The opinion of the court was delivered by: Spatt, District Judge.
MEMORANDUM OF DECISION AND ORDER
This case involves a contract dispute between the Plaintiff
Dunkin' Donuts, ("Dunkin Donuts"), and one of its franchisees,
Defendant Priya Enterprises, ("Priya"), regarding the terms of a
franchise agreement. Presently before the Court are Dunkin'
Donuts' motion for summary judgment on its entitlement to
attorneys' fees and costs and Priya's cross-motion for summary
judgment dismissing the action.
Priya is a franchisee of Dunkin' Donuts, operating stores in
Coram, New York ("the Coram shop") and Lake Ronkonkoma, New York
("the Lake Ronkonkoma shop") pursuant to two separate franchise
agreements dated June 13, 1996. Dunkin' Donuts provides manuals
and guidelines to its franchisees which detail the requirements
for operation of a Dunkin' Donuts shop. These manuals contain
various requirements for cleaning and maintaining production and
sales area equipment; production and handling of food products;
and receiving and storing raw materials. Under the franchise
agreements, franchisees agrees to operate their shops in
accordance with the specifications and standards provided by
Dunkin' Donuts and to maintain the Shop "in the highest degree
of cleanliness, orderliness, sanitation and repair, as
reasonably required by Dunkin' Donuts."
Section 9 of the franchise agreement governs the procedures to
be followed if the franchisee is alleged to have violated the
franchise agreement. According to Section 9.1.2, any
franchisee's violation of a Dunkin' Donuts standard for health,
sanitation, or safety must be cured within 24 hours of the time
Dunkin Donuts gives the franchisee written notice of the
violation. Pursuant to Section 9.3
[i]f FRANCHISEE fails to cure a default, following
notice, within the applicable time period set forth
in paragraph 9.1 . . . FRANCHISEE shall pay to
DUNKIN' DONUTS all damages, costs, and expenses,
including, without limitation, interest at eighteen
percent (18%) per annum, or the highest permissible
rate, and reasonable attorneys' fees incurred by
DUNKIN' DONUTS as a result of any such default or
termination; and said interest and all damages, costs
and expenses, including reasonable attorneys' fees,
may be included in and form part of the judgment
awarded to DUNKIN' DONUTS in any proceeding brought
by DUNKIN' DONUTS against FRANCHISEE.
Neither party contests the validity of the Franchise
Agreement. Rather, the parties dispute the applicability of the
default provision to the facts of this case. Dunkin' Donuts
commenced this action on June 1, 1999, alleging that Priya had
failed to cure sanitation violations found after inspections of
both of its stores. These inspections were conducted in the
Spring of 1998 by Dean Marino and Josh Robinson, Dunkin Donuts
On June 1, 1998, Dunkin Donuts commenced this action alleging
breach of the franchise agreement, and seeking injunctive relief
requiring Priya to cure the alleged health, sanitation, and
safety violations. In addition, Dunkin' Donuts sought an award
of attorneys' fees and costs for the action pursuant to Section
9.3 of the franchise agreement.
Marino re-inspected the Lake Ronkonkoma Shop on August 6,
1998, at which time it was found to be "in substantial
compliance with Dunkin' standards."
Marino inspected the Coram shop on May 3, 1998, and on May 11,
1998 issued a Notice to Cure to Priya citing numerous sanitation
and physical plant violations. Marino re-inspected the Coram
Shop on May 27, 1998 and found the violations remained uncured.
On June 15, 1998, Dunkin Donuts amended its complaint in this
case to allege that Priya breached the franchise agreement for
the Coram shop as well. The amended complaint again sought an
injunction directing Priya to cure the violations and attorney's
fees and costs for bringing the action. Priya answered the
amended complaint and interposed a counterclaim, alleging that
Dunkin Donuts' lawsuit ...