Dominos Pizza LLC v. Robert Deak ( 2010 )


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  •                                                                NOT PRECEDENTIAL
    UNITED STATES COURT OF APPEALS
    FOR THE THIRD CIRCUIT
    _____________
    No. 09-3772
    _____________
    DOMINO’S PIZZA LLC
    v.
    ROBERT J. DEAK,
    Appellant
    _______________
    On Appeal from the United States District Court
    for the Western District of Pennsylvania
    (D.C. No. 3-05-cv-00456)
    District Judge: Honorable Kim R. Gibson
    _______________
    Submitted Pursuant to Third Circuit LAR 34.1(a)
    June 4, 2010
    Before: AMBRO, CHAGARES and VAN ANTWERPEN, Circuit Judges.
    (Filed: June 4, 2010)
    _______________
    OPINION OF THE COURT
    _______________
    VAN ANTWERPEN, Circuit Judge.
    Robert J. Deak (“Deak”) appeals from a September 4, 2009 order of the United
    States District Court for the Western District of Pennsylvania granting Domino’s Pizza
    LLC’s (“Domino’s”) motion for judgment on the pleadings and entering declaratory relief
    in favor of Domino’s. Deak argues that the District Court inappropriately applied
    Pennsylvania’s parol evidence rule and failed to apply a recognized exception to the rule.
    Because we agree that the District Court prematurely declined to apply the admissions
    exception to Pennsylvania’s parol evidence rule, we will reverse and vacate the
    September 4, 2009 order and remand for further proceedings.
    I.
    A.
    In 1980, Deak entered into a franchise agreement with Domino’s Pizza, Inc., the
    predecessor-in-interest to Domino’s. This agreement granted Deak exclusive franchise
    rights in certain areas of Pennsylvania (the “Pennsylvania Agreement”). Among other
    provisions, the Pennsylvania Agreement established a term limit:
    “Unless sooner terminated as provided in Paragraph 9,1 the initial term of this
    Agreement shall be from the date hereof until the last day of the first
    Agreement Year and thereafter, this Agreement shall be automatically renewed
    for successive terms of one Agreement Year until the last day of the tenth
    (10th) Agreement Year, unless [Deak] shall, at [his] sole option, elect not to
    renew and shall give written notice to DOMINO’S of such election at least one
    hundred twenty (120) days prior to the end of any Agreement Year.”
    (J.A. at 59.) In 1990, Deak and Domino’s executed an addendum to the Pennsylvania
    Agreement that, inter alia, extended the term of the Agreement “for an additional ten (10)
    year period following the expiration date of the [Pennsylvania] Agreement. For purposes
    1
    Paragraph 9 contemplates bases for terminating the Pennsylvania Agreement, none
    of which are at issue in this case.
    2
    of clarification, the parties agree that the expiration date of the [Pennsylvania] Agreement
    as executed by this Addendum shall be July 31, 2000.” (Id. at 89.) Finally, Deak and
    Domino’s entered into an additional addendum in 2001 that extended the term of the
    Pennsylvania Agreement “for an additional five (5) year term. For purposes of
    clarification, the parties agree that this additional five (5) year term commenced August 1,
    2000 and expires July 31, 2005.” (Id. at 95.)
    In 1984, Deak and Domino’s entered into a second exclusive franchise agreement
    for certain areas in Maine (the “Maine Agreement”). The Maine Agreement
    contemplated an initial term of “ten (10) years commencing on the date of execution of
    this Agreement.” (Id. at 99.) Thereafter, Deak and Domino’s entered into an addendum
    which extended the term of the Maine Agreement “for an addition ten (10) year period
    following the expiration date of the [Maine] Agreement. For purposes of clarification,
    the parties agree that the expiration date of the [Maine] Agreement as executed by this
    Addendum shall be December 9, 2004.” (Id. at 117.)
    On August 17, 2005, Domino’s informed Deak, by letter, that it planned to “start
    accepting applications to build stores in portions of what was once your area agreements.
    . . . We disagree that you have been granted area rights that exceed any written document
    and have communicated that position to you on several occasions.” (Id. at 123.) Deak
    responded with a letter from counsel contending that the Pennsylvania and Maine
    Agreements continue to be in full force and effect, and that “[s]pecific representations
    3
    were made to [Deak] that his [Pennsylvania and Maine] Agreements would not be limited
    as to time.” (Id. at 125.) Deak’s counsel then asserted that Domino’s proposed course of
    action “is contrary to the specific promises made by Domino’s to Mr. Deak and
    proceeding along these lines will be deemed to be a breach of those guarantees.” (Id.)
    B.
    In light of this disagreement regarding the terms of the Pennsylvania and Maine
    Agreements, and its desire to issue new franchises, Domino’s filed a complaint in the
    District Court seeking a declaratory judgment that the Agreements had expired and that
    Domino’s was free to issue new franchises in Deak’s previously exclusive areas.
    In his answer, Deak contended that a former officer of Domino’s had made oral
    representations to him that he had the right to renew his Pennsylvania and Maine
    Agreements on the same or substantially similar terms for so long as he operated
    Domino’s stores. In particular, Deak relied on an unsworn statement from Sue Pagniano
    (“Pagniano”), a former Regional Vice President of Domino’s, in which she stated, “It is
    my specific recollection there were no time limits placed on the length of the area
    contracts. It was understood that Mr. Deak’s right to be an Area Franchisee is for the
    duration of his development and ownership of Domino’s Pizza Stores . . . .” (Id. at 143.)
    Deak also filed a counterclaim for a declaratory judgment recognizing Domino’s is
    obligated to renew the Pennsylvania and Maine Agreements in the same or substantially
    similar form as past agreements. The District Court granted Domino’s motion to dismiss
    4
    Deak’s counterclaim, with leave to amend. It determined that Pennsylvania’s parol
    evidence rule bars the admission of the alleged agreement for renewal, which was not part
    of a separate agreement, and that Deak did not plead evidence of an admission sufficient
    to survive Domino’s Rule 12(b)(6) motion.2
    Deak then filed an amended counterclaim, which the District Court construed as
    relying exclusively on the admissions exception to the parol evidence rule. The District
    Court granted Domino’s second Rule 12(b)(6) motion because the admissions Deak
    offered did not rise to the level of evidence previously accepted by Pennsylvania courts
    when applying the admissions exception. In particular, the District Court noted that
    Deak’s own assertions and the unsworn testimony of a former officer do not satisfy the
    admissions exception.3
    Domino’s subsequently filed the subject motion for judgment on the pleadings
    under Rule 12(c). Prior to this filing, however, Deak conducted a deposition of Pagniano
    2
    The District Court applied Pennsylvania law to this contract dispute. The court
    declined to abide by the choice-of-law provisions in the Pennsylvania and Maine
    Agreements because the parties did not seek to enforce those provisions prior to filing the
    Rule 12(c) motion. The Pennsylvania Agreement selected Michigan law, whereas the
    Maine Agreement selected “the laws of the state in which the Exclusive Area . . . is
    located.” (See J.A. at 68, 109.)
    Although the applicability of a choice-of-law provision is not a jurisdictional issue
    and the parties may waive their right to enforce it, the conflicts of law issue regarding
    which forum’s law should apply to the dispute may not be waiveable. See Huber v.
    Taylor, 
    469 F.3d 67
    , 75 n.12 (3d Cir. 2006). Accordingly, on remand, the District Court
    may wish to revisit its position on this matter in light of the basis for our reversal.
    3
    The order dismissing Deak’s amended counterclaim is not at issue in this appeal.
    5
    in which she adopted, under oath, her assertions in her previously unsworn statement.4
    Pagniano died shortly thereafter. The District Court granted Domino’s Rule 12(c) motion
    by finding, in part, that Deak failed to sufficiently plead an admission to survive
    Domino’s motion. Deak filed this timely appeal.
    II.
    The District Court had jurisdiction over this matter pursuant to 28 U.S.C. §
    1332(a) and had authority to issue declaratory relief pursuant to § 2201(a). We have
    jurisdiction to review the District Court’s final and appealable order pursuant to § 1291.
    “Our standard of review of a motion for judgment on the pleadings under
    Federal Rule of Civil Procedure 12(c) is plenary. Under Rule 12(c), judgment
    will not be granted unless the movant clearly establishes that no material issue
    of fact remains to be resolved and that he is entitled to judgment as a matter of
    law. In reviewing the grant of a Rule 12(c) motion, we must view the facts
    presented in the pleadings and the inferences to be drawn therefrom in the light
    most favorable to the nonmoving party.”
    Rosenau v. Unifund Corp., 
    539 F.3d 218
    , 221 (3d Cir. 2008) (quoting Jablonski v. Pan
    Am. World Airways, Inc., 
    863 F.2d 289
    , 290-91 (3d Cir. 1988)).
    III.
    4
    Domino’s has sought leave of this Court to file a sur-reply brief pursuant to
    Federal Rule of Appellate Procedure 28(c). We will grant Domino’s motion in a separate
    order. In the brief, Domino’s contends that Pagniano’s deposition cannot be considered
    in the context of its Rule 12(c) motion because it was not part of the pleadings under
    consideration. Regardless of the validity of this contention, we do not rely on Pagniano’s
    deposition in reaching our conclusion.
    6
    As a preliminary matter, we note that in conducting its review of the Rule 12(c)
    motion, the District Court observed that it could “consider any undisputably authentic
    documents attached as exhibits.” Domino’s Pizza LLC v. Deak, 
    654 F. Supp. 2d 336
    , 341
    (W.D. Pa. 2009). As a general proposition, this is true because Federal Rule of Civil
    Procedure 10(c) establishes that a written instrument attached to a pleading as an exhibit
    is part of the pleading itself. We have determined, however, that not all written
    instruments may be considered part of the pleading and have opined that an affidavit
    cannot be part of a pleading. See Rose v. Bartle, 
    871 F.2d 331
    , 339 n.3 (3d Cir. 1989).
    As such, Pagniano’s statement attached to Deak’s answer, which itself is not even an
    affidavit, could not have been considered by the District Court without converting the
    Rule 12(c) motion into a motion for summary judgment. See Fed. R. Civ. P. 12(d); cf.
    
    Rose, 871 F.2d at 339
    n.3. Nevertheless, Deak pled the substance of Pagniano’s alleged
    admission in the body of his pleading; therefore, neither the District Court nor this Court
    need look beyond the pleadings to dispose of Domino’s Rule 12(c) motion.
    Deak raises three issues on appeal: (1) Pennsylvania’s parol evidence rule does not
    apply because the Pennsylvania and Maine Agreements were not fully integrated; (2) the
    parol evidence rule does not apply because his right of renewal is the subject of a separate
    agreement; and (3) even if the parol evidence rule applies, he has sufficiently pled the
    existence of an admission to survive Domino’s Rule 12(c) motion.
    7
    For the purposes of this appeal, we will assume, without deciding, that the parol
    evidence rule applies.5 Consequently, “evidence of any previous oral or written
    negotiations or agreements involving the same subject matter as the contract is almost
    always inadmissible to explain or vary the terms of the contract.” Yocca v. Pittsburgh
    Steelers Sports, Inc., 
    854 A.2d 425
    , 436-37 (Pa. 2004). In this case, Deak seeks to
    introduce evidence that, prior to executing the Pennsylvania and Maine Agreements, he
    was guaranteed the right to renew the Agreements on the same or substantially similar
    terms for as long as he continued to own and operate Domino’s stores. Because we have
    assumed the parol evidence rule applies, we have necessarily assumed that the written
    agreement and oral representations concern the same subject matter. See In re Estate of
    Hall, 
    535 A.2d 47
    , 55 (Pa. 1987) (noting rule only bars evidence on same subject matter
    as writing). Therefore, Deak’s assertion of an oral agreement that the Agreements have
    5
    On a related note, we will also assume, without deciding, that there is no separate
    agreement in this matter. Our assumption that the parol evidence rule applies necessarily
    entails the assumption that the parol evidence presented by Deak concerns the same
    subject matter as the written agreement. See In re Estate of Hall, 
    535 A.2d 47
    , 55 (Pa.
    1987) (indicating parol evidence rule bars admission of prior or contemporaneous oral
    representations only if they concern a matter specifically dealt with in the contract itself).
    Simply enough, if the parol evidence concerns the same subject matter as the contract, it
    cannot be the basis for a separate agreement. See Iron Worker’s Sav. & Loan Ass’n v.
    IWS, Inc., 
    622 A.2d 367
    , 373-74 (Pa. Super. Ct. 1993) (noting separate agreement may
    exist only if it concerns a subject matter different than written agreement). Therefore,
    because we assume the parol evidence rule applies, we are led to the inevitable
    assumption that, for the purposes of this appeal, there is no separate agreement.
    8
    no time limit would be barred by the parol evidence rule. See 
    Yocca, 854 A.2d at 436-37
    (barring parol evidence that would vary term of contract).
    Nevertheless,
    “the parol evidence rule has never barred the introduction of clear, precise, and
    convincing evidence to show that the party who seeks to enforce the written
    agreement according to its tenor has admitted and acknowledged that the
    agreement as written did not express what the parties intended and that what
    the parties intended was omitted from the agreement by mistake or accident.”
    Scott v. Bryn Mawr Arms, Inc., 
    312 A.2d 592
    , 595 (Pa. 1973) (alteration omitted). The
    parol evidence rule bars the admission of material contrary to the express terms of the
    written agreement, “unless it is admitted that the whole of the agreement is not set forth in
    the writing.” 
    Id. The burden
    is on the proponent of the parol evidence to establish such
    an admission of incompleteness in the writing by evidence which is clear, precise, and
    convincing, 
    id., and this
    burden is of both law and fact, Coal Operators Cas. Co. v.
    Charles T. Easterby & Co., 
    269 A.2d 671
    , 674 (Pa. 1970). The admission of
    incompleteness must have been made, or alleged to have been made, at a time subsequent
    to entering into the written agreement. 
    Scott, 312 A.2d at 596
    .
    The District Court determined that Deak’s averments of an admission “simply
    cannot constitute the requisite penetrating admissions.” 
    Deak, 654 F. Supp. 2d at 346
    .
    We do not agree that the District Court could reach this conclusion at this stage of the
    proceedings. The District Court was required to “view the facts presented in the
    pleadings and the inferences to be drawn therefrom in the light most favorable” to Deak.
    9
    See 
    Rosenau, 539 F.3d at 221
    . Judgment on the pleadings should not be granted unless
    there is no material issue of fact and Domino’s is entitled to judgment as a matter of law.
    See 
    id. Under this
    high standard, we cannot agree with the District Court.
    Many of the Pennsylvania cases addressing the sufficiency of evidence of an
    admission proceeded to trial, affording the party at least the opportunity to present sworn
    testimony, or at least beyond the discovery stage to summary judgment, and in some
    instances included responsive pleadings from the party seeking to enforce the written
    agreement. See, e.g., Giant Food Stores, Inc. v. Marketplace Commc’ns Corp., 717 F.
    Supp. 1071, 1075 (M.D. Pa. 1989) (applying admissions exception based on sworn
    affidavit of former employee and letters from corporate officers of party seeking to
    enforce written agreement); 
    Scott, 312 A.2d at 595-96
    (declining to apply admission
    exception because alleged admission did not relate to disputed issue); Yuhas v. Schmidt,
    
    258 A.2d 616
    , 621 (Pa. 1969) (addressing admission in trial testimony); Dunn v. Orloff,
    
    218 A.2d 314
    , 317-18 (Pa. 1966) (declining to find requisite admission in trial testimony
    and pleadings because admission did not relate to the issue in dispute); Universal Film
    Exchs., Inc. v. Viking Theatre Corp., 
    161 A.2d 610
    , 612 (Pa. 1960) (per curiam) (adopting
    lower court opinion which declined to find admission in trial testimony of parol evidence
    proponent regarding out-of-court admissions by proponent of written agreement); Boyd
    Estate, 
    146 A.2d 816
    , 821 (Pa. 1958) (relying on admission in sworn answer despite
    party’s failure to testify at trial); Allinger v. Melvin, 
    172 A. 712
    , 713, 714-15 (Pa. 1934)
    10
    (citing party’s admission in trial testimony); Ward v. Zeigler, 
    132 A. 798
    , 799 (Pa. 1926)
    (finding parol evidence rule inapplicable where proponent of written agreement testified
    at trial that writing did not reflect parties’ entire understanding).
    Because Deak did not have the same opportunity to proceed to trial, we cannot
    fault him simply because he did not produce sworn trial testimony. Further, Domino’s
    filed no responsive pleading and instead opted to seek dismissal of Deak’s counterclaim,
    which the District Court granted, so we cannot fault Deak for failing to point to an
    admission in a pleading.
    Indeed, in a case with evidence of an admission similar to that which Deak pled,
    the Pennsylvania Supreme Court affirmed the lower court’s order denying judgment on
    the pleadings. Coal 
    Operators, 269 A.2d at 674
    . The court concluded that a letter from
    the chairman of the proponent of the written agreement, which contradicted the terms of
    the writing, could suffice as “clear, precise and convincing in nature.” 
    Id. (quotations omitted).
    Particularly, the court noted that the letter’s admissibility and the chairman’s
    authority to bind the corporation remained to be resolved. 
    Id. As such,
    “[o]n the present
    posture of this record, it is impossible to resolve the issue of fact.” 
    Id. Similarly, assuming
    as we must that Deak’s assertions of Pagniano’s
    representations are true, they could establish clear, precise, and convincing evidence that
    the Pennsylvania and Maine Agreements do not reflect the parties’ complete
    understanding. Cf. In re Estate of Fickert, 
    337 A.2d 592
    , 594 (Pa. 1975) (defining clear
    11
    and convincing evidence as that which is “so clear, direct, weighty, and convincing as to
    enable the jury to come to a clear conviction, without hesitancy, of the truth of the precise
    facts in issue”).
    Assuming the veracity of Deak’s allegations, there would be no time limit on the
    Agreements, which contradicts the term limits stated therein. See Coal 
    Operators, 269 A.2d at 672
    (finding admission exception applicable where admission expressly
    contradicted terms of written agreement). Moreover, the admission was issued, at the
    earliest, in December 2004, well after any relevant agreement or addendum was executed.
    See 
    Scott, 312 A.2d at 595
    (asserting that admission must be made subsequent to
    execution of written agreement). We are not concerned, in this procedural posture, with
    the admissibility, credibility, or binding effect of Pagniano’s statement; rather, those are
    issues better resolved at the trial level.6 See Coal 
    Operators, 269 A.2d at 674
    ; see also
    6
    The District Court also noted that Deak’s allegations of statements by other former
    and current corporate officers of Domino’s also do not meet the clear, precise, and
    convincing evidence standard. The District Court’s treatment of these statements is
    flawed in the same manner as its analysis of Pagniano’s statement. Even though these
    allegations mirror those found insufficient in Universal Film Exchanges, the proponent of
    the admissions exception in that case had the opportunity to present evidence at trial and
    offered nothing other than his own 
    allegations. 161 A.2d at 612
    . We cannot agree that
    the same result is required in the procedural posture of this case where Deak’s allegations
    can be substantiated through discovery, depositions, and examination at trial. We are
    aware that these statements were not contained in the pleadings under review; we merely
    acknowledge the misstep in the District Court’s analysis.
    Deak’s pleading of Pagniano’s statement alone suffices to defeat Domino’s Rule
    12(c) motion. If true, and if an admission attributable to Domino’s, her statement that
    there should be no time limit on the duration of the Pennsylvania and Maine Agreements
    indicates that the written agreements may not reflect the entire agreement of the parties.
    12
    Giant Food 
    Stores, 717 F. Supp. at 1074
    n.4 (noting parol evidence rule invokes state
    substantive law, not federal evidentiary rules (citing Betz Labs., Inc. v. Hines, 
    647 F.2d 402
    , 405 (3d Cir. 1981)).
    Furthermore, although Scott’s language appears to require not only an admission
    of incompleteness but also an admission that the true agreement was omitted by mistake
    or 
    accident, 312 A.2d at 595
    , the above-cited cases, which actually applied the admissions
    exception, do not make the same demand, see, e.g., Giant Food 
    Stores, 717 F. Supp. at 1076-77
    ; 
    Yuhas, 258 A.2d at 621
    ; Boyd 
    Estate, 146 A.2d at 821
    .
    IV.
    For the foregoing reasons, we will reverse the District Court’s order granting
    Domino’s motion for judgment on the pleadings, vacate the order granting Domino’s
    declaratory relief, and remand for further proceedings.
    Accordingly, the parol evidence rule would not bar its admission. See 
    Scott, 312 A.2d at 595
    .
    13