Rich Food Services Inc. v. Rich Plan Corp. , 98 F. App'x 206 ( 2004 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
RICH FOOD SERVICES, INCORPORATED, 
a Wyoming corporation; DEBRA K.
SINGLETARY; ROY A. BALDWIN,
Plaintiffs-Appellants,
v.
RICH PLAN CORPORATION, a Delaware
corporation; HERMAN S. GEIST;
HAROLD T. BROADHURST; WILLIAM R.
WILSON,
Defendants-Appellees,  No. 03-1198
and
RICHARD H. DARLING; R. BRUCE
EVANS; ROGER W. LORD; CHERYL A.
THOMPSON; W. E. ADAMSON;
DOUGLAS L. DAVIS; THOMAS A.
VOKAS; BRENT R. ADAMSON; BRYCE
A. JOHNSON,
Defendants.

Appeal from the United States District Court
for the Eastern District of North Carolina, at Raleigh.
W. Earl Britt, Senior District Judge.
(CA-99-677-5-BR)
Argued: January 21, 2004
Decided: May 3, 2004
Before WILKINSON, MICHAEL, and SHEDD, Circuit Judges.
2 RICH FOOD SERVICES v. RICH PLAN CORP.
Affirmed by unpublished per curiam opinion.
COUNSEL
ARGUED: Richard William Farrell, FARRELL & LAMANTIA,
Raleigh, North Carolina, for Appellants. Randall Maitland Roden,
THARRINGTON SMITH, LLP, Raleigh, North Carolina, for Appel-
lees. ON BRIEF: John S. Austin, FRANCIS & AUSTIN, P.L.L.C.,
Raleigh, North Carolina, for Appellee Rich Plan Corporation; F. Hill
Allen, THARRINGTON SMITH, L.L.P., Raleigh, North Carolina, for
Appellees Geist, Broadhurst, and Wilson.
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
OPINION
PER CURIAM:
This case arises out of a franchise relationship that went sour
because, according to the franchisees, the franchisor and its principals
breached the franchise agreements, engaged in fraud and misrepresen-
tation, and failed to make certain required disclosures. The plaintiff-
franchisees appeal the district court’s order granting judgment as a
matter of law to the defendants, the franchisor and its principals. We
affirm.
I.
Debra Singletary and Roy Baldwin, the individual plaintiffs, were
franchisees of defendant Rich Plan Corporation (Rich Plan). Single-
tary and Baldwin sold Rich Plan’s food systems, including frozen
food, freezers, and cooking equipment. Singletary and Baldwin oper-
ated through a succession of corporations, the last of which was plain-
tiff Rich Food Services, Inc. (We will refer to the three plaintiffs
RICH FOOD SERVICES v. RICH PLAN CORP. 3
collectively as the "plaintiffs.") Most pertinent to this appeal, the
plaintiffs also sold comprehensive service agreements, called Full
Service Agreements, designed by the franchisor, Rich Plan.
The plaintiffs’ suit stems from damage to their business allegedly
caused by an investigation by the North Carolina Attorney General
into their business practices. One focus of that investigation was
whether the Full Service Agreements constituted "insurance" under
North Carolina law. If the Full Service Agreements were insurance,
the plaintiffs had to comply with North Carolina insurance law to
offer them legally. A North Carolina court eventually determined that
the Full Service Agreements were insurance under North Carolina
law, and the plaintiffs entered into a consent judgment approved by
the North Carolina Attorney General.
The plaintiffs’ complaint alleges, under various theories, that the
defendants (Rich Plan and certain of its officers or directors) should
have helped the plaintiffs avoid their legal troubles with the North
Carolina Attorney General by disclosing that the Full Service Agree-
ments might be insurance under North Carolina law. The case went
to trial before a jury. At the close of all the evidence, the district court
granted judgment as a matter of law to the defendants on all counts.
The court concluded that some claims were time barred and that the
plaintiffs could not prevail on the remaining claims because the
defendants had no obligation either to advise the plaintiffs on how to
sell Full Service Agreements legally in North Carolina or to otherwise
assist them with their legal problems. The plaintiffs appeal.
II.
We review de novo the district court’s decision to grant the defen-
dants’ Fed. R. Civ. P. 50(a) motion for judgment as a matter of law.
Gairola v. Va. Dep’t of Gen. Servs., 753 F.2d 1281, 1285 (4th Cir.
1985). Judgment as a matter of law should not be granted if there is
sufficient evidence for a reasonable jury to reach a verdict in favor of
the non-moving party. Id.A.
As an initial matter, we reject the plaintiffs’ argument that the dis-
trict court — because of its prior rulings in the case — could not grant
4 RICH FOOD SERVICES v. RICH PLAN CORP.
the defendants’ renewed motion (made at the close of all the evi-
dence) for judgment as a matter of law. Judgment as a matter of law
was reversible error, the plaintiffs say, because it was inconsistent
with the court’s prior rulings that denied the defendants’ pretrial
motion for summary judgment and their motion for judgment as a
matter of law at the conclusion of the plaintiffs’ case. The plaintiffs
do not claim that the prior summary judgment ruling prejudiced them
in presenting their evidence at trial; moreover, the fact that the prior
rulings were made did not preclude the district court from reassessing
the legal sufficiency of the plaintiffs’ case when the defendants
renewed their motion for judgment as a matter of law at the close of
all the evidence. See Malone v. Microdyne Corp., 26 F.3d 471, 475
n.4 (4th Cir. 1994).
B.
The plaintiffs’ main argument on appeal is that the district court
erred by concluding that some of their claims were time barred. These
claims (Counts III, IV, and V) are based on Rich Plan’s duty (as
franchisor) to make certain basic disclosures at the beginning of the
franchise relationship under federal and New York law. See 16 C.F.R.
§ 436.1 et seq.; N.Y. Gen. Bus. Law § 680 et seq. Under both laws
a franchisor is not required to make any disclosures when the franchi-
sor and franchisee merely renew or extend an existing franchise
agreement. 16 C.F.R. § 436.2(k); N.Y. Gen. Bus. Law § 681(11).
Specifically, no disclosure is required under federal law if the agree-
ment is renewed or extended "where there is no interruption in the
operation of the franchised business by the franchisee" and there are
no material changes to the agreement. 16 C.F.R. § 436.2(k). A mate-
rial change is "any fact . . . which has a substantial likelihood of influ-
encing a reasonable franchisee . . . in the making of a significant
decision relating to a named franchise business or which has any sig-
nificant financial impact on a franchisee." 16 C.F.R. § 436.2(n). The
New York state law exemption from disclosure is even more lenient
on the franchisor: no disclosure is required if the agreement is
renewed or extended "where there is no interruption in the operation
of the franchised business by the franchisee." N.Y. Gen. Bus. Law
§ 681(11).
Here, the franchise relationship began in 1992. The district court
ruled that any claim based on disclosures required in 1992 was barred
RICH FOOD SERVICES v. RICH PLAN CORP. 5
by the applicable statutes of limitation. The plaintiffs do not appeal
this ruling. The same parties executed a second franchise agreement
in 1996. Both sides agree that if the 1996 agreement was a new agree-
ment for purposes of federal or New York franchise disclosure law,
Counts III, IV, and V are not time barred because additional disclo-
sures were required in 1996. However, if the 1996 agreement was a
renewal or extension, those claims are time barred because Rich Plan
would not have owed the plaintiffs disclosures within the limitation
periods. We conclude, like the district court, that the 1996 agreement
was a renewal under the applicable federal and New York laws.
The 1996 agreement does not explicitly say whether it is a new
agreement or a renewal or extension of the existing agreement. How-
ever, the undisputed facts indicate that it was a renewal or extension
for purposes of the franchise disclosure laws. For instance, both indi-
vidual plaintiffs signed the 1992 and 1996 agreements as the sole
franchisees in their individual capacities. The plaintiffs’ business was
not interrupted or changed by the execution of the 1996 agreement.
The plaintiffs paid only one franchise fee, and that was in connection
with the 1992 agreement. Both agreements were executed on nearly
identical franchise agreement forms drawn up by the franchisor, Rich
Plan. The only difference between the agreements was that the 1992
agreement contained amendments added at the insistence of the fran-
chisees, while the 1996 agreement did not include any amendments.
We need not decide if a change made solely at the instance of a
franchisee would count as a "material change" for purposes of the fed-
eral disclosure regulations because the franchisees in this case testi-
fied that all of the changes they negotiated in 1992 were meaningless
to them by 1996. Thus, the only functional difference between the
two agreements is that the 1996 agreement added several years to the
term of the franchise relationship.
To support their position that the 1996 agreement was a new agree-
ment, the plaintiffs point primarily to the trial testimony of one of the
individual defendants, Herman Geist. Geist acknowledged testifying
at his deposition that Rich Plan "did not renew [the plaintiffs]. We
gave them a new franchise," and he "didn’t consider that a renewal."
J.A. 1272-73. This, plus similar testimony from one plaintiff, indi-
cates only that certain of the parties believed the 1996 agreement to
be "new" in some abstract sense. The cited testimony does not help
6 RICH FOOD SERVICES v. RICH PLAN CORP.
to answer the question presented: whether, for purposes of triggering
additional disclosure requirements under the franchise laws, the 1996
agreement could properly be considered a new agreement. We agree
with the district court that the 1996 agreement was a renewal or
extension under the franchise disclosure laws because it functioned
only to lengthen an existing franchise relationship. See 16 C.F.R.
§ 436.2(k); N.Y. Gen. Bus. Law § 681(11). Rich Plan was not
required, as a matter of law, to make the federal or New York fran-
chise disclosures in 1996 on the facts presented here. Accordingly, all
claims (Counts III, IV, and V) based on the argument that disclosures
were required in 1996 are barred by the applicable statutes of limita-
tion.
C.
The plaintiffs also argue that the district court erred by entering
judgment as a matter of law on the merits of their remaining claims.
Again, we disagree.
Count I of the complaint alleges that Rich Plan breached the
express terms of the franchise agreements and the implied covenant
of good faith and fair dealing. On the contract claim the plaintiffs
argue that Rich Plan breached its agreement by failing to provide
them with a "unique" and "distinctive merchandising system," as
promised in the franchise agreements. J.A. 1691, 1713. The state-
ments in the agreements about the "unique" and "distinctive" nature
of Rich Plan’s products are simply too vague to be promises that
those products can be offered in North Carolina without complying
with North Carolina insurance law. See St. Charles Cable TV, Inc. v.
Eagle Comtronics, Inc., 687 F. Supp. 820, 831 (S.D.N.Y. 1988)
(under New York law similar statements were too vague to be relied
upon); Performance Motors, Inc. v. Allen, 186 S.E.2d 161, 166 (N.C.
1972) (applying North Carolina law, same). Even if we were inclined
to conclude that Rich Plan promised to advise the plaintiffs about
applicable North Carolina law on the basis of these and other similar
statements in the agreements, we would have to conclude that the
more specific terms of the agreements control. Both the 1992 and
1996 agreements expressly place the burden on the franchisees to
"faithfully comply with all applicable laws or regulations," regardless
of anything in the agreements to the contrary. J.A. 1693, 1715. As the
RICH FOOD SERVICES v. RICH PLAN CORP. 7
district court noted, all of the evidence indicates that the Full Service
Agreements were legal in North Carolina as long as the plaintiffs
complied with the applicable insurance laws. By the terms of the
agreements, it was the plaintiffs’ duty to comply with North Carolina
law. Moreover, the agreements impose no duty on Rich Plan to advise
the plaintiffs on compliance or to take any other action to assist the
plaintiffs with their legal troubles. Thus, there was no breach.
The plaintiffs’ claim based on the implied covenant of good faith
and fair dealing fares no better. The plaintiffs argue that New York
or North Carolina would imply a duty on the franchisor to provide the
franchisee with legal advice or assistance in these circumstances. But
there could be no such implied covenant here because it would con-
flict with the express contractual terms placing the burden on the fran-
chisees to comply with all applicable law. See Horn v. N.Y. Times,
790 N.E.2d 753, 756 (N.Y. 2003); Campbell v. Blount, 210 S.E.2d
513, 515 (N.C. App. 1975). As a result, the district court did not err
in granting the defendants’ motion for judgment as a matter of law on
Count I.
Count II of the complaint, alleging fraud, intentional misrepresen-
tation, and negligent misrepresentation, is likewise deficient. The
plaintiffs again rely on the representation in the agreements that the
Rich Plan merchandising system is "unique" and "distinctive" to sup-
port their claims of fraud and misrepresentation. Just as these state-
ments are too vague to be contractual promises, they are also too
vague to be misrepresentations. See St. Charles Cable TV, 687
F. Supp. at 831; Performance Motors, 186 S.E.2d at 166. Count II of
the complaint also alleges fraudulent concealment of the prospect that
the Full Service Agreements would violate North Carolina law. How-
ever, the undisputed evidence is that Rich Plan had no knowledge that
the Full Service Agreements were insurance under North Carolina
law until the North Carolina Attorney General’s investigation of the
plaintiffs. The plaintiffs cite no authority — and we have found none
— to support their contention that the failure of a franchisor to tell
franchisees of every legal issue that might be confronted by fran-
chisees under the varying laws of other states is fraudulent conceal-
ment under New York or North Carolina law. Thus, the district
court’s entry of judgment as a matter of law for the defendants on
Count II was also proper.
8 RICH FOOD SERVICES v. RICH PLAN CORP.
Finally, the plaintiffs argue that their remaining claims in Counts
III, IV, and VI (those not based on franchise disclosure requirements)
survive because the same breaches of contract and misrepresentations
that support Counts I and II allow them to recover under the theories
presented in the remaining counts. We have already held, however,
that no breach or misrepresentation occurred. Because the plaintiffs
present us with no arguments for why their remaining claims survive
absent a breach or misrepresentation, we conclude that judgment as
a matter of law in favor of the defendants on the remaining counts
was proper.
The judgment is
AFFIRMED.