheme to inflate the prices of Popeye‘s products that CEI was contractually bound to purchase, thus making CEI‘s performance of the franchise agreements more burdensome. The jury exonerated Al Copeland on the tortious interference claim.
We assume without deciding that California‘s more expansive tortious interference claim would encompass actions against NOSC and MFY, see, e.g., Pacific Gas and Electric Company v. Bear Stearns & Company, 50 Cal. 3d 1118, 270 Cal. Rptr. 1, 791 P.2d 587, 589-90 (Ca. 1990), because we find, in any event, that Louisiana law should apply to this issue and, further, that Louisiana would not recognize a cause of action against NOSC and MFY under these facts.
Because CEI filed its third party demands before January 1, 1992, we apply Louisiana‘s pre-codification conflicts law to this issue. See Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487 (1941);
We find that this case presents a “true conflict.” See Sandefer Oil & Gas, 846 F.2d at 322-23; see generally B. Currie, Selected Essays on the Conflict of Laws (1963). California has an interest in applying its expansive tortious interference law to protect California franchisees, while Louisiana has a countervailing interest in applying its limited cause of action to, and thus shielding from unrecognized liability, Louisiana corporations. See 9 to 5 Fashions, Inc. v. Spurney, 538 So. 2d 228, 234 (La. 1989); Brinkley & West, Inc. v. Foremost Insurance Co., 499 F.2d 928, 934 (5th Cir. 1974); Ardoyno v. Kyzar, 426 F. Supp. 78, 82 (E.D. La. 1976).
We are persuaded that, with respect to this issue, Louisiana has the “most significant
Louisiana‘s recent recognition of the tortious interference action, after nearly one hundred years of disallowing it, also evidences a policy of cautious expansion of the tort and a reluctance to apply wholesale its “rather broad and undefined” common law version. See 9 to 5 Fashions, 538 So. 2d at 234, quoting W. Page Keeton et. al, Prosser & Keeton on the Law of Torts § 129, at 979 (5th ed. 1984). Thus, quite apart from its interest in deterring tortious conduct, Louisiana also has an interest in shielding its domiciliary corporations from expansive tortious liability Louisiana has not yet adopted, particularly for conduct occurring within its borders.
We recognize California‘s interest in providing redress to its domiciliary franchisees allegedly injured there. We find, nonetheless, that Louisiana has the more “significant relationship”4 to the parties and the transaction where the issue involves Louisiana‘s limited tortious interference action, defendants domiciled in Louisiana, and, most importantly, allegedly tortious conduct occurring within Louisiana.5 We thus find that Louisiana law should apply to CEI‘s tortious interference claims against NOSC and MFY.
Our Court and various Louisiana courts of appeal have uniformly recognized the narrowness of Louisiana‘s tortious interference action. See, e.g., American Waste & Pollution Control Co. v. Browning-Ferris, Inc., 949 F.2d 1384, 1386-87 (5th Cir. 1991); White v. White, 641 So. 2d 538, 541 (La. App. 3d Cir. 1994); Tallo v. The Stroh Brewery Co., 544 So. 2d 452, 453-55 (La. App. 4th Cir. 1989). Even Louisiana appellate courts purporting to “expand” the cause of action have done so within the limited confines of the 9 to 5 Fashions decision. See, e.g., Guilbeaux v. The Times of Acadiana, 693 So. 2d 1183, 1186 (La. App. 3d Cir. 1997); Neel v. Citrus Lands of Louisiana, Inc., 629 So. 2d 1299, 1301 (La. App. 4th Cir. 1993). Under the present facts, CEI‘s tortious interference claim against NOSC and MFY does not fall within the narrow parameters set forth by the Louisiana Supreme Court in 9 to 5 Fashions, see 538 So. 2d at 234, and not since broadened.
We have recognized that before a Louisiana court will allow a tortious interference action, the plaintiff must identify a duty ex-
CEI has not identified any duty owed it by either NOSC or MFY that would bring those corporations within the purview of Louisiana‘s tortious interference cause of action. While NOSC and MFY may have been closely affiliated to AFC through Al Copeland, Sr., CEI has not demonstrated, nor can we discern, any relationship between the alleged tortfeasors and CEI that would give rise to the requisite duty. See American Waste, 949 F.2d at 1390. We believe that a Louisiana court would have done what the district court here did: allow the tortious interference claim to proceed against the corporate officer, Al Copeland, Sr., whose duty it was not to interfere with the franchise agreements between AFC and CEI. The jury found Copeland had not interfered with the franchise agreements, and we decline to allow CEI to relitigate the same issue against different defendants, particularly when deposition testimony in the case indicated any alleged overpricing scheme was done pursuant to Copeland‘s own guidelines.
Thus, we affirm, for slightly different reasons, the district court‘s dismissal of CEI‘s tortious interference claims against NOSC and MFY.
V.
CEI based its LUTPA claims against AFC on the overpricing scheme allegedly orchestrated by AFC, NOSC and MFY. The district court read the LUTPA limitations period6 as “peremptive” and dismissed the claims as time-barred. CEI argues the district court erred by not considering that the allegedly tortious scheme was a “continuing violation” that did not abate until 1994; only at that time, according to CEI, did the one-year LUTPA period begin to run.
The district court relied on Neill v. Rusk, 745 F. Supp. 362, 365 (E.D. La. 1988) in holding that the “continuing violation” doctrine did not apply to the LUTPA peremptive period. Two recent Louisiana appellate decisions, however, have found that where a violation of LUTPA is “continuing” (i.e., where the violation gives rise to a new cause of action every day), the peremptive period does not begin to run until the violation ceases. See Benton, Benton and Benton v. Louisiana Public Facilities Authority, 672 So. 2d 720, 723 (La. App. 1st Cir. 1996); Fox v. Dupree, 633 So. 2d 612, 615 (La. App. 1st Cir. 1993).
We assume without deciding that the “continuing violation” doctrine applies to the LUTPA peremptive period, because we find, in any event, that CEI‘s LUTPA claims would fail on the merits. A trade practice is unfair “when it offends established public policy and when the practice is unethical, oppressive, unscrupulous, or substantially injurious to consumers....” American Waste, 949 F.2d at 1391, quoting Roustabouts, Inc. v. Hamer, 447 So. 2d 543, 548 (La. App. 1st Cir. 1984). What constitutes an unfair trade practice is determined by the courts on a case-by-case basis. American Waste, 949 F.2d at 1391.
While CEI‘s LUTPA claims are rather amorphous, the only allegations that could possibly survive the one-year limitation period (aided by the “continuing violation” doctrine) are those surrounding the alleged overpricing scheme. These claims essentially revisit CEI‘s tortious interference claims, albeit against a different defendant. As we have observed supra, the jury has already rejected CEI‘s tortious interference claims against the only possible defendant under
We thus affirm, for alternate reasons, the district court‘s dismissal of CEI‘s claims under LUTPA.
VI.
The district court granted AFC‘s motion for summary judgment on CEI‘s fraud claims based on allegations that AFC fraudulently induced CEI to enter the franchise agreements by misrepresenting sales figures, expenses and profits regarding the San Francisco area stores. The court found that the integration/disclaimer clauses in the franchise agreements prevented CEI from justifiably relying on any extra-contractual representations allegedly made by AFC. CEI argues that the integration/disclaimer clauses cannot insulate AFC from its own fraudulent misrepresentations.
We need not address the effect of those clauses, because we find that the allegedly fraudulent statements made to CEI are not actionable as a matter of law. Under Louisiana law, a cause of action exists for fraudulent misrepresentation of past or present facts; “unfulfilled promises or statements as to future events,” however, cannot be the basis for a fraud action. Watermeier v. Mansueto, 562 So. 2d 920, 923 (La. App. 5th Cir. 1990)(emphasis added); see
According to CEI, AFC stated that CEI could expect sales similar to those in the Washington, D.C. area given the demographic similarities between the markets, and that sales would definitely increase in the San Lorenzo Store if CEI ran it properly.7 These statements are nothing more than projections of future events and, as such, are not actionable as fraud under Louisiana law. We therefore affirm, for alternate reasons, the district court‘s grant of summary judgment.
The district court also granted AFC summary judgment as to CEI‘s claims that AFC committed fraud by failing to disclose certain equipment problems with one of the locations and by failing to inform CEI that a competitor of Popeye‘s was planning to relocate next to another location. Under Louisiana law, “[t]o find fraud from silence or suppression of the truth, there must exist a duty to speak or to disclose information.” Greene v. Gulf Coast Bank, 593 So. 2d 630, 632 (La. 1992). Such a duty could arise from statute, or from a special relationship between the parties, such as a fiduciary relationship. Id. at 633. We have observed before, however, that a franchisor and a franchisee are not ordinarily considered fiduciaries in Louisiana. See, e.g., Delta Truck & Tractor, Inc. v. J.I. Case Co., 975 F.2d 1192, 1205 (5th Cir. 1992).
We agree with the district court that CEI has failed to identify any duty on AFC‘s part that would have required it to disclose the facts CEI complains of. First, as already discussed, CEI and AFC were not in a fiduciary relationship. Second, CEI is a relatively sophisticated consumer with the ability to independently investigate the condition of the locations it planned to take over. See Greene, 593 So. 2d at 633. Finally, AFC was only indirectly involved in the purchase of the two locations in question; CEI actually bought them from a third-party franchisee, Natraj Corporation.
Since we find AFC had no duty to disclose the information, we affirm the district court‘s grant of summary judgment in favor of AFC.
VII.
For the foregoing reasons, we AFFIRM the district court‘s dismissal of, and grant of summary judgment on, CEI‘s counterclaims and third party demands.