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Franchise Holding II LLC v. Huntington Restaurants Group Incorporated

United States District Court, Ninth Circuit

January 8, 2014

Franchise Holding II LLC, Plaintiff,
v.
Huntington Restaurants Group Incorporated, et al., Defendants.

ORDER

DAVID G. CAMPBELL, District Judge.

Defendants Richard and Michelle Beattie, Huntington Restaurant Group, and Golden Management have filed a motion for summary judgment. Doc. 72. Plaintiff Franchise Holding II, LLC has also moved for summary judgment. Doc. 74. The motions are fully briefed. For the reasons that follow, the Court will deny Defendants' motion and grant Plaintiff's motion.[1]

I. Background Facts.

On January 27, 2003, Plaintiff obtained a judgment for $24, 874, 870.09 plus interest against Defendants. The Ninth Circuit affirmed the judgment on July 20, 2004. Plaintiff thereafter made efforts to collect on the judgment, including garnishing two bank accounts totaling $355, 737.95 and seizing various items of personal property, including a 43-foot boat in Florida.

On January 11, 2006, Plaintiff and Defendants entered into a contract titled "Agreement for Stay of Execution Upon Judgment" ("the Stay Agreement"). The Stay Agreement established a schedule under which Defendants would make payments totaling $13, 000, 000 by June 1, 2013, at which time Plaintiff agreed to release the remainder of the judgment debt. As part of the Stay Agreement, Defendants agreed that they would "not further contest the Arizona Judgment in any manner and... withdraw and dismiss all pending motions or other challenges" to the judgment. Doc. 75-2 at 3. The Defendants also agreed to advise Plaintiff of the creation of any entities controlled by Defendants, to withhold all compensation to Richard Beattie from "BFLP, Quality Restaurants Northwest, Inc., Huntington Restaurant Group, Inc., Golden Management, Inc. or any other affiliated entity or person affiliated or related in any way to any of the Beattie parties" without Plaintiff's approval, and to allow Plaintiff reasonable access to the financial records of entities controlled by Defendants. Id. at 4-5. In the event Defendant defaulted, the Stay Agreement provided that the stay would immediately cease and Plaintiff would be entitled, without notice, to enforce the judgment.

Defendants made payments totaling $200, 000, but missed a $1, 000, 000 payment on June 1, 2008. Defendants have refused to make any additional payments.

II. Legal Standard.

A party seeking summary judgment "bears the initial responsibility of informing the district court of the basis for its motion, and identifying those portions of [the record] which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Summary judgment is appropriate if the evidence, viewed in the light most favorable to the nonmoving party, shows "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). Summary judgment is also appropriate against a party who "fails to make a showing 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. Only disputes over facts that might affect the outcome of the suit will preclude the entry of summary judgment, and the disputed evidence must be "such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

III. Analysis.

Arizona law governs the Stay Agreement. Doc. 75-2 at 5. The elements for a breach of contract claim under Arizona law include the existence of a contract, a material breach of the contract, and resulting damages. Frank Lloyd Wright Found. v. Kroeter, 697 F.Supp.2d 1118, 1125 (D. Ariz. 2010). Defendants do not dispute that they entered into the Stay Agreement with Plaintiff. Defendants also acknowledge that they materially breached the Stay Agreement and that their breach damaged Plaintiff in the amount of $12.8 million. Defendants maintain, however, that they are entitled to summary judgment for two reasons: (1) the Stay Agreement is unenforceable because it lacked consideration, and (2) the sole remedy available under the Stay Agreement is enforcement of the original $24, 874, 870.09 judgment, which has now expired under Arizona law. The Court will address each of these arguments.

A. Lack of Consideration.

Defendants assert that the Stay Agreement did not impose any obligation that they did not already have, and did not give Plaintiff any right it did not already possess. Doc. 78 at 2. Defendants argue that the Stay Agreement lacks consideration. Id.

"[A] promise must be supported by consideration or some substitute in order to be legally enforceable." Yarbro v. Neil B. McGinnis Equip. Co., 420 P.2d 163, 167 (Ariz. 1966). "[A] benefit to a promisor or a loss or detriment to the promisee is good consideration to legally support a promise." Id. The Court concludes that the Stay Agreement is legally enforceable because both parties tendered consideration.

Plaintiff furnished consideration by promising to forebear on enforcement of the $24, 874, 870.09 judgment. See Id. at 166-67; 3 Williston on Contracts ยง 7:44 (4th ed.) ("Forbearance from exercising a right or doing an ...


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