Fantastic Sams Salons Corporation v. Maxie Enterprises Inc et al

Filing 43

FINDINGS OF FACT AND CONCLUSIONS OF LAW. Ordered by Judge Clay D. Land on 06/21/2012. (CGC)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
ATHENS DIVISION
FANTASTIC SAMS SALONS
CORPORATION,

*
*

Plaintiff,
*
vs.

CASE NO. 3:11-CV-22 (CDL)
*

MAXIE ENTERPRISES INC. and
PAUL RUBIN,

*

Defendants.

*
O R D E R

This is a breach of contract action brought by Fantastic
Sams Salons Corporation (“Fantastic Sams”) against its former
franchisees

Maxie

Enterprises

Inc.

(“Maxie”)

(“Rubin”) (collectively, “Defendants”).

and

Paul

Rubin

Fantastic Sams contends

that Defendants breached the parties’ Salon License Agreement
(“License Agreement”) when Defendants “de-identified” from the
Fantastic Sams brand and stopped paying royalties and fees due
under the License Agreement.
The Court held a bench trial on April 30, 2012.

Defendants

do not dispute that they breached the license agreement, but
they do dispute the amount of damages.
evidence

presented

Fantastic Sams.

at

trial,

the

Court

After considering the
finds

in

favor

of

The Court makes the following findings of fact

and conclusions of law.

FINDINGS OF FACT
At trial, the Court heard testimony and received evidence
from

Benton

Smith,

a

regional

director

for

Fantastic

Sams.

After considering the evidence presented, the Court finds that
the following facts have been proven by a preponderance of the
evidence:
1.

Fantastic Sams is a value priced hair salon chain.

2.

On November 24, 2008, Fantastic Sams and Defendants, along
with Becky Wentworth, entered the License Agreement.

3.

Rubin executed a personal guaranty in connection with the
License Agreement.

4.

Under the License Agreement, Maxie was licensed to operate
a

Fantastic

Sams

salon

at

1431

Capital

Avenue,

Watkinsville, Georgia (“Franchise Location”).
5.

The License Agreement had a term of ten years from the
opening of the salon or eleven years from the date the
License Agreement was entered into, whichever was earlier.

6.

Under

the

License

Agreement,

Maxie

was

required

to

pay

Fantastic Sams a weekly royalty and a weekly advertising
fee during the term of the license agreement.
the

royalties

and advertising fees

The terms of

were set out in the

License Agreement.
7.

Fantastic Sams performed the obligations that were required
of it under the License Agreement.

2

8.

Maxie’s Fantastic Sams salon opened in March 2009.

Maxie

operated a Fantastic Sams salon at the Franchise Location
from March 2009 to November 2, 2010.
9.

On November 2, 2010, Rubin told Fantastic Sams that Maxie
was no longer operating the salon as a Fantastic Sams salon
and that Maxie had begun operating its own independent hair
salon at the Franchise Location.

10.

As

of

November

2,

2010,

Defendants

royalties and advertising fees.

were

in

arrears

on

Defendants have not paid

any royalties or advertising fees since November 2, 2010.
11.

Rubin admitted to Fantastic Sams that he knew that Maxie
breached the License Agreement when Maxie stopped operating
the

salon

as

independent

a

hair

Fantastic
salon

at

Sams,
the

began

Franchise

operating

an

Location

and

stopped paying royalties and advertising fees to Fantastic
Sams.
12.

Fantastic Sams made efforts to seek a purchaser for the
salon at the Franchise Location, and Fantastic Sams also
sought

to

market

the

geographical

area

to

potential

franchisees.
13.

Fantastic
amount

Sams

includes

incurred
past

$166,106.62

damages,

in

which

damages.
consists

This
of

the

contractual royalty fee, adjusted pursuant to the License
Agreement, and the national advertising fund fee through

3

April 20, 2012.

This amount also includes future damages

calculated based on the contractual royalty fee as of April
23, 2012

and the national advertising fund fee

for the

period of time between April 21, 2012 and March 30, 2018.
The future damages were reduced to present value based on
Georgia’s statutory discount rate of five percent.

See

O.C.G.A. § 51-12-13.1
14.

Both Fantastic Sams and Defendants have incurred reasonable
and

necessary

attorney’s

fees

in

this

matter,

and

both

sides have prevailed on various portions of the litigation.
The parties have stipulated that the evidence on attorney’s
fees shows that the net balance of attorney’s fees owed by
each party to the other results in a net award to Fantastic
Sams of $21,000.00 in attorney’s fees.
CONCLUSIONS OF LAW
1.

The License Agreement had a term of ten years from the
opening of the salon or eleven years from the date the
License Agreement was entered into, whichever was earlier.
Given that Defendants opened the salon at the Franchise

1

Fantastic Sams calculated its future damages as $125,449.04.
Fantastic Sams correctly calculated the present value of the fees due
for 2012-13, 2013-14, 2014-15, 2015-16 and 2016-17 as being
$103,910.04. Fantastic Sams incorrectly calculated the present value
of the fees due for 2017-18 as $21,539.00. That is the present value
assuming the $22,615.95 fee is due in 2013; the correct discounted
value for the $22,615.95 fee due in 2018 is $16,876.37.

4

Location in March 2009, the term of the License Agreement
was from March 2009 to March 2019.
2.

Pursuant to the terms of the License Agreement, the License
Agreement was terminated when Maxie ceased operating the
salon as a Fantastic Sams salon and began operating its own
independent hair salon at the Franchise Location.

3.

Defendants
stopped

breached

operating

operating

an

the

the

License

salon

independent

as

hair

a

Agreement

when

Maxie

Fantastic

Sams,

began

salon

at

the

Franchise

Location and stopped paying royalties and advertising fees
to Fantastic Sams.
4.

Fantastic

Sams

incurred

damages

in

the

amount

of

$166,106.62 as a direct result of the breach of contract by
Defendants.
future

The damages include past damages, as well as

damages

reduced

to

present

value

pursuant

to

O.C.G.A. § 51-12-13.
5.

Fantastic

Sams

made

reasonable

efforts

to

mitigate

its

damages by seeking a purchaser for the Franchise Location
in coordination with Defendants and by seeking to market
the geographical area to potential franchisees.
6.

Fantastic Sams is entitled to an award of $21,000.00 in
attorney’s fees under the terms of the License Agreement.

5

CONCLUSION
For the reasons set forth above, the Court finds in favor
of Fantastic Sams on its breach of contract claim.

The Court

awards Fantastic Sams damages in the amount of $166,106.62.

The

Court also awards Fantastic Sams attorney’s fees in the amount
of $21,000.00.
favor

of

The Clerk shall therefore enter judgment in

Fantastic

Sams

and

against

Defendants,

individually, in the total amount of $187,106.62.

jointly

and

Fantastic

Sams may also recover its costs.

IT IS SO ORDERED, this 21st day of June, 2012.
S/Clay D. Land
CLAY D. LAND
UNITED STATES DISTRICT JUDGE

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