STATE OF MINNESOTA
IN COURT OF APPEALS
Susan Dunn, et al.,
National Beverage Corp.,
DTM Distributing, Inc.,
Filed April 3, 2007
Dakota County District Court
File No. C1-03-6885
Phillip R. Krass, Benjamin J. Court, Krass Monroe, P.A., 8000 Norman Center Drive, Suite 1000, Minneapolis, MN 55437-1178 (for Susan Dunn, et al.)
John Edward Connelly, Fiona B. Ruthven, Faegre & Benson LLP, 2200 Wells Fargo Center, 90 South Seventh Street, Minneapolis, MN 55402 (for National Beverage Corp., et al.)
Leif E. Rasmussen, 300 Southdale Place, 3400 West 66th Street, Edina, MN 55435 (for DTM Distributing, Inc.)
Considered and decided by Stoneburner, Presiding Judge; Kalitowski, Judge; and Collins, Judge.
S Y L L A B U S
A party who brings an action for violation of the franchise act pursuant to Minn. Stat. § 80C.17, subd. 1 (2006) is not entitled to attorney fees pursuant to Minn. Stat. § 80C.17, subd. 3 (2006) unless the party has obtained relief under the act.
O P I N I O N
In these consolidated appeals from the district court’s denial of posttrial motions and judgment, National Beverage Corp. argues that (a) the determination that it was a party to the 1972 franchise agreement is erroneous as a matter of law; (b) the evidence regarding the contract claim was insufficient as a matter of law to support the jury’s findings; and (c) the evidence regarding the defamation claim was insufficient as a matter of law to support the jury’s findings. The Twin City Home Juice Co. parties argue that the district court erred as a matter of law in denying their motion for attorney fees pursuant to Minn. Stat. § 80C.17, subd. 3 (2006). Because the evidence was sufficient to support the jury verdict and the district court did not err as a matter of law, we affirm.
August 1, 1972, Twin City Home Juice Co.
At the time of the events at issue in
On May 14, 1999, National Beverage
Chicago Home Juice’s assets. Although the sales agreement did not specify
the 1972 franchise agreement, it did include assets used or necessary in the
operation of the business, even if those assets did not appear on the balance
sheet, unless specifically excluded.
National Beverage sent a letter to Twin City and other Chicago Home
Juice distributors on May 12, 1999, shortly before the sale, advising that the
letter superseded any existing distributor agreements with Chicago Home Juice,
that such agreements had not been assigned to National Beverage as part of the
sale, and that the distributors could continue on a year-to-year basis as long
as they met certain standards. Sue Dunn
and another distributor testified at trial that they had not received this
In 2001, several changes occurred in
In November 2001, Art Dunn sent a letter
to National Beverage raising some grievances, including that National Beverage
denied the franchise, and suggesting that National Beverage buy out the
March 29, 2002, Service and
thereafter, Service ended the subdistribution relationship that
June 2002, however, Leikam, the owner of Service, decided that he wanted to get
out of his contract to purchase
Meanwhile, Sue Dunn began investigating
sale of the business to others. On July
1, 2002, she met McNaughton of DTM to discuss DTM’s interest in purchasing
also discussed selling the business to Tri-County. On August 26, 2002, she and Tri-County
entered into a stock purchase agreement; executed a promissory note for
$375,000 for the assets of the company; and signed a pledge agreement, a third-party
security agreement, and employment and noncompete agreements. But on August 26, 2002, DTM submitted a
written request to buy products directly from National Beverage, which agreed
to the request. DTM advised Tri-County that
it was the authorized dealer for Mr. Pure products and that Tri-County was
not. Tri-County then withdrew from its
was presented that in early October 2002, McNaughton of DTM and representatives
from National Beverage visited several convenience or grocery stores that had
previously obtained Mr. Pure products from
parties then filed posttrial motions, including a motion by Twin City for attorney
fees pursuant to Minn. Stat. § 80C.17, subd. 3 (2006). The district court denied all posttrial
motions and ordered judgment, which was then entered. National Beverage filed a notice of appeal
challenging the judgment and denial of its posttrial motions.
I. Did the district court err in ruling that the issue of whether National Beverage became a party to the 1972 franchise agreement when it purchased the assets of Chicago Home Juice was a question of fact for the jury?
the evidence support the jury’s findings as to
the evidence support the jury’s findings as to
IV. Did the district court err in denying Twin City’s motion for attorney fees under the Minnesota Franchise Act, Minn. Stat. § 80C.17, subd. 3 (2006)?
National Beverage first contends
that the district court erred as a matter of law when it submitted to the jury
the issue of whether National Beverage assumed
National Beverage raised this issue
in motions for summary judgment, directed verdict, and judgment notwithstanding
the verdict, all of which the district court denied. This court will review an appeal from a
denial of summary judgment “to determine whether a genuine issue of material
fact exists and whether the law was correctly applied.” Murphy
v. Allina Health Sys., 668 N.W.2d 17, 20 (
“The construction and effect of a
contract are questions of law for the court.” Turner v. Alpha Phi Sorority House, 276 N.W.2d 63, 66 (
We will first review the relevant contract language. In the 1999 asset-purchase agreement, the assets to be acquired by National Beverage were listed in Schedule 1;
All business, properties and assets of every kind and description, whether real, personal or mixed, tangible or intangible, wherever located, used or necessary in the operation of the Business, free and clear of all liens, encumbrances and interest of any kind including, without limitation:
. . . .
(g) all contracts listed on Schedule 1(g) hereof;
. . . .
(i) all other property owned or leased . . . that is used by or in connection with the Business, whether or not reflected on the most recent balance sheet . . . .
(Emphasis added.) The only contracts listed on Schedule 1(g) are two manufacturing agreements that are not relevant to the issues raised here. Next, Schedule 2, “Liabilities Assumed,” provides that National Beverage assumed only the liabilities attached to the schedule and “no others of any kind or nature.” It states: “Except as set forth in the Amendment and Schedules, neither NBC nor HJA shall assume any obligation, duty or liability of [Chicago Home Juice]. . . .”
Finally, the “Bill of Sale, Assignment and Assumption Agreement” provides that pursuant to the purchase agreement
the Seller hereby grants, conveys, sells, assigns, transfers and delivers to the Purchaser, all of its right, title, interest and benefit in and to the business properties and assets of the Seller of every kind and description, whether real, personal or mixed, tangible or intangible, wherever located (except as specifically excluded from this sale as described below and in the Purchase Agreement), used or necessary in the operation of the Business, all as the same exist on the date hereof, whether or not appearing on the most recent balance sheet for the Seller (collectively, the “Purchased Assets”), free and clear of any Lien. Without limiting the generality of the foregoing, the Purchased Assets shall include, but not be limited to, the following:
. . . .
(g) Contracts. All contracts listed on Schedule 1(g) attached hereto;
. . . .
(i) Other Property. All other property owned or leased by the Seller that is used by or in connection with the business, whether or not reflected on the most recent balance sheet for the Seller.
National Beverage argues that under asset-purchase law, unless the parties make a clear agreement to the contrary, an asset purchaser does not assume and is not liable for the predecessor’s obligations. It cites several cases involving dealerships in which the purchaser was not liable under those agreements. See Mitchell Mach., Inc. v. Ford New Holland, Inc., 918 F.2d 1366, 1369-70 (8th Cir. 1990) (holding that asset purchaser did not become liable for dealership contracts where no language suggested such liability and purchase agreement expressly excluded sales and service agreements with terminated dealers); Ernst v. Ford Motor Co., 813 S.W.2d 910, 916-17 (Mo. Ct. App. 1991) (holding as a matter of law that asset purchaser did not assume obligation for terminated dealership contracts where record did not demonstrate that purchaser assumed liability for such contracts and purchase agreement expressly excluded agreements with terminated dealers from the assets purchased). Because the purchase agreement did not explicitly list the 1972 franchise agreement, National Beverage contends it was not part of the purchase.
National Beverage, however, asserts
It is undisputed that the 1999 asset-purchase agreement does not expressly include the 1972 franchise agreement. But, unlike the cases cited by National Beverage, there is no express exclusion of the 1972 franchise agreement. Cf. Mitchell Mach, 918 F.2d at 1369 (expressly excluding terminated dealership contracts from asset purchase); Ernst, 813 S.W.2d at 916-17 (same). Next, the purchase agreement specifically includes assets that are used in and necessary to the business, even if they were not reflected on the balance sheet. In addition, the contract specified that the assets were not limited to those listed. Finally, as discussed in detail below, there was evidence that National Beverage considered the distributors necessary to the business. We agree with the district court that whether the 1972 franchise agreement was included in the 1999 asset purchase was ambiguous and presented a question of fact for the jury.
National Beverage next challenges the jury’s answers on the special verdict form as to breach of contract, contending that they were unsupported by the evidence and that the district court should have granted its motions for directed verdict and summary judgment.
On review, the district court must
be affirmed if “there is any competent evidence reasonably tending to sustain
the verdict,” viewed in the light most favorable to the prevailing party. Langeslag,
664 N.W.2d at 864 (citation omitted).
The verdict will not be set aside by the appellate court unless it
cannot be sustained on any reasonable theory of the evidence. Pouliot
v. Fitzsimmons, 582 N.W.2d 221, 224 (
A. Parties to 1972 franchise agreement
The jury first found that
National Beverage argues that under the plain language of the 1999 asset-purchase agreement, and absent any evidence that the parties agreed to depart from the law regarding assumption of contract obligations in an asset purchase, the jury’s answer to this question cannot stand as a matter of law. We have already resolved this argument above, ruling that the 1999 asset-purchase agreement was ambiguous as a matter of law and that resolution of whether National Beverage assumed the 1972 franchise agreement was a fact question for the jury.
We now review whether the jury findings can be sustained by any reasonable theory of the evidence. We first address whether the jury had evidence from which it could conclude that the 1972 franchise agreement regarding distribution was an asset used by or in connection with the business. At trial, the jury heard testimony from both Michael Perez, the executive from National Beverage who was in charge of the distributorships, and other distributors that it was an asset. Perez was questioned whether he considered the distribution network to be an asset. He first said: “We really don’t,” but then asked for a definition of the term distribution network. After the explanation, he said that he considered his distributors to be assets. At another point at trial, he acknowledged that the distributorship network was “essential and necessary.” As he explained, while Pepsi has its own distributor network, National Beverage relies on others to distribute its product; without them, it would be out of business. It relies on the distributors, who have personal contacts in the stores, to position itself in the marketplace. While National Beverage argues that Perez’s testimony merely shows his credibility and fairmindedness in agreeing that a good distributor adds value for a manufacturer, this is an argument for the jury as to how it should assess the evidence.
National Beverage also argues that there was no evidence in the record that it was aware of the 1972 agreement or discussed it. Further, National Beverage argues that in its May 12, 1999 letter to the distributors, it specifically told them that it was not assuming the distributor agreements as part of the acquisition. But the jury heard testimony from Susan Dunn and another distributor that they did not receive this letter. Further, Perez acknowledged that some states imposed obligations regulating relationships between franchisees and franchisors, and that there was no indication National Beverage reviewed these laws to determine whether it met any such obligations.
The jury credited
National Beverage contends that the
evidence presented to the jury showed that the distributorship agreement had
been sold to Service and had not yet been returned to either
In support of its claim, National
Beverage cites evidence that as of August 27, 2002 (the date of the first sale
to DTM), Leikam, the owner of Service, still held the assets of
Next, National Beverage asserts another
theory in support of its argument. It contends
that both representatives of Service and National Beverage testified that they
reached a new meeting of the minds as to the terms of their business
relationship and agreed to National Beverage’s standard at-will agreement with
its wholesale customers. Perez testified
that Leikam accepted National Beverage’s position that it did not operate with
a written contract, and Leikam testified that Perez told him that National
Beverage does not have franchise agreements with its distributors. National Beverage contends that this oral agreement
superseded the 1972 agreement, if any, and accordingly extinguished any rights
that may have arisen under it. See Krogness v. Best Buy Co., 524 N.W.2d
282, 286 (
National Beverage makes several additional
arguments. It contends that Service
abandoned performance of its obligations under the 1972 franchise agreement after
June 19, 2002, when it stopped ordering product and attempted to run the
inventory down as much as possible. National
Beverage cites Minn. Stat. § 336.2-306(2) (2002), for the proposition that
when an exclusive buyer stops performing, that buyer forfeits whatever rights
it had to demand that the seller sell to no one else. A review of the section shows that it does
not directly support the argument: “A
lawful agreement by either the seller or the buyer for exclusive dealing in the
kind of goods concerned imposes unless otherwise agreed an obligation by the
seller to use best efforts to supply the goods and by the buyer to use best
efforts to promote their sale.”
Next, National Beverage argues that
because Service breached the agreement first, National Beverage cannot be held liable for
any alleged breach. See Carlson Real Estate Co.
v. Soltan, 549 N.W.2d 376, 379-80 (
C. Causation and damages
Finally, National Beverage contends
that the jury’s findings that National Beverage’s breach was a direct cause of
National Beverage argues that
because the jury awarded this amount, it must have concluded that the breach
for which it was awarding damages was for the failed Service purchase
agreement. It contends that this is
against the weight of the evidence, because there was no evidence that its
actions caused Service to withdraw from the contract and, further,
Next, National Beverage challenges
the jury’s determination on
A. Whether there was evidence that National Beverage personnel made the defamatory statements
In completing the special-verdict form, the jury was asked whether the “[d]efendants” made statements that DTM was the only authorized distributor of Mr. Pure products. The defendants were both National Beverage and DTM. National Beverage contends that there was no evidence before the jury that personnel from National Beverage made the statement.
Brad Mateer, a market owner, submitted an affidavit stating: “On October 2, 2002, Dan McNaughton of DTM Distributing, Inc. and David Sanchez of National Beverage Corp. visited my store and informed me that DTM was the only authorized distributor of Mr. Pure Products in the area.” Mateer testified at trial as follows:
A. Well, [McNaughton] came in with a representative from Mr. Pure and told me he would be the distributor for Mr. Pure products.
. . . .
Q. Do you remember exactly what Mr. McNaughton and the representative from [National Beverage] told you?
A. He said that he would be the distributor in the area.
Q. And did he say anything else?
A. I don’t know if he said he was exclusive or not. I know he said he would be the distributor in the area.
Q. So you understood that to mean that –
A. That he would be the one that would have the product from that particular time on.
National Beverage’s arguments as to the interpretation of this evidence, taking
it in the light most favorable to
Tim Stoffel, the owner of a grocery store that also sold Mr. Pure products, did not testify at trial, but he stated the following in his affidavit:
4. On October 1, 2002, Bill Biggerstaff, a DTM Distributing, Inc. representative, and David Sanchez of National Beverage Corp. visited my store and informed me that DTM Distributing, Inc. was the only authorized distributor of Mr. Pure products in this market.
5. Mr. Biggerstaff and Mr. Sanchez also said
it was illegal for
B. Whether under Dunn and Twin City’s theory of the case, the statements were false at the time they were made
Next, National Beverage contends
that the statements that DTM was the only authorized distributor of Mr. Pure
products were not false when made in October 2002. An appellate court “will not overturn a jury
finding on the issue of falsity unless the finding is manifestly and palpably
contrary to the evidence.” Lewis v. Equitable Life Assurance Soc.,
389 N.W.2d 876, 889 (
National Beverage first notes that
National Beverage next argues that
the alleged defamatory “statements” were subjective interpretations of the
parties’ legal status, which were not false for purposes of a defamation
claim. “Only statements that present or
imply the existence of fact that can be proven true or false are actionable
under state defamation law.” Schlieman v.
Where, as here, the facts are disputed, the truth of defamatory statements is a factual issue to be decided by the jury. Lewis, 389 N.W.2d at 889. The jury had evidence sufficient to support its finding.
the statements harmed Dunn’s or
Next, National Beverage contends that
it was not defamatory to state that DTM was the only authorized distributor of
Mr. Pure products. It contends that a
statement is defamatory only if it disgraces and degrades the plaintiff, holds
him or her up to public hatred, contempt, or ridicule, or harms the plaintiff’s
reputation or lowers the plaintiff in the estimation of the community. See
Advanced Training Sys., Inc. v. Caswell Equip. Co., 352 N.W.2d 1, 9 (
National Beverage also contends that
by this time,
D. Whether a qualified privilege applied
Next, National Beverage contends
that the statements regarding the status of the distribution relationship
between National Beverage and other entities, like statements relating to the
termination of an employment relationship, enjoy a qualified privilege. See
Lewis, 389 N.W.2d at 890. It contends
that speech is protected under
The issue of whether a communication is privileged is a question of law, while “the question of whether the privilege was abused is a jury question.” Lewis, 389 N.W.2d at 890. There is no showing that the district court erred as a matter of law. The jury was not asked to answer the question of whether any privilege was abused, and there is no showing that this was error.
The final issue we address is raised
by Twin City, who argues that the district court erred when it denied its
motion for attorney fees under the franchise act, Minn. Stat. § 80C.17,
subd. 3 (2006). Generally, “attorney
fees are not recoverable in litigation unless there is a specific contract
permitting or a statute authorizing such recovery.” Barr/Nelson,
Inc. v. Tonto’s, 336 N.W.2d 46, 53 (
A person who violates any provision
of the franchise act is liable to the franchisee, “who may sue for damages
caused thereby, for rescission, or other relief as the court may deem
appropriate.” Minn. Stat. § 80C.17,
subd. 1 (2006). Attorney fees may be
awarded under the statute as follows:
“Any suit authorized under this section may be brought to recover the
actual damages sustained by the plaintiff together with costs and disbursements
plus reasonable attorney’s fees.”
The jury found that
There are only a few appellate cases
in which attorney fees under the franchise act are addressed, and none of them resolve
the issue raised here. In Hughes, 389 N.W.2d at 200, the issue
concerned whether the district court abused its discretion in denying a request
for a multiplier in the calculation of attorney fees. In Noble
v. C.E.D.O., Inc., 374 N.W.2d 734 (
To help resolve this issue, we
review caselaw addressing the issue of attorney fees under other remedial
Other statutes have language similar, but not identical, to that in the franchise act. The Minnesota Agricultural Equipment Dealership Act provides for attorney fees as follows:
If a farm equipment manufacturer violates [the act] a farm equipment dealer may bring an action against the manufacturer . . . for damages sustained by the dealer as a consequence of the manufacturer’s violation, together with the actual cost of the action, including reasonable attorney’s fees . . . .
In another case, this court
addressed the denial of a motion for costs and attorney fees in the context of
a consumer-fraud law concerning odometers.
Bachovchin v. Stingley, 504
N.W.2d 288, 290 (
D E C I S I O N
The district court’s rulings were correct as a matter of law and we will not set aside the verdict because the jury was presented with competent evidence reasonably sustaining the findings.
* Retired judge of the district court, serving as judge of the Minnesota Court of Appeals by appointment pursuant to Minn. Const. art. VI, § 10.
 Although its name has since been changed, we refer to this entity by its historical name of Twin City Home Juice Co.
 Several corporate entities related to National Beverage as well as National Beverage were involved in the events leading to this lawsuit; they will be referred to collectively as National Beverage.
 Chicago House Juice at this time was a division of American Citrus Products Corp. but it will continue to be referred to as Chicago Home Juice.
 The entity that
 National Beverage advises that because the discovery process and trial added virtually nothing to the body of evidence, the same arguments apply to its claims that the district court erred in denying its motions for summary judgment, directed verdict, and JNOV.
 National Beverage
asserts that under the 1999 asset-purchase agreement,
 The jury-verdict form referred to the 1972 franchise agreement as the 1972 contract, and it was later asked to determine whether there was a franchise agreement. Because the jury found there was a franchise agreement, which National Beverage does not challenge on appeal, and for the sake of clarity, we refer to it as the 1972 franchise agreement.