Mollinger-Wilson v. Quizno's Franchise Co.

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
DEC 3 2004
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk
ELIZABETH MOLLINGER-
WILSON; ROBERT E. WILSON, Lt.
Colonel, USMC-Ret.,
Plaintiffs-Appellants, No. 04-1131
(D.C. No. 02-N-436 (OES))
v. (D. Colo.)
QUIZNO’S FRANCHISE COMPANY,
Defendant-Appellee.
ORDER AND JUDGMENT *
Before LUCERO , McKAY , and PORFILIO , Circuit Judges.
After examining the briefs and appellate record, this panel has determined
unanimously that oral argument would not materially assist the determination of
this appeal. See Fed. R. App. P. 34(a)(2); 10th Cir. R. 34.1(G). The case is
therefore ordered submitted without oral argument.
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Pro se plaintiffs Elizabeth Mollinger-Wilson and her husband Robert E.
Wilson appeal the decision of the district court to grant them partial summary
judgment and nominal damages in their breach of contract claim against
defendant Quizno’s Franchise Company (Quizno’s). In the district court,
plaintiffs had moved for summary judgment, and defendant had filed a
cross-motion for summary judgment on damages. Plaintiffs’ motion was granted
in part and denied in part; defendant’s motion was granted. Additionally,
plaintiffs appeal the district court’s decision in the same document to deny their
motion to compel discovery and to deny them leave to amend their complaint five
months after they had filed for summary judgment.
The federal district court heard this case under diversity jurisdiction,
28 U.S.C. § 1332(a)(1), and plaintiffs’ breach of contract claim was controlled by
Colorado law. We exercise jurisdiction over the final order of the district court
pursuant to 28 U.S.C. § 1291, and we affirm all of the decision but how the
district court calculated nominal damages under Colorado law.
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Background
Because the critical issue in this case was plaintiffs’ lack of proof on
damages, we need describe the extensive factual background of the case only
briefly. Plaintiffs represented Quizno’s in specific parts of the Rocky Mountain
region. In January 2000, Quizno’s terminated its contract with the plaintiffs.
Plaintiffs brought suit against Quizno’s, and as part of that settlement, Quizno’s
agreed that
As consideration for [plaintiffs] relinquishing [their] rights . . .,
[Quizno’s] shall pay [plaintiffs] the amount of $57,859, payable
within three (3) business days from the date the [Termination]
Agreement is fully executed by the Parties, plus one (1) franchise
agreement, substantially equal to [Quizno’s] present form franchise
agreement and valid for 40 months from the effective date of the
[Termination] Agreement, which the [plaintiffs] may use in the
Territory or which the [plaintiffs] may sell to a third-party, subject to
Quizno’s approval of the third-party as a qualified Quizno’s
franchisee . . . . The Parties hereby agree that payment of the
Termination Fee constitutes payment in full of any amounts owed to
[plaintiffs] by [Quizno’s] in connection with the Territory.
R. Vol. I, Doc. 1, Ex. 1 at 1 [hereinafter Termination Agreement]. The parties
signed the Termination Agreement on February 28, 2000.
Although Quizno’s paid plaintiffs the sum that they were owed within three
days, plaintiffs requested delivery of the promised franchise agreement on
March 15, 2000, and Quizno’s did not deliver that agreement until January 5,
2001. Plaintiffs subsequently brought this suit for breach of the Termination
Agreement. Plaintiffs argue that, under the wording of the contract, they were
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due delivery of the franchise agreement within three days of when the
Termination Agreement was signed, or, in the alternative, within a reasonable
time afterwards. Quizno’s disputes plaintiffs’ interpretation of the Termination
Agreement, asserting that the three-day period applied only to the delivery of the
money, and not to the delivery of the franchise agreement. In the alternative,
Quizno’s asserts that it complied with the Termination Agreement by delivering
the “substantially equal” franchise agreement within a reasonable period of time.
See id.The district court referred the case to a magistrate judge under 28 U.S.C.
§ 636(b)(1)(B). The magistrate judge found that, under a plain reading of the
Termination Agreement, the three-day requirement for delivery applied only to
the sum Quizno’s was to pay plaintiffs, and not to the franchise agreement. The
Termination Agreement was thus ambiguous about when the franchise agreement
was to be delivered, and Colorado law implied that Quizno’s had a “reasonable
time” to perform. R. Vol. III, Doc. 119 at 7 (citing Colo-Tex Leasing, Inc. v.
Neitzert , 746 P.2d 972, 975 (Colo. Ct. App. 1987)). Because the franchise
agreement was to be valid for forty months after the date of the Termination
Agreement, the magistrate judge concluded that it was unreasonable for Quizno’s
to have delayed eleven months to deliver the agreement.
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Although the magistrate judge determined that there had been a breach of
contract, he found that plaintiffs had not produced sufficient evidence of damages
as a result of a breach. Plaintiffs made several arguments to establish damages,
and the following they reassert, inter alia , on appeal. 1
We describe those claims
here and adopt by incorporation the magistrate judge’s accurate responses to
them. First, plaintiffs claimed that they had to forego other business
opportunities to work with Quizno’s. They submitted declining income tax
returns from 1995 through 2000 to illustrate their losses. But, as the magistrate
judge found, nothing in the record tied plaintiffs’ declining income to Quizno’s
failure timely to deliver the franchise agreement after February 28, 2000. Second,
plaintiffs claimed that they had lost profits that should be generally based on the
average unit volume for the operation of Quizno’s restaurants. But lost profit
1
Plaintiffs appear not to have repeated their arguments on appeal that they
incurred damages from the taxes they paid on the sum conveyed in the
Termination Agreement, and that they lost additional revenue in developing their
territory for Quizno’s under their original agreement with the company. See
generally Aplt. Br. The magistrate judge explained in his report and
recommendation that taxes paid on settlements do not naturally follow from the
breach of settlement contracts under the law, R. Vol. III, Doc. 119 at 14 (citing
Western Union Telegraph Co. v. Trinidad Bean & Elevator Co. , 267 P. 1068,
1069 (Colo. 1928)), and that the language of the Termination Agreement had
specifically provided that neither party could have “any further obligation or
duties, however characterized or described, with respect to each other for
obligations related to the Territory, except as set forth in this [Termination]
Agreement.” R. Vol. III, Doc. 119 at 14 (quoting the Termination Agreement);
see also Termination Agreement, R. Vol. I, Doc. 1, Ex. 1 at 1.
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awards are not permitted under Colorado law if “either the amount of the profits
that would have been earned or the fact that the plaintiff would have earned them
is too speculative to determine.” R. Vol. III, Doc. 119 at 18 (quoting Republic
Nat’l Life Ins. Co. v. Red Lion Homes, Inc. , 704 F.2d 484, 489 (10th Cir. 1983)).
And, as the magistrate judge explained, lost profits from a business that was
contemplated but never established would be particularly remote and speculative.
Id. (citing King v. United States , 292 F. Supp. 767, 776 (D. Colo. 1968)). Third,
plaintiffs argued that they lost the franchise agreement itself as an investment
valued between $250,000 to $350,000, but set forth no factual basis for this
evaluation of its value.
Accordingly, the magistrate judge recommended awarding partial summary
judgment to plaintiffs, but granting them only nominal damages. He noted that,
as part of the record, plaintiffs had been willing to sell the franchise agreement to
a third party for $15,000. The magistrate judge therefore recommended that the
calculation of nominal damages be interest on the $15,000 from the time that
plaintiffs requested the franchise agreement from Quizno’s on March 15, 2000, to
when Quizno’s delivered the agreement on January 5, 2001. The district court
adopted the magistrate judge’s report and recommendation, and it entered
judgment for $969.86, which represented the legal rate of interest on $15,000 for
that period of time.
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Additionally, the district court denied plaintiffs’ motion to compel
discovery and leave to amend their complaint. Regarding plaintiffs’ motion to
compel, the district court held that plaintiffs’ request to take additional
depositions was untimely because the deadline for discovery had expired, that
plaintiffs had not employed previous opportunities to take depositions, and that
plaintiffs had presented inadequate proof that additional depositions were
necessary. Regarding plaintiffs’ motion for leave to amend their complaint, the
district court found that plaintiffs had failed to show good cause for amendment,
that plaintiffs’ proposed amendment had failed to conform to the evidence
presented as they asserted, and that there would be significant prejudice to
defendant in permitting amendment at the eleventh hour.
Standard of Review
We review a district court’s decision regarding summary judgment de novo ,
applying the same standard as the district court. Hollingsworth v. Hill , 110 F.3d
733, 737 (10th Cir. 1997). We view the evidence and any inferences therefrom in
the light most favorable to the non-moving party, J.B. v. Washington County , 127
F.3d 919, 923 (10th Cir. 1997); and we will affirm a grant of summary judgment
when “the pleadings, depositions, answers to interrogatories, and admissions on
file, together with the affidavits, if any, show that there is no genuine issue as to
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any material fact and that the moving party is entitled to judgment as a matter of
law,” id. (quoting Fed. R. Civ. P. 56(c)).
We review decisions regarding leave to amend pleadings for abuse of
discretion. Foman v. Davis , 371 U.S. 178, 182 (1962); Calderon v. Kan. Dep’t of
Soc. & Rehab. Servs. , 181 F.3d 1180, 1187 (10th Cir. 1999). And we have
generally held that decisions regarding discovery are within the sound discretion
of the district court. Motley v. Marathon Oil Co. , 71 F.3d 1547, 1550 (10th Cir.
1995) (evaluating motion to compel); GWN Petroleum Corp. v. OK-Tex Oil &
Gas, Inc. , 998 F.2d 853, 858 (10th Cir. 1993) (articulating the general standard).
Discussion
On appeal, plaintiffs argue (1) that “common sense” suggests that their
damages from the late delivery of the franchise agreement exceed the district
court’s award of $969.86; (2) that the franchise agreement should have been
delivered within three days of when they signed the Termination Agreement; (3)
that the franchise agreement that they received was not, as the Termination
Agreement required, “substantially equal” to Quizno’s form franchise agreement
at the time the Termination Agreement was signed; (4) that they should not bear
the burden of proving their own damages even with the arguments they had
asserted; (5) that they should be entitled to trial on the issue of damages; (6) that
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the magistrate judge and district court improperly calculated nominal damages by
looking beyond the four corners of the Termination Agreement to find evidence
that plaintiffs were willing to sell their franchise to a third party for $15,000; and
(7) that the district court should have granted their motions to compel additional
discovery from Quizno’s and to amend their complaint because they were pro se
litigants.
Although plaintiffs are pro se and we construe their pleadings liberally,
Hunt v. Uphoff , 199 F.3d 1220, 1223 (10th Cir. 1999), we will not construct legal
theories on their behalf, Whitney v. New Mexico , 113 F.3d 1170, 1173-74 (10th
Cir. 1997). We thus do not develop plaintiffs’ first objection that “common
sense” suggests that their damages exceeded the amount awarded by the district
court.
Plaintiffs’ second objection is without merit because we hold that the
magistrate judge and district court properly read the plain language of the
Termination Agreement not to require delivery of the franchise agreement within
three days. According to the Termination Agreement, Quizno’s owed “[plaintiffs]
the amount of $57,859, payable within three (3) business days from the date the
[Termination] Agreement is fully executed by the Parties, plus one (1) franchise
agreement, substantially equal to [Quizno’s] present form franchise agreement
and valid for 40 months from the effective date of the [Termination] Agreement
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. . . .” R. Vol. I, Doc. 1, Ex. 1 at 1. The language of the Termination Agreement
makes clear that it is “the amount of $57,859” that was to be “payable within
three (3) business days.” Id. Delivery of the franchise agreement was promised,
but the Termination Agreement did not specify the time frame in which it had to
be delivered.
Plaintiffs’ third objection is that the franchise agreement they received
from Quizno’s was not “substantially equal” to the form franchise agreement in
effect at the time the parties executed the Termination Agreement. Plaintiffs’
arguments center on whether four changes (different provisions regarding
sublease guarantees and advertising cooperatives, the fact that the agreement
reflects Quizno’s change from a private to a public company, and a transfer fee)
are material distinctions from the form of the franchise agreement available at the
time the Termination Agreement was signed. The magistrate judge reviewed each
of plaintiffs’ arguments to find that the franchise agreement delivered
substantially complied with the requirements of the Termination Agreement, and
the district court agreed.
The district court, though, focused more on the fact that there had been a
breach—and we would add that it matters not whether the breach was the result of
the franchise agreement’s untimely delivery or of the substantive content of the
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document delivered—and noted that plaintiffs had failed to establish damages. In
the words of the district court:
Although the magistrate judge suggests a finding that
defendant breached a promise to furnish a franchise agreement within
a reasonable time, plaintiffs are not satisfied. First they repeat their
contention that the agreement required defendant to furnish the
franchise materials within three days. They also imply that this
erroneous interpretation somehow affects the scope of their damages.
Second, they argue that the franchise agreement tendered was not [in]
the form contemplated by the parties’ contract. Third, they insist that
they were not required to pay the transfer fee which defendant
demanded. This is a matter of looking at the written contracts, which
the court has done. The court agrees with the magistrate judge
concerning interpretation of the contracts. By operation of law,
defendant was obliged to tender a franchise agreement within a
reasonable time, and it breached that promise.
In considering the question of damages . . . , [however,
plaintiffs are] obliged to establish, by competent proof under
applicable legal standards, that there is genuine dispute of material
fact which must be resolved at trial . . . . The court has conducted
the requisite de novo review of plaintiffs’ allegations and evidence,
their objections, the issues, and the recommendation. Based on this
review, I have concluded that the recommendation [of the magistrate
judge] is a correct application of the facts and the law. Accordingly,
. . . [t]he recommendation is . . . ACCEPTED.
R. Vol. III, Doc. 124 at 6-7. We agree with the district court’s focus on the fact
that there was a breach and that there should then be an examination of damages.
We decline to examine the differences between the versions of franchise
agreements available because that discussion would do little to advance resolution
of this case, but instead we follow by asking the dispositive question whether
plaintiffs have proven damages from any breach of contract.
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Summary judgment may be granted when “the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that the
moving party is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56 .
Here, according to the Colorado Supreme Court:
It has long been the law in Colorado that a party attempting to
recover on a claim for breach of contract must prove the following
elements: (1) the existence of a contract; (2) performance by the
plaintiff or some justification for nonperformance; (3) failure to
perform the contract by the defendant; and (4) resulting damages to
the plaintiff.
W. Distrib. Co. v. Diodosio , 841 P.2d 1053, 1058 (Colo. 1992) (internal citations
omitted).
Because plaintiffs are the party attempting to recover on a claim for breach
of contract, they have the burden to prove the elements of their claim. See id.This disposes of plaintiffs’ fourth objection that they should not bear the burden
of proving their own damages. And, upon de novo review, we hold that plaintiffs
have failed to carry their burden to prove that they incurred damages as a result of
either the untimely delivery, or arguably the unsubstantially equal content, of the
franchise agreement. We have reviewed the record and evaluated all the evidence
presented. The magistrate judge and the district court have accurately and
thoroughly explained why plaintiffs have failed to establish proof of damages.
None of plaintiffs arguments challenge that basic finding, and we incorporate the
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magistrate judge and district court’s explanations by reference here. Plaintiffs’
objection to the form of the contract presented is therefore not relevant; and
plaintiffs’ fifth objection that summary judgment was not appropriate and that
they should have been entitled to go to trial is without merit.
Plaintiffs’ sixth objection, that the magistrate judge and the district court
improperly calculated the amount of nominal damages by looking beyond the four
corners of the Termination Agreement to note evidence in the record that
plaintiffs were willing to sell their franchise for $15,000, is interesting because it
reopens the issue of how nominal damages should be awarded under Colorado
law.
Colorado is specific that nominal damages are $1—not more, not less. The
Colorado courts have stated that “one dollar is nominal damages, as a matter of
law.” Colo. Inv. Servs., Inc. v. Hager , 685 P. 2d 1371, 1375 (Colo. Ct. App.
1984) (quotation omitted); see also id. (“If you find in favor of the plaintiff, but
do not find any actual damages, you shall nonetheless award him nominal
damages in the sum of one dollar .”) (quotation and citation omitted) (emphasis in
quotation). And those courts have remanded for a trial court that had awarded
more in nominal damages “to modify the award of nominal damages to the trivial
sum of one dollar.” See, e.g. , id. (quotation omitted) ; accord 6 Colo. Prac., Civil
Trial Practice § 12.10 (2d ed.) (West Supp. 2004) (“Where the non-breaching
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party . . . fails to prove the amount of the loss, the non-breaching party may still
recover nominal damages . . . [in the amount of] $1.00.”); id. (“[T]he amount of
nominal damages which can be recovered is $1.00.”).
We recognize irony in the result that plaintiffs should challenge the
calculation of nominal damages as too low, and we remand for the district court
to reduce the award to $1. But that is the correct way to have awarded nominal
damages under Colorado law, and plaintiffs asked us specifically to examine the
issue of how those damages were calculated. Accordingly, we remand for the
district court to modify its award of nominal damages to comport with Colorado’s
requirement that nominal damages be one dollar.
Finally, plaintiffs’ seventh objection, that the district court should have
granted their motions to compel additional discovery from Quizno’s and to amend
their complaint because, as pro se litigants, they should be given another chance
to comply with judicial requirements, is without merit. “[ P]ro se status does not
excuse the obligation of any litigant to comply with the fundamental requirements
of the Federal Rules of Civil and Appellate Procedure.” Ogden v. San Juan
County , 32 F.3d 452, 455 (10th Cir. 1994). The district court explained the basis
of its decision in its opinion, and plaintiffs do not challenge the court’s
fundamental reasoning. We hold that the district court did not abuse its discretion
in making those decisions.
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Conclusion
We AFFIRM the judgment of the district court in all respects except for its
calculation of nominal damages. On this point, we REVERSE the judgment of
the district court, and we REMAND for modification of nominal damages to the
amount of one dollar. All other motions are DENIED as moot.
Entered for the Court
John C. Porfilio
Circuit Judge
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