Almer v. Peanut Corporation of America

Filing 238

Almer v. Peanut Corporation of America

Doc. 238 Att. 4

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US-DIST-CT, BUSINESS FRANCHISE GUIDE ¶9388, Brawley Distribution Co., Inc. v. Polaris Industries Partners L.P., Polaris Industries L.P., Polaris Industries Associates L.P., Polaris Industries Capital Corp., and W.H. Wendel, Jr. (Filed May 1, 1989)

Brawley Distribution Co., Inc. v. Polaris Industries Partners L.P., Polaris Industries L.P., Polaris Industries Associates L.P., Polaris Industries Capital Corp., and W.H. Wendel, Jr. U.S. District Court, District of Minnesota, Third Division. Civil File No. 3-89-0191. Filed May 1, 1989. Distributorship Probably Not "Franchise"; Injunction Barring Termination Denied

Minnesota Franchise Act Preliminary Relief --Injunction Against Termination --Irrepararable Harm --Balance of Harm --Probability of Success on Merits --Public Interest. --A snowmobile and all-terrain vehicle distributor was denied a preliminary injunction barring termination of its distributorship because it failed to establish irreparable harm, a favorable balance of hardships, or probability of success on the merits of its Minnesota Franchise Act claim. The distributor would not suffer irreparable harm if the injunction were denied because an award of damages would be an adequate remedy. The harm suffered by the distributor from termination was outweighed by the injury to the manufacturer that would flow from the injunction. The manufacturer had already taken steps to change its distribution system by entering direct agreements with snowmobile dealers. Issuance of an injunction would require the manufacturer to abrogate those agreements, severely impairing its ability to reestablish these agreements in the future. The distributor was not likely to succeed on the merits of its relationship/termination law claims because the distributorship probably did not qualify as a "franchise" within the law. The public interest factor was not an important consideration in this case, since the cause of action was essentially a private business dispute that affected the public only to the extent that issuance of an injunction would improve or impair consumer access to the manufacturer's products and service. What Is a Franchise? --Franchise Fee --Wholesale Price Arrangement --Penalty for Charging Above Suggested Price --Minimum Purchase Requirement --Advertising, Training Fees. --A snowmobile and all-terrain vehicle distributorship was probably not a "franchise" within the Minnesota Franchise Act because the distributor did not appear to pay a franchise fee as required by the statute. An alleged penalty imposed on the distributor for charging more than the suggested retail price was not a franchise fee. If the distributor charged more than the suggested price, the distributor was required to pay 50% of the difference to the manufacturer. However, this payment was a legitimate means of limiting the price of the products and not a franchise fee. There was no evidence that the distributor ever charged more than the suggested price or ever paid any additional fee under this arrangement. An alleged minimum purchase requirement was not a franchise fee because the distributor did not establish that the number of all terrain vehicles set for distribution constituted any sales quota. There was evidence that the number of vehicles was renegotiated on at least one occasion and insufficient evidence that the number of vehicles was not based on current market research, proper experience with the distributor, and valid business purposes. Fees for training seminars, for advertising, and for processing warranty work constituted ordinary business expenses that could not amount to franchise fees. The advertising programs benefitted the distributor. The warranty work apparently caused no out-of-pocket expenses to the distributor; therefore, it could not be characterized as an expense. Since the distributorship was not shown to be a "franchise" at this stage of the litigation, the distributor failed to demonstrate a likelihood of success on the merits of its franchise law claim. Memorandum and Order

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Exhibits in Support of Motion for Summary Judgment App. 234

[In full text] MAGNUSON, D.J.: This matter is before the court upon the motion of Brawley Distributing Company, Inc. (Brawley) for a preliminary injunction to prevent the defendants (collectively referred to as Polaris) from terminating a distributorship agreement. For the reasons set forth below the court denies this motion. Factual Background Defendants manufacture snowmobiles, all-terrain vehicles (ATVs) and related parts, accessories and clothing. Plaintiff is a distributor of Polaris products and lawn and garden products manufactured by other companies. On April 1, 1982, Brawley and Polaris executed a one-year distributorship agreement designating Brawley as a nonexclusive distributor of Polaris snowmobiles. The parties renewed the distributorship agreement on an annual basis in 1983, 1984 and 1985, essentially on the same terms as the 1982 agreement. In 1985 Polaris began to manufacture ATVs. Polaris and Brawley executed a distributorship agreement for ATVs similar to the one in effect for snowmobiles. The parties renewed each of the agreements on substantially the same terms annually for the years 1985 through 1988. On March 2, 1989, prior to the March 31 termination date of the distributorship agreements, Polaris notified Brawley that it would not renew the agreements for the coming year. Polaris had decided to change its distribution network from the existing two-tiered system to a dealer-direct system. All other snowmobile or ATV manufacturers that market their products in the United States use dealer-direct systems. Polaris has already taken steps to implement the new distribution system, including reviewing and accepting several applications of prospective Polaris direct dealers. Brawley filed this action in the United States District Court for the Middle District of Pennsylvania on March 29, 1989. Brawley simultaneously filed a motion for a temporary restraining order enjoining defendants from terminating the distributorship. Brawley's seven-count complaint alleges unlawful termination of a franchise in violation of the Minnesota Franchise Act (MFA), Minn.Stat. §80C.01 et seq.; breach of an oral commitment to enter into a two-year distributorship agreement; misrepresentation; unjust enrichment; breach of contract; and federal and state anti-trust violations. The complaint seeks injunctive relief only for its claims under the MFA and breach of contract counts. The Honorable Sylvia H. Rambo denied on the merits Brawley's motion for a temporary restraining order and granted a motion by Polaris to transfer the action to Minnesota pursuant to 28 U.S.C. §1404(a). Upon transfer Brawley sought a preliminary injunction to prevent Polaris from terminating the distributorship agreement. A hearing was held on April 21, 1989, in which Brawley relied solely on its MFA claim as the basis for an injunction. Brawley contends that it is a franchisee under the MFA, and as such, it was entitled to 180-day notice prior to termination. Since Polaris failed to give Brawley adequate notice, Brawley claims that the MFA authorizes injunctive relief. Polaris denies that Brawley is a franchisee and argues that the MFA therefore does not apply to this case. Analysis In deciding whether to grant a motion for a preliminary injunction the court must consider four factors: (1) the threat of irreparable harm to the movant; (2) the balance between this harm and the injury that would be inflicted upon other parties litigant by granting the injunction; (3) the probablity that the movant will succeed on the merits; and (4) the public interest. Dataphase Systems, Inc. v. C. L. Systems, Inc., 640 F.2d 109, 113 (8th Cir. 1981). No single factor is dispositive, but the movant bears the burden of proving that the four factors taken as a whole weigh in favor of granting a preliminary injunction. Geico Corp. v. Coniston Partners, 811 F.2d 414, 418 (8th Cir. 1987). I. Irreparable Harm

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Exhibits in Support of Motion for Summary Judgment App. 235

Brawley has failed to establish that absent an injunction it will suffer irreparable harm. Each cause of action alleged in Brawley's complaint provides for damages, and several include claims for punitive damages, treble damages or attorneys' fees. Where a moving party's claims are measurable in damages, a preliminary injunction is not necessary because the threat of irreparable harm is reduced. O.M. Droney Beverage Co. v. Miller Brewing Co., 365 F.Supp. 1067, 1070 (D. Minn. 1973). In Droney, a Miller Brewing Company distributor sought a temporary restraining order to continue the party's relationship after being notified by Miller that it was being terminated. The Droney court described that case as presenting "a classical example of a situation where the remedy of law in the form of an award of damages should plaintiffs prevail is adequate." Id. at 1068. In reviewing the plaintiff's claim for injunctive relief to reinstate a 33 year-old distributor relationship, the court concluded that a manufacturer's alleged failure to abide by its distributorship contracts was measurable in damages. Id. at 1070. II. Balance of Harm To the extent that Brawley will suffer any irreparable harm, that harm is outweighed by the injury to Polaris that would flow from an injunction. Brawley requests the court to force the parties to remain in a business relationship that is unsatisfactory to Polaris. The court's power to do so is limited. As the Droney court acknowledged, this court "could never issue any sort of permanent injunction requiring the two parties to continue in perpetuity to do business with each other." Id. At some point, either now or in the future, Polaris has the right to use the type of distribution system that best serves its own interests. Polaris has already taken steps in this direction and has reached agreements with a number of dealers. If the court were to enjoin Polaris now, Polaris would be forced to abrogate those agreements. This result would severely impair the ability of Polaris to reestablish relationships with these dealers in the future. III. Probability of Success on the Merits The majority of the parties' briefs and oral argument was devoted to the issue of Brawley's probability of success on the merits, and in particular, whether Polaris violated the Minnesota Franchise Act. In Dataphase the Court of Appeals for the Eighth Circuit cautioned against considering likelihood of success in isolation and engaging in an estimation of the mathematical probability of success. 640 F.2d at 113. However, in this case the parties have had ample time to explore and argue the relevant issues under the MFA, and the court has had an opportunity to review both the submissions and the applicable law in this matter. Therefore the probability that Brawley will or will not succeed on the merits in this case weighs heavily at the preliminary injunction stage. [ What Is a Franchise?] In order for a distributor to be a franchisee under the MFA, three prerequisites must be satisfied. The three elements of a franchise are described in Minn. Stat. §80C.01 Subd. 4 and were summarized by the Minnesota Supreme Court in Martin Investors, Inc. v. VanderBie, 269 N.W. 2d 868, 874 (Minn. 1978): (1) A right granted to the franchisee to engage in business using the franchiser's trade name or other commercial symbol, (2) a "community of interest" in the marketing of goods or services between the franchisee and franchiser, and (3) a "franchise fee" paid by the franchisee. [ Franchise Fee] In this case only the third element, payment of a franchise fee, is contested. Minn. Stat. §80C.01 Subd. 9 defines franchise fee as:

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any fee or charge that a franchisee or sub-franchisor is required to pay or agrees to pay for the right to enter into a business or to continue a business under a franchise agreement, including, but not limited to, the payment either in lump sum or by installments of an initial capital investment fee, any fee or charges based upon a percentage of gross or net sales whether or not referred to as royalty fees, any payment for goods or services, or any training fees or training school fees or charges; provided, however, that the following shall not be considered the payment of a franchise fee: (a) The purchase of goods or agreement to purchase goods at a bona fide wholesale price. This definition is potentially very broad, but the types of fees described here are not franchise fees unless the alleged franchisee is required to pay them for the right to do business under a franchise agreement. The distributorship agreements between Brawley and Polaris expressly state that Brawley "for all purposes shall be an independent contractor, and not an agent, employee, partner, joint venturer, or franchisee of Polaris." This clause suggests that the parties intended that the MFA not apply to their business relationship. Brawley now contends that a potential franchisee may not waive its rights under the MFA and that several costs incurred or payments made during Brawley's relationship with Polaris qualify as franchise fees. Without ruling on the waiver issue, the court will address Brawley's arguments regarding the franchise fee. Brawley characterizes the wholesale price arrangement for ATVs as a franchise fee because Polaris allegedly penalizes Brawley for charging more than the suggested price. Polaris does specify a suggested sale price for its ATVs. If Brawley charges more than the suggested price, Brawley is required to pay 50% of the difference to Polaris. This payment is not a franchise fee. The arrangement is merely a legitimate means of limiting the price of Polaris products. Indeed, there is no evidence that Brawley ever charged more than the suggested price or paid Polaris any additional fees under this arrangement. [ Minimum Purchase Requirement] Brawley also contends that Polaris imposed minimum purchase requirements for ATVs and that this constitutes a franchisee fee. The Minnesota Court of Appeals acknowledged this possibility in OT Industry, Inc. v. OT-Tehdas OY Santasalo-Sohl-Berg AB, 346 N.W.2d 162 (Minn. Ct. App. 1984). The court stated that "a minimum volume requirement, even at bona fide factory prices, may in itself be a franchise fee if the franchisee is required to purchase amounts or items that it otherwise would not." Id. at 166. Brawley has failed to provide credible evidence of the elements described in O.T. Industries. Brawley has not established that the number of ATVs set by Polaris for distribution by Brawley was any sort of minimum sales quota. In fact there is evidence that the number of ATVs was renegotiated on at least one occasion. Moreover, evidence is lacking to show that the number of ATVs was not based on current market research, priorexperience with Brawley and valid business purposes. [ Advertising, Training Fees] Brawley finally claims that it was required to pay Polaris fees for advertising and for training seminars and to process warranty work on behalf of Polaris. According to Brawley these expenses are franchise fees. The court disagrees. At most they are ordinary business expenses. The advertising programs employed by Polaris were intended to encourage consumers to purchase more Polaris products from dealers. This in turn would cause dealers to demand more products from distributors. Thus Brawley benefitted from the payments. The warranty work performed by Brawley apparently caused no out of pocket costs to Brawley, and therefore cannot be characterized as an expense at all. At this stage of the litigation the court is unable to discover any hidden royalty payments or franchise fees. IV. Public Interest

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The final Dataphase factor, the interests of the public, is not a serious concern in this case. The cause of action is essentially a private business dispute between Brawley and Polaris. The public is affected only to the extent that issuance of an injunction would improve or impair consumer access to Polaris products and service. The court need not decide whether distributing Polaris products through Brawley or through a dealer-direct system is superior. Both systems should adequately provide Polaris products and service. Therefore the public interest is not an important consideration. Having considered the four factors outlined in Dataphase, the court determines that Brawley has not met its burden of demonstrating the need for a preliminary injunction. Accordingly, It Is Ordered that plaintiff's motion for a preliminary injunction shall be, and hereby is, Denied.

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Exhibits in Support of Motion for Summary Judgment App. 238

STATE-DECISION, BUSINESS FRANCHISE GUIDE ¶10,820, R.A., Inc., Parkview Management, Inc., Richard J. Arrell, and Paul C. Schnoebelen, III v. Anheuser-Busch, Inc. (Dated December 21, 1995)

R.A., Inc., Parkview Management, Inc., Richard J. Arrell, and Paul C. Schnoebelen, III v. AnheuserBusch, Inc. Minnesota District Court, Fourth Judicial District, Hennepin County. File No. CT 95-001778. Dated December 21, 1995. Common Law --Tortious Interference with Contract --Refusal to Approve Transfer -- Standing to Sue --Prospective Transferee, Officers. --Prospective purchasers of a beer distributorship lacked standing to bring tortious interference claims against a manufacturer for failing to disapprove the sale of the distributorship within the time period required by the distribution agreement. The prospective purchasers were not parties to the agreement and, therefore, could not challenge the manufacturer's compliance with the agreement's terms. Back reference: ¶1290. Common Law --Tortious Interference with Contract --Refusal to Approve Transfer -- Existence of Contract. --No valid contract existed between a beer distributor and prospective purchasers of the distributorship because the manufacturer had disapproved the proposed transfer within 30 days of receiving the final requested information regarding the proposed purchasers, as required under the distribution agreement. Therefore, the prospective purchasers could not prevail on their tortious interference with contract claims against the manufacturer. Back reference: ¶1290.14. Common Law --Tortious Interference with Contract --Refusal to Approve Transfer -- Existence of Contract --Condition Precedent. --A beer manufacturer's approval of a proposed distributorship transfer was a condition precedent to every agreement between the distributor and the prospective transferees. Since the manufacturer had not approved the transfer, no valid contract existed between the parties. Therefore, the manufacturer was entitled to summary judgment on tortious interference with contract claims brought by the prospective transferees. Back reference: ¶1290.93. Common Law --Tortious Interference with Contract --Refusal to Approve Transfer --Duty to Act Reasonably. --A brewer did not have a duty towards prospective distributorship transferees to act reasonably in approving or disapproving the proposed transfer. Therefore, tortious interference claims predicated on the existence of such a duty were dismissed. Even if such a duty existed, the brewer satisfied it by conducting an extensive financial, legal, and market analysis of the proposed transfer prior to disapproval. A duty to act reasonably did not equal a duty to make the correct business decision. Back reference: ¶1290. Common Law --Tortious Interference with Prospective Advantage --Refusal to Approve Transfer --Source of Business Opportunity. --A brewer could not have tortiously interfered with the prospective economic advantage of a distributorship's proposed transferees by refusing to approve the transfer. Although the contracts allegedly interfered with were between the distributor and the prospective transferees, the brewer was the source of the business opportunity that would have been obtained by the transferees and, as a matter of law, could not have tortiously interfered with that

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opportunity. Back reference: ¶1290. Common Law --Tortious Interference with Prospective Advantage --Refusal to Approve Transfer --Justification --Improper Intent, Means. --A beer manufacturer's decision not to approve a proposed distributorship transfer was justified as a matter of law and did not constitute tortious interference with the proposed transferees' prospective economic advantage. Other than conclusory allegations by the proposed transferees, there was no evidence that the manufacturer's refusal to approve the transfer resulted from an improper intent or improper means --which would defeat the manufacturer's justification defense. Back reference: ¶1290. Procedure --Sanctions --Frivolous Claims. --Rule 11 sanctions against the prospective purchasers of a beer distributorship were not warranted, even though their tortious interference claims against a manufacturer for refusing to approve the proposed transfer were summarily dismissed. Back reference: ¶1860.45. MEMORANDUM OF LAW [In full text] BUSH, D.J.: This case arises from an attempted sale of a beer wholesalership. Pursuant to a contract between the brewer and the owners of the wholesale business, the brewer refused to approve the sale of the business. The prospective purchaser of the business then sued the brewer, alleging tortious interference with contract and tortious interference with prospective economic advantage. Defendant brewer now moves for summary judgment. Plaintiffs also move for summary judgment on the issue of defendant's liability. Facts Anheuser-Busch, Inc. ("A-B") is a brewer of beers. A-B sells the beer through a network of authorized wholesalers. Capitol City Distributing Co., Inc. ("Capitol City") was the exclusive wholesaler of A-B products in the eastern metropolitan region, including most of Ramsey County and parts of Washington, Dakota, and Anoka counties. Plaintiff R.A., Inc., ("RA") is a corporation formed on or about January 25, 1994 to purchase Capitol City. Plaintiff Richard Arrell is a shareholder of RA and is also a director of RA. Arrell was the general manager of Capitol City and had an agreement to serve as RA's President and Chief Executive Officer. Plaintiff Paul Schnoebelen is also a director of RA. Schnoebelen had a written employment contract to serve as RA's Chief Financial Officer. Plaintiff Parkview Management, Inc. ("Parkview") is a corporation wholly owned by Schnoebelen and had a written contract to provide management services to RA. Non-party Beechwood Partners, L.P., ("Beechwood") is the other RA shareholder. Parkview is the general partner of Beechwood. A-B had a written agreement with Capitol City entitled the "Anheuser-Busch, Inc. Wholesaler Equity Agreement" ("Equity Agreement"). The Equity Agreement, drafted by A-B, sets forth the terms and conditions governing Capitol City's wholesaler relationship with A-B and Capitol City's rights to distribute A-B products within the eastern metropolitan territory. The Equity Agreement provides that it is a personal services contract. Equity Agreement, Art. 2. The Equity Agreement also has provisions relevant to a change in ownership. Paragraph 4 and Exhibits 5, 6, and 7 detail procedures concerning A-B's process for evaluating proposed changes in wholesaler

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ownership and the standards A-B applies in deciding whether to approve a proposed sale. In the agreement, Capitol City agreed that it would not sell, transfer, or assign its right to wholesale A-B's products without first obtaining A-B's written consent. Equity Agreement Art. 4. According to the agreement, if A-B approved a sale of Capitol City, then A-B would either enter into a new Equity Agreement with the purchaser, or would permit Capitol City to assign its rights under the existing A-B/Capitol City Equity Agreement. The Equity Agreement lists factors that A-B might take into consideration in evaluating a prospective purchaser, including financial capability, business experience, and moral character and personality. Equity Agreement, Art. 4(b)(iv). Under the Agreement, Capitol City was obligated to provide A-B with the appropriate information to evaluate the potential purchaser. Equity Agreement, Art. 4(b)(iii). Exhibit 6 to the Equity Agreement governs the collection of information by A-B for the purpose of evaluating the proposed purchaser. After Capitol City requested A-B's approval of a sale of the wholesalership, A-B had thirty days in which to notify Capitol City of its decision. Equity Agreement, Exhibit 6, ¶1(b). However, if A-B determined that it needed more information, A-B could request additional information within ten days of receipt of the request for approval. Equity Agreement, Exhibit 6, ¶2. After receiving new information, A-B had another ten days to request additional information or 30 days to make a decision. Equity Agreement, Exhibit 6, ¶4. This process continues until A-B makes a decision. A-B's failure to make a decision or request additional information in a timely manner "automatically constitute[s] approval of the proposed change in ownership." Equity Agreement, Art. 4(e). If A-B decided not to approve the proposed transfer, the Equity Agreement gave A-B the right of first refusal to purchase the wholesalership. Equity Agreement, Art. 4(d). The Equity Agreement states that no third parties, such as prospective purchasers, have claims against A-B. Equity Agreement, Art. 4(f). None of the plaintiffs is a party to the Equity Agreement and all parties agree that plaintiffs are not third party beneficiaries to that contract. On or about May 26, 1993, Richard Arrell and Paul Schnoebelen, on behalf of a corporation to be formed, entered into a letter of intent with the shareholders of Capitol City. The letter provided that the corporation would purchase substantially all of Capitol City's assets, including its rights under the Equity Agreement. On or about June 2, 1993, A-B received a Request for Approval of Proposed Change of Ownership from Capitol City owners Michael Groppoli and Lauro DiSanto. Over the next few weeks, A-B requested information from Capitol City concerning A-B's analysis of RA. As part of one of those requests, A-B asked Capitol City to obtain information from the Bureau of Alcohol, Tobacco and Firearms ("BATF") and forward it to A-B. Over the course of the next year, A-B requested information necessary to complete its extensive analysis of RA and interviewed plaintiffs. Capitol City responded to A-B's requests for information. On February 15, 1994, Richard Arrell, on behalf of RA, and Michael Groppoli and Lauro Di Santo, on behalf of Capitol City, signed an Acquisition Agreement. On May 11, 1994, Schnoebelen forwarded the information to A-B from the BATF that A-B had earlier asked Capitol City to provide. On May 31, 1994, Capitol City attorney Elliot Kaplan sent a letter to A-B executive Robert Goughenour, informing A-B that Capitol City believed a response was due regarding A-B's decision. On June 3, 1994, A-B attorney Dan Kolditz responded to Kaplan, explaining that the last information had been received on May 11, 1994, making a decision due on June 10, 1994. On June 10, 1994, A-B informed Capitol that it was denying approval of the transfer of Capitol City to RA. The disapproval letter stated that A-B was concerned that RA would be unable to comply with Equity Agreement marketing and capital expenditure requirements while servicing its debt, that RA would breach

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several loan covenants which would place it in default, and that RA would have other financial difficulties. In addition, A-B was concerned that many of the provisions of the R.A. Shareholders' Agreement imposed serious and unacceptable constraints upon the management and business operations of RA. The letter also noted a concern about veto power given to the limited partners, saying the provision indicated that the limited partners lacked confidence in Arrell's ability to manage the business. The disapproval letter also indicated that, pursuant to the Equity Agreement, A-B intended to exercise its right to purchase the wholesalership at the price and under the terms applicable to the proposed sale to RA. Shortly thereafter, Capitol City was purchased by Quality Beverage Sales and Service Limited Partnership n/k/a/ Capitol Beverage Sales, Limited Partnership. Anheuser-Busch Investment Capitol Corporation owns eighty percent of Capitol Beverage Sales and is the limited partner. The other twenty percent owner and general partner is a corporate entity owned by Paul Morrissey, a former A-B employee. Morrissey is the general manager of the business. Plaintiffs commenced this lawsuit against defendant alleging that: 1) A-B tortiously interfered with RA's contract to purchase Capitol City, 2) A-B tortiously interfered with the contract between Parkview and RA, 3) A-B tortiously interfered with Arrell's economic expectancy in his relations with RA, and 4) A-B tortiously interfered with Schnoebelen's employment contract with RA. This matter is presently before the court on three motions: 1) defendant's motion for summary judgment on all claims asserted by plaintiffs, 2) plaintiffs' motion for summary judgment on the issue of defendant's liability, and 3) plaintiff's motion to compel discovery. The court considers each motion separately. SUMMARY JUDGMENT STANDARD The court may render summary judgment "when the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that either party is entitled to judgment as a matter of law." Minn. R. Civ. P. 56.03. In deciding the motion, the court must view evidence in the light most favorable to the nonmoving party. Petersen v. DeKalb Pfizer Genetics, 354 N.W.2d 887, 889 (Minn.Ct.App. 1984). If any doubt exists as to the existence of a genuine issue of material fact, then the doubt must be resolved in favor of finding that the fact issue exists. Lubbers v. Anderson, 539 N.W.2d 398 (Minn. 1995). The moving party carries the burden of proof and persuasion to establish that no genuine issues of material fact exist. Thiele v. Stich, 425 N.W.2d 580 (Minn. 1988); Grand Northern, Inc. v. West Mall Partnership, 359 N.W.2d 41, 44 (Minn.Ct.App. 1988). The moving party must also demonstrate that it is entitled to summary judgment as a matter of law. Vacura v. Haar's Equipment, Inc., 364 N.W.2d 387, 391 (Minn. 1987). Once the moving party makes a prima facie case for summary judgment, the non-moving party must come forward to defeat the motion with "material facts" which show something more than "some metaphysical doubt." Carlisle v. City of Minneapolis, 437 N.W.2d 712, 715 (Minn.Ct.App. 1989). A "material fact" is one that will affect the outcome or result of a case depending on its resolution. Musicland Group Inc. v. Ceridian Corp., 508 N.W.2d 524, 531 (Minn.Ct.App. 1993). To survive a summary judgment motion, a party must make a showing sufficient to establish the existence of all elements essential to that party's case. Glass Service Co. v. State Farm Ins. Co., 530 N.W.2d 867, 870 (Minn.Ct.App. 1995). PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT Plaintiffs move for summary judgment on the issue of defendant's liability on all counts. To prevail on the claims for tortious interference with contract, a plaintiff must show: 1) existence of contract, 2) alleged wrongdoer's knowledge of contract, 3) intentional procurement of the contract's breach, 4) without justification, and 5) damages resulting therefrom. Royal Realty Co. v. Levin, 244 Minn. 288, 292, 69 N.W.2d 667, 671 (1955). The basis for plaintiffs' interference with contract claim is the Acquisition

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Exhibits in Support of Motion for Summary Judgment App. 242

Agreement between RA and Capitol City, the Parkview Management contract, and Schnoebelen's employment contract. Plaintiff Arrell has a claim against A-B for tortious interference with prospective economic advantage. To prevail, the plaintiff must show that defendant intentionally and improperly interfered with plaintiff's prospective contractual relations. United Wild Rice, Inc. v. Nelson, 313 N.W.2d 628, 633 (Minn. 1982). The interference may consist of inducing or otherwise causing a third person not to enter into or continue the prospective relation or preventing the other from acquiring or continuing the prospective relation. Id. The basis of plaintiffs' tortious interference with prospective economic advantage claim is Arrell's agreement with RA to serve as president. Plaintiffs claim that there are no genuine issues of material fact remaining on the issue of defendant's liability to all of the plaintiffs. Plaintiffs claim that all elements of the claims of tortious interference with contract and tortious interference with prospective economic advantage have been met. 1. Plaintiffs' standing to challenge compliance with the Equity Agreement The basis of plaintiffs' summary judgment motion is that A-B failed to disapprove the sale of Capitol City in the time frame required by the Equity Agreement and thereby automatically approved the sale of Capitol City. The parties to the Equity Agreement were A-B and Capitol City. None of the plaintiffs were parties to the Equity Agreement and all parties agree that plaintiffs were not third party beneficiaries of the Equity Agreement. The only entity with standing to challenge A-B's compliance with the terms of the Equity Agreement is Capitol City. 1 Capitol City is not a party to this action. Because none of the plaintiffs are parties to the agreement and are not third party beneficiaries, they lack standing to bring a claim based on the Equity Agreement. 2. Existence of a contract Even if plaintiffs had standing to challenge A-B's compliance with the Equity Agreement, plaintiffs have not demonstrated that they had a valid contract and are entitled to summary judgment. The condition precedent present in that agreement required approval of the transfer by A-B. Plaintiffs claim the condition precedent was satisfied when A-B automatically approved the sale of Capitol City according to the terms of the Equity Agreement between A-B and Capitol City. The Equity Agreement provided that if A-B failed to take action within any of the time frames established in Exhibit 6 to the Agreement, the proposed purchase was approved automatically. Exhibit 6 required A-B to either render a decision regarding the purchase within 30 days of receiving requested information from Capitol City, or to make a request for further information within 10 days of the last received information. Plaintiffs claim that A-B received all of the information it had requested from Capitol City on August 2, 1993. Therefore, A-B automatically approved the transfer on September 1, 1993 if no further requests for information had been made. However, the evidence shows that on June 11, 1993, A-B requested documentation concerning information Capitol City had requested from BATF. A-B had not received the information as of September 1, 1993. Therefore, A-B did not automatically approve the purchase on September 1, 1993. Plaintiffs also claim that A-B automatically approved the sale on May 28, 1994. A-B received information from Capitol City on April 29, 1994. On May 11, 1994, A-B requested additional information, but plaintiffs claim it was not a proper request. However, even if the request was not proper, A-B still had a request for information outstanding. The BATF information that A-B had requested from Capitol City in June, 1993 was not received by A-B until May 11, 1994. A-B notified Capitol City of its disapproval of the sale on June 10, 1994. Therefore, the notification of disapproval was timely. Because plaintiffs lack standing to challenge A-B's compliance with the terms of the Equity Agreement and

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Exhibits in Support of Motion for Summary Judgment App. 243

because A-B notified Capitol City of its disapproval in a timely manner, plaintiffs' motion for summary judgment is denied. DEFENDANT'S MOTION FOR SUMMARY JUDGMENT Defendant moves for summary judgment on both the tortious interference with contract and the tortious interference with prospective economic advantage claims asserted by plaintiffs. Tortious Interference with Contract 1. Condition Precedent As discussed above, to prevail in an action for tortious interference with contract, a plaintiff must show: 1) existence of contract, 2) alleged wrongdoer's knowledge of contract, 3) intentional procurement of the contract's breach, 4) without justification, and 5) damages resulting therefrom. Royal Realty Co. v. Levin, 244 Minn. 288, 292, 69 N.W.2d 667, 671 (1955). Defendant's first argument in support of its summary judgment motion is that none of the plaintiffs had valid, existing contracts. Defendant claims that A-B's approval of the sale of Capitol City to RA was a condition precedent to each of the contracts which are the basis of this claim. Defendant claims that because the condition was not satisfied, the contracts never actually came into existence. A condition precedent is a condition which is to be performed before the agreement of the parties becomes operative. "A condition precedent calls for the performance of some act or the happening of some event after the contract is entered into, and upon the performance or happening of which its obligation is made to depend." Lake Company v. Molan, 269 Minn. 490, 498-99, 131 N.W.2d 734, 740 (1964) (quoting Chambers v. Northwestern Mutual Life Ins. Co., 64 Minn. 495, 497, 67 N.W. 367, 368). The Minnesota Court of Appeals has held that a condition precedent prevents a party from acquiring any rights under the contract at issue unless the condition occurs. Aslakson v. Home Savings Association, 416 N.W.2d 786, 789 (Minn.Ct.App. 1987). A breach of contract does not occur when a contract is conditioned on third-party approval and the approval is not received. Id. A claim for tortious interference with contract cannot prevail if a condition precedent has not been met because there is not a valid contract, a necessary element of the tort. Id. In Aslakson, plaintiffs entered into a purchase agreement with a prospective buyer of their mobile home. The agreement contained the following language: "This offer is contingent upon buyer being able to assume the loan." Id. at 787. Defendant did not approve the buyer's assumption of the loan because defendant found the buyer's credit rating unsatisfactory. Id. A second prospective purchaser was also found uncreditworthy by defendant. Id. Plaintiffs sued, claiming tortious interference with contract, alleging that defendant had wrongfully rejected the applications of the prospective purchasers. The Minnesota Court of Appeals affirmed the trial court's grant of summary judgment to defendants. "[A] breach of contract does not occur when a contract is conditioned on third party approval and the approval is not received." Id. at 789. The Court of Appeals held that because there had been no valid contract, there could not be a claim for tortious interference with contract. Id. at 789. In Aslakson, the seller of the mobile home was the plaintiff. In the instant case the prospective buyers of Capitol City and others who would benefit from the prospective sale are the plaintiffs. Capitol City is not a party to this lawsuit. Plaintiffs argue that Aslakson was decided based upon reasonable refusal and not because of the failure of the condition precedent. The Court of Appeals gave alternate reasons for affirming the trial court's granting of summary judgment. In the instant case, as in Aslakson, this court believes that even if there was a valid contract, A-B had a valid justification for its decision and did not act unreasonably in denying the transfer of Capitol City.

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Exhibits in Support of Motion for Summary Judgment App. 244

Plaintiffs claim that contracts which are void due to the nonoccurrence of a condition precedent may nonetheless give rise to actionable interference. Plaintiffs base this assertion on the Restatement Second of Torts. The Restatement provides that by reason of the statute of frauds, formal defects, lack of mutuality, infancy, unconscionable provisions, or conditions precedent, the third person may be in a position to avoid liability for any breach. "The defendant actor is not, however, for that reason free to interfere with performance of the contract before it is avoided." RESTATEMENT (SECOND) OF TORTS §766 cmt. f(1979). The Restatement is a secondary source and is not binding on this Court. Since this issue has been clearly decided by the Minnesota Court of Appeals decision in Aslakson, any secondary sources are not persuasive. Plaintiffs also cite Royal Realty Co. v. Levin, 244 Minn. 288, 69 N.W.2d 667 (1955), claiming that it stands for the proposition that even if a contract is unenforceable between the parties, it is still a "contract" for purposes of evaluating the first element of a claim for tortious interference. In Royal Realty, the court considered whether a contract which was not enforceable against the other contracting party because of a Statute of Frauds violation was still actionable for interference. The Minnesota Supreme Court decided that a contract, unenforceable under the Statute of Frauds, was still subject to a tortious interference claim. 69 N.W.2d at 672. The Court did not make a broad assertion that all unenforceable contracts are subject to interference claims. Furthermore, the Court did not discuss conditions precedent at all. This case presents a different issue than Royal Realty. Each contract upon which this action is based contains a clause which conditions enforceability of the contract on A-B's approval of the transfer of Capitol City to RA. 2 Because each contract contains a condition precedent which has not been satisfied, none of the contracts became valid or enforceable. Therefore, plaintiffs have not met the first element of the claim of tortious interference with contract. 2. Duty to act reasonably Plaintiffs claim that A-B had a duty to act reasonably even if, because of the condition precedent, the contract was not valid. In support of this contention plaintiffs cite a Hennepin County District Court opinion in which an appeal is currently pending. Adcom Express, Inc. v. EPK, Inc., (Henn. Cty. Dist. Ct. April 12, 1995). Plaintiffs claim that Adcom stands for the proposition that a franchiser who has a duty to act reasonably in consenting to a transfer of a franchise could not unreasonably deny consent and then escape liability by arguing no contract existed. Plaintiffs argue that the initial determination, in a case where approval of the contract is at issue, is whether the party with the discretion was reasonable, not whether a contract existed. The Adcom decision is clearly distinguishable from the instant case. The Adcom decision, even though is was decided in Minnesota was based on California law, not Minnesota law. In addition, in Adcom, the franchisee proposing to sell the franchise was a party to the tortious interference with contract claims. Therefore, the seller, to whom the wholesaler had a duty not to be unreasonable in withholding consent, was a party to the lawsuit. In this case, the Equity Agreement between A-B and Capitol City states that A-B has a duty to act reasonably to Capitol City when considering whether to approve the sale of Capitol City to a prospective purchaser. Equity Agreement, Art. 4(b)(iii). This duty extends only to Capitol City. The Equity Agreement does not impose a duty on A-B to act reasonably toward RA or the other plaintiffs. The duty to act reasonably flows only from the Equity Agreement. At oral arguments, counsel for plaintiffs conceded that A-B did not have a duty to become involved in any business transactions with plaintiffs. Capitol City, the only entity to whom a duty of reasonableness is owed, is not a party to the action. Unlike the plaintiff in Adcom, the plaintiffs here were neither parties to, nor third party beneficiaries of, the Equity Agreement, from which the duty not to unreasonably withhold consent flows. Even if A-B would have had an obligation to act reasonably toward the plaintiffs, A-B satisfied that duty as a matter of law. The record shows that A-B completed an extensive financial, legal, and marketing analysis

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Exhibits in Support of Motion for Summary Judgment App. 245

of RA's proposal to buy Capitol City. Plaintiffs contend that A-B used an incorrect "base case" and applied formulas incorrectly, and thus their outcomes were flawed. Whether or not that is true is irrelevant in deciding whether they acted reasonably. The duty to act reasonably does not mean that A-B had a duty to make a correct business decision. A-B did a full investigation before refusing to approve the transfer of Capitol City to RA. 3 In disapproving the sale of Capitol City to RA, A-B was simply doing what it had a right to do under the Equity Agreement. Even if they made predictions about RA or the wholesale business in the St. Paul territory that turned out to be inaccurate, that does not mean that they were unreasonable in their denial of consent to transfer Capitol City. There are no genuine issues of material fact regarding plaintiffs' claims for tortious interference with contract. Defendant is entitled to summary judgment as a matter of law. TORTIOUS INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE 1. Source of the business opportunity Defendant's first argument in support of its motion for summary judgment on the tortious interference with prospective economic advantage claim is that it is not actionable against A-B because A-B was the source of the business opportunity allegedly interfered with. It is well settled in Minnesota law that a claim of tortious interference with existing contract is only actionable against third parties, not one of the parties to the contract. A party is not liable for interfering with its own contract. Nordling v. Northern States Power Co., 478 N.W.2d 498, 505 (Minn. 1991); Bouten v. Richard Miller Homes, Inc., 321 N.W.2d 895, 901 (Minn. 1982). Minnesota courts have not previously decided whether or not interested third parties can be held liable for tortious interference with prospective economic advantage. However, courts in other states provide guidance on this issue. A Florida court decided that no cause of action for tortious interference existed as a matter of law against a defendant who was a party to the business relationship interfered with. Genet Co. v. Annheuser[sic]-Busch, Inc., 498 So.2d 683, 684 (Fl. Dist. Ct. App. 1986). In the Genet case, owners of an A-B wholesalership had a Wholesaler Equity Agreement with A-B which gave A-B the right to approve or disapprove any sale of the wholesalership. The plaintiffs in the case entered into an agreement to purchase the business. The written agreement was conditioned on A-B's approval of the sale. A-B did not approve the transaction. Id. The plaintiffs then filed suit, claiming that A-B's refusal to approve the sale tortiously interfered with their prospective economic relations. The court granted defendant's summary judgment motion because "A-B had the contractual right ... to approve or disapprove any proposed transfer ... . Thus, A-B was not a disinterested third party to plaintiffs' agreement." 498 So.2d at 684. The court also noted that "A-B was the source of the business opportunity which plaintiffs sought. The tort of willful interference with a business relationship does not exist where the defendant was the source of the business opportunity allegedly interfered with." Id. The Supreme Court of Kansas reached the same conclusion when dealing with a prospective purchaser of a General Motors dealership. Noller v. GMC Truck & Coach Div., 244 Kan. 612, 772 P.2d 271 (Kan. 1989). The plaintiff entered into an agreement to purchase an existing GMC dealership. The purchase agreement was conditioned on GMC's approval of the sale. In addition, the agreement between the existing dealer and GMC gave GMC the right to approve any proposed sale. 772 P.2d at 272. When GMC did not approve the sale, the prospective purchaser sued, claiming tortious interference with prospective business opportunities. The district court granted summary judgment because the alleged interference did not arise from a relationship between the plaintiff and a third person, but from plaintiff's potential relationship with GMC. The Supreme Court of Kansas affirmed, stating that "the tort of interference with a prospective business advantage occurs where a party improperly interferes with a prospective business advantage of a third person." Id. at 276 (emphasis in original). In this case, although the contracts that are the basis for the tortious interference claim are between RA and

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Exhibits in Support of Motion for Summary Judgment App. 246

Capitol City, the business opportunity that RA was seeking and would have obtained if A-B had approved the transfer, was with A-B. If A-B had approved the sale, RA would have entered into an Equity Agreement with A-B. 4 The sole source of plaintiffs' business would have been A-B. 5 A-B is not a disinterested third party, but rather a crucial and indispensable part of RA's prospective business opportunity. Because A-B was the source of the business opportunity interfered with, a claim for interference with that opportunity cannot stand. 2. Justification Defendant's next argument is that even if A-B did interfere with plaintiffs' contract, defendant acted with justification. The tort of interference with contract requires that the alleged tortfeasor acted intentionally and improperly. See Nordling v. Northern States Power Co., 478 N.W.2d 498, 506 (Minn. 1991). Interference is improper if it is without legal justification. Id. The Restatement comments that it is a defense to a tortious interference claim when an actor has a legally protected interest, the actor in good faith asserts that interest, and protects the interest by appropriate means. RESTATEMENT (SECOND) OF TORTS §773 cmt. a (1979). The Minnesota Supreme Court has stated that "[l]iability for wrongful interference may be avoided by showing that defendant was justified by a lawful object which he had a right to assert." Bennett v. Storz Broadcasting Co., 270 Minn. 525, 134 N.W.2d 892, 897-98 (1965). A party is justified in interfering with a business opportunity if it is reasonable conduct under all the circumstances of the case. 270 Minn. at 537 (citing Carnes v. St. Paul Union Stockyards Co., 164 Minn. 457, 463, 205 N.W. 630, 632). Defendant loses the justification defense when acting with an improper motive. Nordling, 478 N.W.2d at 506 (citing RESTATEMENT (SECOND) OF TORTS §766 cmt. s (1979)). Plaintiffs claim there is a genuine issue of material fact regarding whether A-B acted with improper motive or by improper means, thereby defeating summary judgment on the justification defense. To prevail on this issue, plaintiffs must come forward to defeat the motion with "material facts which show something more than `some metaphysical doubt.' " Carlisle v. City of Minneapolis, 437 N.W.2d 712, 715 (Minn.Ct.App. 1989). Plaintiffs contend that A-B had the improper motive of wishing to replace Capitol City management with A-B insiders who would be more likely to engage in illegal practices. In support of that claim, plaintiffs cite vague "irregularities" in the way A-B handled the analysis of RA. 6 Plaintiffs also offer the affidavit of Richard Arrell in support of the contention that A-B wished to replace Capitol City management with A-B insiders who would be more likely to engage in illegal practices. Arrell claims that A-B executives had, on several occasions, made commitments to retailers that Capitol City would make illegal cash payments in exchange for the retailers' promotion of A-B products. 7 However, plaintiffs have offered no solid, credible evidence that the alleged incidents even took place. Even if there were more solid evidence that A-B engaged in illegal transactions, plaintiffs have offered no evidence to connect those incidents with A-B's alleged improper motive in disapproving the sale of Capitol City to RA. Plaintiffs have made conclusory statements suggesting that there is a connection between these incidents and A-B's motive in disapproving the sale of Capitol City, but have failed to provide any admissible evidence connecting these incidents with A-B's decision not to approve the sale of Capitol City to RA. Plaintiffs also claim that A-B used improper means in disapproving the sale of Capitol City. Plaintiffs allege that A-B made misrepresentations to Capitol City during the time they were analyzing the proposed sale of Capitol City. 8 However, plaintiffs offer no evidence to show that the alleged misrepresentations were anything more than minor misstatements. None of the claims made by plaintiffs raise a genuine issue for a jury. The allegations of improper motive and improper means are too speculative and remote to raise a genuine issue of material fact. In addition, plaintiffs have failed to connect the alleged illegal activities on the part of A-B with A-B's disapproval of the sale of Capitol City. A-B's decision not to approve the sale of Capitol City was justified as a matter of law.

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Exhibits in Support of Motion for Summary Judgment App. 247

There are no genuine issues of material fact remaining regarding plaintiffs' claim for tortious interference with prospective economic advantage. Defendant is entitled to summary judgment as a matter of law on this claim. DEFENDANT'S REQUEST FOR SANCTIONS Defendants have requested Rule 11 sanctions against plaintiffs for the cost of defending plaintiffs' summary judgment motion. Defendants have not brought forth sufficient evidence to support sanctions. Defendant's request for sanctions is denied. PLAINTIFF'S MOTION TO COMPEL DISCOVERY Because summary judgment has been granted, this Court will not rule on the discovery motion. The Equity Agreement states that "[n]o action taken by Anheuser-Busch, and no failure of it to act, under any of the terms of this Agreement shall give rise to a claim against Anheuser-Busch by any proposed purchaser." Equity Agreement, Art. 4(f).
2 1

The Acquisition Agreement, which is the basis for the claim of tortious interference in count I, provides that the agreement is conditioned on obtaining "[a]ll consents necessary from Anheuser-Busch, Inc., including the approval of Buyer, as purchaser, by Anheuser-Busch, Inc. and Anheuser-Busch's execution of a new Wholesaler Equity Agreement with Buyer." This language clearly indicates that approval of the transfer by A-B was a condition precedent to a valid contract.

The agreement between Parkview Management and RA, which forms the basis for count II, was conditioned on the closing of the purchase of Capitol City. The letter of agreement began "[u]pon the closing of the Acquisition, the Company shall pay to Parkview Management, Inc. ... ." The provision that the agreement became operative only after the closing of the Acquisition is a condition precedent to the contract becoming operative. Acquisition of Capitol City was in turn conditioned on approval by A-B. Similarly, the agreement between RA and Schnoebelen, which forms the basis for count IV, is conditioned on the acquisition of Capitol City. The letter of agreement states that "[e]ffective upon the closing of Employer's proposed acquisition of certain assets of Capitol City, you will be paid a base salary of ... ." This provision is clearly a condition precedent to the agreement becoming effective.
3

The Supreme Court of Kansas affirmed a district court's grant of summary judgment in a case in which General Motors refused to approve the sale of a dealership without conducting any investigation of the proposed purchaser or giving any reason for the disapproval. Noller v. GMC Truck & Coach Div., 772 P.2d 271 (Kan. 1989). In this case, A-B conducted an extensive investigation and gave a thorough explanation for the disapproval. To require A-B to enter into a contract with RA would violate the fundamental principle of law that a party has the right to choose the persons with whom it does business. No individual or business is required to enter into a business transaction with anyone. See, e.g., Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585, 602 (1985) (quoting United States v. Colgate & Co., 250 U.S. 300, 307 (1919)).

4

5

The Equity Agreement acknowledges the importance of the sale of a wholesalership to both parties. "The change of ownership, ... of Wholesaler's business is a matter of vital concern to both Anheuser-Busch and Wholesaler. Anheuser-Busch recognizes and supports Wholesaler's desire to obtain the best available price for its business. Wholesaler understands that the ability of Anheuser-Busch to successfully market its products in the Territory is dependent upon the financial, marketing and other qualifications of the prospective purchaser of Wholesaler's business." Equity Agreement, Art. 4(b).

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Exhibits in Support of Motion for Summary Judgment App. 248

6

Plaintiffs claim that the manner in which A-B executive Bruce Sandison became involved directly in the decision not to approve the sale of Capitol City is "suspect". Plaintiff's fail, however, to suggest a concrete connection between Sandison's involvement and any improper motive. Plaintiffs merely claim that his involvement "raises serious questions about A-B's motives and purported methods."

Next, plaintiffs claim that A-B wished to purchase Capitol City before it was aware that RA was a potential purchaser of the business and that Sandison was in charge of the acquisition attempt. However, plaintiffs have not demonstrated how this fact is evidence of an improper motive on the part of A-B. Plaintiffs merely claim that this incident "suggests that A-B was not being objective or `reasonable' in its approach to [Capitol City's] proposed sale to RA." Plaintiffs also claim that documents produced by Mr. Sandison's department prove that A-B stopped evaluating RA as a potential purchaser at least one month before it informed Capitol City of its decision. Assuming that this is true, plaintiffs do not demonstrate how this proves an improper motive on the part of A-B. Arrell offered only two examples of the alleged illegal transactions. First, Arrell claimed that Steve Zelinsky, A-B District Manager, "made commitments to the owners of Gabes on the Park in St. Paul that Capitol City would make cash payments in order to reimburse Gabes for the expense of a band in exchange for an exclusive distribution of A-B products for the event in question." Arrell Affid. ¶6. The allegation in Arrell's affidavit appears to be hearsay. Assuming for the purposes of summary judgment that the allegation is true, it is an isolated incident and too speculative to defeat summary judgment. Second, Arrell claimed that Zelinsky contacted T-Birds and that "the owner of T-Birds indicated to Mr. Zelinsky that he would be willing to put Budweiser on tap in exchange for some Budweiser pool table lights." Arrell Affid. ¶6. The facts as alleged in the affidavit imply only that that the owner of T-Birds may have suggested that A-B engage in a transaction that might be illegal. The affidavit does not demonstrate that A-B agreed with the owner of T-Birds or did anything illegal in connection with this incident.
8 7

The first misrepresentation that A-B cites is a statement made by A-B attorney Dan Kolditz on June 3, 1994 to Capitol City attorney Elliot Kaplan. Kolditz informed Kaplan that A-B had requested more information from Capitol City on May 11, 1994, giving A-B until June 10, 1994, to decide whether to approve or disapprove the sale of Capitol City. In fact, the request had been made to Paul Schnoebelen, who was not an employee of Capitol City. Plaintiffs claim this letter was a misrepresentation crafted to allow A-B enough time to decide whether or not it would induce Capitol City to breach its contract with RA. Plaintiffs have not offered any evidence to show that Kolditz' statement that the information had been requested of Capitol City was anything more than a minor misstatement.

The second misrepresentation cited by A-B is a telephone call made by A-B executive Green to Arrell on June 8, 1994. Green indicated that RA and Capitol City needed to re-execute their purchase agreement to complete its evaluation process. Plaintiffs claim this statement was an intentional misrepresentation meant to secure A-B's right to acquire Capitol City on the same terms that RA would have utilized in acquisition of Capitol City. However, plaintiffs offer no evidence to support the contention that this request was made out of an improper motive.

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Exhibits in Support of Motion for Summary Judgment App. 249

US-DIST-CT, BUSINESS FRANCHISE GUIDE ¶7732, Siedare Associates, Inc. v. Amperex Sales Corp. (Dated July 20, 1981)

Siedare Associates, Inc. v. Amperex Sales Corp. U.S. District Court, District of Minnesota, Fourth Division. No. 479 Civ. 398. Dated July 20, 1981. Ordinary Business Expenses Did Not Constitute Franchise Fee

What Is a Franchise? --Fee Requirement --Business Expenses and Franchise Fee. --Since expenses incurred by a sales representative for sending employees to sales meetings, mailing promotional material, and assisting in collecting delinquent accounts did not constitute a franchise fee within Minnesota's relationship/termination law, the sales representative was not a franchisee. Such expenditures were ordinary costs of conducting business as a sales representative. To hold otherwise would subject every sales representative relationship to requirements imposed on franchise relationships. Thus, the sales representative's claims based on Minnesota's franchise law were summarily dismissed. Memordandum [In full text] Alsop, D.J.: When considering