Bald v. PCPA, LLC et al

Filing 23

///ORDER granting 15 plaintiff's Motion for Summary Judgment. So Ordered by Judge Steven J. McAuliffe.(lat)

UNITED STATES DISTRICT COURT
DISTRICT OF NEW HAMPSHIRE
Allan Bald,
Plaintiff
v.

Case No. 15-cv-219-SM
Opinion No. 2016 DNH 081

PCPA, LLC, and
Prime Choice Brands, LLC,
Defendants
O R D E R
This action arises out of the alleged breach of a franchise
agreement between two limited liability companies: The Flying
Butcher, LLC (as franchisee) and Meat House Franchising, LLC (as
franchisor).

In April of 2014, Meat House Franchising found

itself in financial distress and the defendants, PCPA and Prime
Choice Brands, acquired the rights to enforce its franchise
agreements against its franchisees.

Having acquired those

rights, the defendants, in March of 2015, asserted breach of
contract claims against the Flying Butcher and Allan Bald, its
principal.

Defendants invoked arbitration provisions included in both
The Flying Butcher’s franchise agreement and a related “area
development agreement,” as the appropriate process to resolve its
claims.

The Flying Butcher acknowledges that it is contractually

obligated to arbitrate the parties’ disputes.

But, Allan Bald,

the sole member of The Flying Butcher, LLC, denies that he is a
party (in his personal capacity) to either the Franchise
Agreement or the Area Development Agreement.

Accordingly, Bald

brought this action, seeking a declaratory judgment that he is
not legally bound to arbitrate any disputes that may exist
between him and defendants.

Pending before the court is Bald’s motion for summary
judgment.

Defendants object, saying there are genuinely disputed

material facts bearing on the dispositive questions posed, that
is, whether Bald, in his personal capacity, is a party to the
Franchise Agreement and/or the Area Development Agreement and, if
so, whether the mandatory arbitration provisions, as worded,
apply to him.

For the reasons discussed, Bald’s motion for summary
judgment is granted.

Standard of Review
When ruling on a motion for summary judgment, the court must
“constru[e] the record in the light most favorable to the nonmoving party and resolv[e] all reasonable inferences in that
party’s favor.”
(1st Cir. 2014).

Pierce v. Cotuit Fire Dist., 741 F.3d 295, 301
Summary judgment is appropriate when the record

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reveals “no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.”
P. 56(a).

Fed. R. Civ.

In this context, “a fact is ‘material’ if it

potentially affects the outcome of the suit and a dispute over it
is ‘genuine’ if the parties’ positions on the issue are supported
by conflicting evidence.”

Int’l Ass’n of Machinists & Aerospace

Workers v. Winship Green Nursing Ctr., 103 F.3d 196, 199-200 (1st
Cir. 1996) (citations omitted).
71, 76 (1st Cir. 2011).

See also Nolan v. CN8, 656 F.3d

Nevertheless, if the non-moving party’s

“evidence is merely colorable, or is not significantly
probative,” no genuine dispute as to a material fact has been
proved, and “summary judgment may be granted.”

Anderson v.

Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986) (citations
omitted).

The key, then, to defeating a properly supported motion for
summary judgment is the non-movant’s ability to support his or
her claims concerning disputed material facts with evidence that
conflicts with that proffered by the moving party.
Fed. R. Civ. P. 56(c).

See generally

It naturally follows that while a

reviewing court must take into account all properly documented
facts, it may ignore a party’s bald assertions, speculation, and
unsupported conclusions.
987 (1st Cir. 1997).

See Serapion v. Martinez, 119 F.3d 982,

See also Scott v. Harris, 550 U.S. 372, 380

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(2007) (“When opposing parties tell two different stories, one of
which is blatantly contradicted by the record, so that no
reasonable jury could believe it, a court should not adopt that
version of the facts for purposes of ruling on a motion for
summary judgment.”).

Background
In 2011, Bald formed The Flying Butcher, LLC, a New
Hampshire limited liability company.
that business organization.

Bald is the sole member of

On April 20, 2012, The Flying

Butcher entered into a franchising agreement with Meat House
Franchising (“MHF”).
no. 15-3).

See generally Franchise Agreement (document

At some point in 2014, MHF began to experience

financial distress and franchisees started closing their stores.
In April of 2014, defendants entered into an agreement with MHF’s
secured creditors, pursuant to which defendants apparently
acquired all of the rights that MHF held under the Franchise
Agreement with The Flying Butcher, as well as certain
intellectual property that once belonged to MHF.

According to Bald, The Flying Butcher terminated its
Franchise Agreement on April 2, 2014 - approximately two weeks
before defendants acquired MHF’s assets.

Defendants dispute

that, asserting that Bald continued “advertising” using the Meat

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House name on a Facebook page until at least May 10, 2014.

But,

for purposes of resolving Bald’s pending motion, that dispute is
not important.

On March 16, 2015, defendants filed a statement of claim
with the American Arbitration Association (“AAA”), asserting that
both Bald and The Flying Butcher are parties to, and breached,
the Franchise Agreement and Area Development Agreement, both of
which contain mandatory arbitration provisions.

Bald objected,

asserting that he was not personally bound by the arbitration
provisions.

According to defendants, the AAA determined on April

21, 2015, that defendants met the filing requirements for
arbitration against Bald by reason of the arbitration provision
contained in the Franchise Agreement (it seems the AAA did not
address the arbitration provision said to be included in the Area
Development Agreement).

Shortly thereafter, Bald filed this suit

in state court, seeking a judicial declaration that he is not
contractually bound by the arbitration provisions in the
referenced contracts.

That action was removed to this court and

Bald subsequently filed the pending motion for summary judgment.

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Discussion
I.

Who Decides Whether a Party is Obligated to Arbitrate?
A preliminary question presented by plaintiff’s motion for

summary judgment is whether this court or the American
Arbitration Association decides whether Bald is subject to the
Franchise Agreement’s arbitration provision.

That issue can be

resolved fairly quickly.

As the Supreme Court has observed, it is well-established
that because arbitration is a matter of contract, “a party cannot
be required to submit to arbitration any dispute which he has not
agreed so to submit.”

AT & T Techs., Inc. v. Commc’ns Workers of

Am., 475 U.S. 643, 648 (1986).

The Court went on to note that,

“[t]his axiom recognizes the fact that arbitrators derive their
authority to resolve disputes only because the parties have
agreed in advance to submit such grievances to arbitration.”
at 648-49.

Id.

Consequently, “[u]nless the parties clearly and

unmistakably provide otherwise, the question of whether the
parties agreed to arbitrate is to be decided by the court, not
the arbitrator.”

Id. at 649 (emphasis supplied).

Needless to

say, if Bald is not personally liable under the Franchise
Agreement, he is not obligated to arbitrate any dispute arising
thereunder.

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II.

Is Bald a Party to the Contract in His Individual Capacity?
Bald unambiguously signed the Franchise Agreement in his

capacity as an authorized representative of The Flying Butcher.
The signature block on the contract reads as follows:
The Flying Butcher, LLC
By: Allan Bald
Title: CEO
Similarly, in June of 2012, Bald executed an “Amendment to
Franchise Agreement” on behalf of “The Flying Butcher, LLC d/b/a
The Meat House of Amherst” as “Allan Bald, Manager, Duly
Authorized.”

See Amendment to Franchise Agreement (document no.

16-12) at 4.

It seems facially plain, then, that Bald signed not

in his personal capacity but only as the agent of, and on behalf
of the business entity, a disclosed principal.

New Hampshire courts “follow section 328 of the Restatement
(Second) of Agency, which provides that ‘[a]n agent, by making a
contract only on behalf of a competent disclosed or partially
disclosed principal whom he has power so to bind, does not
thereby become liable for its nonperformance.’”

GE Mobile Water,

Inc. v. Red Desert Reclamation, LLC, 6 F. Supp. 3d 195, 200
(D.N.H. 2014) (collecting cases).

See also Restatement (Third)

Of Agency § 6.01 (2006) (“When an agent acting with actual or
apparent authority makes a contract on behalf of a disclosed

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principal, (1) the principal and the third party are parties to
the contract; and (2) the agent is not a party to the contract
unless the agent and third party agree otherwise.”).
Consequently, the New Hampshire Supreme Court has noted that:
[A] manager or member, acting as an agent of an LLC, is
protected from personal liability for making a contract
where acting within his authority to bind the LLC.
Thus, where an LLC enters into a contract, the
manager’s signature on the contract, with or without a
designation as to his representative capacity, does not
render him personally liable under the contract. LLC
members and managers who disclose that they are
contracting on an LLC’s behalf are not liable for a
breach because they are not parties to the contract only the LLC itself is.
Mbahaba v. Morgan, 163 N.H. 561, 565-66 (2012) (citations and
internal punctuation omitted).1

So, the legal presumption is that an authorized member of a
limited liability company who executes a contract on behalf of
that company is not a party to the contract in his or her
personal capacity.

And, when parties to a contract wish to bind

1

Of course, a manager or member of an LLC is free to
assume personal liability for “any or all of the debts,
obligations, and liabilities of the limited liability company,”
N.H. Rev. Stat. Ann. (“RSA”) 304-C:23, but his or her agreement
to do so must be clearly expressed. Absent such a clear
assumption of liability on the part of a member or manager, New
Hampshire law is clear: “No member or manager of a limited
liability company shall be obligated personally for any such
debt, obligation, or liability of the limited liability company
solely by reason of being a member or acting as a manager of the
limited liability company.” RSA 304-C:23 I(b).
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that member in his or her individual capacity, they, including
the agent to be personally bound, must express their intentions
clearly and unambiguously.

“The most obvious indicator of intent

is the form of the signature. . . . [W]here individual
responsibility is demanded the nearly universal practice is that
the officer signs twice - once as an officer and again as an
individual.”

Israel v. Chabra, 537 F.3d 86, 97 (2d Cir. 2008)

(citation omitted).

Here, as noted above, no such intent to bind

Bald in his personal capacity is evidenced: both the Franchise
Agreement and the Amendment to Franchise Agreement contain a
single signature block; Bald executed those contracts solely on
behalf of the limited liability company; and he did not sign
either contract in his personal capacity.

Indeed, his name does

not appear anywhere in the agreement save for his signature as
agent.
There is no evidence or suggestion that MHF ever asked Bald
to personally guaranty The Flying Butcher’s obligations under the
Franchise Agreement - notwithstanding that the Franchise
Agreement clearly states that MHF would require every “person
with an ownership interest” in the franchisee to sign a personal
guaranty.

Franchise Agreement at para. 11(a)(i).

Nor did MHF

require Bald to obtain a “Spousal Consent,” as referenced in
Paragraph 12(e) of the Franchise Agreement.

That MHF did not

require Bald to sign a personal guaranty or obtain “spousal

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consent,” and that Bald executed the Franchise Agreement solely
on behalf of The Flying Butcher, support his claim that neither
he nor MHF ever intended that he would be personally liable under
the franchise contract.

Additionally, defendants offer no admissible evidence
suggesting that MHF ever negotiated for, or even discussed,
Bald’s becoming a party to the Agreement in his individual
capacity.

Nor has any evidence been offered suggesting a course

of dealing, or acts, or statements by Bald suggesting an intent
on his part to become a party to or personally liable under the
agreement.

Defendants do point to language in the form Franchise
Agreement itself that seems to contemplate that the various
franchisees’ principals are individually liable under the
Franchise Agreements.

For example, they point to Paragraph 12

entitled “Covenants,” which specifically references and purports
to bind “You [i.e., The Flying Butcher] and your Principals.”
That paragraph prohibits The Flying Butcher and its principals
from disclosing or improperly using any trade secrets,
proprietary software, business practices, and other proprietary
information and intellectual property of MHF.

(Parenthetically,

those are the covenants defendants claim Bald and the Flying

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Butcher violated.)

Additionally, Paragraph 24 of the Franchise

Agreement, which contains the arbitration provision, states that
“you and we (‘the parties’) agree” to be bound by arbitration.
MHF asserts that, reading the Franchise Agreement in its entirety
and as a whole, it should be clear that the parties intended the
pronoun “you” to refer to The Flying Butcher and its principals.2
But defendants offer no other admissible evidence to support
their contention that Bald is personally liable under the
Franchise Agreement.

Their position rests entirely upon weak and

inferential evidence based on the language used in the agreement.

Of course, that MHF might have contemplated or even “agreed”
that a franchisee’s principals would be party to and personally
bound by contractual obligations to preserve trade secrets,
proprietary software, etc., does not operate to personally
obligate those individual principals.

See, e.g., EQT

Infrastructure Ltd. v. Smith, 861 F. Supp. 2d 220, 233 (S.D.N.Y.
2012) (the ambiguous presence of an individual’s name in a
contract is an insufficient indication of an intent to be
personally bound — that intent must be clear and explicit).

2

If

Bald argues, to the contrary, that since the
arbitration provision, as worded and unlike paragraph 12, does
not include any reference to “Principals,” even if he is deemed
to be a party to, or personally liable under the Franchise
Agreement, still, he would not be subject to arbitration. It is
unnecessary to resolve that interpretive dispute, however.
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MHF intended to make the Flying Butcher’s principal (or any other
franchisee’s principals) personally liable to MHF under the
Franchise Agreement, it easily could have done so by obtaining
the principal’s clear and explicit consent.

MHF did not do so.

See generally DK Joint Venture 1 v. Weyand, 649 F.3d 310 (5th
Cir. 2011) (holding that despite contract language purporting to
bind “affiliates” of corporate signatory (including individual
corporate officers), the parties cannot bind corporate officers
to the contract and its arbitration provision unless those
officers clearly agree to be bound) (collecting cases).

See also

EQT Infrastructure, 861 F. Supp. 2d at 232-33 (S.D.N.Y. 2012)
(applying the so-called “Lollo” factors under New York law and
concluding that an agent who signed a contract on behalf of a
disclosed principal was not personally liable under that
contract); American Guild of Musical Artists v. Atlanta Municipal
Theater, Inc., 322 F. Supp. 1154 (N.D. Ga. 1971) (concluding that
agent of nonprofit corporation was not personally bound by
contract, despite provisions stating that he was signing it both
as an agent for his employer and “in his capacity as an
individual” and that “this agreement shall bind him, individually
and personally,” as well as his employer); McCarthy v. Azure, 22
F.3d 351, 361 (1st Cir. 1994) (signing an arbitration agreement
as agent for a disclosed principal is not sufficient to bind the
agent to arbitrate claims against him personally).

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While the record before the court is perhaps not as fully
developed as it might be, still, there are no material facts
shown to be genuinely disputed, and on this record, the balance
comes down decidedly in favor of Bald.

Bald is entitled to

judgment as a matter of law given the undisputed facts, as it is
clear that he is neither a party to, nor personally bound by, the
terms of the Franchise Agreement.

Conclusion
For the foregoing reasons, as well as those set forth in
plaintiff’s legal memoranda, Bald is not a party to, nor is he
personally liable under, nor is he personally bound by the
Franchise Agreement between The Flying Butcher, LLC, and Meat
House Franchising, LLC.3

Consequently, he did not agree to

arbitrate disputes with defendants related to the agreement, and

3

As to the parties’ related contract - the “Area
Development Agreement” dated September 10, 2010 - Bald
acknowledges that the Franchise Agreement references such a
document, but says he has no recollection (or documentary
evidence) of having ever signed it. For their part, defendants
have failed to produce an executed copy of the Area Development
Agreement. But, they say there is circumstantial evidence Bald
signed that contract, since he paid an “area development fee.”
Of course, that is not evidence that Bald signed such an
agreement in his personal capacity; even if Bald did sign that
contract (an unknown), it is entirely possible that he signed it
solely as an authorized representative of The Flying Butcher or
some other corporate entity (as some evidence in the record
suggests he may have done). Consequently, on this record,
defendants’ only colorable argument is that Bald is personally
bound by the arbitration provision in the Franchise Agreement.
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so is not subject to the mandatory arbitration clause included in
that agreement.

Accordingly, Bald’s motion for summary judgment

(document no. 15) is granted.

The rights of the parties having been declared, further
relief in the nature of an injunction is unnecessary.

Should

such relief become necessary for any reason, however, plaintiff
may file an appropriate motion in this case and it will be heard.

SO ORDERED.
___________________________
Steven J. McAuliffe
United States District Judge
April 19, 2016
cc:

Jonathan M. Shirley, Esq.
David M. Chaise, Esq.
Michael Einbinder, Esq.
William B. Pribis, Esq.

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