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Bores v. Domino's Pizza, LLC: US District Court : FRANCHISE | CONTRACT | COMPUTERS - no showing of non-compliance with order regarding computer function specifications

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Kevin Bores, et al.,
Plaintiffs,
Civ. No. 05-2498 (RHK/JSM)
ORDER
v.
Dominos Pizza LLC,
Defendant.
Scott E. Korzenowski, J. Michael Dady, Clarence J. Kuhn, Dady & Garner, P.A.,
Minneapolis, Minnesota, for Plaintiffs.
Marc P. Seidler, Brian M. Dunn, DLA Piper US LLP, Chicago, Illinois, Sonya R.
Braunschweig, DLA Piper US LLP, Minneapolis, Minnesota, for Defendant.
This matter is before the Court on Plaintiffs Motion for Enforcement of Judgment.
For the reasons set forth below, the Court will deny the Motion.
BACKGROUND
The issue in this franchise dispute was whether the Defendant, Dominos Pizza LLC
(Dominos), had the right to force Plaintiffs (Dominos franchisees) to install its new
point-of-sale computer system, called PULSE. The PULSE hardware could only be
purchased from IBM and the PULSE software could only be purchased from Dominos.
Plaintiffs asserted that their franchise agreements gave them the right to obtain computer
hardware and software from any source. Accordingly, they argued that Dominos attempt
to mandate PULSE ran afoul of their rights under the franchise agreements.
-2-
The parties cross-moved for summary judgment; on May 23, 2007, the Court
granted each motion in part and denied each in part. The crux of the Courts ruling was that
Dominos could not continue to mandate PULSE without providing specifications for
PULSE hardware and software that would enable Plaintiffs to obtain equipment meeting
those specifications from any source. Judgment was subsequently entered, stating:
Should Dominos persist in requiring the[] Plaintiffs to install PULSE in their
Dominos stores, Dominos must provide them with specifications for the
PULSE hardware and software, and Dominos must permit them to purchase
computer hardware and software meeting those specifications from any source.
Dominos later appealed the summary-judgment Order and the Judgment; its appeal remains
pending.
Invoking Federal Rule of Civil Procedure 70, Plaintiffs now move for an Order
enforcing the judgment, but the exact nature of the relief Plaintiffs seek is unclear.
While Plaintiffs initially ask the Court to enforce the Judgment by requiring Dominos to
provide franchisees with actual computer software specifications (Pl. Mem. at 2), they
later ask the Court to hold Dominos in contempt for failing to comply with the terms of
the Judgment (id. at 17). Regardless of how the Motion is styled or construed, however, it
will be denied because Plaintiffs have failed to satisfy their burden of demonstrating any
intentional non-compliance on Dominos part. See Indep. Fedn of Flight Attendants v.
Cooper, 134 F.3d 917, 920 (8th Cir. 1998) (party seeking contempt bears burden of
1 Dominos devotes a portion of its Opposition to arguing that the Courts powers under Rule
70 are narrow and that relief is rarely granted under that Rule. Regardless, it is clear that the Court
enjoys the power to grant the relief Plaintiffs seek under its inherent powers or under the All Writs Act,
28 U.S.C. 1651. See Peacock v. Thomas, 516 U.S. 349, 356 (1996) (noting district courts
inherent powers to enforce their judgments); United States v. N.Y. Tel. Co., 434 U.S. 159, 172
(1977) (district court enjoys power under All Writs Act to issue orders as may be necessary or
appropriate to effectuate . . . orders it has previously issued).
2 The parties focus their arguments on Dominos software specifications, not the hardware
specifications; Plaintiffs mention the latter only superficially and assert that they are overly stringent. The
reason for the hardware specifications, however, is that the required hardware will be partially
compatible with PULSE, which Dominos intends to require franchisees to install in the future (once
their franchise agreements expire). Hence, Dominos used hardware requirements that may actually aid
franchisees in the future, because they will not have to purchase entirely new equipment if Dominos
later mandates PULSE.
-3-
prov[ing] facts warranting a civil contempt order by clear and convincing evidence).1
ANALYSIS
Plaintiffs argue that Dominos has failed to comply with the Order in three ways.
None of their arguments has merit.
1. Vague specifications. Plaintiffs first argue that although Dominos has
provided them with what it calls specifications for computer hardware and software, those
specifications are too vague and leave it impossible for [third-party software] vendors to
satisfy [Dominos] actual requirements. (Reply at 5-8; accord Pl. Mem. at 7.)2 This
argument is specious.
At the hearing on the summary-judgment motions, Plaintiffs made clear that they
were simply seeking functional specifications that is, what functions [Dominos]
requires th[e] software to perform (May 23, 2007 Order at 17 n.13) and not detailed
technical specifications for PULSE. That is precisely what Dominos has provided. In the
3 The specifications are attached to the parties papers in several places. (See, e.g., Bores Aff.
Ex. B.)
4 Dominos requires third-party software vendors to be certified, that is, shown to be
compliant with Dominos specifications. Certification involves software testing that lasts several days.
-4-
Courts view (and that of Dominos expert, David Duryea), the specifications provide an
appropriate level of detail to explain to Plaintiffs and their software vendors what functions
the software needs to perform. For example, the specifications require the software to be
able to maintain customer data and allow editing and updating of that data
(Specifications 1.2.1-.2); display security messages (e.g., no delivery after dark) (id.
1.3.3); and allow manual price adjustments (id. 1.4.10).3 More detailed specifications
would have made it more difficult for vendors to adapt off-the-shelf (already existing)
software for use in Dominos stores.
What is most damning to Plaintiffs argument, however, is that all of Plaintiffs
proposed software vendors have acknowledged that their products currently meet most of
Dominos specifications, and can be readily and easily modified to meet all of them. For
instance, David Brekke, a Senior Corporate Sales Executive from Speedline Solutions
(Speedline), stated that when he demonstrated Speedlines software for Dominos the
software met all but a few of [Dominos] requirements. (Brekke Aff. 17.) Similarly,
software produced by National Systems Corporation (NSC) failed to meet only 20 of
Dominos 207 software specifications when it was initially tested. (Kargman Aff. 20.)
Both Speedline and NSC continue to seek certification,4 and both recently stated that they
are fully capable of meeting Dominos specifications and fully intend to do [so].
5 Plaintiffs assert that Dominos intentionally left the specifications vague and that, when NSC
was having its software tested for certification, Dominos imposed new requirements that were not
found in the specifications. (Reply at 6-7.) For example, one specification requires software to be able
to display certain data, but Dominos told NSC that its software did not meet this specification because
the data was displayed in more than one report, despite the specification not indicating that the data
must be displayed in only one place. (Second Kargman Aff. 12.) Tellingly, however, Plaintiffs did
not raise this argument in their opening brief; they assert that Dominos is changing the specifications
for the first time in their Reply. It appears that it is Plaintiffs who are changing, as their Reply makes
clear.
In any event, even if Plaintiffs are correct that Dominos has occasionally required software to
be able to perform functions not expressly stated in the specifications, that should not come as a huge
surprise. The Court agrees with Wayne Pederson, Dominos Director of Information Systems, that
[n]o matter how detailed software specifications are, every software project requires communication
between developer and customer and amplification or clarification of the requirement. If Dominos . . .
software specifications had been 100 pages long, or 1,000 pages long, they could not have covered
every detail. (Pederson Aff. 29.) If Plaintiffs had proffered evidence indicating that Dominos was
playing fast and loose by changing the software specifications simply to avoid certifying software as
compliant, Plaintiffs argument might gain traction. There is no evidence of that, however. Nor is there
any evidence that the un-expressed specifications cannot quickly and easily be remedied by vendors
(as opposed to unwritten specifications requiring complicated software changes).
-5-
(Second Brekke Aff. 6; accord Second Kargman Aff. 7.) In fact, no software vendor has
informed Dominos that it did not understand the specifications or could not comply with
them. (Pederson Aff. 25 (No vendor . . . ever raised any questions concerning the clarity
or sufficiency of the specifications, nor did any vendor ever express that the specifications
were unfair or unrealistic.).)5
The Court strongly suspects that even if Dominos had provided Plaintiffs with more
detailed mathematical descriptions for its specifications, Plaintiffs still would have filed
the instant Motion. Chris McGlothlin, Dominos Chief Information Officer, stated that
Dominos considered giving Plaintiffs very detailed technical specifications, which would
have consisted of approximately 1000 pages of precise descriptions. (McGlothlin Aff.
-6-
12.) If that had been the case, however, Plaintiffs software vendors probably would not
have been able to adapt off-the-shelf software for use in Dominos stores; they would have
had to create the software from scratch, a costly (and lengthy) proposition. In that instance,
Plaintiffs likely would have come into Court arguing that the specifications were too
specific, rendering it impossible (financially or otherwise) for them to acquire software
meeting the specifications from other sources. Instead, Dominos issued less onerous
specifications that could be met in several ways, because it is not really interested in how
vendors accomplish[] the required functionalities, but only that they [are] there. (Pederson
Aff. 29.) That is consistent with the vendors own views; they all admitted that
specifications should merely describe[] what the system should do and not how the system
should do it. (Brekke Aff. 9 (emphasis added); accord Kargman Aff. 9; Bouras Aff.
11; Mulloy Aff. 13.)
2. Failure to work with vendors in good faith. Plaintiffs next argue that Dominos
has not worked with the software vendors in good faith, because it has utilized every kind
of stall tactic imaginable to intentionally delay the certification process. (Reply at 9-20.)
The Court cannot agree.
It is true that the certification process has proceeded more slowly than Plaintiffs
(and probably even Dominos) would like. But the reality of doing business with a large
corporation is that e-mails are not responded to immediately, phone calls often do not get
returned within an hour, and things generally move more slowly than Plaintiffs apparently
believe that they should. Frequently, one person cannot make a decision without input from
6 Dominos requires franchisees to sponsor software vendors, out of a concern that approving
a vendor that hadnt been requested by a franchisee [would be considered by some franchisees] to be
a suspect endorsement of a competitor. (Pederson Aff. 35.)
-7-
others; facts need to be gathered and issues discussed before a response can be formulated.
In the Courts view, that is precisely what has occurred here.
Moreover, some of the delay in the certification process is attributable to the
vendors themselves. Dominos has asked vendors to sign non-disclosure agreements
concerning some of its data, and several of them (including Speedline and NSC) have
negotiated changes to those agreements. Any changes must be vetted by Dominos legal
department before they can be accepted, and that process takes some time. (Pederson Aff.
16 & Ex. A.) In other instances, vendors were slow in responding to Dominos. For
example, on September 16, 2007, a few days after NSC had failed its initial certification
testing, Pederson advised the franchisee sponsoring NSC that it could attempt certification
again on September 24, 2007, just eight days later (and hardly consistent with intentional
delay). (Pederson Aff. Ex. D.)6 Pederson did not receive a response until October 1, more
than two weeks later, and at that time NSC requested a delay until November to schedule
further certification testing. (Pederson Aff. Ex. E.)
By way of another example, on August 9, 2007, Speedline contacted Dominos to
schedule certification testing. (Brekke Aff. 20.) Dominos told Speedline that it could
not schedule testing until November because other vendors were already slotted for
certification testing in the interim. On September 17, 2007, however, Dominos contacted
7 Although there is no evidence currently before the Court indicating contumacious conduct by
Dominos, the Court will not hesitate to impose appropriate sanctions in the future (possibly including a
finding of contempt) if Plaintiffs are later able to demonstrate that Dominos is intentionally evading the
Judgment in this case.
-8-
Speedline and advised it that it had a cancellation and could schedule Speedlines
certification testing for either October 1 or October 8, if Speedline were ready. (Pederson
Aff. 37-38 & Ex. B.) Such a move on Dominos part is inconsistent with the suggestion
that Dominos has intentionally delayed the certification process.
Simply put, the record currently before the Court does not demonstrate any attempt
by Dominos to stonewall or otherwise delay the certification process.7
3. Foisting PULSE on franchisees through the back door. Finally, Plaintiffs argue
that even though Dominos has provided specifications for franchisees to obtain
computer hardware and software from third-party vendors, in actuality Dominos is still
requiring franchisees to install PULSE. They point to the fact that Dominos is requiring
franchisees seeking to install third-party computer systems to contact Dominos by
December 31, 2007 to schedule a certification review. A franchisee that fails to do so runs
the risk that certified software will not be installed in-store by June 30, 2008 which is the
deadline for all hardware and software upgrades to be in place because Dominos
installation resources are limited. (McGlothlin Aff. Ex. C.) Dominos has stated that any
franchisee without a certified third-party computer system in place by June 30, 2008 may
be in default of their franchise agreement. (Id.) Because no third-party software systems
have yet been certified, Plaintiffs argue that Dominos is using the December 31, 2007
-9-
deadline as a way to force franchisees to opt to install PULSE this year, so that they can
be guaranteed of not defaulting on their franchise agreements.
The Court fails to understand Plaintiffs argument. There is no December 31, 2007
deadline for franchisees to either choose PULSE or choose a third-party software
system. Rather, Dominos has requested that franchisees seeking certification of outside
software do so by December 31, 2007. It certainly was not irrational for Dominos to
make such a request, since certification (as has been seen) is a lengthy process; franchisees
waiting until sometime early next year might run the risk of passing the true June 30, 2008
deadline without getting third-party software certified and installed in their stores.
Moreover, Plaintiffss argument is premature. As noted above, the deadline for new
computer equipment to be installed (whether PULSE or otherwise) is June 30, 2008. It is
entirely possible that Dominos will certify third-party vendors sometime next year and that
franchisees still will be able to get the third-partys equipment installed in their stores
before the deadline. In the event there were evidence in the future that Dominos had
intentionally delayed certifying vendors, giving franchisees a reasonable apprehension of
defaulting under their franchise agreements, Plaintiffs could return to the Court at that time
(and before the June 30, 2008 deadline) and seek relief. But at this juncture, there is no
reason to conclude that franchisees are being forced to install PULSE because of a
December 31, 2007 deadline. Indeed, Plaintiffs have proffered no evidence that any
franchisee has opted to install PULSE out of a concern that it would not be able to get
third-party software installed in a timely fashion.
8 As the Court reminded the parties at todays hearing on Plaintiffs Motion, the Court expects
the parties to work in good faith with one another to resolve any disputes that might arise during the
certification process. The Court strongly believes that the issues raised in the instant Motion could have
been resolved by the parties without the Courts intervention.
-10-
CONCLUSION
Simply put, there exists no persuasive evidence before the Court that Dominos is
intentionally trying to delay the certification process. Nor does the Court believe that the
specifications Dominos has provided are insufficient, as Plaintiffs software vendors
admit. Based on the foregoing, and all the files, records, and proceedings herein, IT IS
ORDERED that Plaintiffs Motion for Enforcement of Judgment (Doc. No. 280) is
DENIED.8
Dated: November 6 , 2007 s/Richard H. Kyle
RICHARD H. KYLE
United States District Judge
 

 
 
 

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