UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-1357
JOHN A. MCDONALD; JOHN A. MCDONALD, II,
Plaintiffs - Appellants,
versus
ROBERT FRIEDMAN; RED HOT & BLUE RESTAURANTS,
INCORPORATED,
Defendants - Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Richard D. Bennett, District Judge. (CA-
02-2812-RDB)
Argued: February 2, 2005 Decided: April 19, 2005
Before WILKINSON and KING, Circuit Judges, and Samuel G. WILSON,
United States District Judge for the Western District of Virginia,
sitting by designation.
Affirmed by unpublished per curiam opinion.
ARGUED: W. Stanwood Whiting, OFFICE OF THE ATTORNEY GENERAL OF
MARYLAND, Towson, Maryland, for Appellants. Steven Keith Fedder,
LEITESS, LEITESS & FRIEDBERG, P.C., Baltimore, Maryland, for
Appellees. ON BRIEF: William F. C. Marlow, Jr., MARLOW & WYATT,
Towson, Maryland, for Appellants. Damon L. Krieger, PIPER RUDNICK,
L.L.P., Baltimore, Maryland, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
PER CURIAM:
This is an action for fraud brought under the district court’s
diversity jurisdiction by John A. McDonald and his son John A.
McDonald, II (the “McDonalds”), against Red Hot & Blue Restaurants,
Inc. (“RHB”) and its president, Robert Friedman, arising out of the
failure of a franchising agreement with RHB’s subsidiary, Red Hot
& Blue, Inc. (referred to herein as the “subsidiary” or as “RHB’s
subsidiary”). The district court granted summary judgment to the
defendants, and we affirm.
I.
In March 1997, the McDonalds entered into a written franchise
agreement with RHB’s subsidiary to operate a restaurant franchise
in Morgantown, West Virginia. Under the agreement, the McDonalds
paid the subsidiary an initial, non-refundable franchise fee of
$25,000 and agreed to pay royalties based on a percentage of their
gross sales. The agreement, which contained an integration clause
and a “time is of the essence” provision, called for the McDonalds
to construct the facility and begin operation within twelve
months.1 The agreement also required the McDonalds to submit their
site proposals in writing. The McDonalds submitted one written
proposal and RHB’s subsidiary approved it on July 9, 1999.
1
The agreement provided for a one-year limitations period for
all claims arising out of the agreement or the relationship of the
parties.
2
However, due to some problems with that site, the McDonalds did not
open a franchise at the approved location. Although the McDonalds
claim they sought to identify alternative sites, they did not make
any further written proposals. On August 23, 2000, nearly three
and a half years after the execution of the franchise agreement,
Friedman sent the McDonalds a letter noting that the McDonalds had
failed to open a franchise restaurant as the agreement required and
indicating RHB’s desire to bring its business relationship with
them to an “amicable end.” Although not required under the
agreement, the letter proposed to refund $5,000 of the initial
$25,000 franchise fee. The McDonalds rejected the offer, and on
October 30, 2000, Friedman terminated the franchise agreement
because the McDonalds had failed to comply with its express terms.
Six months later, in June 2001, the McDonalds’ counsel
notified RHB of the sale at public auction of used restaurant
equipment that the McDonalds had purchased “as is” from a third
party in 1998 for $115,000. The letter referred to the “recent
wrongful termination of their franchise” and alleged that the
McDonalds “were defrauded into not only purchasing the equipment
but entering into the franchise agreement in the first instance.”
The McDonalds sold the equipment at public auction for less than
$10,000.
The McDonalds filed this action in July 2002, in the Circuit
Court for Baltimore County, Maryland. Rather than sue the
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franchisor, RHB’s subsidiary, for breach of the franchise
agreement, the McDonalds sued RHB and Friedman, alleging two counts
of fraud.2 On the first count, the McDonalds essentially claimed
that the defendants fraudulently induced them to enter into a
franchise agreement that they never intended to honor. The
McDonalds claimed that Friedman orally represented that RHB’s
subsidiary would approve site selections in other locations,
including Maryland, and that he promised the McDonalds “all the
time they needed” to find a restaurant site. They claimed that the
defendants did not honor these oral inducements or intend to at the
time Friedman gave them. On the second count, the McDonalds
claimed that the defendants intentionally misrepresented the value
of the used restaurant equipment the McDonalds purchased from a
former franchisee. The defendants removed this case to the
district court. Following discovery, the court found that the
McDonalds’ evidence was insufficient to establish reasonable
reliance, an essential element of their fraud claims, and entered
summary judgment for the defendants.
II.
We review a district court’s award of summary judgment de
novo. Shaw v. Stroud, 13 F.3d 791, 798 (4th Cir. 1994). After
2
As the district court correctly noted, the McDonalds could not
raise a breach of contract claim because the franchise agreement’s
one-year limitations period had passed.
4
careful consideration of the parties’ briefs and oral argument, the
record, and the relevant legal authorities, we conclude that the
district court properly granted summary judgment to defendants.
Accordingly, we affirm essentially on the reasoning of the District
Court. McDonald v. Friedman, Case No. RDB-02-2812 (D. Md. Feb. 3,
2004). Our review of the record also convinces us that there is
insufficient evidence from which a jury could conclude that the
defendants made material misrepresentations. See Sass v. Andrew,
832 A.2d 247, 256 (Md. Ct. Spec. App. 2003)(noting that “fraud or
fraudulent inducement means that a party has been led to enter into
an agreement...as a result of deceit.”)
The McDonalds’ theory as to their claim of fraudulent
inducement can be reduced to this: the failure of RHB’s subsidiary
to revise the express terms of the contract as to the franchise
location and its refusal to extend indefinitely the “time is of the
essence” provision is evidence that the defendants never intended
to honor the agreement. This theory is untenable. The
franchisor’s ultimate reliance on the express terms of the contract
certainly cannot be evidence of fraud. Indeed, the argument stands
logic on its head. The McDonalds cannot breach their unequivocal
written promise to begin franchise operations within twelve months
and then cite the franchisor’s reliance on the unequivocal, clearly
understandable provisions of its written franchise agreement as
their evidence of fraud.
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The McDonalds’ theory and evidence on the second claim fare no
better. The McDonalds inspected and purchased “as is, where is”
used restaurant equipment from a third party, a former franchisee.
They complain that defendants represented that the equipment was a
“good deal” but that years later they were able to resell it for
only a fraction of the purchase price. There is no evidence that
the price they paid for the equipment was inflated or that the
defendants had any financial stake in the sale of the equipment.
In essence, their proof of fraud seems to boil down to nothing more
than their inability to sell the equipment years later for a price
close to the price they paid for it. There is simply no evidence
showing that defendants misrepresented the value of the equipment.
Furthermore, even if the McDonalds had produced evidence showing
that the purchase price was inflated, we would still find no
evidence of any material misrepresentation on the part of the
defendants. See First Union Nat’l Bank v. Steele Software Syst.
Inc., 838 A.2d 404,442 (Md. Ct. Spec. App. 2003) (noting that “a
representation which merely amounts to a statement of opinion,
judgment, probability or expectation, or is vague and indefinite in
its nature and terms” is not a material misrepresentation).
III.
We find that the district court appropriately considered and
addressed this matter. In addition, we find no evidence from
6
which a jury could find that the defendants made material
misrepresentations and therefore affirm.
AFFIRMED
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