Solanki v. 7-Eleven, Inc.

Filing 63

OPINION AND ORDER re: 48 MOTION for Summary Judgment. filed by 7-Eleven, Inc. For the reasons discussed above, Defendants Motion for summary judgment dismissing all of Plaintiffs claims is hereby DENIED. (Signed by Judge Lorna G. Schofield on 01/29/2014) (jcs)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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:
JIMMY SOLANKI,
:
Plaintiff,
:
:
-against:
:
7-ELEVEN, INC.,
:
Defendants. :
:
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X

01/29/2014

12 Civ. 00027 (LGS)
OPINION AND ORDER

LORNA G. SCHOFIELD, District Judge:
Plaintiff Jimmy Solanki (“Solanki”) brings this action pursuant to New York General
Business Law §§ 683 and 687, commonly referred to as the Franchise Sales Act (the “FSA”),
against Defendant 7-Eleven, Inc. (“7-Eleven”). Defendant moves for summary judgment
dismissing the action in its entirety. For the reasons discussed below, this motion is denied.
I.

Facts
The facts are taken from the parties’ summary judgment submissions and, as is required

on this motion, construed in the light most favorable to Plaintiff, the nonmoving party.
Solanki purchased his first 7-Eleven franchise in 2003, located in Clifton, New Jersey
and his second 7-Eleven franchise in 2005, located in Manhattan, New York. Solanki sold the
Clifton, New Jersey store in 2009.
Shortly thereafter, Solanki became interested in purchasing a third 7-Eleven franchise in
Brooklyn, New York, known as Store 34320, the store that is the subject of this lawsuit (the
“Store”). In late May or early June 2009, Solanki met with 7-Eleven Franchise Sales Manager
Martina Hagler (“Hagler”) to discuss this possibility (the “Initial Meeting”).

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At or shortly following the Initial Meeting, Solanki received a copy of the July 2009
edition of 7-Eleven’s Franchise Disclosure Document for New York. The document contained,
among other things, “unaudited financial statements that show the most recently available annual
averages of the actual sales, earnings and other financial performance . . . of franchised 7-Eleven
stores.” The document also included language cautioning franchisees that “[m]any factors will
affect the actual sales and earnings of a store you franchise” and that they “should not predict
any future results based on historical operating summaries.”
At the Initial Meeting, Hagler explained the Franchise Disclosure Document and the
application process to Solanki. Solanki had some familiarity with the process, as he had
experienced it before with both of his prior 7-Eleven franchises.
Solanki testified that he had made up his mind that he wanted to purchase the Store
before he received the Franchise Disclosure Document and that 7-Eleven would provide a
Franchise Disclosure Document only after a potential franchisee had expressed an interest in
acquiring a particular store. Solanki filed a declaration in opposition to this motion clarifying
that, while he expressed an interest in the Store prior to viewing the Franchise Disclosure
Document, he did not decide or commit to acquire the Store until after he had seen the document.
At or shortly following the Initial Meeting, Solanki also received a Business Plan Outline
from 7-Eleven, which stated, “Acceptance of this plan by 7-Eleven in no way . . . represent[s]
that 7-Eleven agrees that the sales, profits, expenses or other financial information reported in
your plan are accurate, obtainable, or feasible.” The Business Plan Outline also stated, “By
reviewing or accepting the Store Budget, 7-Eleven is in no way representing that a particular
store will achieve a certain level of sales, expenses, income or any other financial performance.”
At the time he received the Business Plan Outline, Solanki signed a disclaimer, which
stated, in part, “I/we acknowledge . . . that the acceptance of me/us as franchisee(s) by 7-Eleven
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is not to be construed as 7-Eleven’s representation that the sales and earnings calculations which
I/we have set forth in the sample financial statement for the store will be achieved.”
Following the Initial Meeting, Solanki filled out the Business Plan Outline without
anyone else’s assistance or consultation except for the input and documents Defendant’s
personnel provided him. Using the outline, he prepared a business plan as required, projecting
sales to be $1.5 million for the first year of operation. Solanki submitted his business plan to
Hagler for approval by Defendant.
About two months after submitting his business plan, Solanki had another meeting
(“Second Meeting”) with Hagler and 7-Eleven Market Manager Sal Cangelosi (“Cangelosi”). At
the Second Meeting, the representatives from 7-Eleven approved his business plan and told
Solanki that he was a qualified candidate.
Defendant points to deposition testimony from Solanki, which Defendant interprets as
saying that neither Hagler nor Cangelosi represented to Solanki at the Second Meeting that 7Eleven had done its own revenue projections for the Store. Solanki counters in his declaration
that, while neither Hagler nor Cangelosi directly stated that 7-Eleven had done its own
projections, Hagler informed Solanki at the Second Meeting that the projections in his business
plan were “consistent with and in line with 7-Eleven’s estimates,” which Solanki understood to
imply that 7-Eleven had done its own projections.
7-Eleven’s revenue projections for the Store, if any existed, were never provided to
Solanki. No revenue projections, prepared either by 7-Eleven or Solanki, were included in the
Franchise Disclosure Document.
On or before July 21, 2009, Solanki received a copy of 7-Eleven’s form franchise
agreement (the “Agreement”). The Agreement contained an integration clause. Solanki

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executed the Agreement on August 24, 2009. Pursuant to the Agreement, Solanki paid 7-Eleven
$228,900 in franchise fees.
At the time he executed the Agreement, Solanki understood that construction on the Store
would be completed in October 2009; however, zoning and code issues caused a delay until June
2010. The Store opened on June 25, 2010, which was the effective date of the Agreement.
During its first year of operation, the Store never achieved the sales that Solanki had
projected in his business plan. By June of 2011, the Store had generated total sales of about
$310,000. During that first year, Solanki invested an additional $50,000 in the Store.
In or about April of 2011, Solanki requested that 7-Eleven reassign him to another store
in Manhattan, which request was denied. Then, in or about June of 2011, Solanki communicated
to 7-Eleven that he wished to return the Store to 7-Eleven because he could not make payroll. At
Solanki’s request, 7-Eleven terminated the Agreement effective June 20, 2011.
The Complaint was filed on January 4, 2012.
II.

Legal Standard
The standard for summary judgment is well established. Summary judgment is

appropriate where the record before the Court establishes that there is no “genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). A genuine dispute as to a material fact exists “if the evidence is such that a reasonable
jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986). The Court must construe the evidence in the light most favorable to the
nonmoving party and must draw all reasonable inferences in the nonmoving party’s favor. See
Id. at 255.

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III.

Discussion
In this action, Solanki asserts four claims against 7-Eleven, all for violations of the FSA,

and all based on the same factual predicate. Solanki alleges that Hagler represented to him at the
Second Meeting that the revenue projections in his CBP “were consistent with and in line with 7Eleven’s estimates” and that he relied on this representation when deciding to enter into the
Agreement. Solanki argues that 7-Eleven therefore violated the FSA because (1) the revenue
estimates of 7-Eleven and the basis for the estimates, alluded to by Hagler, were not included in
the Franchise Disclosure Document, as required by the FSA and (2) the 7-Eleven earnings
estimates were false, misleading and lacked any reasonable basis.
Defendant moves for summary judgment on all claims, arguing that the record does not
contain any evidence to support the allegations in the Complaint or create any disputes of
material fact. This argument fails, as the Court finds that the record does contain evidence such
that a reasonable jury could return a verdict for Solanki, and does raise several issues of material
fact to be decided by a jury.
First, Defendant argues that no one from 7-Eleven could possibly have represented to
Solanki that his revenue projections for the Store were consistent with those of 7-Eleven because
Solanki admits in his deposition that no one from 7-Eleven told him that 7-Eleven had done its
own projections for the Store. However, this testimony is ambiguous:
Q. . . . Did [the representatives from 7-Eleven] ever tell you they had done their own
projections?
A. They had similar projections.
Q. Did they?
A. 7-Eleven always projects before they open stores.
Mr. Miller [attorney for Plaintiff]: The question is about the store though.
A. No. No, they did not.
At first, when asked if the representatives from 7-Eleven ever told him “they” – which
could mean either the specific representatives at issue or 7-Eleven, the corporation – had done
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their own projections, Solanki testifies that they “had similar projections,” which implies that
they had shared information with Solanki about their projections. Then, when pressed on the
matter, Solanki testifies that “7-Eleven always projects,” again implying, but not stating, that the
representatives had shared information with him about the company’s projections. Finally, after
a statement by his own attorney, Solanki says, “No, they did not.” However, it is not entirely
clear on the record which question, if any, this statement is answering, and even if it is an answer
to the question about whether the 7-Eleven representatives told him that they had done their own
projections, then this answer causes the deposition testimony to contradict, or at a minimum,
confuse, itself.
The Court must construe this deposition testimony in the light most favorable to Solanki,
the nonmoving party, and must draw all reasonable inferences in Solanki’s favor. Anderson, 477
U.S. at 255. Therefore, the Court declines to interpret this testimony as an admission by Solanki
that no one from 7-Eleven told him, or implied to him, that 7-Eleven had done its own
projections for the Store.
Furthermore, Solanki provides a declaration in which he clarifies his deposition,
testifying that while the representatives from 7-Eleven did not directly state that 7-Eleven had
done its own projections, Hagler did inform Solanki that his projections were consistent with
those of 7-Eleven, which Solanki understood to imply that 7-Eleven had done its own
projections. Defendant argues that Solanki’s declaration should be disregarded. A subsequent
declaration that contradicts prior deposition testimony should be disregarded on summary
judgment. Mack v. U.S., 814 F.2d 120, 124 (2d Cir. 1987). However, the declaration at issue
cannot be said to contradict definitively the prior deposition testimony, as the prior testimony is
unclear. Instead the declaration works to clarify the deposition’s apparent internal inconsistency.

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Considering all of this testimony, it is clear that whether Hagler made the representation alleged
in Solanki’s complaint is a disputed issue of material fact for trial.
Next, Defendant argues that, even assuming the representation discussed above was
made, Solanki had already made up his mind to purchase the Store before he received the
Franchise Disclosure Document; therefore, Solanki could not have relied on Hagler’s alleged
representation or its absence from the Franchise Disclosure Document when deciding whether to
enter into the Agreement. Defendant provides deposition testimony from Solanki in which he
agrees that he had “made up [his] mind that [he] wanted to buy” the Store before he received the
Franchise Disclosure Document.
However, making up one’s mind that he wants to buy a particular store and making up
one’s mind that he is committed to actually go through with the purchase based on information
are two different things. Solanki testifies in his declaration that while he expressed his desire to
acquire the Store prior to viewing the Franchise Disclosure Document – desire that he testifies in
both his deposition and his declaration was necessary to get 7-Eleven to provide the Franchise
Disclosure Document in the first place – he did not decide or make a commitment to do so until
afterwards. Thus, whether Solanki relied on Hagler’s alleged representation is a disputed issue
of material fact for trial.
Finally, Defendant argues that, even assuming Solanki relied on Hagler’s alleged
representation, this reliance was not reasonable because Solanki disclaimed reliance on such
representations. Defendant provides evidence of disclaimers reviewed, acknowledged and
signed by Solanki before he entered into the Agreement, many of which are quoted in the
“Facts” section above.
Regarding a claim for common law fraud, it is true that “a party cannot justifiably rely on
a representation that has been disclaimed by agreement.” Dallas Aerospace, Inc. v. CIS Air
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Corp., 352 F.3d 775, 785 (2d Cir. 2003). However, Solanki’s claims are under the FSA, which
prohibits waivers of any duty or liability imposed by the FSA. See New York General Business
Law § 687(4)-(5); Emfore Corp. v Blimpie Assoc., Ltd., 860 N.Y.S.2d 12, 14 (1st Dep’t 2008)
(holding that waivers of liability are barred by the FSA). Therefore, any disclaimers reviewed,
acknowledged or signed by Solanki cannot bar his claims under the FSA. See id. This leaves
disputed issues of material fact for trial as to the reasonableness of Solanki’s reliance. See id.
IV.

Conclusion
For the reasons discussed above, Defendant’s Motion for summary judgment dismissing

all of Plaintiff’s claims is hereby DENIED.
Dated: January 29, 2014
New York, New York

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