The opinion of the court was delivered by: Sprizzo, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiff Eugene Feeley, individually and as assignee of the
Peekskill Muffler Corporation ("PMC") (collectively "plaintiff")
brings the instant action for damages against The Whitman
Corporation, Midas International Corporation, Midas Realty
Corporation, and Cosmic Enterprises, Inc. (collectively "Midas"),
alleging claims under the Racketeer Influenced and Corrupt
Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq., and
claims for fraud and tortious interference with contract and
prospective economic advantage under the common law of the State
of New York. Pursuant to Rule 56, Fed.R.Civ.P., Midas moves for
summary judgment dismissing the complaint. Plaintiff has brought
a cross-motion for summary judgment or for default judgment
pursuant to Rule 55(b)(2), Fed.R.Civ.P. In the alternative,
plaintiff seeks further discovery under Rule 56(f), Fed.R.Civ.P.
For the reasons set forth below, Midas's motion is granted and
plaintiff's cross-motion is denied.
Midas International Corporation is a wholly owned subsidiary of
The Whitman Corporation and is responsible for issuing Midas
franchises and providing Midas products and equipment to Midas
franchisees. See id. ¶¶ 14-16. Midas International Corporation
also sells and leases real estate to its franchisees. See id. ¶
17. Its wholly owned subsidiary Midas Realty Corporation secures
and develops real property for Midas franchises and also sells
and leases property to those franchises. See id. ¶¶ 20, 22.
Cosmic Enterprises, Inc., is a wholly owned subsidiary of The
Whitman Corporation and Midas International Corporation. See
id. ¶¶ 24-25. It owns and operates company-owned Midas Muffler
Shops. See id. ¶ 26. All defendants are Delaware corporations.
See id. ¶¶ 11, 13, 18, 23.
Between 1975 and 1986, PMC entered into a series of franchise
agreements with Midas, pursuant to which PMC opened its seven
Midas Muffler shops in New York. See Compl. ¶¶ 59-77. Plaintiff
alleges that Midas fraudulently induced PMC to enter each of the
seven franchise agreements. See Plaintiff's Statement Pursuant
to Local Civil Rule 3(g) of the United States District Courts for
the Southern and Eastern Districts of New York ("Pl.3(g) Stmt.")
The first of these agreements was executed on February 6, 1975,
and licensed PMC's Peekskill franchise. See Defendants'
Statement Pursuant to Local Civil Rule 3(g) of the United States
District Courts for the Southern and Eastern Districts of New
York ("Def.3(g) Stmt.") ¶ 1. During the negotiations, Midas
allegedly misrepresented to PMC that the franchise agreement gave
PMC a specific and exclusive trade market area for its Peekskill
franchise. See Pl. 3(g) Stmt. ¶ 2. Midas also presented to PMC
a written initial entry and expansion market study describing the
primary market and the secondary market for the Peekskill
franchise, the closest existing Midas shop location and the
location of other automobile muffler repair shops, and the
projected market potential and first year's sales for the
Peekskill franchise. See Compl. ¶ 163. Plaintiff alleges that
the market study included false representations by Midas that PMC
would receive a specific market area. See id. ¶ 166.
Each of the franchise agreements between Midas and PMC
contained the following non-exclusivity clause:
Non-exclusivity. The right, franchise, and license
granted herein shall be non-exclusive. Midas shall at
all times have the right to establish and operate
itself, or to license any other party or parties to
establish and operate, a Midas Muffler Shop or Shops
at any other location or locations whatever.
Def.Ex. B, Trademark and Franchise Agreement ¶ 1.2. The
agreements also included an integration clause which stipulates
that the written trademark and franchise agreement, together with
the written lease,
constitute and contain the entire agreement and
understanding of the parties with respect to the
subject matter hereof and thereof. There are no
representations, undertakings, agreements, terms or
conditions not contained or referred to herein or in
any such lease or sublease.
Def.Ex. B, Trademark and Franchise Agreement ¶ 9.9.
In alleged reliance on Midas's alleged oral and written
misrepresentations, PMC executed the February 6, 1975, franchise
agreement for the Peekskill, New York, Midas franchise shop.
See Compl. ¶ 142. Plaintiff claims that Midas made comparable
misrepresentations upon which PMC relied with respect to the
Scarsdale franchise in 1982, the Bedford franchise in 1983, the
Carmel and Tarrytown franchises
in 1985, and the Poughkeepsie and Wappingers Falls franchises in
1986. See id. ¶¶ 139-166.
Plaintiff further claims that PMC was compelled to open its
Scarsdale, Bedford Hills, Carmel, and Tarrytown Midas franchises
in order to protect and preserve the economic viability of its
existing and potential franchises. See Compl. ¶¶ 146, 150, 154,
158. Under the terms of the franchise agreements, Midas had
complete access to PMC's business records, and plaintiff alleges
that Midas misused this information to determine the location of
new franchise shops that would compete with the existing PMC
franchise shops. See Affidavit of Eugene Feeley ("Feeley Aff"),
dated May 30, 1996, ¶ 16. According to plaintiff, following the
purchase of the Peekskill shop in 1975, Midas used PMC's business
records to expand their overall market share by establishing new
shops in the same area. See id. ¶¶ 17-20. The addition of each
new shop would have negatively impacted PMC's existing and
potential businesses by siphoning off customers from the existing
PMC shops to the new, more conveniently located shops. See id.
¶¶ 17, 20. As a result, plaintiff claims that Midas's business
strategy allowed them no choice but to purchase the new franchise
shops or suffer grave economic harm.
PMC challenged Midas's business practices of opening new
franchise shops within the markets for existing franchise shops,
and plaintiff claims that these challenges led to a
confrontational relationship with Midas. See id. ¶¶ 7, 8. In
response to PMC's challenges, Midas allegedly threatened to
locate franchises in certain towns in order to draw additional
customers away from PMC's existing shops. See id. ¶ 8.
Plaintiff also claims that Midas interfered with their
negotiations to purchase a Midas franchise shop in Danbury,
Connecticut. On January 24, 1984, plaintiff and Danbury Exhaust
Specialists, Inc. ("Danbury Exhaust"), signed a letter of intent
for the sale of the Danbury franchise to PMC, and PMC made a
$10,000 deposit. See Affidavit of Robert J. Wolfe ("Wolfe
Aff."), dated January 11, 1988 ¶ 3. That letter of intent
provided that the parties would sign a contract to sell Danbury
Exhaust's assets to Peekskill Muffler for $615,000, provided that
Danbury Exhaust obtained a revised lease for its shop including
certain terms, that Midas approved the transaction, and that the
parties completed the transaction by April 15, 1984. See id.
None of these conditions were met, however.
Thereafter, PMC expressed to Danbury Exhaust its continuing
interest in purchasing the franchise shop. See Wolfe Aff. ¶¶ 6,
8, 17-19. On August 7, 1984, PMC sent Danbury Exhaust a letter
proposing amendments to their original contract. See id. ¶ 8.
On January 24, 1985, Danbury Exhaust sent plaintiff a revised
contract with a purchase price of $420,000, almost $200,000 less
than the price initially negotiated. See id. ¶ 15. In the
transmittal letter, Danbury Exhaust stated that if the contract
was not signed and returned by February 1, 1985, the deal could
not go forward. See id.
When the contract was not signed by that date, Danbury Exhaust
officially terminated the negotiations with plaintiff and
returned PMC's deposit. See id. ¶ 16. On February 12, 1985,
Danbury Exhaust received a letter from plaintiff dated February
7, 1985, enclosing a contract signed by plaintiff. See id. ¶
17. Danbury Exhaust never signed the contract. Nonetheless,
plaintiff claims that Danbury Exhaust had assented to the terms
of the contract, and therefore, wrongfully refused to sign the
February 7, 1985, contract executed by plaintiff. See Compl. ¶¶
263, 264. ...