Husain v. McDonald's CA1/1 ( 2013 )

Filed 12/17/13 Husain v. McDonald’s CA1/1
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for
publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication
or ordered published for purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FIRST APPELLATE DISTRICT
DIVISION ONE
SYED ALI HUSAIN et al.,
Plaintiffs, Cross-defendants and
Appellants, A136623
v. (Marin County
MCDONALD’S CORPORATION, et al., Super. Ct. No. CIV096177)
Defendants, Cross-complainants and
Respondents.
This case returns to us after (1) an appeal in which this court affirmed an order
granting Syed Ali Husain and Khursheed Husain (the Husains) a preliminary injunction
allowing them to continue operating three McDonald’s Corporation (McDonald’s)
restaurant locations during the pendency of this litigation (Husain v. McDonald’s Corp.
(2012) 205 Cal.App.4th 860 (Husain I)) and (2) a writ proceeding in which this court
vacated portions of a September 21, 2012 order (the September 2012 order) granting
terminating sanctions against the Husains (Husain v. Superior Court (Mar. 28, 2013,
A136692) [nonpub. opn.] (Husain II)).1 The present appeal, stayed until the writ petition
was decided, challenges other portions of the September 2012 order that (1) dissolved the
preliminary injunction in favor of the Husains and (2) granted injunctive relief to
McDonald’s under which McDonald’s took over control of the restaurant locations in
1
On our own motion we take judicial notice of our full opinions in Husain I and
Husain II, and of the records before us in both proceedings. (Evid. Code, § 452,
subd. (d).)
issue from the Husains on September 25, 2012. We now affirm those portions of the
September 2012 order.
I. BACKGROUND
The Husains have owned McDonald’s franchises since the early 1980’s. By 2005,
they held five McDonald’s franchises in San Francisco and Daly City. In June 2005, the
Husains entered into an agreement with third parties to purchase an additional seven
McDonald’s restaurants in Marin County. The underlying dispute in this case centers on
whether McDonald’s made an enforceable promise to the Husains to provide new 20-year
franchises to them for three of the restaurants whose franchise terms were due to expire
in 2009 and 2010. The Husains sued McDonald’s to enforce the alleged promise, and
McDonald’s cross-complained to compel the Husains to restore the three disputed
restaurants to McDonald’s. Both sides moved for preliminary injunctions at the outset of
the litigation, the Husains to prevent McDonald’s from terminating their rights to operate
the restaurant locations and McDonald’s to force the Husains to cease operations at the
three locations and vacate the premises. Following an evidentiary hearing, the trial court
entered an order on December 20, 2010 granting a preliminary injunction allowing the
Husains to continue operating the restaurants during the litigation, and denying
McDonald’s motion for a preliminary injunction (the December 2010 order).
A. Preliminary Injunction Ruling
The trial court explained the basis for the December 2010 order as follows:
“ ‘[T]he ultimate goal of any test to be used in deciding whether a preliminary injunction
should issue is to minimize the harm which an erroneous decision may cause.’ [(White v.
Davis (2003) 30 Cal.4th 528, 544.)] [¶] Although some of the evidence can be considered
as supporting either the Husains’ or . . . McDonald’s contentions [as to the Husains’
contractual right to new franchises], the court finds that there is a reasonable likelihood
that the trier of fact will accept the Husain[s’] view of the evidence. . . . Perhaps more to
the point, the balance of harms tips strongly in [the] Husain[s’] favor.” (Underscoring
omitted, italics added.) The trial court placed special significance in its consideration of
the “reasonable likelihood” issue on Mr. Husain’s testimony concerning assurances made
2
to him by McDonald’s executives about obtaining franchise renewals, and his reliance on
those assurances in agreeing to purchase the existing franchises with remaining terms of
less than 10 years. Regarding the balance of harms issue, the trial court relied on
evidence, including Mr. Husain’s testimony, that loss of the income from the three
restaurants would jeopardize his entire business.
We affirmed the December 2010 order in Husain I.2 We emphasized that we do
not reweigh the evidence in determining the validity of an injunction, but limit our review
to determining if the trial court abused its discretion by exceeding the bounds of reason or
contravening uncontradicted evidence, or based its ruling on a pure error of law as
applied to undisputed facts. (Husain I, supra, 205 Cal.App.4th at p. 867.) With regard to
the reasonable likelihood issue, we observed that the trial court’s order “reflect[ed]
nothing more than the trial court’s evaluation of the controversy on the record before it at
the time of its ruling . . . .” (Husain I (Apr. 30, 2012, A131235, A131689) [nonpub. part
of partially pub. opn.], p. 19.) On the issue of the balance of harms, we deferred to the
trial court’s determination upon conflicting evidence that the Husains’ loss of the income
from the three restaurants jeopardized the entire business they had built up for the last 30
years, and exceeded any potential harm to McDonald’s from granting an injunction in
favor of the Husains. (Id. at pp. 19–20.)
B. McDonald’s Sanctions Motions3
In their original verified complaint, the Husains alleged as one basis for their
breach of contract cause of action that McDonald’s franchising manager, Jodi Breen, had
offered in writing to renew the franchise terms for each of the three restaurants in
January 2006 and that Mr. Husain had timely signed and mailed the Breen letters back to
her indicating his willingness to accept the new terms on January 21, 2006. McDonald’s
maintained Mr. Husain never communicated his acceptance of the offers contained in the
Breen letters and the offers expired by their own terms. In later sworn declarations, Mr.
2
Husain I also affirmed a related order entered on February 16, 2011.
3
This section is drawn from this court’s decision in Husain II, supra, A136692.
3
Husain averred under penalty of perjury that he mailed the signed Breen letters back to
Breen by delivering them for mailing to the Capuchino Station Post Office on January 21,
2006. He attached to his declarations a copy of a form United States Postal Service
certificate of mailing filled out with Breen’s mailing address and stamped with a
Capuchino Station postmark dated January 21, 2006. Mr. Husain testified under oath to
his timely mailing of the Breen letters in a deposition and at the preliminary injunction
hearing.
McDonald’s obtained evidence the Capuchino Station Post Office was in fact
closed to customers on January 21, 2006, and it would have been impossible for Mr.
Husain to mail the Breen letters from that office on that date.4 Further, McDonald’s
obtained evidence the particular form of postmark stamp on the certificate of mailing
Husain presented to the court did not exist in 2006 and was not in use until 2008. The
Husains subsequently dropped the contract cause of action based on the Breen letters.
Based on its showing of apparent perjury and evidence fabrication, McDonald’s
moved for terminating sanctions against the Husains in June 2012. The Husains opposed
the motion and produced contrary evidence. The trial court denied the motion for
sanctions, finding McDonald’s would at most be entitled to the dismissal of the cause of
action the Husains had already dismissed, even if it found they had forged the certificate
of mailing. The court also found there was a factual dispute about the asserted
falsification.
Four weeks into a jury trial in this case, after the Husains completed their case-in-
chief, McDonald’s presented a renewed a motion for terminating sanctions, contending in
part that Mr. Husain had (1) presented falsified invoices purporting to be from Blackrock
Paving (Blackrock) and used the invoices to substantiate an overstated amount of
4
When confronted with this evidence, Mr. Husain changed his account of what
happened and stated he flagged down a letter carrier outside the post office on January 21
and got him to take his letter inside and stamp his certificate of mailing. McDonald’s
rebutted this story with evidence the necessary postal stamp could not have been accessed
by an employee on that date.
4
investment expenses in response to an interrogatory asking him to itemize amounts he
alleged he invested in his Marin franchises, and testified untruthfully about the
documents during the trial; and (2) falsified the certificate of mailing pertaining to the
Breen letters. As we observed in Husain II, by the time McDonald’s brought its motion,
it had cross-examined Mr. Husain extensively in the jury’s presence about his statements
and evidence concerning the Blackrock invoices and the Breen letters in an effort to
destroy his credibility with the jury.
C. The September 2012 Order
In its order granting terminating sanctions, the trial court stated: “After hearing
Mr. Husain’s testimony and having evaluated his credibility, the Court finds that [the
Husains] have committed perjury and provided false evidence in discovery and in the
trial.” The court ordered terminating sanctions, finding no lesser sanction would be
appropriate or would ensure compliance and a fair trial. In paragraphs Nos. 1 and 2 of its
sanctions order, the court ordered the dismissal with prejudice of the Husains’ third
amended complaint, and the striking of their answer to McDonald’s amended cross-
complaint. These were the portions of the trial court’s September 21, 2012 order that
were in issue in Husain II.
The trial court also addressed the December 2010 order on the parties’ injunctive
relief requests, which was still in force, as follows: “The Order . . . granting Plaintiffs a
Preliminary Injunction and denying Defendants’ Motion is modified to dissolve the order
granting Plaintiffs a Preliminary Injunction and to grant Defendants a Preliminary
Injunction preventing Plaintiffs from continuing unlawfully to use McDonald’s
trademarks and occupy McDonald’s restaurants pending entry of a final judgment.”
(Italics added.) The court explained that it found the Husains had no likelihood of success
on the merits due to (1) the court’s order striking the Husains’ pleadings and (2) “the
Court’s assessment of Mr. Husain’s credibility.” Further, the court stated the Husains’
previous claim of irreparable injury was entirely undercut by the Husains’ stipulation
read to the jury on September 6, 2012 that they had “sufficient assets to pay all of their
5
personal and business debt and expenses without the income from [the three restaurants
McDonald’s was seeking to recover from them].”
The court implemented its stated intention to modify the December 2010 order
with the following specific orders: “3. Effective at midnight on September 25, 2012, the
Order dated December 22, 2010[5] granting Plaintiffs a Preliminary Injunction is
dissolved. [¶] 4. Effective at 12:01 a.m. on September 25, 2012, the Plaintiffs and their
agents are preliminarily enjoined from 1) using McDonald’s Proprietary Marks [or any
other indicia] suggesting an affiliation with McDonald’s at the Novato, 4th Street, and
Merrydale Restaurant locations; and 2) occupying the Novato, 4th Street, and Merrydale
Restaurant locations pending the entry of a final judgment on McDonald’s Amended
Cross-Complaint. [¶] 5. Effective at 12:01 a.m. on September 25, 2012, McDonald’s
USA, LLC shall have the right to own, occupy and operate the Novato, 4th Street, and
Merrydale restaurant locations.” (Hereafter referred to as paragraphs Nos. 3, 4 and/or 5.)
D. Husain II
In Husain II, we directed the trial court to vacate the order striking the Husains’
pleadings, and to enter a new and different order denying terminating sanctions,
reinstating the Husains’ pleadings, and setting the matter for a new trial. While we did
not question the trial court’s findings concerning the Husains’ litigation misconduct, we
found the circumstances did not demonstrate that any remedy short of dismissal would
have been inadequate to preserve the fairness of the trial. We observed that the trial court
“afforded McDonald’s perhaps the most effective sanction of all—giving it wide latitude
to expose Mr. Husain’s fabrications and perjury to the jury through cross-examination.”
(Husain II, supra, A136692.)
We stayed all proceedings in the present appeal pending the decision in Husain II,
and erroneously dismissed the appeal as moot upon the filing of the opinion in Husain II.
5
As noted earlier, the December 2010 order was actually entered on December 20,
2010.
6
Following the Husains’ petition for rehearing, we vacated the dismissal and lifted the stay
by order entered on April 25, 2013.
II. DISCUSSION
The Husains assert the injunctive relief portions of the September 2012 order must
be reversed and the restaurant locations in issue restored to them because (1) Husain II
eliminated the foundational underpinning for the trial court’s finding of no likelihood of
success on the merits; and (2) the trial court violated the Husains’ due process rights and
tainted the entirety of its rulings on injunctive relief by granting case-dispositive relief to
McDonald’s—tantamount to a declaratory judgment granting McDonald’s the permanent
injunctive relief sought in its cross-complaint—without permitting the Husains an
evidentiary hearing they had requested on the authenticity of the Blackrock invoices.6
We take up the latter argument first.
At the outset, we reject the Husains’ premise that the September 2012 order
granted permanent (“case-dispositive”) injunctive relief to McDonald’s. It did not. The
court specified in its order that it was modifying the December 2010 preliminary
injunction order to (1) “dissolve the order granting [the Husains] Preliminary Injunction,”
and (2) grant McDonald’s “a Preliminary Injunction preventing [the Husains] from
continuing unlawfully to use McDonald’s trademarks and occupy McDonald’s
restaurants pending entry of a final judgment.” (Italics added.) In paragraph No. 4 of the
order it stated that as of September 25, 2012, the Husains were to be “preliminarily
enjoined” from using McDonald’s proprietary trademarks at the subject restaurant
locations or occupying those locations “pending the entry of a final judgment on
McDonald’s Amended Cross-Complaint.” (Italics added.) The court could not have
been clearer in these paragraphs that it was granting McDonald’s preliminary injunctive
relief, not a permanent injunction or a premature declaratory judgment.
6
We have no need to address the Husains’ further argument that the unclean hands
doctrine, cited as an alternative ground in the September 2012 order, is inapplicable.
7
The Husains would have us ignore all of the foregoing language and focus on the
omission of the words “pending the entry of a final judgment” at the end of paragraph
No. 5 of the order (stating McDonald’s would have “the right to own, occupy and
operate” the restaurant locations in issue as of September 25, 2012).7 We decline to
construe the order in that myopic fashion. The meaning and effect of a judicial order is
determined according to the rules governing the interpretation of writings generally. (See
In re Marriage of Richardson (2002) 102 Cal.App.4th 941, 948–949.) The entire
document is to be construed as a whole to effectuate the court’s obvious intention. (Id. at
p. 949.) We do not seize upon one sentence or clause of the ruling to destroy the
remainder. (Ibid.) In our view it was unnecessary for the court to restate that it was
providing interim relief in paragraph No. 5 of the order because that intention was
manifest throughout the writing. Read together, paragraphs Nos. 4 and 5 merely
specified that McDonald’s rather than the Husains would have the right going forward to
occupy and operate the subject McDonald’s restaurant locations pending entry of a final
judgment on McDonald’s cross-complaint.8
We also find no merit in the Husains’ contention that Husain II undercut the basis
for the trial court’s modification of its December 2010 preliminary injunction rulings.
Trial courts possess the inherent power to modify a preliminary injunction. (City of San
Marcos v. Coast Waste Management, Inc. (1996) 47 Cal.App.4th 320, 328; New Tech
Developments v. Bank of Nova Scotia (1987) 191 Cal.App.3d 1065, 1071–1072.) The
7
McDonald’s already owned the locations. The underlying dispute concerns the
Husains’ right to operate McDonald’s restaurants at the locations pursuant to a renewal of
their franchise agreements for a new term.
8
The Husains waived the arguments raised for the first time in their reply brief
that paragraph No. 4 was also effectively a permanent injunction despite its form, and
that the “case-dispositive” rulings assertedly made in paragraphs Nos. 4 and 5 of the
order require a reversal in full. (California Retail Portfolio Fund GMBH & Co. KG v.
Hopkins Real Estate Group (2011) 193 Cal.App.4th 849, 862.) In any event, for the
reasons already stated, we reject the premise of these arguments that the September 2012
order involved permanent injunctive relief of any kind. We deny as moot McDonald’s
motion to strike those portions of the Husains’ reply brief.
8
decision to grant, deny, dissolve, or refuse to dissolve a preliminary injunction rests in the
sound discretion of the trial court. (Union Interchange, Inc. v. Savage (1959) 52 Cal.2d
601, 606.) Such an order will not be modified or dissolved on appeal except for an abuse
of discretion. (Ibid.)
We find no abuse of discretion here. The December 2010 order was based on
evidence the balance of hardships in granting or denying the competing preliminary
injunction motions weighed strongly in favor of protecting the Husains from apparent
financial ruin, coupled with a reasonable probability a jury would believe Mr. Husain’s
representations concerning McDonald’s promises to him over the substantial conflicting
evidence. The hardship evidence was the major underpinning of the court’s original
order. That disappeared from the case when Mr. Husain stipulated at trial he could pay
his debts and expenses without income from the three franchises. The Husains tacitly
concede the stipulation by itself is sufficient to uphold the trial court’s order dissolving
the preliminary injunction it issued in favor of the Husains in 2010. (See Cohen v. Board
of Supervisors (1985) 40 Cal.3d 277, 286–287 [order denying preliminary injunction may
be upheld if no abuse of discretion shown as to either likelihood of success or interim
harm].) They nonetheless insist the trial court’s finding regarding their likelihood of
prevailing on the merits was an abuse of discretion.
According to the Husains, the trial court abused its discretion by failing to exercise
it: “The trial court did not exercise discretion in finding no likelihood of success, but did
so because of the terminating sanctions, which have now been nullified by the opinion in
[Husain II].” (See In re Marriage of Gray (2007) 155 Cal.App.4th 504, 515 [failure to
exercise discretion is an abuse of discretion].) The Husains maintain this asserted failure
to exercise discretion, without regard to the trial court’s finding of interim harm, requires
reversal at a minimum of those portions of the order enjoining them from using
McDonald’s proprietary marks at the three restaurants and granting McDonald’s the right
to occupy and operate them pending entry of a final judgment (paragraphs Nos. 4 and 5).
(See Teachers Ins. & Annuity Assn. v. Furlotti (1999) 70 Cal.App.4th 1487, 1493
9
[appellate court must reverse order granting preliminary injunction if “the trial court has
abused its discretion as to either factor”].)
The Husains again misread the trial court’s order. The terminating sanctions
imposed by the trial court were not its sole and exclusive basis for modifying the
December 2010 preliminary injunction rulings. The order makes clear that the court also
relied on its assessment of Mr. Husain’s credibility to find the Husains had no likelihood
of prevailing on the merits. It states: “Based on the Court’s order dismissing the Third
Amended Complaint and striking [the Husains’] Answer to [McDonald’s] Amended
Cross-Complaint and the Court’s assessment of Mr. Husain’s credibility, the Court finds
that Plaintiffs have no likelihood of success on the merits and that Defendants/Cross-
Complainants will and do succeed on the merits.” (Italics added.) Immediately
following that sentence, the order goes on to find and discuss why the Husains would
“suffer [no] irreparable injury from loss of the three restaurants.” If the injunctive relief
portions of the September 2012 order rested solely on the terminating sanctions imposed
without any discretionary weighing of likelihood of success, no “assessment of Mr.
Husain’s credibility” or consideration of irreparable injury would have been necessary.
We therefore find the trial court did exercise discretion in assessing the Husains’
likelihood of success in the litigation. Nothing in Husain II undermined that assessment.
We simply found this was not one of those rare cases in which any remedy short of
dismissal was inadequate to preserve the fairness of the trial. The impeachment evidence
McDonald’s had amassed against Mr. Husain combined with the Husains’ stipulation
fully supported the trial court’s September 2012 injunctive relief rulings.
10
III. DISPOSITION
With the exception of the terminating sanctions previously reviewed in Husain II,
supra, A136692, the order of September 21, 2012 is affirmed.
_________________________
Margulies, Acting P.J.
We concur:
_________________________
Dondero, J.
_________________________
Banke, J.
11