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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
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Nos. 15-14872, 15-15759
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D.C. Docket No. 1:07-cv-00741-RWS
EDWARD TRONNES, et al.,
Plaintiffs-Appellants,
versus
MOE’S SOUTHWEST
GRILL, LLC, et al.,
Defendants-Appellees.
________________________
Appeals from the United States District Court
for the Northern District of Georgia
________________________
(November 15, 2016)
Before ROSENBAUM and JULIE CARNES, Circuit Judges, and UNGARO, *
District Judge.
PER CURIAM
*
Honorable Ursula Ungaro, United States District Judge for the Southern District of Florida,
sitting by designation.
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I. Background
This is an appeal from judgment entered in favor of Defendants and against
Plaintiffs after a seven day bench trial. (ECF Nos. 588-598.)
Plaintiffs, who are Moe’s Southwest Grill franchisees, alleged that they
“overpaid and continue to overpay for food, supplies, equipment, and other goods
and services used in their franchise operations, as a result of a ‘kickback’
arrangement benefiting the Defendants.” (ECF Nos. 506, 94 ¶¶ 59-72.) Plaintiffs
further alleged that they were entitled to disgorgement of the overpayments
because Defendants failed to disclose the kickback arrangement in violation of
common law, FTC regulations and each of the plaintiffs’ relevant state’s consumer
protection act. (Id.)
After conducting a bench trial, the district court issued Findings of Fact and
Conclusions of Law finding in favor of Defendants and entered judgment
accordingly. (ECF No. 599.) Thereafter, the district court granted Defendants’
motion for attorneys’ fees and awarded Defendants attorneys’ fees in the amount
of $938,234.90 based upon a provision in the Market Development Agreements
(“MDAs”) into which Plaintiffs had entered providing for an award of attorneys’
fees to the franchisor, its agents or employees as the prevailing parties in any
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action “arising out of or related to” the MDAs. (ECF No. 618.) Plaintiffs timely
filed this appeal challenging both the judgment in favor of Defendants and the fee
award. (ECF Nos. 625, 647.)
II. Standard of Review
We review findings of fact made by district courts under the clearly
erroneous standard and conclusions of law de novo. Thomas v. Bryant, 614 F.3d
1288, 1303 (11th Cir. 2010).
III. Analysis
After reviewing the record and the parties’ briefs, we affirm the judgment
entered in favor of Defendants based on the district court’s well-reasoned Findings
of Fact and Conclusions of Law. (ECF No. 599). However, we reverse the district
court’s award of attorneys’ fees because the court erred in finding that Plaintiffs’
claims arose from or related to the MDAs signed by the parties.
The district court awarded Defendants attorneys’ fees, in the amount of
$938,234.90, based solely on the attorneys’ fees provision in the MDAs signed by
each franchisee and Appellee Moe’s Southwest Grill, LLC (ECF No. 618.) The
district court found that “the relationship between the parties resulting from the
Franchise Agreements arose from and related to the initial MDAs entered into by
the parties . . . [such that] Defendants are entitled to recover reasonable attorneys’
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fees and costs associated with defending this action pursuant to the terms of the
MDAs.” (Id. at 4-5).
“Because contract interpretation is a question of law, we review the district
court’s interpretation of the contract and subsequent [award] of attorneys’ fees de
novo.” Johnson Enters. of Jacksonville, Inc. v. FPL Grp., Inc., 162 F.3d 1290,
1329 (11th Cir. 1998) (internal citations omitted). In this Circuit, “[d]isputes that
are not related—with at least some directness—to performance of duties specified
by the contract do not count as disputes ‘arising out of’ the contract.” Telecom
Italia, SpA v. Wholesale Telecom Corp., 248 F.3d 1109, 1116 (11th Cir. 2001);
Gregory v. Electro-Mech. Corp., 83 F.3d 382, 386 (11th Cir. 1996); McBro
Planning & Dev. Co. v. Triangle Elec. Const. Co., 741 F.2d 342, 344 (11th Cir.
1984), abrogated on other grounds by Lawson v. Life of the S. Ins. Co., 648 F.3d
1166, 1171 (11th Cir. 2011); Seaboard Coast Line R.R. Co. v. Trailer Train Co.,
690 F.2d 1343, 1349-50 (11th Cir. 1982).
The relevant provision of the MDAs providing the basis for the district
court’s award of attorneys’ fees is as follows:
Should Developer institute an action against Franchisor or any of
Franchisor’s agents or employees for any claim arising out of or
related to this Agreement, Franchisor (or its agents or
employees), if it prevails, shall recover from Developer its costs
and reasonable attorneys’ fees incurred in defending said action.
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Record at 1869 § 21. 1
The district court erred in finding that Plaintiffs’ claims arise out of or relate
to the MDAs.2 Plaintiffs’ Third Amended Complaint alleged claims based entirely
on Plaintiffs overpaying for food, supplies, equipment and other goods and
services due to an illegal kickback scheme, which Defendants failed to disclose to
Plaintiffs in violation of state law and federal regulations. (ECF Nos. 506, 94 ¶¶
59-72.) These allegations relate directly to the Franchise Agreements which
governed the operation of each franchise, including “prepar[ing] and sell[ing] all
products sold” by franchisees, but lack any direct relationship to the MDAs which
first granted franchisees the right to develop Moe’s Southwest Grill restaurants
subject to the franchisor’s requirements. Record at 1860-1877, 1835-57, 1839 §
7(a).
Having reviewed and interpreted the MDAs and FAs de novo, we therefore
conclude that because: (1) there is no dispute that Plaintiffs’ claims arise out of and
relate to an alleged kickback scheme that took place and impacted franchises
1
Because each of the MDAs and Franchise Agreements (“FAs”) executed by the parties are
identical, we cite only to the MDA and FA executed by Robert Dreesch, Steve Egan-Fowler and
Brad Dunning.
2
The district court did not address whether Defendants Raving Brands Holding, Inc., Raving
Brands, Inc., H. Martin Sprock, III (“Sprock”), or Moe’s Southwest Grill Holdings, LLC, were
“agents or employees” of Moe’s Southwest Grill, LLC, such that these Defendants could recover
attorneys’ fees under fee provision of the MDAs. (See ECF No. 618.) While Sprock was almost
certainly an employee or agent of Moe’s Southwest Grill, LLC and could, therefore, recover
attorneys’ fees for disputes arising out of or relating to the MDAs, the relationship between the
remaining Defendants and Moe’s Southwest Grill, LLC is unclear.
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during the operation of each respective franchise; and (2) the language employed
in the MDAs and FAs plainly shows that the operation of each franchise is
governed by the FAs and not the MDAs, Plaintiffs claims do not “arise out of or
relate[] to” the MDAs and the award of attorneys’ fees was error. Telecom Italia,
248 F.3d at 1116; see also Seaboard Coast Line R.R. Co., 690 F.2d at 1349-50
(claim did not arise under contract where the contract did “not profess to cover all
present and future aspects of the relationship between [the parties]” but was instead
“a contract of limited application”).
AFFIRMED IN PART AND REVERSED IN PART.
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