ALBARQAWI v. 7-ELEVEN, INC.

Filing 42

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE MARY A. MCLAUGHLIN ON 2/13/14. 2/18/14 ENTERED AND COPIES E-MAILED.(mbh, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
BAHER ALBARQAWI

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v.
7-ELEVEN, Inc.

CIVIL ACTION

NO. 12-3506

MEMORANDUM
McLaughlin, J.

February 13, 2014

This case arises from a franchise agreement between
the plaintiff, Baher Al-Barqawi (“Al-Barqawi”), and the
defendant, 7-Eleven, Inc. (“7-Eleven”), for a 7-Eleven franchise
located in Southwest Philadelphia.

Al-Barqawi entered into a

franchise agreement with 7-Eleven in August 2008.

In doing so,

Al-Barqawi relied on statements made by 7-Eleven representatives
indicating that the 7-Eleven store he was franchising did not
have any problems with crime.

During the first week that Al-

Barqawi operated the store, he discovered that the store had
been subject to frequent criminal activity.

Nonetheless, Al-

Barqawi operated the store for more than two years.
In 2011, after 7-Eleven terminated Al-Barqawi’s
franchise for violations of the franchise agreement, Al-Barqawi
brought this suit.

Al-Barqawi brings claims for breach of

contract, negligent and intentional misrepresentation,
rescission, and promissory estoppel.

Before the Court is the

defendant’s motion for partial summary judgment.

7-Eleven

argues that it is entitled to summary judgment on the
plaintiff’s promissory estoppel, rescission, and negligent and
intentional misrepresentation claims.

The Court agrees and will

grant summary judgment for the defendant.

This case will move

forward on the plaintiff’s breach of contract claim.

II.

Factual Record1
In January 2008, the plaintiff, Baher Al-Barqawi,

sought to become a franchisee of 7-Eleven.
application was rejected.

Al-Barqawi’s initial

On June 12, 2008, a 7-Eleven

Franchise Sales Manager contacted Al-Barqawi about a newly
available franchise opportunity located in Southwest
Philadelphia at 1337 S. 58th Street (the “Store”).
and his wife were unfamiliar with the location.

Al-Barqawi

They visited

the Store and asked 7-Eleven representatives about the
neighborhood.

They were told that the neighborhood and Store

were safe and that there was no problem with crime.
1

The only

The plaintiff’s response briefs do not contain a
recitation of facts or otherwise respond to the defendant’s
statement of facts. The plaintiff does not argue that any of
the facts relied upon by the defendant are in dispute. Rather,
the facts that are material to this motion, most of which are
taken from the plaintiff’s complaint, are supported by evidence
submitted by the plaintiff.
2

issue with crime reported by 7-Eleven was one incident with a
robber who had since been killed.

Al-Barqawi submitted a

franchise application and was approved.
agreement on August 22, 2008.

He signed a franchise

Compl. ¶¶ 5-8; Decl. of Baher Al-

Barqawi ¶¶ 2-5; Def.’s Mot. for Summary Judgment, Exh. C1,
Franchise Agreement.
Al-Barqawi began operating the Store on October 8,
2008.

On Al-Barqawi’s first day as franchisee, $50,000 worth of

money orders was stolen by employees of the former franchisee of
the Store.

Two days later, Al-Barqawi was robbed at gunpoint in

the Store.

A day or two after that, a police officer who was

visiting the Store informed Al-Barqawi that the Store had been
robbed several times, and that the former franchisee kept a
baseball bat under the counter to chase away potential robbers
and shoplifters.

Compl. ¶¶ 10-11; Answer ¶ 50; Pl.’s Resp. to

Answer ¶ 50; Decl. of Baher Al-Barqawi ¶ 8; 1/17/13 Al-Barqawi
Dep. Trans. at 179: 13-21.
In September 2009, Al-Barqawi asked 7-Eleven if he
could do a “BCP Conversion” of the Store.

This would have

required Al-Barqawi to purchase the property, store, and
equipment in return for an increase of his share of the gross
profits.

Al-Barqawi was prepared to invest an additional
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$100,000 for this purpose.

7-Eleven denied the request.

1/30/13 Al-Barqawi Dep. Trans. at 44:7-45:21.
On April 18, 2011, 7-Eleven terminated the franchise
agreement with Al-Barqawi, purportedly due to his failure to
meet 7-Eleven’s minimum net worth requirement and because of
cleanliness violations.

After the franchise agreement was

terminated, Al-Barqawi learned from the former franchisee that
the Store had previously encountered frequent criminal activity
that was not disclosed to Al-Barqawi before he purchased the
franchise.

IV.

Compl. ¶ 17, Exh. F; Decl. of Baher Al-Barqawi ¶ 15.

Discussion2
A.

Standard of Review
A party is entitled to summary judgment if there “is

no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.”
56(a).
2

Fed. R. Civ. P.

The moving party bears the initial burden of

This is a diversity action between the plaintiff, a
citizen of New Jersey, and the defendant, a Texas corporation.
The Franchise Agreement contains a choice of law provision that
states that the agreement shall be governed and construed under
the laws in which the store is located. Al-Barqawi’s franchise
was located in Pennsylvania. The parties do not discuss choice
of law in their briefs, but both parties cite only to
Pennsylvania law. See Def.’s Mot. for Summary Judgment, Exh.
C1, Franchise Agreement at 34.
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demonstrating the basis of its motion.
Catrett, 477 U.S. 317, 323 (1986).

Celotex Corp. v.

Once a properly supported

motion for summary judgment is made, the burden of production
shifts to the nonmoving party, who must set forth specific facts
showing that there is a genuine issue for trial.
Liberty Lobby, Inc., 477 U.S. 242, 250 (1986).

Anderson v.
In reviewing a

motion for summary judgment, the court does not resolve factual
disputes or make credibility determinations, and must view facts
and inferences in the light most favorable to the party opposing
the motion.

Siegel Transfer, Inc. v. Carrier Express, Inc., 54

F.3d 1125, 1127 (3d Cir. 1995).

B.

Promissory Estoppel Claim
The defendant argues that it is entitled to summary

judgment on the plaintiff’s claim for promissory estoppel (Count
V) because a promissory estoppel claim “can only exist in the
absence of a contract.”

Iversen Baking Co. v. Weston Foods,

Ltd., 874 F. Supp. 96, 102 (E.D. Pa. 1995) (citing Carlson v.
Arnot-Ogden Mem. Hosp., 918 F.2d 411, 416 (3d Cir. 1990).

The

plaintiff does not oppose summary judgment for the defendants on
the promissory estoppel claim.
C.

Oral Arg. Trans. at 3:25-4:2.

Rescission Claim
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The defendant argues that it is entitled to summary
judgment on the plaintiff’s equitable rescission claim (Count I)
because (1) the plaintiff must choose either the remedy of
rescission or the remedy of damages, and (2) the plaintiff
waived any claim for equitable rescission by failing to act
promptly.
The Court finds that the rescission remedy is not
available to the plaintiff because the plaintiff failed to act
promptly on his potential claim for rescission.
is a prerequisite to the remedy of rescission.

Prompt action
Schwartz v.

Rockey, 932 A.2d 885, 894 (Pa. 2007) (citing Fichera v. Gording,
227 A.2d 642, 643-44 (Pa. 1967)).

The Pennsylvania Supreme

Court explained that:
When a party discovers facts which warrant rescission
of his contract, it is his duty to act promptly, and,
in case he elects to rescind, to notify the other
party without delay, or within a reasonable time. If
possible, the rescission should be made while the
parties can still be restored to their original
positions. Failure to rescind within a reasonable
time is evidence, and may be conclusive evidence, of
an election to affirm the contract.
Fichera, 227 A.2d at 643-44 (quoting 8 Pennsylvania Law
Encyclopedia § 258 at 280-281).

The non-breaching party must

act promptly to rescind a contract from the viewpoint of a
reasonably prudent person.

Stafford Investments, LLC v. Vito,
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375 F. App'x 221, 223-24 (3d Cir. 2010) (citing Siskin v. Cohen,
70 A.2d 293, 294–95 (Pa. 1950)).
District courts applying Pennsylvania law have also
“uniformly held that when one party breaches a contract in such
a manner that the other party would have the right to terminate
the contract, the non-breaching party will lose that right if it
continues to perform and accept performance of the contract
after learning of the breach.” Surgical Laser Technologies, Inc.
v. Heraeus Lasersonics, Inc., 1995 WL 70535, at *2 (E.D. Pa.
Feb. 15, 1995) (citing several cases applying that rule).
Here, the plaintiff failed to act promptly and
continued performance of the contract long after learning of 7Eleven’s breach.

Al-Barqawi’s rescission claim is based on the

defendant’s alleged misrepresentation that the Store was safe
and had no problems with crime.

The plaintiff entered into the

Franchise Agreement with 7-Eleven on August 22, 2008, relying on
the defendant’s misrepresentations.

On the first day the

plaintiff operated the Store as franchisee, former employees
stole $50,000 of money orders.
robbed at gunpoint.

Two days later, the Store was

A few days after that, a Philadelphia

Police Officer informed the plaintiff that the Store had been
robbed repeatedly and that the police were frequently called to
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the Store.

Compl. ¶¶ 8, 10-11; Decl. of Baher Al-Barqawi ¶ 8;

1/17/13 Al-Barqawi Dep. Trans. at 179: 13-21.
The plaintiff was on notice during his first week as
franchisee that the defendant may have misrepresented the safety
of the Store.

Upon learning that the Store had problems with

crime, the plaintiff had a duty to pursue his rescission claim
within a reasonable time.

The plaintiff here waited over two

years before pursuing a rescission claim against 7-Eleven.

By

that time, the plaintiff had operated the store for a
significant period of time.

The plaintiff had even requested a

“BCP conversion,” which would have required an additional
investment on the part of the plaintiff in exchange for greater
profits.

After operating and profiting from the Store for so

long, it would be difficult to return both parties to their
original positions.
At oral argument, the plaintiff argued that Al-Barqawi
did act promptly to initiate his rescission action once he was
informed by the former franchisee that the Store’s prior
criminal activity was not disclosed to Al-Barqawi.

The

plaintiff argued that Al-Barqawi did not have a duty to pursue
his rescission claim until he was told specifically that 7-

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Eleven made misrepresentations to him regarding crime at the
Store.

See Oral Arg. Trans. at 5:7-6:1.
The plaintiff was on notice long before then, however,

of facts indicating that 7-Eleven may have misrepresented the
history of crime at the Store.

Al-Barqawi knew enough within

one week of operating the Store to conclude that 7-Eleven may
have made misrepresentations to him.

Al-Barqawi did not act

promptly on his rescission claim, but continued to perform on
the contract for more than two years, and the parties cannot be
restored to their pre-contract positions.

C.

Negligent and Intentional Misrepresentation
The defendant argues that the plaintiff’s claims for

damages based on negligent and intentional misrepresentation
(Counts II and III) are barred by the statute of limitations.
The argument is essentially the same as for the rescission
claim.

These claims are also based on the allegations that the

defendants misrepresented to Al-Barqawi and his wife that the
Store was safe and had no problems with crime.

Al-Barqawi

alleges that he relied on those misrepresentations when entering
into the Franchise Agreement.

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In Pennsylvania, the statute of limitations for fraud
and negligent misrepresentation is two years.
5524(7).

42 Pa.C.S.A. §

The statute of limitations begins to run as soon as

the right to bring suit arises.

Pocono Int’l Raceway, Inc. v.

Pocono Produce, Inc., 468 A.2d 468, 471 (Pa. 1983).

The

plaintiff has a duty to “use all reasonable diligence to inform
himself or herself properly of the facts and circumstances upon
which the right of recovery is based and to institute suit
within the prescribed statutory period.”

Ciccarelli v. Carey

Canadian Mines, Ltd., 757 F.2d 548, 556 (3d Cir. 1985) (citing
Schaffer v. Larzelere, 189 A.2d 267, 269 (Pa. 1963)).
The plaintiff was injured by the defendant’s alleged
misrepresentations when he signed the franchise agreement on
August 22, 2008.

The plaintiff should have known of his injury

during the first week that he operated the franchise, in October
2008.

During October 2008, the plaintiff asserts that he was

robbed at gunpoint and he was informed by police officers that
crime occurred frequently at the store.

At that time, Al-

Barqawi should have been aware that 7-Eleven’s statements
regarding the safety of the store may have been misleading or
fraudulent.

The statute of limitations would have expired at

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the latest, therefore, by November 2010.

The plaintiff did not

file his complaint until July 26, 2011.
The plaintiff argues, however, that the statute of
limitations should be tolled under the doctrine of fraudulent
concealment or equitable tolling.

The statute of limitations is

not tolled for mistake, misunderstanding, or lack of knowledge
of the plaintiff.

Ciccarelli, 757 F.2d at 556 (citing Schaffer,

189 A.2d at 269).

“However, if through fraud or concealment the

defendant causes the plaintiff to relax vigilance or deviate
from the right of inquiry, the defendant is estopped from
invoking the bar of limitation of action.”

Id.

In order for

equitable tolling to apply, the defendant must have acted
affirmatively to induce the plaintiff to delay bringing suit.
Id.

(quoting Gravinese v. Johns-Manville Corp., 471 A.2d 1233,

1238 (Pa. Super. 1984)).
In this case, the plaintiff has not made any showing
that the defendants attempted to cause the plaintiff to delay
bringing this action.

The plaintiff’s equitable tolling

argument appears to be based on a misapplication of the
doctrine.

The plaintiff argues that 7-Eleven is estopped from

raising a statute of limitations defense because “7-Eleven
deliberately took actions designed to mislead Al-Barqawi as to
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conditions as the store.”

Pl.’s Supp. Resp. at 6.

The fraud or

concealment that the plaintiff argues entitles him to equitable
tolling is 7-Eleven’s concealment of the nature of criminal
activity at the Store, and the former franchisee’s statements
about criminal activity at the Store.

These statements were

made before Al-Barqawi signed the franchise agreement.

Although

these may have been fraudulent statements, they are not
statements that would have induced Al-Barqawi to delay bringing
this action.

The plaintiff has not asserted that, once he

realized that the Store had problems with crime, the defendant
attempted to deter the plaintiff from bringing his cause of
action, through fraud or concealment.

Rather, the plaintiff

does not reference any statements or fraudulent conduct of the
defendant after he signed the franchise agreement.
The plaintiff’s argument that the statute of
limitations did not begin to run until Al-Barqawi was informed
by former franchisees that 7-Eleven made misrepresentations to
him regarding crime at the Store is also unavailing.

Al-Barqawi

was aware of facts and circumstances by his first week as
franchisee indicating that 7-Eleven may have made fraudulent
statements to him.

It was at that point, at the latest, that

the statute of limitations began to run.
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The statute of

limitations expired in November 2010, and the plaintiff’s
negligent and intentional misrepresentation claims are timebarred.
An appropriate order shall issue separately.

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