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Bores v. Domino's Pizza, LLC: FRANCHISE | CONTRACT - "specifications" trumps "any"; "from any source" = "only ours, but might be able to buy used"

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
___________
No. 07-2520
___________
Kevin Bores; Jennifer Huber; *
Christopher McCormick; Blue Earth *
Enterprises, Inc.; Mid America Pizza, *
LLC; Rising Dough, Inc.; RJ Inc.; *
Galleons Inc.; J Triple T, Inc.; FBN, *
Inc.; Try Our pizza Inc.; M&M Pizza, * Appeal from the United States
* District Court for the District of
Plaintiffs - Appellees, * Minnesota.
*
v. **
Domino's Pizza, LLC, *
*
Defendant - Appellant. *
___________
Submitted: March 12, 2008
Filed: June 20, 2008
___________
Before BYE, SMITH, and COLLOTON, Circuit Judges.
___________
BYE, Circuit Judge.
Domino's Pizza, LLC, appeals the district court's grant of summary judgment
holding Domino's may not require franchisees to purchase Domino's custom-designed,
integrated computer system. We reverse.
-2-
I
Domino's is a national pizza franchise. The plaintiffs are owners of various
Domino's franchises located in Minnesota, Maine, Missouri, and Ohio. When they
became Domino's franchisees, the plaintiffs executed Domino's Standard Franchise
Agreement. Of relevance here is Section 8.2, which provides:
We will provide you with specifications for pizza, other authorized food
and beverage preparation, dispensing, storage and display equipment,
delivery and related motor vehicles, other equipment, fixtures, furniture,
computer hardware and software, exterior and interior signs and
decorating required by the Store. You may purchase items meeting our
specifications from any source.
(Emphasis supplied).
The present dispute concerns Domino's PULSE system, a "proprietary,
comprehensive computer system created specifically for Domino's Pizza stores" which
"allows better communication, service, . . . information gathering and reporting, and
coordination" among Domino's United States stores. Domino's created PULSE in the
1990s and began installing it in corporate stores in 2001. It has since advised all
franchisees they must purchase and install PULSE by June 30, 2008. PULSE
computer hardware can only be purchased from IBM, and PULSE computer software
can only be purchased from Domino's.
Plaintiffs argue Domino's mandated the purchase and use of its PULSE system
solely to generate additional revenue from franchisees. Plaintiffs have refused to
install PULSE, arguing under Section 8.2 of the franchise agreements Domino's must
provide the "specifications" for PULSE and allow them to purchase computer
hardware and software meeting those specifications "from any source," not solely
from Domino's.
1Plaintiffs have not cross-appealed the dismissal of their other claims and the
only claim before us on appeal is the contract claim.
-3-
The dispute over PULSE culminated in plaintiffs filing this litigation, alleging:
1) breach of contract; 2) fraud; 3) negligent misrepresentation; 4) breach of the
implied covenant of good faith and fair dealing; 5) violation of the Minnesota
Franchise Act; and 6) promissory estoppel. Domino's counterclaimed for breach of
contract and indemnification and sought declaratory relief allowing it to require
franchisees to purchase and install the PULSE system.
Plaintiffs moved for summary judgment and Domino's moved for dismissal of
plaintiffs' claims. The district court granted Domino's motion on five of plaintiffs' six
claims, but granted plaintiffs' motion for summary judgment on the claim for breach
of contract.1 The court concluded the franchise agreements did not allow Domino's
to require franchisees to purchase the PULSE system. On appeal, Domino's argues
the district court misinterpreted the plain language of the franchise agreements.
II
We review a grant of summary judgment de novo, applying the same standard
as the district court. Jaurequi v. Carter Mfg. Co., Inc., 173 F.3d 1076, 1085 (8th Cir.
1999). Summary judgment is proper if there exists no genuine issue as to any material
fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P.
56(c). When ruling on a summary judgment motion, a court must view the evidence
"in the light most favorable to the nonmoving party." Dush v. Appleton Elec. Co.,
124 F.3d 957, 962-63 (8th Cir. 1997). However, a "nonmovant must present more
than a scintilla of evidence and must advance specific facts to create a genuine issue
of material fact for trial." F.D.I.C. v. Bell, 106 F.3d 258, 263 (8th Cir. 1997).
-4-
This diversity action is governed by state substantive law, Erie R.R. Co. v.
Tompkins, 304 U.S. 64, 78 (1938), and we apply the law of Minnesota, Maine,
Missouri, and Ohio, respectively, to the breach of contract claims.
The interpretation of an unambiguous contract is a matter for the court.
Travertine Corp. v. Lexington-Silverwood, 683 N.W.2d 267, 271 (Minn. 2004);
Hawkes v. Commercial Union Ins. Co., 764 A.2d 258, 266-67 (Me. 2001); J.E.
Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. 1973);
Saunders v. Mortensen, 801 N.E.2d 452, 454 (Ohio 2004). When interpreting a
contract, the goal is to divine the parties' intent. Travertine, 683 N.W.2d at 271;
Apgar v. Commercial Union Ins. Co., 683 A.2d 497, 500 (Me. 1996); J.E. Hathman,
491 S.W.2d at 264; Saunders, 801 N.E.2d at 454. If a contract is unambiguous, the
parties' intent is manifest from the terms of the contract itself. Travertine, 683 N.W.2d
at 271; Apgar, 683 A.2d at 500-01; J.E. Hathman, 491 S.W.2d at 264; Saunders, 801
N.E.2d at 454. The district court found the language of the franchise agreements
unambiguous. On appeal, the parties agree but advance different interpretations of
Section 8.2. See Bank Midwest v. Lipetzky, 674 N.W.2d 176, 179 (Minn. 2004)
(holding mere disagreement over the interpretation of contract language does not
render the contract ambiguous); Moody v. State Liquor & Lottery Comm., 843 A.2d
43, 49 (Me. 2004) ("Language is ambiguous when 'it is reasonably susceptible to
different interpretations.'") (emphasis supplied); Robbins v. McDonnell Douglas
Corp., 27 S.W.3d 491, 496 (Mo. Ct. App. 2000) ("An ambiguity does not exist merely
because the parties dispute the meaning of the contract."); Amdee, Inc. v. Jacobson,
No. 52800, 1987 WL 17914, *4 (Ohio Ct. App. October 1, 1987) (unpublished) ("In
deciding whether more than one reasonable interpretation renders the language
ambiguous, the court rules whether each proposed interpretation is reasonable.").
Section 8.2 provides, in relevant part: "We will provide you with specifications
for . . . computer hardware and software . . . . You may purchase items meeting our
specifications from any source." (Emphasis supplied). The district court, relying on
-5-
a partial dictionary definition of "specification," concluded Domino's was required to
provide franchisees with the information necessary to guide them through the process
of constructing a system comparable to Domino's PULSE computer system, and could
not specify they purchase the PULSE system. The district court held specifications
referred to the component parts and technology necessary to construct a product, e.g.,
a computer system and computer software program, and not to a finished product, i.e.,
Domino's PULSE system. In other words, the franchise agreement only allowed
Domino's to mandate a comparable computer system, not a specific computer system.
In addition, the district court noted Section 8.2 permitted franchisees to obtain
the specified computer hardware and software "from any source." It concluded "from
any source" only had meaning if the specified items could be obtained from multiple
sources. Because the computer hardware was only available from IBM, and the
PULSE software only from Domino's, the district court held the agreement had to be
interpreted as allowing franchisees the ability to construct a comparable system using
materials and technology available from multiple sources.
Domino's argues the district court relied on an unduly restrictive interpretation
of specification. According to Domino's, specification refers not only to a plan or
written description embodying the manner and process of making, constructing,
compounding, and using an item, but also to "[a] single item or article that has been
specified." Applying this broader definition, Domino's argues the franchise
agreements allow it to specify a computer system capable of performing specific
functions or to specify a single computer system the PULSE system. Domino's
further argues its interpretation of specification is not affected by language allowing
franchisees to obtain specified items "from any source." It contends any source does
not mean the items have to be available from multiple sources. Instead, the American
Heritage Dictionary defines "any" to include "[o]ne, some, every, or all without
specification." American Heritage Dictionary 81 (4th ed. 2000). Thus, any source can
mean only one source.
-6-
We conclude the definition of specification applied by the district court was
unnecessarily narrow. The American Heritage Dictionary defines specification as:
1. The act of specifying. 2.a. specifications. A detailed exact statement
of particulars, especially a statement prescribing materials, dimensions,
and quality of work for something to be built, installed, or manufactured.
b. A single item or article that has been specified. 3. An exact written
description of an invention by an applicant for a patent.
Id. at 1669.
The Webster's Unabridged Dictionary definition of specification includes:
n. 1. the act of specifying. 2. Usually, specifications. a detailed
description or assessment of requirements, dimensions, materials, etc.,
as of a proposed building, machine, bridge, etc. 3. a particular item,
aspect, calculation, etc., in such a description. 4. something specified,
as in a bill of particulars; a specified particular, item, or article.
Webster's Unabridged Dictionary 1832 (2d ed. 1997).
Webster's Third International Dictionary defines specification, in part, as:
4: a detailed, precise, explicit presentation . . . of something or a plan or
proposal for something: as a: a written statement containing a minute
description or enumeration of particulars . . . : also: a single article, item,
or particular or an allegation of a specific act . . . .
Webster's Third International Dictionary 2187 (1986) (emphasis in original).
Plaintiffs contend specification, as used in the franchise agreements, can only
mean the list of the parts and technology from which Domino's PULSE system is
constructed. Applying the above definitions, however, it is apparent the plain and
ordinary meaning of specification includes both a list of the component parts
-7-
necessary to construct or describe an item, as well as a single, finished, product. For
example, specification encompasses a detailed description of the particular
characteristics desired in an automobile or simply identifying a particular make and
model; in each instance specifications are provided. Thus, we conclude the plaintiffs'
arguments unreasonably focus on only one of the commonly understood definitions
of specification; nothing in the franchise agreements limits the meaning of
specification to a single usage. Applying the commonly understood definition of
specification, the agreements permit Domino's to specify a computer system with
comparable capabilities or the PULSE system.
We further conclude Section 8.2's language permitting franchisees to obtain the
specified computer software and hardware "from any source" does not change the
meaning of specification. Plaintiffs argue "any" means multiple sources, and
interpreting specification to include items only available from one source would
render "from any source" meaningless. We disagree. From any source is necessarily
limited to available sources, and, as Domino's points out, the definition of "any"
includes "one, some, every or all." American Heritage Dictionary 81 (4th ed. 2000).
Thus, the franchise agreements merely allow plaintiffs to purchase the specified
computer system PULSE from any available sources, be they one or many.
Further, plaintiffs' assertion they are not permitted to purchase the PULSE system
from multiple sources is factually unsupported. Domino's is the most likely source
from which the PULSE system could be obtained, but not necessarily the only source.
For example, the franchise agreement would not preclude franchisees from obtaining
a used PULSE system from another franchisee.
-8-
III
Accordingly, we reverse the district court's grant of summary judgment in favor
of plaintiffs and remand with instructions to grant Domino's motion to dismiss and
enter judgment in its favor.
______________________________
 

 
 
 

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