Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

DUNKIN' DONUTS INC. v. BARR DONUT

January 17, 2003

DUNKIN' DONUTS INCORPORATED, Plaintiff,
v.
BARR DONUT, LLC, Alexander Barrett, Oshrie Sak, SRS Donuts Corp., and Scott Glassman, Defendants. Dunkin' Donuts Incorporated, Plaintiff, v. Barr Donut, LLC, Defendant.



The opinion of the court was delivered by: BAER, District Judge.

OPINION & ORDER

This matter came before me while I sat in the Eastern District of New York in August 2002 and was transferred to me for all purposes by Judge Seybert. Docket numbers 00 Civ. 6130 and 01 Civ. 5872 were consolidated by order dated September 25, 2002. Two motions for partial summary judgment are before me. First, Dunkin' Donuts Incorporated ("Dunkin"') moves pursuant to Fed.R.Civ.P. 56 for partial summary judgment on count I of its complaint against Barr Donut, LLC ("Barr") on the ground that Barr failed to comply with the express terms of the parties' franchise agreement by maintaining a shop far below Dunkin's acceptable standards for health, sanitation, and safety. Second, Dunkin' moves for summary judgment against Barr, Alexander Barrett ("Barrett"), and Oshrie Zak ("Zak") (collectively, the "Barr defendants") on counts IV, V, and VI of Dunkin's third amended complaint for the Barr defendants' violation of three different provisions of the franchise agreement.*fn1 Further, Dunkin' also moves for summary judgment against SRS Donuts Corp. ("SRS") and Scott Glassman ("Glassman") seeking a declaratory judgment that SRS and Glassman no longer have a conditional option to re-enter the Barr Donut franchise because of the termination of the Barr franchise agreement. Defendants Barr and Zak have cross-moved for partial summary judgment on the same three counts asserted in Dunkin's third amended complaint. For the reasons set forth below, Dunkin's motion for partial summary judgment against Barr with respect to count I of its first complaint is granted, and Dunkin's motion for partial summary judgment against the Barr defendants on count V of its third amended complaint is also granted. Further, Dunkin's motion for a declaratory judgment that SRS and Glassman no longer have a conditional option to re-enter the Barr Donut franchise because of the termination of the Barr franchise agreement is granted. Dunkin' has agreed in open court that a decision of this nature releases the entire case and that it will seek no damages save attorney's fees to be decided on papers. As to that award, submissions from the plaintiff will be due by the end of January and any objections within two weeks thereafter.

 I. BACKGROUND

  As a preliminary matter, and with respect to both motions before me, the submissions by the Barr as well as the SRS and Glassman defendants are deficient. Specifically, Local Civil Rule 56.1 of the United States District Court for the Southern and Eastern Districts of New York requires a party opposing a motion for summary judgment to submit a counter-statement of facts as to which a triable issue remains and which "may not rest upon the mere allegations or denials of [his] pleading, but . . . must set forth specific facts showing that there is a genuine issue for trial." Sterbenz v. Attina, 205 F. Supp.2d 65, 67 (E.D.N.Y. 2002) (stating "[w]here plaintiff has not responded to defendants' factual assertions — all of which are established by documentary evidence and/or the deposition testimony of plaintiff

[242 F. Supp.2d 299]

      or her counsel — this Court has deemed those facts to be uncontroverted") (citing Fed.R.Civ.P. 56(e) (2002)); see also Local Civ. R. 56.1(b). In addition, "[e]ach statement of material fact by a movant or opponent must be followed by citation to [admissible] evidence." Local Civ. R. 56.1(d) (citing Fed.R.Civ.P. 56(e)). Finally, the facts presented in the movant's statement — in this case, Dunkin's — "will be deemed to be admitted unless controverted" by the opposing party's statement. Local Civ. R. 56.1(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Millus v. D'Angelo, 224 F.3d 137, 138 (2d Cir. 2000); Sterbenz, 205 F. Supp.2d at 67. Here, defendants Barrett, SRS, and Glassman did not submit a proper counter-statement controverting Dunkin's statement of material facts as required under Local Rule 56.1(b) with respect to Dunkin' partial summary judgment on count I of plaintiffs complaint. Further, defendants Barr and Zak failed to include citations to evidence in their counter-statement of facts, and largely denied Dunkin's statement of facts on the ground that those facts are inadmissible — a contention with which I disagree for reasons detailed infra. With respect to Dunkin's motion for summary judgment on counts IV, V, and VI of its third amended complaint, Barr has simply provided its own statement of facts without at all attempting to controvert plaintiffs statements. Because the opposing parties have therefore failed to comply with Local Rule 56.1, Dunkin's facts will be deemed admitted for the purpose of both motions.

 1. Facts Relevant to Dunkin's Motion for Summary Judgment on Count I of its Complaint

  Dunkin' is a Delaware Corporation with its principal place of business in Randolph, Mass. It is engaged in the business of franchising independent business persons to operate Dunkin' Donuts shops throughout the United States. (Pl.'s Rule 56.1 Statement ¶ 1 for 01 Civ. 5872). Dunkin' is the franchiser of the Dunkin' Donuts franchise system. In addition, Dunkin's wholly-owned subsidiary, Dunkin' Donuts USA, Inc., is the owner of the trademark, service mark, and trade name DUNKIN' DONUTS and related marks. (Id. ¶ 3). Dunkin' Donuts USA, Inc. owns a number of federal registrations for the mark "Dunkin' Donuts" and related marks. (Id. ¶ 4).

  Defendant Barr is a New York Limited Liability Company, with its principal place of business in Melville, New York. (Id. ¶ 12). From in or about June 1998 to the present, Barr has been the owner and operator of the Melville Dunkin' Shop pursuant to a franchise agreement dated June 9, 1998 ("franchise agreement" or "agreement"). (Id.). Dunkin' provides each of its franchisees with a set of manuals and guidelines that set forth in detail the procedures, methodology, and standards applicable to the operation of a Dunkin' shop. (Id. ¶ 13). Paragraph 5.0 of the franchise agreement provides the following:
FRANCHISEE understands and acknowledges that every detail of the Dunkin' Donuts System is important to DUNKIN' DONUTS, to FRANCHISEE and to other Dunkin' Donuts franchisees in order to develop and maintain high and uniform standards of quality, cleanliness, appearance, service, facilities, products and techniques to increase the demand for Dunkin' Donuts products and to protect and enhance the reputation and goodwill of DUNKIN' DONUTS. . . . (Laudermilk Cert. (00 Civ. 6130) Ex. C).
In addition, paragraph 5.1.7 of the agreement provides that the franchisee will
 
comply promptly with all applicable laws, rules, regulations, ordinances and orders of public authorities including, but not limited to, the Board of Fire Underwriters and other similar

[242 F. Supp.2d 300]

      organizations and all governmental agencies, however designated, which address health, safety, sanitation, environmental or other issues affecting operations of the Dunkin' Donuts Shop. (Id. ¶ 5.1.7). The franchise agreement also reserved to Dunkin' the right to inspect the shop in order "to assure that [the items therein] conform to the standards and specifications of the Dunkin' Donuts System." (Id. ¶ 6.0). If Dunkin' found what it believed to be a violation of a standard relating to health, sanitation, or safety, Dunkin' would notify the franchisee in writing of the violation within 24 hours; if it did not cure the violation within that time period, the franchisee would be held in default under the franchise agreement. (Id. ¶ 9.0.2).

  On June 15, 2000, Barr's shop was inspected by a Dunkin' representative, Jeff Polizotto, who found a number of violations relating to health, sanitation, and safety. (Pl.'s Rule 56.1 Statement ¶ 21, Exs. 3 & 4). Accordingly, Dunkin' gave Barr a notice to cure the violations. When the shop was re-inspected on June 19, 2000, Polizotto found that the violations had not been cured. (Id. ¶ 23, Exs. 3 & 4). The shop was inspected again on May 4, 2001. (Id. ¶ 24; Polizotto Cert., Ex. 6). During a 15-minute inspection, Polizotto again found a number of violations relating to health, sanitation, and safety. (Id.). Once again, Dunkin' gave Barr a notice to cure the violations and found that the violations remained uncured when Dunkin' once again inspected the shop on May 7, 2001. (Id. ¶ 26, Ex. 6). The same cycle of inspection-notice-failure to cure occurred a third time beginning on August 10, 2001. (Id. ¶ 27). Dunkin' hand-delivered to Barr a notice to cure on August 10, 2001, which identified violations and demanded that Barr cure the violations within 24 hours. (Id. ¶ 28, Ex. 6). Because Barr failed to cure these violations when the shop was re-inspected on August 12, 2001 — at which time Polizotto found a number of violations, including the presence of mouse droppings, flies, stagnant water collecting on the floor, and expired food products (Id. 29, Ex. 6) — Dunkin' found that Barr was in breach of the franchise agreement. (Id. ¶ 31).

  Barr counters that it had the shop inspected on August 13, 2001 by its own inspector, Yankee Exterminating Co, Inc., who found "no evidence of insect or rodents inside or outside the facility." (Def.'s Rule 56.1 Statement ¶ 9, Ex. 12). Barr further submits that the Yankee inspector's observations are consistent with those of the landlord at 116 Broad Hollow Road, where the Melville shop is located, who claims that he saw no evidence of vermin infestation in the shop during his dealings with the shop. (Id. ¶ 10, Ex. 13). In addition, Barr contends that Dunkin' had a duty to help it deal with the alleged violations both after the May and August 2001 violations, but that to this date Dunkin' has failed to "lift a finger to assist Barr in dealing with the alleged standards violations." (Id. ¶ 12). Specifically, Barr claims that since it purchased the franchise, Sonja Sorochinsky, the representative manager and Barrett's wife, has not been provided training at Dunkin's corporate training center, and presumably for this reason has failed to comply with the sanitation provisions under the franchise agreement. (Def.'s Rule 56.1 Statement ¶ 4).

  On August 20, 2001, Dunkin' served a supplemental notice of termination on Barr, terminating the franchise agreement and demanding that Barr immediately comply with its post-termination obligations as set forth in the franchise agreement. (Pl.'s Rule 56.1 Statement ¶ 31, Laudermilk Cert. Ex. H). To date, Barr has refused to do so and is presently operating its shop as if it were a licensed Dunkin' franchisee. (Id. Ex. 1, ¶ 18). Shortly thereafter, Dunkin' moved for a

[242 F. Supp.2d 301]

      preliminary injunction and order terminating the parties' franchise agreement and enjoining Barr's unauthorized use of plaintiffs trademarks and trade dress and enjoining Barr from engaging in unfair competition in violation of the Lanham Act.

  A preliminary injunction hearing was held before me in the Eastern District of New York on August 23, 2002. At that hearing, Sorochinsky admitted that the oven was not up to Dunkin's standards and had more than one day's worth of buildup, and that the food preparation area and equipment needed to be cleaned. (Id. Ex. 2, 173-74; 177-79). In addition, hundreds of photographs were admitted into evidence depicting mold, flies, and other serious health and sanitation violations at Barr's shop. (Id. Ex. F). Dunkin' now moves for summary judgment on the question of whether Barr has breached the franchise agreement by failing to maintain sanitary conditions.

 2. Facts Relevant to Barr defendants on Dunkin's Motion re: Count V of its Third Amended Complaint

  Defendant Barrett was the managing member and 75% owner of Barr at all times during which Barr was licensed to operate the Melville Dunkin' Shop. (Pl.'s Rule 56.1 Statement ¶ 5). Defendant Zak ("Zak") was a member and 12.5% owner of Barr at all times during which Barr was licensed to operate the Melville Dunkin' Shop. (Id. ¶ 6). Defendant SRS, a New York corporation, was a Dunkin' franchisee for the Melville Shop before Barr became the franchisee. (Id. ¶ 8). Defendant Glassman personally guaranteed and agreed to perform SRS's obligations pursuant to the SRS franchise agreement. (Id. ¶ 9). Pursuant to paragraph 1.3 of the Barr franchise agreement, Barr warranted that "all financial and other information which FRANCHISEE has provided to DUNKIN' DONUTS in connection with FRANCHISEE'S application for this Dunkin' Donuts franchise is true and accurate." (Id. Ex. C, ¶ 1.3). Pursuant to paragraph 5.1.7, Barr agreed to

 
comply promptly with all applicable laws, rules, regulations, ordinances and orders of public authorities including, but not limited to, the Board of Fire Underwriters and other similar organizations and all governmental agencies, however designated, which address health, safety, sanitation, environmental or other issues affecting operations of the Dunkin' Donuts Shop. (Id. Ex. C, ¶ 5.1.7).
Pursuant to paragraph 8.0.1 of the agreement, Barr agreed not "to do or perform, directly or indirectly, any act injurious or prejudicial to the good will associated with Dunkin's proprietary marks and the Dunkin' system." (Id. ¶ 10, Ex. C, ¶ 8.0.1). In addition, under paragraph 9.1.3, Barr is not entitled to any cure period if it "falsified financial data or otherwise commits an act of fraud with respect to its rights or obligations under this Agreement." (Id. ¶ 11, Ex. ¶ 9.1.3). Finally, pursuant to paragraphs ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.