Dunkin' Donuts Franchised Restaurants, LLC v. Claudia I, LLC

998 F. Supp. 2d 383, 2014 WL 512998, 2014 U.S. Dist. LEXIS 16122
CourtDistrict Court, E.D. Pennsylvania
DecidedFebruary 10, 2014
DocketCivil Action No. 12-2010
StatusPublished
Cited by2 cases

This text of 998 F. Supp. 2d 383 (Dunkin' Donuts Franchised Restaurants, LLC v. Claudia I, LLC) is published on Counsel Stack Legal Research, covering District Court, E.D. Pennsylvania primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Dunkin' Donuts Franchised Restaurants, LLC v. Claudia I, LLC, 998 F. Supp. 2d 383, 2014 WL 512998, 2014 U.S. Dist. LEXIS 16122 (E.D. Pa. 2014).

Opinion

[386]*386MEMORANDUM

STENGEL, District Judge.

This dispute involves a franchising relationship gone awry. Plaintiffs, Dunkin’ Donuts Franchised Restaurants, LLC, DD IP Holder, LLC, Baskin-Robbins Franchised Restaurants, LLC and DB Real Estate Assets I, LLC (Collectively “Dun-kin’ ”) filed this action against its Franchisee Claudia I LLC and its members Manfred and Lynne Marotta (“Claudia” or “the Marottas”) seeking relief for breach of the franchise agreement.1 Claudia answered the complaint and filed a counterclaim against Dunkin’. Claudia also filed a third party complaint against Third Dunkin Donuts Realty, Inc. (“TDDR”) and Spring Hill Realty, Inc. (“Spring Hill”). Dunkin’ and TDDR now move for summary judgment on Claudia’s counterclaim and third party complaint. For the reasons that follow, I will partially grant Dunkin’s motion.

I. Background

The Dunkin’ Donuts store that is at the center of this franchise dispute was located at 505 Old York Road in Jenkintown, Pennsylvania. Pis.’ Statement of Undisputed Facts (doc. no. 69) ¶ 3. This property is owned by Spring Hill. Prime Lease, Certification of Manfred Marotta (“Certification”) Ex. B (doc. no. 77-20). TDDR and Spring Hill executed a lease (“the prime lease”) for the Jenkintown property on March 1, 2002. Id. TDDR entered into a sublease for the premises with the original franchisee on December 20, 2002. Sublease, Certification Ex. C (doc. no. 77-3). Thereafter, TDDR merged into DB Real Estate Assets I, LLC and DB Real Estate became the sublandlord for the store. Pis.’ Statement of Undisputed Facts ¶ 9. On July 16, 2009, Claudia purchased the franchise and took the seller’s tenant interest at the Jenkintown store by a transfer agreement executed by the seller, Claudia and Dunkin’. Transfer Agreement, Deck of Gary Zullig Ex. B (doc. no 53-2). Claudia and Dunkin’ then entered into a franchise agreement. Franchise Agreement, Certification Ex. A (doc., no. 77-1). Dun-kin’ reserved the right to terminate the franchise agreement if it terminated the sublease to the store. Id. ¶ 14.2.

Claudia had multiple complaints about Spring Hill and wanted to relocate the store. First, Claudia has presented evidence that Spring Hill failed to maintain the property as required by the prime lease. Defs.’ Statement of Undisputed Facts (doc. no. 78) ¶¶ 37-52. As a result, the exterior of the store deteriorated which may have hurt business. Second, Claudia paid a monthly base rent of $8,750 which amounted to $36 per square foot; however, the Marottas found that fair market rent for comparable properties in Jenkintown ranged from $18 to $22 per square foot. Id. ¶ 89; Sublease § 1.8. Finally, Spring Hill was overcharging Claudia for common area maintenance (cam).

Article 17 of the prime lease required Claudia to reimburse Spring Hill for its pro-rata share of cam expenses. Claudia’s pro-rata share was calculated by dividing the square footage of the store by the square footage of the Spring Hill’s leasable floor area. Prime Lease § 17.2. According to the prime lease, the size of the store was 3,167 square feet, Sublease 12, and [387]*387Spring Hill’s leasable floor space was 29,-384 square feet. Prime Lease § 1.1(h). Claudia conducted an audit of Spring Hill’s claimed cam charges and calculated that the actual size of the store was 2,782 square feet and that Spring Hill’s leasable space was 30,094. Siegal & Drossner Audit, Certification Ex. G. (doc. no 77-7). The overstatement of square footage in the lease caused Claudia to pay a higher rate of cam charges than it actually owed.2 As a result, Claudia was entitled to reimbursement pursuant to article 17.4 of the prime lease.3

As sublessee, Claudia was powerless to resolve its disputes with Spring Hill.4 Further, Claudia was at Dunkin’s mercy to make a good deal on a lease for the store’s location when the prime lease expired at the end of 2012.5 Therefore, Claudia requested that Dunkin’ relocate the store and seek reimbursement of the cam overcharges. Defs.’ Statement of Undisputed Facts ¶¶ 24-31, 68. According to Emails produced during discovery, Dunkin’ executives did not dispute that cam charges were overstated. Certification Ex. I (doc. no. 77-9). The executives also agreed that 505 Old York Road was not a good location. Id. Nonetheless, Dunkin’ chose to extend the prime lease rather than relocate. First Amendment to Sublease, Certification Ex. K (doc. no 77-11). While the renewed prime lease reduced the base rent and eliminated future cam charges, the deal required that Claudia waive its rights to seek reimbursement for past cam overcharges. Id. Claudia did not accept the new sublease.

The Jenkintown store did not turn a profit. Claudia was unable to generate enough revenue to pay the rent, taxes, cam charges and other operational expenses. Certification ¶¶ 143-44. As a result, Claudia stopped paying rent in 2011. Pis.’ Statement of Undisputed Facts ¶ 22. Dunkin’ terminated the sublease and the franchise agreement and this action followed. On May 17, 2013, 2013 WL 2147951, I granted Dunkin’s motion for a preliminary injunction requiring Claudia to vacate the Jenkintown store. Shortly thereafter, Dunkin’ relocated the store to 445 Old York Road in Jenkintown.6

[388]*388II. STANDARD OF REVIEW

A motion for summary judgment may be granted when “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). Summary judgment is proper when no “reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A party seeking summary judgment initially bears the burden of identifying those portions of the record that it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Summary judgment is therefore appropriate when the non-moving party fails to rebut the moving party’s argument by pointing to evidence that is “sufficient to establish the existence of an element essential to that party’s case, and on which that party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322, 106 S.Ct. 2548. “Evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor.” Anderson, 477 U.S. at 255, 106 S.Ct. 2505.

III. DISCUSSION

A. Third Dunkin Donuts Realty, Inc.

I will dismiss all claims against TDDR. TDDR was the original lessee on the prime lease and the original sublessor on the sublease. It is undisputed that TDDR merged into plaintiff DB Real Estate Assets I, LLC on May 26, 2006. Pls.’ Statement of Undisputed Facts ¶ 9. TDDR no longer exists. Therefore, DB Real Estate Assets I, LLC assumed TDDR’s rights to the prime lease and sublease to the Jenkintown store and all liability for the breach of the same. 15 Pa.C.S. § 1929(b); see also Pittsburgh Terminal Coal Corp. v. Potts, 92 Pa.Super. 1, 14 (1927) (“legal successor of the original lessor ...

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Cite This Page — Counsel Stack

Bluebook (online)
998 F. Supp. 2d 383, 2014 WL 512998, 2014 U.S. Dist. LEXIS 16122, Counsel Stack Legal Research, https://law.counselstack.com/opinion/dunkin-donuts-franchised-restaurants-llc-v-claudia-i-llc-paed-2014.