Petition — Mason v. Burger King Corp.
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83-ijtg7 |"
No.
In the Supreme Court of the United States
October Term, 1983
GERALD A. MASON, et al.,
Petitioners,
vs.
BURGER KING CORPORATION,
Respondent.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
J. Ropert Oxran, Ese.
(Counsel of Record )
BrITTON, COHEN, CASSEL, KAUFMAN
& ScHANTz, P.A.
100 S. Biscayne Boulevard, +800
Miami, Florida 33131
Phone: (305) 371-3100
Attorneys for Petitioners
E. L. Menpennatt, Inc., 926 Cherry Street, Kansas City, Mo. 64106, (816) 421-3030
QUESTIONS PRESENTED FOR REVIEW
I. Is the Decision of the Eleventh Circuit Court in
Conflict With the Decisions of Several Circuits and This
Court in Gasoline Products, Inc. v. Champlin Refining,
283 U.S. 494 (1931) Insofar As the Trial Judge Ordered
a Partial New Trial on the Amount of Damages, When
That Issue Was Clearly Not Distinct and Separable From
the Issue of Liability?
II. Is the Decision of the Eleventh Circuit in Conflict
With This Court’s Decision in Atlantic and Gulf Stevedores,
Inc. v. Ellerman Lines, 369 U.S. 355 (1962), or a Substantial
Deparature From the Law Set Forth Therein Insofar As
the Trial Judge Failed to Seek a Resolution of the Jury’s
Answers Which Would Make Them Consistent?
LIST OF PARTIES
Allison Park Corp. +1
B-K Foods, Inc.
Burger King Corporation
Gerald A. Mason
Wesley Hardy 4
Donald Szabo
Richard D. Peterson
Dauphin Foods Corp. +1
Smithfield Corp. +2
Washington Corp. +1
Elkhart =1 Inc.
Southbend +1 Inc.
State College, P.A. +1 Inc.
Lafayette Corporation +1
Lafayette Corporation +2
Hardy Enterprises, Inc.
Ill
TABLE OF CONTENTS
Questions Presented for Review ...............cccccceccceceesseeeeseeee I
Be OE TI i ssisedpnkec acccnccctcisdnsobneiiniacemiidisigadaias nie II
Te OE I ocsrscccssccsiniesibccccenles eee IV
I I oisicvinccnsiesinisntsicciccinadsiaeciaeeaeaiemiaceiaie 1
OG HOMIE on ccesnisscassnssmenipieinncoucstakicumemmanmadeann 1
Argument—
I. The decision of the Eleventh Circuit is in
conflict with decisions of several circuits and
this Court in Gasoline Products, Inc. v.
Champlin Refining, 283 U.S. 494 (1931) in-
sofar as the trial judge ordered a partial new
trial on the amount of damages, when that
issue was clearly not distinct and separable
from the issue of liability 00.0000... 7
II. The decision of the Eleventh Circuit is in con-
flict with this Court’s decision in Atlantic and
Gulf Stevedores, Inc. v. Ellerman Lines, 369
U.S. 355 (1962), or a substantial departure
from the law set forth therein insofar as the
trial judge failed to seek a resolution of the
jury’s answers which would make them con-
RI ceccivnsntinittinnanitsenisgeeeinbiiiamecmpedh ei
MIST Ae MEN SS Sate PATA Heo 15
Cees GE NWN ogcckicoccccscrcsenedeobince Eee oem 15
Appendix—
Decision of Eleventh Circuit Court of Appeals
Ge Fae 0 TT nccieevincecicintinsacteenntavadtanceias Al
Order of U. S. District Court, Southern District of
Florida dated October 31, 1980 .0..........c.cccccccesesees A47
IV
Order of U. S. District Court, Southern District of
Florida, dated February 20, 1981 ......... jtochusmivaansodas A50
Order of U. S. District Court, Southern District of
Florida, dated May 20, 1981 00... ceeeeeeeeees A52
Findings of Fact and Conclusions of Law of U. S.
District Court, Southern District of Florida,
(Ss SS eee A55
Findings of Facts and Conclusions of Law of U. S.
District Court, Southern District of Florida,
Gated November 25, 1061 .................ccs.ccscsscssssessseees A65
Final Judgment of U. S. District Court, Southern
District of Florida, dated December 16, 1981 .... A77
Findings of Fact and Conclusions of Law of U. S.
District Court, Southern District of Florida,
= — fA ena A102
Final Judgment in Favor of Burger King Corp.
and Against Defendants on Attorney’s Fees and
Expenses, dated June 3, 1982 0.0.0........ccccccceeees All12
Order of U. S. District Court, Southern District of
Florida, dated June 29, 1982 .00..0........ccccccccens. A120
Order of U. S. District Court, Southern District of
Florida, dated December 30, 1980 2.0... 000000000... Al2l
BE eee en ee A123
TABLE OF AUTHORITIES
Cases
Ajax Hardware v. Industrial Plants Corp., 569 F.2d 181
RE Ee DNR thereat aio tao BSE Ail MOEA 10
Atlantic and Gulf Stevedores, Inc. v. Ellerman Lines,
Ue We I I erent ne rin ne 1, 13
Fury v. Shakespeare, 554 F.2d 1376 (5th Cir.1977) ..... 9
Vv
Gasoline Products, Inc. v. Champlin Refining, 283 U.S.
SURE NMI caticoosephacintsidiass ionipshisecetadiiaasispseonencmudaaemnti aie deaatnetta 1,8
Hadra v. Herman Blum Consulting Engineers, 632 F.2d
SP CUS ID icaciciccasatesitasetndinsecantescountasmeeieaaa: ae
Lucas v. American Manufacturing Co., 630 F.2d 291
GUEE: APNE CIUNINDT . cisncscanectsicsincssiciniseninacomnssschgicapenhaamsaaeaaal: 9
Miller v. Royal Netherlands Steamship Co., 508 F.2d
Be CE NED Giricctrateinincdetsnntignecdcen 13
Williams v. Slade, 431 F.2d 605, 608 (5th Cir.1970) ....8,9, 11
Other Authorities
Sy Ge: GD ac Oe eek ee l
i: SRR, PNM "ciccslinn'niscacolcshaniien oubcdogemiionaeaieomaeaane Eee 5
a eee ee Rane SNe oe 6
«tt
No.
In the Supreme Court of the United States
October Term, 1983
GERALD A. MASON, et al.,
Petitioners,
VS.
BURGER KING CORPORATION,
Respondent.
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
BASIS FOR JURISDICTION
The judgment sought to be reviewed is dated August
1, 1983, and no time was recorded. Rehearing was denied
on October 14, 1983. This petition is brought before this
Court pursuant to 28 U.S.C. §1254(1).
STATEMENT OF THE CASE
The Petitioners, GERALD A. MASON, WES HARDY,
RICHARD PETERSON and DONALD SZABO, et al. held
varying interests in Burger King franchises and develop-
ment agreements. Suit was initiated by BURGER KING
containing more than thirty counts whereby BURGER
KING sought, inter alia, termination of certain development
agreements in Pittsburgh, Pennsylvania and Kansas City,
Missouri; cancellation of 26 franchise agreements, and the
recovery of certain sums allegedly owed on promissory
notes, royalties and the like. Counter¢laims and affirma-
tive defenses were set forth by the Petitioners.
2
The case was tried before a jury. The nature of the
jury’s findings, however, created certain problems. The
The first problem related to findings regarding amounts
owed. The claim of BURGER KING which was submitted
to the jury in Special Issue +1 was based upon five promis-
sory notes, with a principal balance in excess of $900,000
and accounts receivable in excess of $600,000. These
amounts were not in dispute. Rather, the Petitioners,
MASON, et al., had presented certain defenses which, if
successful, would have defeated liability.
The jury, however, ruled in favor of BURGER KING
as to liability in regard to those items, but ignored the
amounts in evidence. Instead of awarding a sum in excess
of $900,000 on the promissory notes and $600,000 on the
accounts receivable, the jury awarded $1.00 and $100,000.
Second, the jury’s answers to certain special inter-
rogatories appeared to be potentially inconsistent. In par-
ticular, the jury responded to Special Issue +5 as follows:
“With respect to BURGER KING CORPORA-
TATION’s claims regarding termination of the
franchise agreements, we the jury find that:
“A. BURGER KING CORPORATION properly
terminated all of the franchise agreements.................
“or
“B. BURGER KING CORPORATION wrongfully
terminated all of the franchise agreements.................
“or
“(C.) BURGER KING CORPORATION properly
terminated the franchise agreements covering the
restaurants listed in Column 1 and wrongfully
terminated the franchise agreements covering the
restaurants listed in Column 2.
1 2
Franchise Agreements Franchise Agreements
_ Terminated Properly Terminated Improperly
TAREE R ERE eRe Renee ee ee EER eee ee eee ene ee ee eewenne
eer reer i Peter tr reer eer
Pe ee Ow eee n ene eee re een eee ee ene eeteeeeeeeeeeeeeieeeee
*The jury’s actual writing, with the crossing out of various
numbers, is contained in the Appendix at p. Al23. However, the
response typed above is an accurate representation of what the
jury did. The double lines indicate a number which was crossed
out.
4
Subsequent to the jury verdict, BURGER KING filed
a Motion for Clarification of the verdict with regard to
Special Issues +1 and +2. It sought the entry of an Order
awarding the full principal and interest of the Promissory
Notes and an additional award of $1.00, and the full amount
of the accounts receivable, plus interest, together with an
additional award of $100,000.00. In the alternative,
BURGER KING moved for the entry of Judgment Not-
withstanding the Verdict seeking the full amount of the
Promissory Notes and accounts receivable, together with
interest thereon.
The Petitioners sought to uphold the jury’s verdict, if
at all possible, in accordance with the requirements of the
Seventh Amendment. Petitioners proposed to the Court a
possible explanation of the jury’s verdict, in light of the
entire case, which would have permitted the jury’s verdict
to stand in its entirety.
The District Court, by an Order dated October 31,
1980. denied BURGER KING’s Motion for Clarification as
to Special Issues No. 1 and 2 and further denied the Motion
for Judgment Notwithstanding the Verdict as to Special
Issues No. 1 and 2. The District Court, on its own motion,
determined, however, that the jury’s verdicts on those
Special Issues decided the issue of liability against the
Petitioners but the award of $1.00 on Promissory Notes in
the principal amount of $900,000 (totalling in excess of
$1,000,000, including interest), and $100,000 on accounts
receivable with a book value of over $500,000 (actually
totalling in excess of $600,000, including interest) was
contrary to the weight of the evidence. The District Court
then ordered that a new trial limited to the issue of dam-
ages only on these two claims would be held. BURGER
KING’s Motion for Judgment Notwithstanding the Ver-
dict as to Special Issue No. 5 was denied. However, the
5
District Judge found that he could not ascertain the jury’s
response to Special Issue No. 5 regarding the franchises.
Without addressing the meaning of the word “NONE” in
the “Properly Terminated” column of Special Issue No. 5,
the Court directed that a new trial be held with regard
to all of Petitioners’ franchises not specifically listed in
the “Improperly Terminated” column.
Following the court’s Order of October 31, 1980, the
Petitioners moved for a new trial on all issues on the
grounds that, given the District Court's rulings regarding
Special Issues No. 1 and 2, the jury’s verdict regarding
those claims indicated a substantial possibility of juror
misconduct or confusion, specifically an improper compro-
mise verdict. The court denied the Petitioners’ Motion
for a New Trial and directed that the new trial would be
limited to the issues set forth in the District Court’s Octo-
ber 31, 1980 Order. Following the entry of this Order,
the Petitioners moved the District Court to amend its
Order to certify the order for Interlocutory Appeal, pur-
suant to 28 U.S.C. §1292(b). The District Court, by its
Order dated February ?4, 1981, denied this motion.
On March 6, 1981, BURGER KING moved for Partial
Summary Judgment on the damages issues of its claims on
the promissory notes and accounts receivable, which were
the subject of Special Issues No. 1 and 2, which motion
was supported by an affidavit updating the testimony
introduced at the first trial concerning the balances due
on these obligations as reflected by BURGER KING’s books
and records. The Petitioners opposed the motion on the
same grounds as had been advanced in opposition to
BURGER KING’s Motion for Judgment Notwithstanding
the Verdict on these same claims, incorporating all of the
arguments advanced in opposition to that motion and the
testimony from the first trial in support of those argu-
ments (regarding the existence and amount of offsets
and credits). The District Court granted BURGER
KING’s motion on these claims, converting the jury’s $1.00
award to $1,052,147.70 and the jury’s $100,000 award to
$711,544.77.
The second jury trial commenced on August 26, 1981.
The second jury's verdict found that BURGER KING had
properly terminated six of the seven franchise agreements
which the jury had considered. Three of these franchises
were terminated on grounds identical to those which the
first jury held did not justify termination of several other
franchises.
A bench trial was held on September 2, 1981 wherein
it was held by the court that BURGER KING was not en-
titled to rescission of certain franchise agreements. On
September 21-22, 1981, another trial was heard before the
court wherein the court awarded the Petitioners’ net profits
to BURGER KING.
Following the entry of a final judgment, attorney's
fees and costs, Petitioners filed their Notice of Appeal to the
Eleventh Circuit on January 10, 1982, and BURGER KING
cross appealed. After submission of briefs and hearing
arguments, the Eleventh Circuit vacated the award of net
profits, but affirmed the trial judge in all other respects.
The result in this case was that by virtue of the whit-
tling away of the jury’s province by the trial judge and the
Eleventh Circuit,* a judgment highly favorable to the Peti-
tioners was changed into a nightmare, a total judgment
in excess of $3,000,000, and the loss of many franchises in
which the Petitioners had invested for many years.
*Jurisdiction was pursuant to 28 U.S.C. § 1291.
ARGUMENT
A
THE DECISION OF THE ELEVENTH CIRCUIT IS
IN CONFLICT WITH THE DECISIONS OF SEVERAL
CIRCUITS AND THIS COURT IN GASOLINE PROD-
UCTS, INC. v. CHAMPLIN REFINING, 283 U.S. 494
(1931) INSOFAR AS THE TRIAL JUDGE ORDERED
A PARTIAL NEW TRIAL ON THE AMOUNT OF
DAMAGES, WHEN THAT ISSUE WAS CLEARLY
NOT DISTINCT AND SEPARABLE FROM THE IS.-
SUE OF LIABILITY.
The issue created by the factual circumstances cited
above wherein the jury found in favor of BURGER KING
but awarded minimal damages, was whether the trial judge
erred in granting a partial new trial limited solely to the
issue of the amount of damages. The position advanced by
MASON was that granting a partial new trial was error in
view of the jury’s award of negligible sums in the face of
findings in favor of BURGER KING on liability. MASON
had submitted that the jurors’ conduct was indicative of a
compromise verdict, an agreement to rule in favor of
BURGER KING but to award nominal damages, especially
in view of the undisputed amounts asserted in relation to
the claimed liability.
The panel which heard this case in the Eleventh Cir-
cuit denied MASON’s position. It did so despite an initial
restatement of the applicable law as follows:
“It is axiomatic, however, that a partial new trial
may not be granted if it would infringe upon a
litigant’s seventh amendment right to a jury trial. In
Gasoline Products v. Champlin Refining Co., 283 U.S.
494, 513, 75 L.Ed. 1188 (1931), the Supreme Court
enunciated the standard which governs partial new
trial practice:
{[w]here the practice permits a partial new trial,
it may not properly be resorted to unless it clearly
appears that the issue to be retried is so distinct
and separable from the others that a trial of it
alone may be had without injustice.
“Id. at 500, 51 S.Ct. at 515, 75 L.Ed. at 1191. Apply-
ing Champlin Refining the former Fifth Circuit Court
of Appeals held that a jury verdict influenced by an
improper compromise cannot stand and a complete
new trial is required because liability and damages
are inseparable. See, e.g., Lucas v. American Manu-
facturing Co., 630 F.2d 291, 294 (Sth Cir.1980); Hat-
field v. Seaboard Air Line R.R. Co., 396 F.2d 721, 724
(5th Cir.1968). Hence, if there is a compromised
finding on liability, a separate trial on damages alone
will not suffice—both liability and damages must be
litigated in a new trial.” Id.
The nature of the decision of the appellate court is
such that it meets some of the suggested bases for certiorari
jurisdiction. Specifically, it is in direct conflict with deci-
sions of this Court, the Fifth Circuit and the Second Circuit.
The basic rule regarding granting a partial new trial
was set forth in Gasoline Products, Inc. v. Champlin Refin-
ing, quoted above. The meaning of that rule has been
established by several decisions of the Fifth Circuit.
In Williams v. Slade, 431 F.2d 605, 608. (5th Cir.1970),
the court stated:
“In other words, a court may properly award a par-
tial new trial only when the issue affected by the error
9
could have in no way influenced the verdict on those
included in the new trial. If the decision on the
other issues could in any way have been infected by
the error, then a new trial must be had on all issues.”
(Emphasis supplied )
The court in Williams v. Slade also quoted with ap-
proval the following passage:
‘‘We have power in an appropriate case to remand
only for redetermination of the amount of damages,
excluding from the scope of a new trial the question
of liability, see Washington Gas Light Company v.
Connolly, 94 U.S. App.D.C. 156, 214 F.2d 254, and
cases there cited. But our power in this regard is to
be exercised with caution and not when the error
which necessitates a new trial is in respect of a mat-
ter which might well have affected the jury’s deter-
mination of other issues. Cf. Thompson v. Camp, 6
Cir., 167 F.2d 733. Here it appears from the record
as a whole that the interests of justice will be best
served by a new trial on all issues. * * *” 244 F.2d
at 376. (Emphasis supplied).
Likewise, in Lucas v. American Manufacturing Co.,
630 F.2d 291 (5th Cir.1980) the court stated:
“Where, as here, the issues of liability and damages
were tried together and there are indications that the
jury may have rendered a compromise verdict, the
Court should grant a new trial on all issues rather
than one limited solely to the issues rather than one
_limited to solely the issue of damages.” (At 294; Em-
phasis added).
Furthermore, in Fury v. Shakespeare, 554 F.2d 1376
(5th Cir.1977), the court stated:
10
“We also have decided that a new trial is required
on the issue of compensatory damages. Because this
issue is so intimately intertwined with issues of li-
ability . . . justice requires that a new trial be held on
all issues.”
The Second Circuit has also stated the governing rule
in a similar manner, requiring a new trial on all matters
if there was a reasonable possibility of a compromise ver-
dict. Ajax Hardware v. Industrial Plants Corp., 569 F.2d
181 (2d Cir.1977).
The prevailing rule, as initially stated by this Court
and applied by various Circuit Courts is that a new trial
on the issues of both liability and the amount of damages
should be granted if the apparent error “could have” or
“might well have” influenced other findings or where
“there are indications” of a compromise verdict. The
thrust of the prevailing rule is significant. It is that where
a compromise is possible (‘could have,” “might well have
influenced,” or “indication”’) a new trial should encompass
all issues which could have possibly been affected by the
error which is indicative of compromise.
The Eleventh Circuit has completely reversed the
existing rule. The possibility or indication of compro-
mise is no longer the basis for a new trial on the related
issues of both liability and damages. The new test moves
in the opposite direction. The court looked for, not an in-
dication of possible error affecting the entire decision,
but for a possible explanation of the jury’s conduct, stat-
ing in part:
“It is possible that the jury thought BKC would re-
ceive payment on the promissory notes and accounts
based solely on their finding that BKC was entitled
to recover for these items and, therefore, any ad-
11
ditional findings of ‘damages’ would simply amount
to a duplication.”
The thrust of the new rule is that where a possible
explanation can be provided, only a partial new trial should
be granted.* This is the direct opposite of the prevailing
rule which said that if there was any indication of com-
promise, a complete new trial should be granted. Mere
speculation as to possible explanations was not sufficient
to deny a total new trial in the face of indications of con-
duct affecting the entire decision.
The possibility of compromise no longer governs, and
“indications” of compromise are no longer significant; and
the fact that the error (a clearly inappropriate damage
award) “might have” or “could have affected other issues”
is now subservient to speculation based upon “the totality
of the circumstances.” The court attributed this test to
Williams v. Slade, supra. Such language does appear in
Williams at page 609. However, it is clear that when one
reads the pertinent portion of the decision, it is simply
an explanatory passage, perhaps not as clear as one would
desire, which does not alter the test set forth on lines
30-35, at page 608, quoted above. In other words, the
court can examine the totality of circumstances to deter-
mine whether the error could have influenced the verdict.
A general examination of the totality of circumstances in
order to search for any possible explanation is not the ap-
propriate test. Restated, a court may properly examine
the totality of the circumstances, but toward what end?
*The appellate panel cited only Hadra v. Herman Blum Con-
sulting Engineers, 632 F.2d 1242 (5th Cir.1980) in support of its
holding. In Hadra the Court stated that the issue excluded from
the new trial was logically independent of the alleged source of
compromise and the appellant conceded that there was no likeli-
hood of jury misconduct.
12
The prevailing rule directed the examination toward dis-
covering any indication that the error affected other issues
such as liability, thereby mandating a complete new trial.
The new rule directs an examination toward discovering
any possible explanation which will then serve as a basis
for denial of a complete new trial.
This shift in emphasis is not a mere question of degree.
Rather, it directly reverses the old rule, creates conflict
with the decisions quoted above, and creates considerable
confusion for any trial judge faced with this question.
II.
THE DECISION OF THE ELEVENTH CIRCUIT IS
IN CONFLICT WITH THIS COURT’S DECISION IN
ATLANTIC AND GULF STEVEDORES, INC. v. ELLER-
MAN LINES, 369 U.S. 355 (1962) OR A SUBSTANTIAL
DEPARTURE FROM THE LAW SET FORTH THERE.
IN INSOFAR AS THE TRIAL JUDGE FAILED TO
SEEK A RESOLUTION OF THE JURY’S ANSWERS
WHICH WOULD MAKE THEM CONSISTENT.
Another issue decided adversely to MASON by the
appellate panel was whether the trial judge could have
reconciled the jury’s findings that “NONE” of the MASON
franchises were properly terminated with an apparent find-
ing that some were improperly terminated.
The pertinent special issue was constructed as follows:
SPECIAL ISSUE NO. 5
With respect to BURGER KING CORPORATION’s
claims regarding termination of the franchise agree-
ments, we the jury find that:
A. BURGER KING CORPORATION properly termi-
nated all of the franchise agreements.
13
or
B. BURGER KING CORPORATION wrongfully
terminated all of the franchise agreements,
or
C. BURGER KING CORPORATION properly ter-
minated the franchise agreements covering the restau-
rants listed in Column 1 and wrongfully terminated
the franchise agreements covering the restaurants
listed in Column 2.
The jury did not check categories A or B. Rather, it
turned to category C which had a column for franchises
properly terminated and a column for franchises wrong-
fully terminated. There was a great deal of listing in each
column and subsequent crossing out. (The jury’s work
product is contained in the Appendix). Ultimately, after
much crossing out, under the column designating proper
termination, the jury wrote in the word “None”. However,
the jury had apparently not completed the process of
crossing out specific numbers under the contrary column.
The Eleventh Circu.t disregarded the basic rule of
law which governs this type of situation; namely, this
Court’s pronouncement in Atlantic and Gulf Stevedores,
Inc. v. Ellerman Lines, 369 U.S. 355 (1962):
“Where there is a view of the case that makes the
jury’s answers to special interrogatories consistent,
they must be resolved that way. For a search for one
possible view of the case which will make the jury’s
findings inconsistent results in a collision with the
Seventh Amendment.” (At 364; Emphasis supplied).
This principle has been explicitly incorporated in Miller v.
Royal Netherlands Steamship Co., 508 F.2d 1103 (5th Cir.
1975).
14
There is a view of the case which explains the apparent
inconsistency, and discounts the reasoning of the Eleventh
Circuit. It is readily apparent that the jurors initially re-
jected alternatives A and B (all yes or all no). Turning
to C, they began to enter various franchise numbers under
two columns designating proper termination or wrongful
termination. Subsequently, they did much crossing out.
Then they entered the word “None” under the column for
proper termination. At that point, they decided that their
position was clear and their work was finished and left
the answers in their existing form.
The Eleventh Circuit overlooked an extremely prob-
able scenario and failed to apply the governing rule, namely
that when reconciliation of special interrogatories is pos-
sible, the court should do so in order to preserve the right
provided by the Seventh Amendment. Therefore, the
ruling below constitutes a substantial departure from the
law which conflicts with a previous decision of this Court.
15
CONCLUSION
Wherefore, based upon the foregoing, this Court should
issue a writ of certiorari.
Respectfully submitted,
BRITTON, COHEN, CASSEL,
KAUFMAN & SHANT2Z, P. A.
100 S. Biscayne Blvd., +800
Miami, Florida 33131
Phone: (305) 371-3100
Attorneys for Petitioners
By J. Ropert OLIAN
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that a true and correct copy of
the foregoing Petition for Writ of Certiorari was furnished
by mail to ANDREW C. HALL, ESQ,., Hall and O’Brien,
P.A., Brickell Concours, +200, 1401 Brickell Avenue, Miami,
Florida 33131; and LEE N. ABRAMS, ESQ., Mayer, Brown
& Platt, Co-Counsel for Respondent, 231 S. LaSalle St.,
Chicago, Illinois 60604, this 29th day of December, 1983.
J. Ropert OLIAN
Al
APPENDIX
DECISION OF ELEVENTH CIRCUIT COURT
OF APPEALS
(Dated August 1, 1983)
BURGER KING CORPORATION,
Plaintiff-Appellee, Cross-Appellant,
Vv.
Gerald A. MASON, et al.,
Defendants-Appellants, Cross-Appellees.
BURGER KING CORPORATION, a Florida Corporation,
Plaintiff-Appellee, Counter-Defendant, Cross-Appellant,
Vv.
Gerald A. MASON, et al.,
Defendants-Appellants, Counter-Plaintiffs,
Cross-Appellees.
Nos. 82-5066, 82,5803.
United States Court of Appeals, Eleventh Circuit.
Aug. 1, 1983.
Franchisor sued franchisee upon various claims, and
the franchisee sought on appeal to reverse portions of the
final judgment of the United States District Court for the
Southern District of Florida at Miami, Edward B. Davis,
J. The franchisor filed cross appeals to certain adverse
rulings. Franchisee also filed separate appeal from at-
torney’s fee award and franchisor cross appealed on such
issue. The Court of Appeals, Albert J. Henderson, Circuit
Judge, held that: (1) compromise verdict was not in-
dicated and district court did not abuse discretion in or-
A2
dering new trial only on issue of damages; (2) where
jury’s choice of one alternative was inconsistent with its
finding that no franchise had been properly terminated
and jury’s answer did not resolve disposition of over half
of the franchises, trial court properly declined to supply
facts submitted for jury’s determination but left un-
answered; (3) instruction to jury that franchise could not
be revoked absent a “material” breach of the particular
agreement comported with substantial Florida case law:
(4) where franchisor consented to use of trademark pro-
vided that franchisor retained its right to seek damages
upon later determination of its right to cancel any or all
of remaining franchises, trial court could find that fran-
chisee “ratified” such proposal and therefore was estopped
from claiming that franchisor had agreed to trademark
use; (5) continued trademark use by one whose trade-
mark license had been cancelled satisfied likelihood of
confusion test and constituted trademark infringement;
but (6) record failed to support finding that profits earned
by franchisee equaled franchisor’s damages from breach
by franchisee, and thus award of profits as compensatory
damages for breach of contract was error.
Attorney's fees award made pursuant to Florida statute
vacated, and damages assessed for breach of franchise
agreements vacated; case remanded with directions; judg-
ment otherwise affirmed.
1. Jury (Key) 31(7%2)
Partial new trial may not be granted if it would in-
fringe upon litigant’s Seventh Amendment right to jury
trial, and it must clearly appear that issue to be retried
is so distinct and separable from others that trial of it alone
may be had without injustice. U.S.C.A. Const.Amend. 7:
Fed.Rules Civ.Proc.Rule 59(a), 28 U.S.C.A.
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2. Federal Civil Procedure (Key) 2315
If there is compromised finding on liability, separate
trial on damages alone will not suffice, and both liability
and damages must be relitigated in new trial. Fed.Rules
Civ.Proc.Rule 59(a), 28 U.S.C.A.
3. Federal Civil Procedure (Key) 2194
Nominal or inadequate finding of damages by itself
does not automatically mandate conclusion that award was
product of compromise verdict and, rather, inquiry must
concentrate on any indicia of compromise apparent from
the record and other factors which may have caused jury
to return verdict for inadequate damages. Fed.Rules Civ.
Proc.Rule 59 (a), 28 U.S.C.A.
4. Federal Civil Procedure (Key) 2315
Only if “totality of the circumstances” indicates that is-
sue sought to be excluded by partial new trial is not sep-
arable from error in damage award will plenary new trial
be authorized. Fed.Rules Civ.Proc.Rule 59(a), 28 U.S.C.A.
5. Federal Civil Procedure (Key) 2315
Where jury repeatedly found that defendant failed to
establish its affirmative defenses, which was only basis on
which defendant could escape liability, and where sole in-
dication of jury compromise was low amount of damages
and jury required only two to three hours to reach verdict
after long, protracted trial, and where award could only
be explained by reference to use of term “damages” on
special interrogatories, compromise verdict was not indi-
cated and district court did not abuse discretion in order-
ing new trial only on issue of damages. Fed.Rules Civ.Proc.
Rule 59a), 28 U.S.C.A.
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6. Federal Courts (Key) 825
Even though more stringent appellate review is called
for when trial court orders new trial, abuse of discretion
standard controls appellate consideration of the decision.
Fed.Rules Civ.Proc.Rule 59(a), 28 U.S.C.A.
7. Federal Civil Procedure (Key) 2197
Trial judge must make all reasonable efforts to recon-
cile inconsistent jury verdict, and if there is view of case
which makes jury’s answers consistent, court must adopt
that vi:w and enter judgment accordingly.
8. Federal Civil Procedure (Key) 2192
Test employed in determining whether conflict in ver-
dict can be reconciled is whether answers may fairly be
said to represent logical and probable decision on relevant
issues as submitted, but if jury’s answers are so am-
biguous or conflicting that they cannot be reconciled fairly,
trial court may not enter judgment thereon.
9. Federal Civil Procedure (Key) 2237
Special verdict which does not resolve essential facts
or which does so in inexplicable fashion will not support
judgment, and trial judges are not empowered to fill in
facts omitted from answer to special interrogatory.
10. Federal Civil Procedure (Key) 2240
When insurmountable inconsistency or ambiguity in
jury verdict is perceived, trial court may resubmit issue to
jury before it is dismissed, or order new trial on some or
all of the issues. Fed.Rules Civ.Proc.Rule 59(a), 28
U.S.C.A.
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11. Federal Civil Procedure (Key) 2216
Because of risk of inconsistency and ambiguity which
accompanies use of special interrogatories, attorneys should
pay careful attention insuring that acceptable verdict has
been rendered before jury is discharged from case.
12. Federal Civil Procedure (Key) 2240
In suit arising out of franchise operation, wherein
jury’s choice of one alternative was inconsistent with its
finding that no franchise had been properly terminated
and jury’s answer did not resolve disposition of over half
of the franchises, trial court properly declined to supply
facts submitted for jury’s determination but left un-
answered. Fed.Rules Civ.Proc.Rule 59(a), 28 U.S.C.A.
13. Contracts (Key) 261(1), 321(2)
Mere breach of agreement which causes no loss will
not sustain suit for damages, much less rescission.
14. Contracts (Key) 261(2)
Although as general rule parties to contract may
strictly enforce its terms and courts will not rewrite agree-
ment to undo consequences of bad bargain, unilateral ter-
mination of contracts is not blindly sanctioned when de-
fault causes no harm to party seeking to avoid performance.
15. Contracts (Key) 353(7)
Instruction to jury that franchise could not be revoked
absent a “material’’ breach of the particular agreement
comported with substantial Florida case law.
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16. Federal Courts (Key) 781
Given possible ambiguity in state judicial precedent,
Court of Appeals deferred to district judge’s interpretation
of law of state in which he presided.
17. Trade Regulation (Key) 540
Ordinarily, trademark infringement cases are pred-
icated on complaint that defendant employed trademark so
similar to that of plaintiff that public will mistake defen-
dant’s products for those of the plaintiff. Lanham Trade-
Mark Act, § 32(1) (a), 15 U.S.C.A. § 1114(1) (a).
18. Trade Regulation (Key) 334
Falsely suggesting affiliation with trademark owner in
manner likely to cause confusion as to source or sponsorship
constitutes infringement. Lanham Trade-Mark Act, § 32
(1) (a), 15 U.S.C.A. § 1114(1) (a).
19. Trade Regulation (Key) 338
Unauthorized use of trademark which has effect of
misleading public to believe that user is sponsored or ap-
proved by registrant can constitute infringement. Lanham
Trade-Mark Act, § 32(1) (a), 15 U.S.C.A. § 1114(1) (a).
20. Trade Regulation (Key) 112
Where trademark registrant consented to use of trade-
mark provided that registrant retained its right to seek
damages upon later determination of its right to cancel any
or all of remaining franchises, trial court could find that
franchisee “ratified” such proposal and therefore was es-
topped from claiming that registrant had agreed to trade-
mark use. Lanham Trade-Mark Act, § 32(1)(a), 15
U.S.C.A. § 1114(1) (a).
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21. Trade Regulation (Key) 338
Continued trademark use by one whose trademark li-
cense had been cancelled satisfied likelihood of confusion
test and constituted trademark infringement. Lanham
Trade-Mark Act, $$ 1 et seq., 32(1) (a), 35, 15 U.S.C.A. §§
1051 et seq., 1114(1) (a), 1117.
22. Trade Regulation (Key) 598
Trial court could find that franchisor did not prove
with sufficient certainty that continued operation after
termination of franchise caused purported injury.
23. Damages (Key) 6
Wrongdoer cannot escape liability simply because
harm he caused is difficult to value, but plaintiff must
make positive showing that defendant was in fact respon-
sible for the alleged damages.
24. Damages (Key) 28
Award of infringer’s profits can be appropriate mea-
sure of damages for federal or state trademark infringe-
ment but disgorgement of profits earned is not remedy for
breach of contract and, under Florida law, contract plain-
tiff may recover damages in amount which will place him
in position that he would have obtained but for the breach
or the damages that are the natural and proximate result
of the default, subject to the rules of foreseeability and
certainty.
25. Damages (Key) 189
Record failed to support finding that profits earned by
franchisee equaled franchisor’s damage from breach by
franchisee, and thus award of profits as compensatory dam-
ages for breach of contract was error.
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26. Damages (Key) 40(1)
Accounting of profits may be appropriate to prevent
unjust enrichment of trademark infringer, but does not
compart with compensatory nature of breach of contract
damages.
27. Trade Regulation (Key) 672, 683
Damages provision of Lanham Act vests considerable
discretion in district court, and, guided by principles of
equity, court may award defendant's profits, and additional
extraordinary relief such as treble damages and attorney's
fees are available under statute if district court believes
that such assessment would be just. Lanham Trade-Mark
Act, § 35, 15 U.S.C.A. § 1117.
28. Trade Regulation (Key) 725
Remedial accommodation provided by damages pro-
vision of Lanham Act envisions exercise of trial judge's dis-
cretion, and it would be inappropriate for reviewing court
to attempt determination of damages in first instance. Lan-
ham Trade-Mark Act, § 35, 15 U.S.C.A. § 1117.
29. Trade Regulation (Key) 682
Award of attorney’s fees for violation of Lanham Act
is proper only in “exceptional cases” and the elements of
bad faith or fraud must be present to support the same.
Lanham Trade-Mark Act, § 35, 15 U.S.C.A. § 1117.
30. Trade Regulation (Key) 683
There is no automatic right to enhance damages for
Lanham Act violation. Lanham Trade-Mart Act, § 35,
15 U.S.C.A. § 1117,
A9
31. Trade Regulation (Key) 673
Although accounting of profits can be effective means
to prevent unjust enrichment of trademark infringer, all
monetary awards under damages provision of Lanham
Act are subject to principles of equity. Lanham Trade-
Mark Act, § 35, 15 U.S.C.A. § 1117.
32. Federal Civil Procedure (Key) 2737.5
Where it was provided in development agreements
that in the event developers disputed franchisor’s termi-
nation of agreement and legal action was commenced
developers would indemnify and reimburse franchisor for
costs and attorney’s fees in successfully “defending such
action,” term “action” near end of provision meant legal
action as opposed to “action” of terminating agreements in
general, but where in response to franchisor’s general com-
plaint developers contended that development agreements
had been illegally cancelled and filed counterclaim for
specific performance and damages for wrongful termina-
tion, franchisor was placed in position of defending lawsuit
for wrongful termination of development agreements, and
situation was squarely within terms of attorney's fee pro-
vision.
33. Costs (Key) 10
Under Florida law, contract which provides for pay-
ment of attorney’s fees is binding and must be enforced by
trial court.
34. Federal Civil Procedure (Key) 2737.5
In view of overlapping of issues, some of which were
compensable and some of which were not compensable
under contract provision for payment of attorney’s fees,
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and in view of district court judge’s opportunity to esti-
mate amount of lawyer time devoted to various issues be-
fore him, fee awarded to franchisor pursuant to develop-
ment agreements satisfied reasonableness standard.
35. Costs (Key) 173(1)
Under Florida statute providing for reasonable attor-
ney’s fee award to prevailing party, there must be finding
by the court that there was complete absence of justiciable
issue raised by losing party, and same was true even
where it was obvious to reviewing court that, by award-
ing fees pursuant to the statute, the trial judge found
that claims met statutory standard. West’s F.S.A. § 57.105.
36. Costs (Key) 173(1)
Attorney’s fees can be granted under Florida statute
when claims have been dismissed or defeated as long as
no justiciable issues of law or fact were raised by the
claims, and although dismissal by itself will not support
award, voluntary dismissal is not bar to award of attor-
ney’s fees under the statute. West's F.S.A. § 57.105.
37. Costs (Key) 173(1)
Notwithstanding Florida statute providing for award
of reasonable attorney's fee to prevailing party in any
civil action in which court finds that there was complete
absence of justiciable issue raised by losing party, there
is no Florida authority to justify, much less mandate,
award for services of house counsel as part of attorney’s
fees. West's F.S.A. § 57.105.
38. Costs (Key) 10
Under Florida law, contract provision which specifies
that attorney’s fees must be paid in event of litigation
All
is enforceable as agreement for indemnification, and where
franchisor did not have to pay out additional money for
services of its house counsel, it could not claim “reimburse-
ment” for prorata share of fixed corporate expense.
West's F.S.A. § 57.105.
Appeals from the United States District Court for
the Southern District of Florida.
Before VANCE and HENDERSON, Circuit Judges,
and TUTTLE, Senior Circuit Judge.
ALBERT J. HENDERSON, Circuit Judge:
Following approximately five years of litigation in the
United States District Court for the Southern District of
Florida encompassing two jury trials, one bench trial and
countless motions and hearings, the appellants, a group of
investors including Gerald Mason, Wesley Hardy, Donald
Szabo and Richard Peterson (hereinafter collectively re-
ferred to as ‘“Mason”) by this appeal, seek to reverse por-
tions of the final judgment. The Burger King Corporation
(“BKC”), the original plaintiff in the action, filed a cross-
appeal to certain adverse rulings of the district court.
Mason also filed a separate appeal from the attorney’s fee
award and BKC again cross-appealed on this issue. After
an exhaustive review of the evidence and each assignment
of error, we affirm in part and remand in part for further
proceedings.
I. Introduction
BKC, one of the largest franchisors of fast-food res-
taurants in the United States, maintained a business rela-
tionship with Mason for many years. As a result of this
relationship, Mason acquired the right to establish Burger
King restaurants in two major metropolitan areas and to
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develop other restaurants throughout the United States
during the 1970's. Mason's territorial rights derived from
two development agreements between the parties by which
Mason obtained the exclusive authority to establish Burger
King franchises in Pittsburg and Kansas City. Over the
years Mason purchased at least twenty-seven Burger King
franchises under separate agreements. In connection with
the development of some of the franchises, BKC provided
financing to Mason for which Mason executed promissory
notes. Mason incurred additional obligations for payments
due under certain lease agreements with BKC, for supplies
furnished on account and for royalties due under the fran-
chise agreements. (The leases, accounts for supplies and
royalties will be referred to as the “accounts”. )
The long standing Mason-BKC business association
began to deteriorate in 1977 when BKC notified Mason of
the cancellation of the two exclusive development agree-
ments. In 1978, BKC filed this suit seeking a declaration
that it had properly terminated the development contracts.
Mason responded with a counterclaim for reinstatement
and damages for the revocation. Afterwards, in 1979, BKC
informed Mason that it was unilaterally terminating all
twenty-seven of its Burger King franchises for failure to
comply with the terms of the franchise agreements. Even-
tually, through amendments to the complaint and counter-
claim, the suit filed in 1978 expanded to controversies
concerning both the development and franchise agreements
as well as demands arising from Mason’s liability on the
promissory notes and the accounts.
In 1980 the case came on for trial and the issues were
submitted to the jury on special interrogatories. The jury
found that the development contracts were validly can-
celled but that BKC wrongfully terminated twelve of the
franchise agreements. Because of the equivocal nature
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of the jury’s verdict as to the remaining fifteen franchise
terminations, the district court ordered a new trial on those
agreements. The court also granted a new trial to BKC
for a computation of damages resulting from Mason’s lia-
bility on the promissory notes and accounts, Since there
Was no genuine issue of fact as to the amount due on the
promissory notes and accounts, the district court thereafter
entered a summary judgment in favor of BKC for those
damages. Before the second jury trial, BKC conceded its
error in terminating one of the fifteen franchises left for
trial. Also, during the second trial, the district court sus-
tained, as a matter of law, the revocation of seven of the
franchises. Thus, by concession or court order, eight of
these fifteen terminations were eliminated from the jury’s
consideration. After the second trial in 1981, the jury
found that BKC validly terminated six of the remaining
franchises. Consequently, Mason prevailed in its efforts
to nullify the terminations of fourteen of its franchises
and BKC successfully defended the cancellation of thirteen
franchise agreements.
Subsequent to the second jury trial, the district court
held a bench trial on BKC’s claims for common law trade-
mark infringement, unfair competition and breach of the
franchise agreements based upon Mason’s post-termination
use of the Burger King trademarks. The court awarded
to BKC the profits earned from the franchises previously
found to have been lawfully terminated for the breach
of the franchise agreements.
Finally, the district court conducted a hearing on
BKC’s application for attorney’s fees. The court awarded
fees in accordance with the provisions of the development
agreements, the notes, the leases and a Florida statute.
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II. The 1980 Jury Verdict
In attacking the trial judge’s resolution of the 1980
jury verdict, Mason challenges the grant of a new trial
limited to the issue of BKC’s damages on the promissory
notes and the accounts, Second, Mason. asserts that the
district court also erred in ordering a new trial for a deter-
mination of the validity of BKC’s cancellation of the fran-
chises not listed on the jury’s verdict form.
A. Did the jury compromise?
In its answer to Special Issue = 1, the jury found in
favor of BKC on the promissory notes (valued at approx-
imately $1,000,000.00), rejecting Mason's affirmative de-
fenses thereto.! However, it awarded BKC only $1.00 as
damages. Responding to Issue = 2, the jury sustained
BKC’s right to recover on the accounts (valued at approx-
imately $500,000.00) and found against the affirmative de-
fenses. BKC was awarded $100,000.00 as “damages’’ for
this item
Neither party brought these inconsistent results to
the district court’s attention until after the jury had been
discharged and it was too late to resubmit the damages
question to the jury. BKC eventually filed a motion for
a clarification of the jury verdict on the promissory notes
and the accounts. By this motion, BKC sought a judgment
for the face amount of the debts, as shown by the evidence,
plus the “damages” awarded by the jury. Alternatively,
BKC moved for a judgment notwithstanding the verdict
1. As affirmative defenses to liability on the notes and the
accounts, Mason claimed that (1) BKC was guilty of economic
coercion; (2) BKC fraudulently induced Mason to incur the
liabilities; and (3) Mason was entitled to a set-off for the full
amount of the obligations because BKC wrongfully terminated
the development agreements. These contentions were also the
subject of Mason's counterclaim,
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for the full amount of the obligations. The district court
denied both motions and, instead, ordered a new trial lim-
ited to a computation of BKC’s damages on the promissory
notes and the accounts. Subsequent to this order, BKC
filed a motion for summary judgment supported by affi-
davits establishing its entitlement to the full amount of
the debts. Since Mason submitted no evidence in opposi-
tion to the affidavits, the district court granted judgment
to BKC for these liquidated amounts.
Mason contends that the jury’s inadequate award of
damages signifies an improper compromise verdict because
three was no dispute as to the correct amount due on the
notes and accounts. Mason therefore claims that the liabil-
ity and damages issues were inseparable and the trial judge
erred in restricting a new trial to the question of damages.
Rule 59(a) of the Federal Rules of Civil Procedure
provides that a new trial may be granted “on all or part
of the issues.’’ The decision whether to grant a new trial is
discretionary with the district court and will not be re-
versed absent an abuse of that discretion. See, e.g., Franks
v. Associated Air Center, Inc., 663 F.2d 583, 586 (5th Cir.
1981); Lucas v. American Manufacturing Co., 630 F.2d 291
(5th Cir.1980);* Young v. International Paper Co., 322 F.2d
820, 822 (4th Cir.1963).
[1,2] Itis axiomatic, however, that a partial new trial
may not be granted if it would infringe upon a litigant’s
seventh amendment right to a jury trial. In Gasoline Prod-
ucts v. Champlin Refining Co., 283 U.S. 494, 51 S.Ct. 513, 75
L.Ed. 1188 (1930), the Supreme Court enunciated the stan-
dard which governs partial new trial practice:
2. In Bonner v. City of Prichard, 661 F.2d 1206 (11th Cir.
1981) (en banc), the Eleventh Circuit Court of Appeals adopted
as precedent the decisions of the former Fifth Circuit issued before
October 1, 1981.
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{w]here the practice permits a partial new trial, it
may not properly be resorted to unless it clearly ap-
pears that the issue to be retried is so distinct and
separable from the others that a trial of it alone may
be had without injustice.
Id. at 500, 51 S.Ct. at 515, 75 L.Ed. at 1191. Applying
Champlin Refining, the former Fifth Circuit Court of Ap-
peals held that a jury verdict influenced by an improper
compromise cannot stand and a complete new trial is re-
quired because liability and damages are inseparable. See,
e.g., Lucas v. American Manufacturing Co., 630 F.2d 291,
294 (5th Cir.1980); Hatfield v. Seaboard Air Line R.R. Co.,
396 F.2d 721, 724 (5th Cir.1968). Hence, if there is a com-
promised finding on liability, a separable trial on damages
alone will not suffice—both liability and damages must be
relitigated in a new trial. Id.
[3, 4) With this admonition in mind, we focus our
attention on whether the district court abused its discre-
tion in rejecting the compromise claim. ‘“A compromise
verdict is one where it is obvious that the jury compromised
the issue of liability by awarding inadequate damages.”
Freight Terminals Inc. v. Ryder System, Inc., 461 F.2d 1046,
1053 (5th Cir.1972). However, a review of the cases from
the former Fifth Circuit Court of Appeals establishes that
a nominal or inadequate finding of damages by itself does
not automatically mandate the conclusion that the award
was the product of a compromise verdict. See, e.g., Hadra
v. Herman Blum Consulting Engineers, 632 F.2d 1242, 1247
(5th Cir.1980), cert. denied, 451 U.S. 912, 101 S.Ct. 1983,
68 L.Ed.2d 301 (1981); Davis v. Becker & Associates, Inc.,
608 F.2d 621 (5th Cir.1979); Bassett Furniture Industries
of North Carolina, Inc. v. NVF Co., 576 F.2d 1084, 1094 (5th
Cir.), reh. denied with opinion, 583 F.2d 778 (5th Cir.1978);
Parker v. Wideman, 380 F.2d 433, 437 (5th Cir.1967). In-
Al7
deed, if inadequate damages was the sole test for a com-
promise, Rule 59(a) would have little or no purpose.
Rather, our inquiry must concentrate on any indicia of
compromise apparent from the record, Hatfield, 396 F.2d
721, 723-24, and other factors which may have caused the
jury to return a verdict for inadequate damages. See
Hadra, 632 F.2d 1242, 1244n. 1. Only if the “totality of the
circumstances” indicates that the issue sought to be ex-
cluded by a partial new trial is not separable from the error
in the damage award, will a plenary new trial be au-
thorized. See Williams v. Slade, 431 F.2d 605, 609 (5th
Cir.1970).
Two former Fifth Circuit cases offer instructive ex-
amples of situations where the record contained adequate
indications of compromise to warrant a complete new
trial, In Hatfield, the court held that a jury verdict
finding liability and awarding $1.00 in damages was the
result of a compromise. The court found that under
all the circumstances, including the jury’s confusion con-
cerning contributory negligence and the fact that it took
two days to return a verdict, there was strong support
for the conclusion that the inadequate award of damages
was the culmination of a compromise among the jurors.
The former Fifth Circuit again determined that the jury
probably compromised in Lucas v. American Manufac-
turing Co., 630 F.2d 291 (5th Cir.1980). In Lucas, the
trial judge admonished the jury to return a verdict quickly
because a hurricane was approaching the city. The jury
did so, but after finding the defendant liable, awarded
the plaintiff patently inadequate damages. On appeal,
the Fifth Circuit remanded for a new trial on liability
and damages. The court reasoned that in their haste to
decide the case before the arrival of the hurricane, the
jurors probably compromised, agreeing to find liability
only if the damages were kept to a minimum.
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By contrast, the court has rejected the compromise
theory when the record discloses another basis for the
improper award. For example, in Hadra v. Herman Blum
Consulting Engineers, 632 F.2d 1242 (5th Cir.1980), cert.
denied, 451 U.S. 912, 101 S.Ct. 1983, 68 L.Ed.2d 301 (1981),
the jury found that the defendant had breached the
plaintiff's employment contract but awarded no damages.
The district court ordered a new trial confined to the
plaintiffs’ claim of damages for the breach. The Fifth
Circuit affirmed the grant of a partial new trial. The
court rejected the defendant’s contention that the jury
verdict was the product of a compromise, thereby affirm-
ing the district court’s explanation that the failure to
afford monetary relief could have resulted from an im-
proper determination that the plaintiff failed to mitigate
his damages by accepting alternative employment. See
632 F.2d at 1244, n. 1. In Hadra, the court emphasized
that the defendant pointed to ‘no circumstances, such
as those listed in Hatfield, that indicate the possibility
of a compromise verdict ...”. Id. at 1246. Consequently,
since there was sufficient evidence to support the jury’s
finding of liability, the court held that it was proper to
order a new trial limited to damages.
[5] The record before us confirms our belief that
the liability and damages issues were also separable in
this instance. First, and foremost, the jury repeatedly
found that Mason failed to establish its affirmative de-
fenses, the only basis upon which Mason could escape
liability. It did so in finding against Mason on the prom-
issory notes and accounts; it rejected the affirmative de-
fenses again when they were asserted as grounds for
setting aside the terminations of the development agree-
ments; and once more when they constituted the founda-
tion for the counterclaim against BKC. We can come
Al9
to no other conclusion than that the jury did not believe
Mason’s allegations of economic coercion, fraudulent in-
ducement or wrongful termination of the development
agreements. Having clearly convinced the jury that these
claims lacked merit, BKC should not have to defend
against them again. Second, the record contains abso-
lutely no indicia of a compromise other than the low
amount of damages. After a long, protracted trial, the
jury required only two to three hours to reach its ver-
dict. It obviously was not deadlocked. The jury did
not request additional instructions or attempt to qualify
its verdict in any manner. Finally, as BKC points out,
the award could be explained by reference to the use
of the term “damages” on the special interrogatories. It
is possible that the jury thought that BKC would receive
payment on the promissory notes and accounts based
solely on their finding that BKC was entitled to recover
for these items and, therefore, any additional finding
of “damages” would simply amount to a duplication.®
The “totality of the circumstances” simply do not point
to a compromise verdict. Viewed in this factual and
procedural setting, the district court did not abuse its
discretion in ordering the partial new trial.
B. Franchise Termination Verdict Form
Special Issue = 5 sought a determination of the validity
of BKC’s terminations of Mason's franchise agreements.
The jury could find: (a) BKC properly terminated all
of the agreements; (b) BKC wrongfully terminated all of
the agreements; or (c) BKC properly terminated the
3. BKC offered alternative verdict forms which asked the
jury to designate the amount of Mason’s “liability” on the various
obligations. The term “liability” would have more accurately re-
flected the nature of the recovery. Thus, although the proffer
was rejected, BKC did attempt to avoid the potentially confusing
reference to “damages”.
A20
franchises listed in column one and wrongfully terminated
the franchises listed in column two. The jury circled
alternative (c), but after designating some franchise num-
bers under the properly terminated column, crossed them
out and wrote “none”. The jury specified only twelve
of the twenty-seven franchise agreements at issue in the
wrongfully terminated column.*
Again, neither party requested that the issue be re-
submitted to the jury for clarification. As a result, the
jury was discharged without the opportunity to correct
these inconsistencies, leaving the district court with the
difficult task of interpreting the verdict. In a post trial
motion, BKC sought a judgment notwithstanding the ver-
dict, claiming that the evidence established that all of
the franchises had been properly cancelled. Alternatively,
BKC asked for a new trial on all of the franchise termi-
nations. As expected, Mason took the opposite position,
asserting that the verdict correctly found that all of the
franchises were wrongfully terminated. The district court
rejected all of those contentions, instead ordering a new
trial for the restaurants which were not listed in either
column. In its order, the court stated that “[i]t [was]
very uncertain ... whether [the jury] made any deter-
mination as to the other restaurants [not listed] .. . [and]
it would not serve the best interests of justice for the
court to attempt to read the jury’s mind in an effort to
resolve this ambiguity.” R. 3136.
Mason faults the trial court for its failure to construe
these responses as a finding that all of the franchises
had been wrongfully terminated. Emphasizing the dis-
trict court’s duty to attempt to reconcile inconsistent
special verdicts, Mason claims that the district court was
4. The jury’s answer to Special Issue # 5 is reproduced as
an appendix to this opinion.
A2l
required to so conclude because the jury’s answer that
“none” were properly cancelled obviously indicates that
the jury decided that all twenty-seven terminations were
without legal cause. Mason makes this argument in spite
of the fact that the jury did not select that alternative
on the verdict form and only identified twelve franchises
in that category.
(6) As stated before, the district court has authority
under Rule 59(a) of the Federal Rules of Civil Procedure
to order a partial new trial. Even though more stringent
appellate review is called for when the trial court orders
a new trial, the abuse of discretion standard still controls
our consideration of the decision. See, e.g., Williams v.
City of Valdosta, 689 F.2d 964, 974 (11th Cir.1982); Rabun
v. Kimberly-Clark Corp., 678 F.2d 1053 (11th Cir.1982).
{7-11} <A trial judge must make all reasonable efforts
to reconcile an inconsistent jury verdict and “if there is
a view of the case which makes the jury’s answers con-
sistent, the court must adopt that view and enter judg-
ment accordingly.” Griffin v. Matherne, 471 F.2d 911,
915 (Sth Cir.1973). See, e.g., Atlantic & Gulf Stevedores,
Inc. v. Ellerman Lines, 369 U.S. 355, 364, 82 S.Ct. 780,
786, 7 L.Ed.2d 798, 806-807 (1962); Aquachem Company,
Inc. v. Olin Corp., 699 F.2d 516, 521 (11th Cir.1983); Miller
v. Royal Netherlands Steamship Co., 508 F.2d 1103, 1106
(Sth Cir.1975). The test employed in determining whether
a conflict in the verdict can be reconciled is “whether
the answers may fairly be said to represent a logical and
probable decision on the relevant issues as submitted .. .”.
Griffin, 471 F.2d at 915. However, if the jury’s answers
are so ambiguous or conflicting that they cannot be re-
conciled fairly, the trial court may not enter judgment
thereon. Royal Netherlands Steamship Co. v. Strachan
Shipping Co., 362 F.2d 691, 694 (5th Cir.1966), cert.
A22
denied, 385 U.S. 1004, 87 S.Ct. 708, 17 L.Ed.2d 543 (1967).
A special verdict which does not resolve the essential
facts, or does so in an inexplicable fashion, will not sup-
port a judgment. Prentice v. Zane’s Administrator, 49
U.S. (8 HOW.) 470, 484, 12 L.Ed. 1160, 1166 (1850);
Hartnett v. Brown & Bigelow, 394 F.2d 438, 441, n. 2
(10th Cir.1968). Moreover, trial judg © are not empow-
ered to fill in facts omitted from the answer to a special
interrogatory. Guidry v. Kem Manufacturing Co., 598
F.2d 402 (5th Cir.), reh. denied with opinion, 604 F.2d
320, 321 (5th Cir.1979). When an insurmountable in-
consistency or ambiguity is perceived, the trial court
may resubmit the issue to the jury before it is dismissed
or order a new trial on some or all of the issues. Nord-
mann v. National Hotel Co., 425 F.2d 1103, 1106 (5th
Cir.1970).°
[12] Without doubt, the response to special issue
z+ 5 was both inconsistent and ambiguous. If the jury
intended to find that all of the franchises had been wrong-
fully terminated, it could have selected alternative (b)
—it did not. Thus, the choice of alternative (c) was
inconsistent with its answer that none of the franchises
had been properly terminated. More significantly, the
answer does not resolve the disposition of over half of
5. Because of the risk of inconsistency and ambiguity which
accompanies the use of special interrogatories, attorneys should
pay careful attention to insuring that an acceptable verdict has
been rendered before the jury is discharged from the case. Guidry,
598 F.2d at 405-06. Often the need for a new trial can be
avoided by requesting resubmission to the jury. This procedure
undoubtedly would have remedied the problem created by the
answer to special issue + 5, since the jury could have completed
its answer upon resubmission. A very cursory reading of the ver-
dict form would have uncovered the inadequacies of the verdict.
Had the attorneys examined the verdict with the same degree of
vigor with which they pursued their cause at the trial and their
assignments of error on appeal, valuable judicial resources could
have been conserved.
A23
the franchises. As the district court observed, it is not
clear what the jury found, if anything, with respect to
the omitted franchises. The trial court properly declined
to supply facts submitted for the jury’s determination
but left unanswered. Guidry, 598 F.2d 402. Inconsistent
or ambiguous verdicts must be reconciled only if that
can be accomplished from a fair reading of the verdict.
Griffin, 471 F.2d at 915. Faced with this incompatible
answer, we have no criticism of the district court's exer-
cise of its discretion in this instance.
III. Material Breach Instruction
In its cross-appeal, BKC challenges the finding that
some of the franchises were wrongfully terminated. The
source of this complaint is the district court’s instruction
to the jury that a franchise could not be revoked absent
a “material” breach of the particular agreement. This,
BKC says, is an erroneous statement of Florida law. In
essence, BKC urges that it was entitled to strictly enforce
the termination provisions of the agreements without
regard to the materiality of the alleged defaults,
[13, 14] Although the Florida courts have recog-
nized that the terms of franchise agreements are enforce-
able, North Dade Imported Motors, Inc. v. Brundage
Motors, Inc., 221 So.2d 170, 177 (Fla.Dist.Ct.App.), “it
is elementary that the mere breach of an agreement which
causes no loss . . . will not sustain a suit... for damages,
much less rescission.” Block v. City of West Palm Beach,
112 F.2d 949, 952 (5th Cir.1940) (quoted in, Westcap
Government Securities, Inc. v. Homestead Air Force Base
Federal Credit Union, 697 F.2d 911, 913 (11th Cir.1983) ).
Pursuant to this rule, the Florida courts, and this court
construing Florida law, have held that a party may not
escape performance under a contract on the ground that
A24
a tender was not made by the date specified in the con-
tract. Rather, a party who tenders late may enforce the
contract with due allowance for any damage caused by
the tardiness. See, e.g., Westcap Government Securities,
Inc., 697 F.2d at 914; Blaustein v. Weiss, 409 So.2d 103
(Fla.Dist.Ct.App.1982); Jackson v. Holmes, 307 So.2d 470
(Fla.Dist.Ct.App.), cert. denied, 318 So.2d 404 (Fla.1975);
Larsen v. Miami Gardens Dev. Corp., 299 So.2d 50 (Fla.
Dist.Ct.App.1974); National Exhibition Co. v. Ball, 139
So.2d 489 (Fla.Dist.Ct.App.1962). Indeed, a Florida court
has refused to countenance unilateral cancellation in that
context even when the contract stipulated that time was
of the essence. Jackson, 307 So.2d at 471-472. Thus,
although as a general rule parties to a contract may
strictly enforce its terms and the courts will not rewrite
an agreement to undo the consequences of a bad bargain,
see, e.g., Sapienza v. Bass, 144 So.2d 520 (Fla.Dist.Ct.App.
1962), the Florida courts do not blindly sanction unilateral
termination of contracts when a default causes no harm
to the party seeking to avoid performance.
[15, 16] Consistent with this principle, the Florida
courts have indicated that the materiality of a breach is
relevant when a party seeks to terminate or rescind a
contractual relationship. See, e.g., Callins v. Abbatecola,
412 So.2d 58Fla.Dist.Ct.App.1982) (when a party sought
to terminate a real estate contract on the ground that
the purchaser’s check was returned for insufficient funds,
the court stated that “the question involved here is .
whether [the tender of a bad check] . . . constituted such
a material breach .. . as to justify ... termination. . .”.
Id. at 59); Gittlin Companies, Inc. v. David & Dash, Inc.,
390 So.2d 86 (Fla.Dist.Ct.App.1980) (rescission of distrib-
utorship contract was not justified when the defendant
made direct sales in violation of the exclusive distribution
A25
provision of the distributorship agreement because the
breach was not material or substantial). In Gittlin Com-
panies, 390 So.2d at 86, the Florida court cited McAlpine
v. Aamco Automatic Transmissions, Inc., 461 F.Supp. 1232
(E.D.Mich.1978), in support of its holding that an im-
material breach of a distributorship agreement did not
excuse performance. The McAlpine opinion states the
rule followed by the district court in this case:
A material breach would allow the franchisees
to terminate their Franchise Agreements and discon-
tinue future performance. An immaterial breach
would allow the franchisees to sue for any damage
caused, but they would still be bound to continue
performance under the contract.
461 F.Supp. at 1249.
We conclude that the district court’s instruction com-
ported with substantial Florida case law and reject BKC’s
argument to the contrary.®
6. The decision in Austin’s Rack, Inc. v. Austin, 396 So.2d
1161 (Fla.Dist.Ct.App.), cert. denied, 402 So.2d 607 (Fla.1981),
does not compel a different result. That case held that an em-
ployer may terminate an employee if the employee commits an
act specified as grounds for termination in the employment agree-
ment. While the Austin case generally supports the proposition
that parties to a contract may strictly enforce its termination
provisions, even the Austin court indicated that the termination
clause was reasonable. To the extent that Austin represents a
contrary line of authority, we, nevertheless, find that the ma-
teriality instruction was not error. Given this possible ambiguity
in the Florida authorities, we defer to the district judge's inter-
pretation of the law of the state in which he presides. See
Alabama Electric Cooperative, Inc. v. First National Bank of
Akron, Ohio, 684 F.2d 789, 792 (11th Cir.1982); Kaufman & Broad
Home Systems, Inc. v. International Brotherhood of Firemen &
Oilers, 607 F.2d 1104, 1108 (5th Cir.1979).
A26
IV. Post-Termination Trademark Use
A. Background
Each of the franchise agreements stipulates that upon
termination of the franchise, the franchisee must discon-
tinue use of the Burger King trademarks. Following
the May 1979 unilateral cancellation of all 27 of Mason's
franchises, Mason sought an injunction to prohibit BKC
from interfering with the operation of its restaurants
as Burger King franchises. At the August 1979 eviden-
tiary hearing on this motion, BKC advised the court that
it would maintain the status quo, e.g. it would not force
Mason to cease operating under the Burger King name,
pending a final resolution of the franchise dispute. How-
ever, BKC conditioned this offer on its right to later pur-
sue relief for the post-termination operation. Although
Mason made no explicit response to this proposal, no
further mention was made of this issue and Mason lim-
ited its proof and arguments to other remedies. There-
after, BKC provided supplies to and accepted royalties
from the Mason franchises during the litigation.
BKC amended its complaint to add a cause of action
under the Lanham Act, 15 U.S.C. § 1114(1) (a), for Mason's
post-termination use of the Burger King trademarks. At
the close of the 1980 jury trial, the district court granted
Mason's motion for a directed verdict on the Lanham Act
claim. After doing so, the district court permitted BKC
to again amend its complaint to include claims for com-
mon law trademark infringement, unfair competition and
breach of contract based upon Mason’s use of the trade-
marks at any restaurants whose franchise revocations
might be adjudicated valid in the second trial. Finally,
following the second jury’s finding that certain franchises
had been legally terminated, the district court proceeded
with a bench trial on BKC’s common law trademark, un-
A27
fair competition and breach of contract causes of action.
The district court held that Mason breached the franchise
provisions prohibiting use of the Burger King trademark
after invalidation of the agreement. Concluding that
Mason had been “unjustly enriched” by this breach, the
district court awarded BKC the profits earned by Mason
as a consequence of the post-termination operation of these
franchises as “compensatory damages” for the violation,
In this order, the court found that BKC did not consent to
the post-termination use of the trademark.
B. Lanham Act Claim
By way of cross-appeal, BKC asserts that the district
court erred in directing a verdict favorable to Mason dur-
ing the first jury trial on its Lanham Act claim for post-
termination trademark infringement.’ BKC maintains
that it established the essential elements of federal trade-
mark infringement when it proved that Mason displayed
the Burger King marks after its right to do so had been
revoked. We agree.
[17-19] In order to prevail on a trademark infringe-
ment claim, the registrant must show that (1) its mark
was used in commerce by the defendant without the
registrant’s consent and (2) the unauthorized use was
likely to cause confusion, or to cause mistake or to deceive.
15 U.S.C. § 1114(1)(a). Ordinarily, trademark infringe-
ment cases are predicated on the complaint that the de-
fendant employed a trademark so similar to that of the
plaintiff that the public will mistake the defendant's prod-
7. Because the first jury did not specify any franchises under
the “properly terminated” column, BKC’s claim for post-termina-
tion trademark infringement at the properly terminated restau-
rants could not have provided any relief after the first trial.
However, once some franchises were found to have been validly
terminated, the issue of the correctness of the directed verdict
on the Lanham Act cause of action was revived.
A28
ucts for those of the plaintiff. See, e.g., Exxon Corp. v.
Texas Motor Exchange of Houston, Inc., 628 F.2d 500 (5th
Cir.1980). Also, it is well established that “falsely sug-
gesting affiliation with the trademark owner in a manner
likely to cause confusion as to source or sponsorship con-
stitutes infringement.” Professional Golfers Ass’n of Amer-
ica v. Bankers Life & Casualty Co., 514 F.2d 665, 670 (5th
Cir.1975) (emphasis supplied). See also, Control Com-
ponents, Inc. v. Valtek, Inc., 609 F.2d 763, 770 (5th Cir.),
cert. denied, 449 U.S. 1022, 101 S.Ct. 589, 66 L.Ed.2d 484
(1980). Thus, a trademark infringement case need not
just involve imitation of the registrant's mark. The un-
authorized use of a trademark which has the effect of mis-
leading the public to believe that the user is sponsored or
approved by the registrant can constitute infringement.
Professional Golfers Ass’n, 514 F.2d at 670. The Lanham
Act cause of action was based on the theory that by
using the Burger King trademarks after the trademark
license had been cancelled, Mason falsely suggested that
its restaurants were sponsored by and affiliated with BKC.
Because this type of infringement is cognizable under the
Lanham Act, we must examine BKC’s proof in light of the
requirements of the statute.
[20] Mason denies the use of BKC’s trademark with-
out consent because after the terminations, BKC provided
supplies bearing the Burger King trademarks and accepted
royalties from the Mason group. This point was stressed
on several occasions in the district court. Mason advanced
this argument for the frist time during the hearing on
Mason’s motion for a directed verdict on the Lanham Act
claim. The trial judge granted the motion without stating
his reasons. Mason had insisted that a directed verdict
was mandated because (1) BKC consented to the use of
the trademark and (2) BKC did not show likelihood of
confusion. Subsequently, BKC amended its complaint to
A29
allege common law trademark infringement, unfair com-
petition and breach of contract arising from Mason's post-
termination use of the trademarks. BKC and Mason stip-
ulated that any relief for these claims would be determined
by the district court in a bench trial following the second
jury trial if any of the franchises were found to have been
properly terminated. At the subsequent bench trial, Ma-
son asserted that BKC could not recover for common law
trademark infringement because BKC consented to Mason’s
continued use. The consent issue was finally resolved ad-
versely to Mason by the district judge in his findings of
fact rendered after the bench trial. The court found that
rather than acquiescing in the infringement, BKC agreed
at the August, 1979 hearing that it would allow Mason to
continue operating restaurants under the Burger King
banner, provided that it retained its right to seek damages
upon a later determination of its right to cancel any or all
of remaining franchises. The court found that Mason had
“ratified” this proposal, and therefore, was estopped from
claiming that BKC had agreed to the trademark use.
The trial court reasonably could infer that Mason ac-
quiesced in BKC’s offer to permit Mason to continue to
operate its restaurants upon the condition that BKC re-
tained its right to recover for post-termination trademark
infringement. Mason did not object to this approach and
acted in a manner consistent with acceptance until the
close of the 1980 jury trial. From our review of the rec-
ord, we cannot say that a finding of estoppel under these
circumstances was clearly erroneous.
(21! Because Mason used the Burger King trade-
marks after the revocation of that right without BKC’s
consent, a trademark infringement claim was established
so long as the trademarks were employed in a manner that
was likely to cause confusion, to cause mistake or to de-
A30
ceive. 15 U.S.C. § 1114(1)(a). Common sense compels
the conclusion that a strong risk of consumer confusion
arises when a terminated franchisee continues to use the
former franchisor’s trademarks. A patron of a restaurant
adorned with the Burger King trademarks undoubtedly
would believe that BKC endorses the operation of the
restaurant. Consumers automatically would associate the
trademark user with the registrant and assume that they
are affiliated. Any shortcomings of the franchise therefore
would be attributed to BKC. Because of this risk, many
courts have held that continued trademark use by one
whose trademark license has-been canceled satisfies the
likelihood of confusion test and constitutes trademark in-
fringement. See, e.g., United States Jaycees v. Philadel-
phia Jaycees, 639 F.2d 134 (3d Cir.1981); Professional
Golfers Ass’n v. Bankers Life & Casualty Co., 514 F.2d 665
(5th Cir.1975); Prompt Electric Supply Co., Inc. v. Allen-
Bradley Co., 492 F.Supp. 344, 349 (E.D.N.Y.1980) ; National
Board of YWCA v. YWCA of Charleston, S.C., 335 F.Supp.
615, 628-629 (D.S.C.1971). BKC proved that Mason em-
ployed the Burger King trademarks after its franchise
agreements were properly cancelled. This use was with-
out BKC’s consent and was likely to cause confusion.
Accordingly, we hold that the district court erred in direct-
ing a verdict against BKC on its Lanham Act complaint
and remand for a determination of the appropriate relief
in conformity with 15 U.S.C. § 1117.°
C. Damages for Breach of the Franchise Agreements
[22,23] As pointed out earlier, the district court con-
cluded that Mason breached the provisions of the franchise
agreements which prohibited the post-termination use of
the Burger King trademarks. Although BKC also argued
8 See Section IV D (“Lanham Act Damages”) imfra.
A3l
that Mason was guilty of common law trademark infringe-
ment and unfair cormpetition through the continued use
of the trademark, the district court made no findings on
those claims. Then, after ruling that BKC had not shown
certain consequential damages from the post-termination
use of the trademarks, the court awarded BKC the profits
that Mason earned at the properly terminated franchises
as “compensatory damages” for the breach. BKC com-
plains that the trial court should have allowed consequen-
tial damages; Mason, on the other hand, alleges that the
trial court erred in ordering it to disgorge the profits.
BKC’s assertions need not detain us long. It sought
damages based on its contention that Mason's continued
operation damaged its reputation and thwarted its plans
to expand in the areas in which Mason franchises were
located. After considering BKC’s evidence in support of
those damages, the district court determined that (1) BKC
had not established that Mason had tarnished its image,
and (2) BKC did not prove that Mason's failure to close
its stores prevented BKC from carrying out its market-
ing or development plafs. Contrary to BKC’s suggestion,
the district court did not deny damages because the
amounts were uncertain—the court found that BKC did
not prove that Mason's actions caused the claimed harm.
This factual finding was not clearly erroneous. A
reading of the record confirms that BKC did not prove
with sufficient certainty that Mason's continued operation
caused the purported injury. While it is clear that a
wrongdoer cannot escape liability simply because the harm
he caused is difficult to value, see, e.g., ABC-Paramount
Records, Inc. v. Topps Record Distributing Co., 374 F.2d
455 (Sth Cir.1967), it is equally well established that a
plaintiff must make a positive showing that the defendant
was in fact responsible for the alleged damages See. e.g.
A32
Asgrow-Kilgore Co. v. Mulford Hickerson Corp., 301 So.2d
441, 445 (Fla.1974). BKC simply failed to meet its burden
of proof.
The award of profits is more troublesome. Mason and
BKC focus their arguments on the propriety of ordering
an accounting of profits for trademark infringement. As
the parties recognize, a trademark infringer can be required
to turn over the profits he earns during the period of the
infringement subject to the discretion of the district judge
and in light of the equities of the case. 15 U.S.C. § 1117.
See, e.g., Maltina Corp. v. Cawy Bottling Co., Inc., 613 F.2d
582 (5th Cir.1980); Mead Johnson & Co. v. Baby’s Formula
Service, Inc., 402 F.2d 19 (5th Cir.1968). However, the
district court did not find that Mason infringed upon a
trademark. Rather, faced with BKC’s claims for trade-
mark infringement, unfair competition and breach of the
franchise agreements, the trial judge found only that
Mason violated the franchise agreements. For that in-
fraction, the court awarded Mason's profits as “compensa-
tory damages.””
9. While at first blush it might appear that the district court,
in essence, found that Mason committed common law trademark
infringement, a closer reading of the findings of fact and con-
clusions of law and the briefs filed in the district court, reveals
that the court made no finding on the trademark or unfair com-
petition claims. The three causes of action (trademark. unfair
competition and breach of the franchise agreements) were pursued
and defended against separately in the trial briefs. Mason's de-
fense against the common law trademark intrusion was the same
as that advanced at the hearing on the Lanham Act violation at
the first trial. The district court’s order unequivocally states
that Mason “breached the contractual obligations imposed on
them by the provisions in each of those franchise agreements
which govern the post-termination conduct of the franchisees.”
and that “[b]y their continued wrongful operation of each of the
thirteen restaurants _. . the Defendants have breached the fran-
chise agreement relating to each restaurant.” The opinion con-
tains no reference to trademark “infringement” or the elements
of a common law trademark infringement right of action. The
district court's award of damages was based on the breach of
the franchise agreements
A33
(24) Although an award of the infringer’s profits can
be an appropriate measure for damages for federal or state
trademark infringement, e.g., Maltina Corp., 613 F.2d at
564-585; 15 U.S.C. § 1117; Fla.Stat.Ann. §§ 495.131, 495.141
(West 1972), disgorgement of profits earned is not the
remedy for breach of contract. Under Florida law, a con-
tract plaintiff may recover damages in an amount which
will place him in the position that he would have obtained
but for the breach or the damages that are the natural
and proximate result of the default, subject to the rules
of foreseeability and certainty. 17 FlaJur.2d Damages
$ 26 (1980); Juvenile Diabetes Research Foundation v.
Rievman, 370 So.2d (Fla.Dist.Ct.App.1979); Popwell v.
Abel, 226 So.2d 418 (Fla.Dist.Ct.App.1969): Olin’s Inc. v.
Avis Rental Car System of Florida, Inc., 172 So.2d 250 (Fla.
Dist.Ct.App.), cert. denied, 177 So.2d 482 (Fla.1965). In
some cases, if the offending conduct causes the non-breach-
ing party to lose profits, the defendant can be required
to compensate the plaintiff for the lost profits. Sampley
Enterprises, Inc. v. Laurilla, 404 So.2d 841 (Fla.Dist.Ct.
App.1981). Consequently, if BKC had demonstrated that
Mason's refusal to cease operation after the terminations,
as required by the franchise agreements, caused the injury
to its reputation or the delay in development as it claimed,
those damages could have been recovered as the natural
and proximate result of the breach. But the district court
found that Mason's breach did not cause that harm.
[25, 26] There is no support in the record that the
profits earned by Mason equalled BKC’s damages from
the breach. That would be correct only if BKC proved
that it would have taken over the operation of the fran-
chises after termination and BKC reasonably could have
earned the profits that were generated by Mason from
such operation. Because BKC failed to show that it was
A34
entitled to Mason's profits as compensation for the breach,
the award of such profits as compensatory damages for
breach of contract was error and must be vacated.”
D. Remand for Determination of Lanham Act Damages
We have concluded that Mason’s post-termination use
of the Burger King trademarks at those restaurants whose
franchise agreements were lawfully cancelled constituted
trademark infringement under § 1114(1) (a) of the Lanham
Act. We also hold that it was error to award profits, a
trademark infringement remedy, for breach of the franchise
agreements. While it may be tempting to simply treat the
profits fixed as damages for the breach of contract as
the proper measure of recovery for the Lanham Act trade-
mark infringement and, consequently, avoid the necessity
of a remand, such a course of action would be an improper
exercise of our appellate role.
[27-31] The damages provision of the Lanham Act
stipulates:
When a violation of any right of the registrant of
a mark registered in the Patent and Trademark Office
shall have been established in any civil action arising
under this chapter, the plaintiff shall be entitled.
subject to the provisions of sections 1111 and 1114 of
this title, and subject to the principles of equity, to
recover (1) defendant's profits, (2) any damages sus-
tained by the plaintiff, and (3) the costs of the action
The court shall assess such profits and damages or
cause the same to be assessed under its direction. In
10. The district court stated that the profits award prevented
Mason's “unjust enrichment” from the breach. An accounting of
profits may be appropriate to prevent the unjust enrichment of
a trademark infringer, see, e.g., Maltina Corp. v. Cawy Bottling
Co., 613 F.2d 582 (5th Cir.1980), but does not comport with the
compensatory nature of breach of contract damages.
A35
assessing profits the plaintiff shall be required to
prove defendant's sales only; defendant must prove
all elements of cost or deduction claimed. In assessing
damages the court may enter judgment, according to
the circumstances of the case, for any sum above the
amount found as actual damages, not exceeding three
times such amount. If the court shall find that the
amount of the recovery based on profits is either in-
adequate or excessive the court may in its discretion
enter judgment for such sum as the court shall find
to be just, according to the circumstances of the case.
Such sum in either of the above circumstances shall
constitute compensation and not a penalty. The court
in exceptional cases may award reasonable attorney
fees to the prevailing party. ,
15 U.S.C. § 1117 (emphasis supplied).
This section vests considerable discretion in the dis-
trict court. Guided by the principles of equity, the court
may award the defendant's profits. Additional extra-
ordinary relief such as treble damages and attorney’s fees
are available under the statute if the district court believes
that such an assessment would be just. The statute also
provides for the adjustment of any profits award if it is
inadequate or excessive. This remedial accommodation
clearly envisions the exercise of the trial judge’s discre-
tion. Consequently, it would be inappropriate for this
court to attempt a determination of damages in the first
instance. See Boston Professional Hockey Ass’n v. Dallas
Cap & Emblem Mfg., Inc., 597 F.2d 71, 78 (5th Cir.1979).
This is the traditional and statutory function of the district
court.”’
11. We are cognizant of Mason’s position that a recovery
of profits would be improper for this trademark violation and
(Continued on following page)
A36
V. Attorney's Fees
After an extensive hearing, the district court found
that BKC was entitled to recover $884,924.80 in attorney's
fees and $94,570.83 in related expenses. The court denied
BKC’s claim for attorney's fees for the services performed
by its “in-house” lawyers. Mason challenges the award
on several grounds. BKC contends that it is entitled to
fees for the services of its house counsel.
A. Contract Provision
[32] Approximately $600,000.00 of the fee award was
allocated to work done in connection with the termination
of the development agreements. The attorney’s fees pro-
vision of the development agreements states that:
In the event Developers [Mason] dispute Burger King
Corporation’s termination of this Agreement and legal
action is commenced, Developers shall indemnify and
Footnote continued—
that any such assessment would be an abuse of discretion. We
set aside the profits as damages only because they are unau-
thorized for the breach of the franchise agreements and do not
now express any opinion on this issue. However, in the interests
of avoiding another appeal, we note certain principles that should
guide the district court in the exercise of its discretion on re-
mand. First, an award of attorney’s fees is proper only in
“exceptional cases’’—the elements of bad faith or fraud must be
present to support the grant of attorney’s fees. See Safeway
Stores, Inc. v. Safeway Discount Drugs, Inc., 675 F.2d 1160,
1169 (11th Cir.1982); Durbin Brass Works, Inc. v. Schuler, 532
F.Supp. 41, 44 (E.D.Mo.1982); Salton Inc. v. Cornwall Corp., 477
F.Supp. 975, 992 (D.N.J.1979). Second, there is no automatic
right to enhanced damages. Trial judges have wide latitude in
determining a just amount of recovery for trademark infringe-
ment. See Holiday Inns, Inc. v. Alberding, 683 F.2d 931, 935
(Sth Cir.1982). Finally, although an accounting of profits can
be an effective means to prevent the unjust enrichment of the
infringer. Maltina Corp. v. Cawy Bottling Co., 613 F.2d 582 (5th
Cir.1980), all monetary awards under § 1117 are “subject to the
principles of equity.” In short, contrary to the assertions of
both parties, no hard and fast rules dictate the form or quantum
of relief.
A37
reimburse Burger King Corporation for costs and at-
torney’s fees in successfully defending such action.
Exh. 289, R. 4500-4554 (emphasis supplied). Mason urges
that because BKC initiated the action against it, seeking
a declaratory judgment on the propriety of the termina-
tions, attorney’s fees are not authorized under this pro-
vision of the contract. According to Mason, fees are avail-
able only for the defense of legal action relating to ter-
mination of the development agreements.
We agree that BKC could not claim attorney’s fees
pursuant to this clause of the contract unless it was put
to the task of defending legal action concerning the termi-
nations. It seems clear to us that the term “action” ap-
pearing near the end of the provision refers to the “legal
action” mentioned at the beginning, as opposed to the “ac-
tion” of terminating the agreements in general. How-
ever, this observation does not negate the right to at-
torney’s fees since BKC did in fact defend legal action to
uphold the terminations. In response to BKC’s original
complaint, Mason contended that the development agree-
ments were illegally cancelled and filed a counterclaim
for specific performance and damages for wrongful termi-
nation. By this counterclaim, BKC was placed in the
position of defending a lawsuit for wrongful termination
of the development agreements—a situation squarely with-
in the terms of the attorney’s fee provision.
[33] Under Florida law, a contract which provides
for the payment of attorney’s fees is binding and must be
enforced by the trial court. See, e.g., Brickell Bay Club
Condominium Ass’n, Inc. v. Forte, 397 So.2d 959, 960 (Fla.
Dist.Ct.App.), petition for review denied, 408 So.2d 1092
(Fla.1981);° Silver Blue Lake Apartments, No. 3, Inc. v.
Manson. 334 So.2d 48 (Fla.App.1976). Consequently, the
A38
district court did not err in awarding attorney's fees as
provided in the contract.
B. Computation of Fees
[34] The district court determined that 68°% of the
total time which BKC’s attorneys devoted to the Mason-
BKC litigation was spent on issues compensable under
the terms of certain contracts or pursuant to Florida Stat-
ute § 57.105. In reaching this conclusion, the court stated:
[23] Burger King’s attorneys failed to maintain their
time records in a fashion which would facilitate, an
easy delineation by the Court between fees attribut-
able to compensable and non-compensable matters.
This necessarily leads to a certain imprecision in the
Court’s allocation
25. Burger King’s counsel worked on both issues for
which attorney’s fees can properly be awarded and
on other non-compensable issues. The fees and dis-
bursement which Burger King has paid [to its out-
side lawyers] must be allocated among the various
issues in the case. While no mathematically precise
allocation can be made because of the overlapping of
issues and the absence of specific detailed records, the
court is still in a position to make a competent and
reasonable allocation. Such allocation is as follows:
1. The termination of development agree-
ments—45%
2. Promissory notes and leases—20%
3. The successful defense of claims to which Fla.
Stat. § 57.105 is applicable—3%.
A39
26. The percentage allocation in the above finding is
based upon the evidence presented at trial and the
court’s own familiarity with the case....
Findings of Fact and Conclusions of Law, April 5, 1982.
Mason challenges this method of assessing the fees,
claiming that attorney’s fee awards are an abrogation of
the common law and, as such, strong proof of entitlement
is mandatory. Mason urges this court to disallow the award
or reduce it substantially because of BKC’s failure to main-
tain precise issue-by-issue time records. Mason cites a
number of bankruptcy cases for the proposition that fees
must be denied when the attorney’s time records are in-
adequate. See, e.g., In re First Colonial Corp. of America,
544 F.2d 1291 (5th Cir.1977), cert. denied, 431 U.S. 904, 97
S.Ct. 1696, 52 L.Ed.2d 388 (1977); In re Meade Land & De-
velopment Co., Inc., 527 F.2d 280 (3d Cir.1975); In re Orbit
Liquor Store, 439 F.2d 1351 (5th Cir.1971).
This argument is unpersuasive. As the district court
noted, the issues in this case overlapped to a significant ex-
tent. For example, BKC’s proof of its grounds for ter-
mination of the development agreements (a compensable
issue) also served as proof of the propriety of some of the
franchise terminations (a non-compensable issue). The
district judge was forced into the role of a referee in the
conduct of this litigation over an extended period of time.
Needless to say, he was intimately familiar with the issues
in the case. He was in an excellent position to estimate the
amount of lawyer time devoted to the various issues before
him.
Moreover, the Flordia appellate courts have approved
of attorney’s fees awards based upon estimates by the trial
judge of the time reasonably necessary to the ultimate
task. See, e.g., Florida Department of Natural Resources
A40
v. Gables-By-the-Sea, Inc., 374 So.2d 582, 585 (Fla.Dist.Ct.
App.1979), cert. denied, 383 So.2d 1203 (1980). Cf. R.H.
Coody & Assoc., Inc. v. Shelton, 352 So.2d 852 (Fla.1977)
(court found rate excessive but did not object to estimate
of time when attorney did not keep time records). Indeed,
in Gables-By-the-Sea, the appellate court sanctioned an at-
torney’s fee determination in a case in which the trial judge
stated:
The [c]ourt recognizes that in this case hours were not
specifically kept and the hours that were stated as es-
timates are estimates .. . Considering the testimony
... the [c]Jourt is awarding the sum of $850,000 in at-
torneys’ fees.
374 So.2d at 585. Mason was responsible for BKC’s
attorney’s fees because the parties agreed to such indem-
nification by contract. Florida law permits attorney’s fees
to be determined in the manner employed by the district
court. Under the circumstances, the fee satisfies the rea-
sonableness standard.
C. Florida Statute § 57.105
The district court ruled that 3% of BKC’s attorney’s
fees were attributable to the defense of claims governed by
Florida Statute § 57.105. That statute provides:
The Court shall award a reasonable attorney’s fee to
the prevailing party in any civil action in which the
Court finds that there was a complete absence of a
justiciable issue of either law or fact raised by the
losing party.
In granting attorney’s fees under § 57.105 because of Ma-
son’s prosecution of Counts III, VII and X of the second
amended counterclaim, the court stated only that Counts
A4l
III and VII had been voluntarily dismissed and Count X
was dismissed by a directed verdict. Mason maintains that
under Florida law, a voluntary dismissal or a directed ver-
dict does not justify the application of § 57.105. BKC con-
cedes the correctness of this interpretation of Florida law,
but insists that Counts III, VII and X were frivolous, and
hence, the district court properly invoked the sanctions of
§ 57.105.
[35, 36] Even though the purpose of § 57.105 is to
prevent the “reckless waste of judicial resources‘as well as
the time and money of prevailing litigants”, Whitten v.
Progressive Casualty Insurance Co., 410 So.2d 501, 505
(Fla.1982), the § 57.105 award must be remanded to the
district court because of a technical defect in its order.
In Whitten, the Florida Supreme Court stated:
The statute [§ 57.105] provides that a party is entitled
to an award of attorney's fees only when the court
determines that there was a complete absence of a
justiciable issue raised by the losing party. Without
such a finding, an order assessing attorney’s fees is
technically deficient and must be reversed.
410 So.2d at 506. In holding that the failure to make such
a finding invalidates an award under § 57.105, the Florida
court cited a number of Florida appellate decisions. Sig-
nificant to our review, however, is the Whitten court’s
“but see” citation to Autorico, Inc. v. Government Em-
ployees Insurance Co., 398 So.2d 485, 488 (Fla.Dist.Ct.App.
1981). Autorico held that the absence from the order of
the magic words “complete absence of a justiciable issue of
law or fact’’ required by the statute does not invalidate the
award. The Autorico appellate court reasoned that since
$ 57.105 governs only when there is a complete absence of
a justiciable issue the requisite finding “is implicit in an
A42
order which grants a motion for said fees based entirely
upon [§ 57.105]. 398 So.2d at 488.
Were we writing on a clean slate, the Autorico analysis
might have more appeal. It is obvious to us that by award-
ing fees pursuant to § 57.105, the trial judge found that the
claims met that statutory standard. Nevertheless, we are
bound to follow the Florida Supreme Court’s later pro-
nouncement in Whitten which compels the trial court to
spell out its finding of the statute’s requirements. At least
one Florida appellate court since the Whitten decision has
construed Whitten as requiring a remand of an award made
“pursuant to § 57.105” because the trial court did not in-
clude the statute’s language in its order. Apgar & Mark-
ham Construction of Florida, Inc. v. Macasphalt, 424 So.2d
41 (Fla.Dist.Ct.App.1982). We have been unable to locate
any more recent authority to the contrary. In light of the
Florida cases available to us, we have no alternative but
to remand the § 57.105 award to the district court for a
determination of whether Counts III, VII and X presented
any justiciable issues of either law or fact. Id. at 42%%
12. Although our remand of this award makes appellate re-
view premature, we nevertheless emphasize that attorney's fees
can be granted under § 57.105 when claims have been dismissed
or defeated as long as no justiciable issues of law or fact were
raised by the claims. Fierer v. 18th Avenue Development Corp.,
417 So.2d 1005 (Fla.App.1982). Although the dismissal by itself
will not support an award, Executive Centers of America, Inc. v.
Durability Seating & Interiors, Inc., 402 So.2d 24 (Fla.Dist.Ct.
App.1981), “voluntary dismissal is not a bar to an award of at-
torney’s fees.” Fierer, 417 So.2d 1005.
The Florida Supreme Court has approved the following stan-
dard for the application of the attorney’s fees statute:
The requirement . . . is a finding of a total or absolute lack
of a justiciable issue, and to us, this is tantamount to a finding
that the action is frivolous... .
[A] trial court must find that the action is so clearly
devoid of merit both on the facts and the law as to be com-
pletely untenable.
(Continued on following page)
A43
D. In-House Counsel Fees
{37] Finally, BKC assigns as error to the district
court’s refusal to include the services of its house counsel
as a part of the attorney’s fees. In rejecting BKC’s re-
quest, the district court stated:
Attorney’s fees for the services of in house counsel
are not recoverable. There is no precedent in Flor-
ida law for an award of attorney’s fees for the ser-
vices of in-house counsel. Cases from other juris-
dictions awarding fees for the services of in-house
counsel who actively tried the case are not factually
similar to this case when in-house counsel acted pri-
marily as a liaison between the client and outside
counsel who had complete responsibility for the con-
duct of the case.
Findings of Fact and Conclusions of Law, April 5, 1982.
We agree with the district court. First, there is no
Florida authority to justify, much less mandate, such an
award. Travelers Indemnity Co. v. Thomas, 315 So.2d
111 (Fla.Dist.Ct.App.1975), cert. denied, 336 So.2d 108 (Fla.
1976), upon which BKC places significant reliance, does
not support BKC’s position. In Travelers Indemnity, the
court indicated in dicta that a party could recover the
Footnote continued—
tien v. Estate of Dutton, 384 So.2d 171, 175 (Fla.App.), petition
for review denied, 392 So.2d 1373 (Fla.1980) (emphasis in
original) (cited with approval in Whitten v. Progressive Casualty
Ins. Co., 410 So.2d 501, 505 (Fla.1982)). The Florida appellate
courts have insisted upon strict compliance with the Allen
standard. See, eg., Lake Osborn Utilities Co., Inc. v. Sims,
411 So.2d 994 (Fla.Dist.Ct.App.1982); Braden River Civic Ass’n,
Inc. v. Manatee County, 403 So.2d 1007 (Fla.Dist.Ct.App.1981).
Nonetheless, one Florida appellate court affirmed an award under
§ 57.105 when, for example, the plaintiff alleged interference
with business relations and the evidence did not support any
of the elements of the tort. Kisling v. Wooldridge, 397 So.2d
747 (Fla.Dist.Ct.App.1981).
A44
reasonable value of services performed by in-house coun-
sel ‘‘in instances where the defense was furnished by house
counsel.” Id. at 114 (emphasis supplied). As the district
court found, however, BKC’s lawyers acted only in a liai-
son capacity. Outside counsel was responsible for han-
dling the case. Our reading of Travelers Indemnity con-
firms that the court did not intend to suggest, much less
require, that in-house counsel fees should be assessed in
this situation.
[38] Second, a recovery of the “reasonable value” of
BKC’s in-house lawyers’ time is not necessary to indemnify
BKC for the expenditures incurred as a result of the
litigation.'"* A contract provision which specifies that at-
torney’s fees must be paid in the event of litigation is en-
forceable in Florida “‘as an agreement for indemnification.”
Trustees of Cameron-Brown Investment Group v. Tavor-
mina, 385 So.2d 728, 731 (Fla.Dist.Ct.App.1980). BKC did
not have to pay out additional money for the services of
its house counsel, so it cannot claim “reimbursement” for
this pro-rata share of its fixed corporate expense. The
district court did not err in declining to charge Mason
an amount representing either the cost or the value of
BKC’s corporate employees.
VI. Conclusion
We have examined the remaining issues raised by the
parties: (1) the district court’s refusal to direct a verdict
for Mason on the franchise terminations based upon the
pledge of stock to the Pittsburg National Bank and the
sale of stock to John Mosher prior to BKC’s approval of
13. The development agreement attorney’s fees provision,
which was the basis for the vast majority of the fees awarded.
specifically provided that Mason would “indemnify’ and reimburse”
BKC for attorney’s fees.
A45
the transfer of the franchise agreement to the corpora-
tion; (2) the district court’s direction of a verdict against
BKC on the franchise termination predicated upon a trans-
fer of an interest in the profits of a restaurant; and (3) the
district court’s alleged abuse of discretion in limiting the
cross-examination of Helen O. Donaldson and excluding
a letter from Mason’s accountant to BKC offered during
the cross-examination. After careful consideration, we find
these assignments of error lack any merit and warrant
no further discussion.
We VACATE the attorney's fees award made pursuant
to Fla.Stat. § 57.105 and the damages assessed for breach
of the franchise.agreements. We REMAND to the district
court for (1) a finding of whether the statutory require-
ments of Fla.Stat. § 57.105 were satisfied in its award of
attorney’s fees and (2) a determination of the relief un-
der the Lanham Act, 15 U.S.C. § 1117. In all other re-
spects, the judgment of the district court is AFFIRMED.
A46
APPENDIX
SPFCIAL iSSUE NO. $
With respect to BURGER KING CORPORATION's claims regarding termine
taon of the franchise egreements. we the jury find thst
A. BURGER KING CORPORATION properly terminated al) of tre
frarnctuse sgements.
«
B. BURGER KING CORPORATION wrongfully terminated ali of the
frarctise egeerents, EEE
«
(.) BURGER KING CORPORATION properly tcrmunsted the tra
Chuse egesments covering Une resteurants listed in Colum ) ae stong-
fully terminated the franchise agreements covering the restaurants listed
an Column 2.
1 2
Franchise Agreer 7s
Terminates tmnt serty
Franchise Agreements
Terminsteo Proceriy
Pe en eee
“ee r= 463
7 —s ,
- 4337
—— Ss we}
ee
#13G¢0
*\G624
4— 1709
#1363
18227
wmacl24
=
waa)
#2249
ari?
A47
ORDER OF U. S. DISTRICT COURT, SOUTHERN
DISTRICT OF FLORIDA DATED
OCTOBER 31, 1980
(Filed October 31, 1980)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 78-2932-CIV-EBD
BURGER KING CORPORATION,
Plaintiff,
-V-
GERALD A. MASON, et al..,
Defendants.
ORDER
THIS MATTER has come before the Court on the fol-
lowing post trial motions:
>
1. Plaintiff's motion for clarification of the jury ver-
dict as to Special Issues No. 1 & 2.
2. Plaintiff's motion for a judgment notwithstanding
the verdict as to Special Issues No. 1 & 2.
3. Plaintiff's motion for a judgment notwithstanding
the verdict as to Special Issue No. 5.
4. Plaintiff's motion for a new trial as to Special
Issue No. 5.
5. Plaintiff's motion for a judgment notwithstanding
the verdict as to Special Issue 6.
A48
The Court has reviewed these motions and the memo-
randa submitted in their support, as well as the papers
filed in opposition. In addition, the Court has had the
benefit of oral argument on these matters. Based upon
an evaluation of the arguments presented, in light of the
entire record in this cause, it is
ORDERED AND ADJUDGED as follows:
1. The motion for clarification of the jury verdict as
to Special Issues No. 1 & 2 is Denied.
2. The motion for a judgment notwithstanding the
verdict as to Special Issues No. 1 & 2 is Denied.
Although the motions pertaining to Special Issues
Number 1 & 2 which seek clarification of the jury’s
verdict and/or entry of a judgment notwithstanding the
verdict are denied, an alternative form of relief is ap-
propriate. The awards of money damages in favor of
Burger King on both the promissory notes and the ac-
counts receivables establish liability against the defen-
dants. The verdict award of $1.00 on promissory notes
with a face value of close to $900,000.00 and the verdict
award of $100,000.00 on accounts receivable with a book
value of over $500,000.00 are contrary to the weight of
the evidence presented at trial. Therefore, a new trial
shall be held on the issue of damages alone with respect to
the promissory notes covered in Special Issue No. 1 and the
accounts receivable covered in Special Issue No. 2.
3. The motion for a judgment notwithstanding the
verdict as to Special Issue No. 5 is Denied. There was
sufficient competent evidence presented to the jury from
which they could have concluded that some of the franchises
were improperly terminated.
4. The motion for a new trial as to Special Issue
No. 5 is granted in part and denied in part. The jury
A49
determined that the franchise agreements covering res-
taurants +436, +837, +1127, +1201, #1360, +1689,
+1791, +1863, +1887, +2024, +2247 and +2249 were
improperly terminated. There was sufficient evidence pre-
sented to the jury from which they could arrive at such
a finding. Therefore, the motion for a new trial as is
relates to these restaurants is Denied.
It is very uncertain from the jury’s answer to Special
Issue No. 5 whether they made any determination as to
the other restaurants. Because of the substantial rights
and property interests at stake, it would not serve the
bests interests of justice for the Court to attempt to read
the jury’s mind in an effort to resolve this ambiguity.
Therefore, the motion for a new trial as it relates to
the propriety of the termination of the franchise agree-
ments covering restaurants +164, +285, +302, +473,
$545, +583, +597, +606, +1055, +1091, #1253, +1802
and +2080 is Granted.
5. The motion for a judgment notwithstanding the
verdict as to Special Issue No. 6 is denied. There was
sufficient competence presented to the jury from which
they could have determined that the defendants did not
engage in a conspiracy to defraud Burger King.
DONE AND ORDERED this 31st day of October, 1980.
/s/ Edward B. Davis
United States District Court
Judge
Copies Furnished To:
Andrew C. Hall, Esq.
Lee N. Abrams, Esq.
Edward Kaufman, Esq.
A50
ORDER OF U. S. DISTRICT COURT, SOUTHERN
DISTRICT OF FLORIDA, DATED
FEBRUARY 20, 1981
(Filed February 24, 1981)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 78-2932-CIV-EBD
BURGER KING CORPORATION,
Plaintiff,
-v-
GERALD A. MASON, et al.
Defendant.
ORDER
THIS MATTER has come before the Court on the fol-
lowing motions:
1. The Motion of the Plaintiff for Bifurcation:
2. The Motion of the Plaintiff for Leave to Amend
the Second Amended Complaint; and
3. The motion of the Defendants for Certification
Pursuant to 28 U.S.C. §1292(b).
The Court has considered these motions, as well as
the papers filed in opposition. Based upon this evaluation,
in light of the entire record in this cause, it is
A51
ORDERED AND ADJUDGED as follows:
1. The Motion for Bifurcation is Denied. All re-
maining issues will be tried in one proceeding.
2. The Motion to Amend the Complaint is granted
in part and denied in part. Plaintiff's motion to amend
paragraph 289 is granted. Plaintiff's motion to amend the
Complaint in order to add Count XXXX is denied as to
proposed paragraphs: 417, 419, 420, 424, 425, 427, 428,
429, 431 and 432. These paragraphs deal with matters
which have already been the subject of a jury determina-
tion. The motion, however, is granted as to all other
paragraphs of the proposed amendment.
3. The Motion for Certification pursuant to 28 U.S.C.
£1292(b) is Denied. The issue which the Defendants seek
to appeal is simply not a controlling question of law.
DONE and ORDERED this 20th day of February, 1981.
/s/ Edward B. Davis
U.S. District Court Judge
ec: Counsel of Record
A52
ORDER OF U. S. DISTRICT COURT, SOUTHERN
DISTRICT OF FLORIDA, DATED
MAY 20, 1981
(Filed May 21, 1981)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 78-2932-CIV-EBD
BURGER KING CORPORATION,
Plaintiff,
-V-
GERALD A. MASON, et al.,
Defendants.
ORDER
THIS MATTER has come before the Court on the
following motions:
1. The motion of the plaintiff for partial summary
judgment;
2. The motion of the defendants to dismiss Counts
XXXVI through XXXIX;
3. The motion of the defendants to dismiss Count
XXXX.
The Court has reviewed the motions, as well as the
papers filed in opposition. Upon consideration of the argu-
ments presented, in light of the entire record in this case,
it is
A53
ORDERED AND ADJUDGED as follows:
1, The motion of the plaintiff for partial summary
judgment is Granted. The liability of the Defendant has
already been determined. The amount due is the only
unresolved issue with regard to the plaintiff's claims on
the notes and receivables. The affidavit of Thomas F.
Crummey, Vice President < Treasurer of Burger King
Corporation, is competent and unrefuted. Therefore, par-
tial summary judgment is hereby entered in favor of the
plaintiff, Burger King, in the amount of One Million Seven
Hundred Sixty-Three Thousand Six Hundred Ninety-Two
Dollars and Forty cents ( $1,763,692.40).
Because this figure as reflected in the affidavit is the
amount outstanding as of February 15, 1981, the plaintiff
is granted leave to file supplementary affidavits which
reflect any additional obligations on the notes and re-
ceivables since that date.
2. The motion to dismiss Counts XXXVI through
XXXIX is Granted in part and denied in part. The motion
to dismiss as to Counts XXXVI, XXXII and XXXVIII is
Denied. As to Count XXXIX, the motion is granted with
respect to the prayer for damages. L.J.S. Company v.
Marks, 480 F.Supp. 241 (S.D.Fla. 1979). The motion is
denied as to the other portions of Count XXXIX dealing
with declaratory and injunctive relief.
In Count XXXIX the defendants have raised a con-
stitutional challenge to the application of the Florida De-
ceptive and Unfair Trade Practices Act to the facts of
this case. No legal authority is cited in support of the
argument. The defendants are granted leave to file a
supplementary memorandum of law which more fully
considers this issue.
A54
3. The motion to dismiss Count XXXX is Denied.
This count sets forth a cause of action in a fashion suf-
ficient to afford the defendants with ‘fair notice of the
nature of the claim.
DONE AND ORDERED this 20th day of May, 198!
s/ Edward B. Davis
United States District Court
Judge
Copies Furnished To:
Lee N. Abrams, Esq.
Edward Kaufman, Esq.
Mark Peddecord, Esq.
Andrew Hall, Esq.
A55
FINDINGS OF FACT AND CONCLUSIONS OF LAW
SEPTEMBER 18, 1981
(Filed September 18, 1981)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 78-2932-CIV-EBD
BURGER KING CORPORATION, a
Florida corporation,
Plaintiff,
-VS-
GERALD A. MASON, et al.,
Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
This matter has come before the Court for trial on
the claim of the plaintiff, BURGER KING CORPORA-
TION, for equitable rescission of the franchise agreements
covering Restaurant +1253 in Johnstown, Pennsylvania,
Restaurant +1802 in Altoona, Pennsylvania, and Restau-
rant +2080 in Carlisle, Pennsylvania. Burger King’s claim
for rescission is set forth in Count XXXX of Second
Amended Complaint. Sitting in its capacity as a court
of equity, the Court heard and considered the evidence
presented by both the plaintiff and the defendants. Based
upon an evaluation of the evidence, in light of the applic-
able precedent, the Court does make and enter the fol-
lowing Findings of Fact and Conclusions of law
. AS6
’ FINDINGS OF FACT
1. In late 1972, Defendants Mason, Szabo and Hardy
submitted to Burger King Corporation a standard Burger
King Multiple Franchise Application for a license to op-
erate a Burger King restaurant in Johnstown, Pennsyl-
vania. This restaurant was subsequently designated as
Restaurant +1253.
2. The capitalization plan submitted as part of the ap-
plication represented that the defendants intended to cap-
italize the Johnstown restaurant with $37,000.00 of equity
capital and $37,000.00 of non-real estate debt.
3. The capitalization plan was part of the standard
application required by the application form and indicated
the manner in which the defendants’ proposal to capitalize
the subject restaurant as of its opening date.
4. Burger King’s Financial Analysis Department gave
financial approval of defendants’ franchise application on
December 7, 1972.
5. On January 4, 1973, Burger King approved defen-
dants’ application to operate the restaurant in Johnstown,
Pennsylvania.
6. As of the opening date of the Johnstown restaurant,
the actual debt-to-equity was not the same as that pro-
posed in the capitalization plan. The actual level of debt
incurred by the franchise at the opening was in excess of
the amount proposed in the capitalization plan.
7. On or about January 4, 1974, Burger King’s Fi-
nancial Analysis Department prepared a consolidated debt-
to-equity spread sheet in connection with Defendants’ ap-
plication for a separate franchise unit in Butler, Pennsyl-
vania. This spread sheet reflected the debt-to-equity situa-
tion of each of Defendants’ franchises in operation at that
A57
time, including Store +1253. The financial information
with regard to such stores reflected in this debt-to-equity
spread sheet were obtained from balance sheets for the
respective restaurants on file with Burger King for the pe-
riod ending September 30, 1973. The debt-to-equity ratio
of Store +1253, as reflected by its September 30, 1973
quarterly balance sheet and by the January 4, 1974 debt-
to-equity spread sheet was infinity to one, consisting of
$60,000.00 in long-term debt to outside creditors, no loans
from franchises and a negative $7,000 retained earnings.
8. Burger King never made any objections to the de-
fendants with regards to the manner in which Restaurant
+1253 had initially been capitalized prior to the filing of
this lawsuit.
9. In early 1976, the defendants Mason, Szabo and
Hardy submitted an application for a license to operate a
Burger King restaurant in Altoona, Pennsylvania. The
restaurant was subsequently designated as Burger King
licensed Restaurant +1802.
10. As part of the application, a capitalization plan
was submitted which represented that the defendants in-
tended to capitalize the restaurant with $143,000.00 of
equity capital and non-real estate debt.
11. $133,000.00 of the equity capital described in the
capitalization plan represented shareholder loans. No
subordination agreements were submitted by the defen-
dants with respect to these loans nor were any subordina-
tion agreements ever submitted in conjunction with share-
holder loans applicable to other Burger King franchises
owned by the defendants.
12. It was Burger King’s standard policy to require
subordination agreements in order for loans from fran-
chisee shareholders to be treated as equity rather than
debt.
A58
13. Notwithstanding the lack of shareholder subord-
ination agreements and in contravention of the company’s
stated policy, Burger King’s Financial Analysis Depart-
ment gave financial approval to the defendants’ Franchise
Application on May 19, 1976.
14. On June 3, 1976, Burger King’s National Develop-
ment Committee gave final approval to the defendants’
application for a license to operate the restaurant in Al-
foona, Pennsylvania.
15. As of the opening date of this restaurant, the
actual debt-to-equity ratio was not the same as was pro-
posed in the capitalization plan and the amount of equity
invested in the restaurant was less than that proposed in
the capitalization plan.
16. During the first week of May, 1977, Defendants
forwarded to Burger King’s Financial Analysis Department
a quarterly balance sheet for Store +1802 for the period
ending March 31, 1977. This quarterly balance sheet re-
flected long-term liabilities in the total amount of
$142,194.00, no loans from stockholders or owners, no cap-
ital stock or owner investment, no capital surplus and re-
tained earnings of approximately negative $12,000.00.
Under Burger King’s method of calculating debt-to-equity
ratios, this balance sheet reflected an infinite debt-to-equity
ratio as of the date of that financial statement, approx-
imately five months after the opening of the restaurant.
17. Prior to the filing of this lawsuit, Burger King
never objected to the defendants concerning the manner
in which Restaurant =1802 had initially been capitalized.
18. In late 1976 or early 1977, Defendants Mason,
Szabo and Peterson submitted a standard Burger King
Multiple Franchise Application for a franchise restaurant
to be located in Carlisle, Pennsylvania. This restaurant
A59
was subsequently designated as Burger King licensed
Restaurant +2080.
19. As part of the standard application for Restaurant
+2080, the defendants submitted a capitalization plan. In
this capitalization plan, the defendants proposed to open
the restaurant with a total investment of $149,500.00 con-
sisting of $125,000.00 in shareholder loans and $24,500.00 in
owners’ equity. No subordination agreement was ever
submitted with this application.
20. Notwithstanding the lack of any subordination
agreements covering the shareholder loans for the Carlisle
restaurant, Burger King’s Financial Analysis Department
gave financial approval to the defendants’ franchise ap-
plication on August 10, 1976.
21. On July 3, 1977, Burger King’s National Develop-
ment Committee gave final approval to the defendants’
application for a license to operate the restaurant in
Carlisle, Pennsylvania.
22. As of the opening date of this restaurant. the
actual debt-to-equity ratio was not the same as was
proposed in the capitalization plan, in that the actual
debt level incurred by the franchise at that time was in
excess of the amount proposed and the amount of equity
invested was less than the amount proposed.
23. Approximately eight months after the Carlisle
restaurant opened, the defendants submitted a quarterly
balance sheet to Burger King’s Financial Analysis De-
partment reflecting long term indebtedness of approxi-
mately $335,043.00, no loans from stockholders or owners.
approximately $3,000.00 of owner invested equity, no
capital surplus and retained earnings of approximately
$8,156.00.
A60
24. Prior to the filing of this lawsuit, Burger King
never objected to the defendants concerning the manner
in which Restaurant +1253 had been initially capitalized.
25. Standard Burger King operating procedure makes
it mandatory for its franchisees to submit quarterly balance
sheets to its Financial Analysis Department. The date
contained on these sheets provides the Financial Analysis
Department with sufficient information to compile the
debt-to-equity ratio of a franchise as of the date of the
statement within a reasonable degree of certainty.
26. Even though Burger King could compute the
debt-to-equity ratio, they did not review the quarterly bal-
ance sheets, which they required, for any of the restaurants
involved in this lawsuit during their first year of opera-
tion in order to detect capitalization deficiencies and cash
flow problems.
27. It is Burger King’s standard policy to initially
require a one-to-one debt-to-equity ratio.
28. It is Burger King’s standard policy to compute a
consolidated debt-to-equity ratio for all of a franchisee’s
existing restaurants when that franchisee applies for an
additional franchise unit. The Financial information
utilized by Burger King’s Financial Analysis Department
in computing this consolidated debt-to-equity ratio is de-
rived from the most recent quarterly balance sheets con-
tained in Burger King’s files.
28. On or about April 28, 1975, Burger King’s Fi-
nancial Analysis Department prepared a_ consolidated
debt-to-equity ratio spread sheet in connection with the
defendants’ application for two additional units in the
Pittsburgh area. This calculation was made approximately
one year after the opening of defendants’ restaurants
#1382 and +1358. At the time of this computation. the
A61
capitalization position of Restaurants Nos. 1382 and 1358
reflected an infinite debt-to-equity ratio. The head of
Burger King’s Financial Analysis Department gave fi-
nancial approval to the defendants’ application for the
additional units in the Pittsburgh area despite the infinite
debt-to-equity ratios on two of the defendants’ franchises
which had been opened for only one year.
29. There is no evidence of any secret plan on the
part of the defendants which demonstrates an intention
to capitalize the restaurants in a different manner than
that proposed in the capitalization plans.
30. The defendants did not deliberately conceal from
Burger King the facts upon which the claims for rescission
are based. The defendants disclosed such facts th:ough
the submission of quarterly balance sheets which reflected
actual rather than projected conditions.
31. Within one year from the opening date of each
of the three restaurants at issue, Burger King Corpora-
tion had actual knowledge or had been provided with
sufficient information from which it could and should
have obtained actual knowledge of the actual initial cap-
italization of the three subject restaurants, and despite
such knowledge, Burger King never objected to Defen-
dants as to the manner in which the subject restaurants
were capitalized, continued to grant to Defendants addi-
tional franchises, and continued to accept from Defendants
the payment of franchise fees, royalties on sales, and
advertising contributions based on sales.
32. There has been no proof that Burger King has
sustained any pecuniary loss or other actual damage as a
result of entering into the franchise agreements for Res-
taurant Nos. 1253, 1802 and 2080.
A62
33. Burger King Corporation unreasonably delayed
in asserting its claim against Defendants for rescission
with regard to the subject franchises despite its knowledge
of the actual initial capitalization of the subject restaurants.
Defendants have been prejudiced by such delay in that
they have continued to invest their own time and money
in the operation of these restaurants under the reasonable
assumption that Burger King Corporation did not object
to the manner in which the subject franchises were
capitalized.
34. Notwithstanding the language in Burger King’s
Franchise Application, the capitalization plans submitted
by the defendants in connection with Restaurants Nos.
1253, 1802 and 2080 were not materially relied upon by
Burger King in approving these applications.
CONCLUSIONS OF LAW
1. In order to prevail upon an equitable claim for
rescission under Florida law, the plaintiff must establish
(1) that the defendants made a material misrepresentation;
(2) that the representation was material to the Plaintiff's
decision to enter into the subject contract; (3) that the
Plaintiff reasonably relied upon such misrepresentations;
and (4) that in reliance upon the misrepresentations, the
Plaintiff is caused to act to its own detriment or injury.
Robson Link & Co. v. Leedy Wheeler & Co., 18 So.2d 523
(Fla.1944).
2. Burger King failed to seek rescissions of the fran-
chise agreements for Restaurant Nos. 1253, 1802 and 2080,
despite having actual or imputed knowledge of the capitali-
zation. This lack of diligence in timely asserting the re-
scission claim coupled with Burger King’s failure to follow
its own standard procedure amounts to a waiver of any
A63
right which it may have had to rescind the subject fran-
chise agreements.
3. Burger King’s continued acceptance of the benefits
accruing to it under the franchise agreements for Res-
taurant Nos. 1253, 1802 and 2080 despite its actual or im-
puted knowledge of the true initial capitalization of these
franchises amounts to ratification by Burger King of any
misrepresentation by the defendants upon which Burger
King may have relied in entering into the franchise agree-
ments.
4. Burger's King’s lack of diligence in timely seeking
rescission of the franchise agreements for Restaurant Nos.
1253, 1800, and 2080 despite its actual or imputed knowl-
edge of the true initial capitalization of these restaurants
caused the defendants to continue to invest their time and
money in these operations to their detriment and injury to
the extent that rescission is barred by the doctrine of
laches.
5. Burger King has failed to establish by a prepon-
derance of the evidence that it has suffered any injury or
detriment sufficient to justify rescission of the defendants’
franchises as a result of any reliance which it placed upon
the capitalization plans for Restaurant Nos. 1253, 1802 and
2080.
Based upon the foregoing Findings of Fact and Con-
clusions of law, it is
ORDERED and ADJUDGED that judgment is hereby
entered in favor of the Defendants, Mason, Hardy, Peter-
son and Szabo and against the Plaintiff, Burger King Cor-
poration, on its claim for equitable rescission of the fran-
chise agreements covering Restaurant Nos. 1253, 1802 and
2080.
A64
DONE and ORDERED this 18th day of September,
1981.
s/ Edward B. Davis
United States District Court Judge
Copies Furnished to:
Andrew C. Hall, Esq. A
Lee Abrams, Esq.
Edward Kaufman, Esq.
A65
FINDINGS OF FACT AND CONCLUSIONS OF LAW
NOVEMBER 25, 1981
(Filed November 25, 1981)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 78-2932-CIV-EBD
BURGER KING CORPORATION, a
Florida corporation,
Plaintiff,
-VSs-
GERALD A. MASON, et al.,
Defendants.
FINDINGS OF FACT AND CONCLUSIONS OF LAW
THIS MATTER has come before the Court on the
claim of the Plaintiff, BURGER KING CORPORATION,
for compensatory damages based upon the termination of
franchisee agreements covering restaurants bearing the
following numbers: +164 in Harrisburg, Pennsylvania;
=285 in Mechanicsburg, Pennsylvania; +1055 in Hershey,
Pennsylvania; +597 in Johnstown, Pennsylvania; +606
in State College, Pennsylvania; +1253 in Johnstown, Penn-
sylvania; +302 in Roseland, Indiana; +583 in Elkhart,
Indiana; +1358 in South Bend, Indiana; +473 in W. La-
fayette, Indiana; +545 in Lafayette, Indiana; +1091 in
Lafayette, Indiana and +1382 in Independence, Missouri.
On September 21 and 22, 1981, a bench trial was conducted
on these issues. Based upon the evidence presented, in
light of the entire record in this case, the Court does make -
A66
and enter the following Findings of Fact and Conclusions
of Law.
FINDINGS OF FACT
1. Burger King Corporation is the owner of various
trademarks and service marks, including “Burger King”
and “Home of the Whopper’, and said marks are in full
force and effect under the Lanham Act and the common
law. Burger King Corporation is in the business of li-
censing franchisees to use those trademarks and service
marks, and other unique systems, names and marks, in
connection with the operation by its franchisees of
hamburger-oriented, limited menu fast food restaurants
throughout the United States and abroad.
2. At various times between 1969 and 1974, Burger
King Corporation and certain of the Defendants entered
into thirteen separate franchise agreements, each of which
licensed the named franchisees to operate a Burger King
restaurant at a specified location. The location of the
restaurant, the named franchisees and the date the fran-
chise agreement was entered into are as follows:
Restaurant
Number Location
164 Harrisburg, Pa.
285 Mechanicsburg, Pa.
1055 Hershey, Pa.
597 Johnstown, Pa.
606 State College, Pa.
1253 Johnstown, Pa.
302 Roseland, Ind.
583 Elkhart, Ind.
1358 South Bend, Ind.
473 W. Lafayette, Ind.
545 Lafayette, Ind.
1091 Lafayette, Ind.
1382 Independence, Mo.
Date of
Named Franchise
Franchisees Agreement
D. W. Szabo 4/1/74
G. A. Mason
R. A. Peterson
D. W. Szabo 4/1/74
G. A. Mason
R. A. Peterson
D. W. Szabo 4/1/74
G. A. Mason
R. A. Peterson
D. W. Szabo 9/2269
W. S. Hardy
W. S. Hardy 3/21/70
E. Lamb, Jr.
S. W. Szabo 5/11/73
W. S. Hardy
G. A. Mason
W. S. Hardy 4/17/72
G. A. Mason
W. S. Hardy 4/17/72
G. A. Mason
W. S. Hardy 11/30/73
G. A. Mason
W. S. Hardy 1/27/69
W. S. Hardy 5/23 ‘69
W. S. Hardy 119/72
W. S. Hardy 4 29 74
D. W. Szabo
M. T. Peddecord
A68
3. Following the execution of each of those thirteen
franchise agreements, the franchisees named therein as-
signed the franchise agreement to an assignee corporation,
as follows:
Name of Date of BKC
Restaurant Operating Written Consent
Number Corporation to Assignment
164 Dauphin Foods Corp. +1 10/18/76
285 Dauphin Foods Corp +1 10/18 76
1055 Dauphin Foods Corp. +1 10/18/76
597 Johnstown Corp. +1 419 76
606 State College, Pa., No. 1, Inc. 419 76
1253 Johnstown Corp. =2 10 18,76
302 South Bend No. 1, Inc. 12/14 73
583 Elkhart No. 1, Inc. 12/18/73
1358 South Bend No. 1, Inc. 41674
473 Lafayette Corporation No. 1 6/1/76
548 Lafayette Corporation No. 2 61,76
1091 Hardy Enterprises, Inc. 5/2/72
1382 Burger King of Greater Kansas None
City, Inc. (whose name sub-
sequently was changed to Regal
Foods, Inc.)
4. In August 1968, Defendant Mason acquired a 25°;
stock interest in Lafayette Corporation No. 1.
5. In June 1969, Defendant Mason acquired a 25%
stock interest in Lafayette Corporation No. 2.
6. In December 1971, Defendant Mason acquired a
33 1/3% stock interest in Hardy Enterprises. Inc.
A69
7. In October 1969, Defendant Mason acquired a 25%
stock interest in Johnstown Corp. #1.
8. In April 1970, Defendant Mason acquired a 25%
stock interest in State College, Pa., No. 1, Inc.
9. In March 1973, Defendant Szabo acquired a 25%
stock interest in State College, Pa., No. 1, Inc.
10. Defendants, Mason, Hardy, Szabo and Peterson
are, and at all relevant times have been, the stockholders
of B-K Foods, Inc.
11. On or about June 30, 1978, Lafayette Corporation
No. 1 and Lafayette Corporation No. 2 were merged into
Hardy Enterprises, Inc.
12. On or about October 31, 1976, Elkhart No. 1, Inc.
was merged into South Bend No. 1, Inc.
13. On or about September 30, 1977, B-K Foods, Inc.
acquired all of the outstanding stock of South Bend No. 1,
Inc.
14. On May 18, 1979, Burger King sent to Defendants
a letter notifying them that Burger King had unilaterally
determined to terminate all of Defendants twenty-seven
(27) franchise agreements for their various restaurants.
Only the thirteen franchise agreements listed in Finding 2
are the subject of this proceeding. The termination letter
stated the following:
“By reason of the material breaches and acts of default
described above, Burger King Corporation does here-
by terminate each of the franchise agreements listed
on Exhibit “A” attached hereto (including the thir-
teen franchise agreements described in Paragraph 1,
above). Please be advised that should any of you (or
any corporation to which you have assigned any of the
franchise agreements listed on said Exhibit “A”),
A70
identify yourself (or itself) as a Burger King Cor-
poration franchisee, after receipt of this Notice of Ter-
rmination, Burger King Corporation will take such ac-
tion as it deems necessary in order to protect itself
against trademark infringements and otherwise. Fur-
ther, you are directed to comply with the provisions
of each applicable franchise agreement which govern
the conduct of a franchisee following termination of
the franchise agreement by Burger King Corporation.”
15. Following the receipt of the May 18, 1979 ter-
mination letter, Defendants continued to operate each of
the various franchises which had purportedly been ter-
minated by the May 18 letter, and the Defendants con-
tinued to assert that Burger King’s attempted unilateral
termination of the franchise agreements was not effective,
that they had not committed the various acts of default
alleged by the plaintiff in its termination letter, and that
such acts, if in fact they had been committed, did not
in any fashion justify termination of the various franchise
agreements.
16. On May 18, 1979, the Defendants operated three
Burger King licensed restaurants in the South Bend/
Elkhart market, two of which restaurants were leased from
Burger King (commonly known as BKL’s). Following
May 18, 1979, Burger King has developed no new restau-
rants, either company-owned or franchised, in South Bend
or Elkhart.
17. As of May 18, 1979, Defendants operated three
restaurants in Lafayette, Indiana, two of which restaurants
were BKL’s and a third of which was owned by the De-
fendants. Following May 18, 1979, Burger King has de-
veloped no new restaurant, either company-owned or fran-
chised, in Lafayette, Indiana.
A7l
18. As of May, 1979, the Defendants operated three
restaurants which have been determined to be properly
terminated in the Harrisburg ADI. Those stores, Numbers
164, 285, and 1055, were operated in and around the city
of Harrisburg, itself. All three of those stores were owned
by the Defendants. On or about December 24, 1979,
Burger King opened a new franchise restaurant in Camp
Hill, Pennsylvania, approximately 1.1 miles from store
Number 285 operated by the Defendants in Harrisburg,
Pennsylvania.
19. In an order dated September 4, 1981, this Court
determined that Burger King Corporation had properly
terminated the franchise agreements covering Restaurant
+302, +473, +545, +583, +1091, +1358 and +1382 on
May 18, 1979. On September 2, 1981, the jury found that
Burger King Corporation had properly terminated the
franchise agreements covering Restaurant +164, +285,
#1055, +597, +606 and +1253 on May 18, 1979.
20. Each of the standard of Burger King Franchise
Agreements signed by Defendants contained a provision
requiring the franchisee, upon termination of the fran-
chise, to cease operation of the restaurant as a Burger
King restaurant, and to take certain steps in order to make
the actual structure appear physically dissimilar to a
Burger King restaurant.
21. Despite the May 13, 1979 termination of each of
the thirteen franchise agreements, the Defendants con-
tinued to operate each of the thirteen restaurants as a
Burger King restaurant, and to utilize Burger King Cor-
poration’s trademarks and service marks as part of the
operation. The Defendants benefitted financially as a re-
sult of this continued use.
A72
22. At the August 1, 1979 evidentiary hearing on De-
fendants’ Amended Motion for Temporary Restraining
Order and Preliminary Injunction, courisel for Burger
King Corporation expressly advised Defendants and the
Court that Burger King Corporation would agree to main-
tain the status quo by not interfering with Defendants’
operation of their 27 restaurants as Burger King licensed
restaurants pending an adjudication as to whether it had
properly terminated some or all of the franchise agree-
ments covering those restaurants. This proposal was pred-
icated on the condition that the agreement would be with-
out prejudice to Burger King Corporation’s right to ob-
tain relief against Defendants for their post-termination
operation of each of those restaurants as a Burger King li-
censed restaurant in the event of a subsequent adjudication
that Burger King Corporation had terminated some or all
of those franchise agreements properly. Defendants there-
after did not present any evidence or arguments with
respect to that portion of their July 12, 1979 amended mo-
tion which sought a preliminary injunction restraining
Burger King Corporation from effectuating its termina-
tion of Defendants’ franchise agreements.
23. By their conduct, the Defendants ratified to
Burger King’s proposal that it would agree to maintain the
status quo pending an adjudication as to whether it had
properly terminated some or all of the Defendants’ fran-
chise agreements, and that Defendants are estopped from
challenging Burger King Corporation's simultaneous reser-
vation of its rights which was an express condition of that
proposal
24. By reason of their continued operation of Res-
taurant +597 in Johnstown as a Burger King licensed
restaurant after May 18, 1979. Defendants Mason, Szabo,
Hardy and Johnstown Corp. =1 have been unjustly en-
o
A73
riched in the amount of $122,500.00 in adjusted net profits.
Those Defendants should be required to disgorge that
amount by which they have been unjustly enriched.
25. By reason of their continued operation of Restau-
rant +606 as a Burger King licensed restaurant after May
18, 1979, Defendants, Mason, Szabo, Hardy and State Col-
lege, Pa., No. 1, Inc, have been unjustly enriched in the
amount of $6,600.00 in adjusted net profits. Those Defen-
dants should be required to disgorge that amount by which
they have been unjustly enriched.
26. By reason of their continued operation of Res-
taurant +1253 as a Burger King licensed restaurant after
May 18, 1979, Defendants, Mason, Szabo, Hardy and Johns-
town Corp. +2 have been unjustly enriched in the amount
of $70,900.00 in adjusted net profits. Those Defendants
should be required to disgorge that amount by which they
have been unjustly enriched.
27. By reason of their continued operation of Res-
taurant +545 as a Burger King licensed restaurant after
May 18, 1979, Defendants, Mason, Hardy and Hardy En-
terprises, Inc. have been unjustly enriched in the amount
of $16,300.00 in adjusted net profits. Those Defendants
should be required to disgorge that amount by which they
have been unjustly enriched.
28. The Plaintiff has failed to sustain its burden of
showing what Burger King would have done in May of
1979 with regard to development and ‘or marketing in the
South Bend/Elkhart, Lafayette, Mechanicsburg and Her-
shey markets. The evidence is insufficient to demonstrate
that Burger King had determined, in May of 1979, that
additional stores could and shouid be built in these markets
and that it would proceed forthwith with the development
of such new stores.
AZ
29. The Plaintiff has failed to introduce sufficient
credible evidence to demonstrate what it would have done
in developing the South Bend Elkhart and Lafayette mar-
kets, or that its evaluation of the potential of these
markets has reached a stage sufficient to warrant additional
development by Burger King.
30. The Plaintiff has failed to sustain its burden of
showing that the Defendants prevented it from carrying
out its May 1979 development or marketing plans by virtue
of their failure to close their stores or by virtue of this law-
suit.
31. The evidence is insufficient to establish that Bur-
ger King’s image in the South Bend Elkhart, Lafayette,
Mechanicsburg and Hershey markets was damaged by the
Defendants.
32. Defendants have not made a showing sufficient
to demonstrate that they are entitled to a preliminary in-
junction restraining Burger King Corporation from exer-
cising its contractual rights to effectuate the termination
of each of the thirteen franchise agreements described in
Finding 2 above, and therefore Burger King Corporation
is not precluded from exercising those contractual rights.
CONCLUSIONS OF LAW
1. By continuing to operate each of the thirteen res-
taurants described in Finding 2 above as a Burger King
licensed restaurant, and by continuing to utilize Burger
King Corporation’s trademarks and service marks in con-
nection therewith, after Burger King Corporation’s May
18, 1979 termination of each of the franchise agreements
covering those restaurants, Defendants have breached the
contractual obligations imposed on them by the provisions
A75
in each of those franchise agreements which govern the
post-termination conduct of the franchisees.
2. By their continued wrongful operation of each of
the thirteen restaurants described in Finding 2 above, the
Defendants have breached the franchise agreement relat-
ing to each restaurant. ;
3. In order to prevent Defendants from being un-
justly enriched by their misconduct, Burger King Corpora-
tion is entitled to recover from Defendants the profits
which Defendants have derived from their operation of
each of Restaurants +545, +597, +606, and +1253 as a
Burger King licensed restaurant since May 18, 1979.
4. In light of the evidence presented and applicable
legal principles, the Court concludes that Burger King Cor-
poration is entitled to recover from Defendants the amounts
specified in the Findings of Fact, as compensatory damages.
5. Defendants have the burden of proof as to each
of their affirmative defenses to Burger King Corporation's
claims for relief.
6. Defendants have not sustained their burden of
proving any affirmative defense to Burger King Corpora-
tion’s claims for relief.
7. Burger King Corporation is entitled to the entry
of a permanent injunction restraining Defendants from us-
ing Burger King Corporation’s trademarks and service
marks in connection with the operation of any restaurant
which is not licensed to use those marks.
Based upon the above Findings of Fact and Conclusions
of Law, it is
ORDERED and ADJUDGED that Final Judgment
is hereby awarded in favor of the Plaintiff, Burger King
A76
Corporation, and against the Defendants, G.A. Mason, D.W.
Szabo, R. A. Peterson and W. S. Hardy in the amount of
$216,300.00. It is further
ORDERED and ADJUDGED that the Defendants shall
be permanently enjoined from using Burger King Corpora-
tion’s trademarks and service marks in connection with the
operation of the thirteen franchisees which are the sub-
ject of this Order.
DONE and ORDERED this 25th day of November,
1981.
‘s/ Edward B. Davis
United States District Court Judge
Copies Furnished To:
Andrew C. Hall, Esq.
Lee N. Abrams, Esq.
Edward Kaufman, Esq.
A77
FINAL JUDGMENT
(Filed December 16, 1981)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
MIAMI DIVISION
Case No. 78-2932-Civ-EBD
BURGER KING CORPORATION, a
Florida corporation,
Plaintiff,
Vs.
GERALD A. MASON, et al.,
Defendants.
FINAL JUDGMENT
THIS CAUSE came before the Court for trial in June
1980, in August 1981 and in September 1981. Based upon
the jury’s verdict of August 4, 1980, the jury’s verdict of
September 2, 1981, the Court’s rulings on the various mo-
tions of the parties for directed verdicts, the Court’s May
20, 1981 Order granting BURGER KING CORPORATION ’s
March 16, 1981 Motion for Partial Summary Judgment,
the Court’s September 18, 1981 Findings of Fact and Con-
clusions of Law with respect to BURGER KING COR-
PORATION’s claims for equitable rescission, and the
Court’s November 25, 1981 Order with respect to BURGER
KING CORPORATION ’s claims for relief based on the al-
legations of Counts XXXVI-XXXIX of the Amended Sec-
ond Amended Complaint, and the Court having considered
the record herein, the Court does hereby enter this Final
Judgment as follows:
A78
IT IS ORDERED, DECREED AND ADJUDGED that:
I. Final Judgment With Respect to Counts I-IV of the
Amended Second Amended Complaint
1. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY and SZABO the
sum of TWO HUNDRED THIRTY-SIX THOUSAND FOUR
HUNDRED TWENTY-EIGHT DOLLARS AND TWENTY-
EIGHT CENTS ($236,428.28) on Promissory Note No.
102721, together with interest thereon at the rate of twelve
percent (12%) per annum from November 1, 1981 until
paid, as provided by law.
2. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall re-
cover of Defendants MASON and SZABO the sum of ONE
HUNDRED SEVENTY-NINE THOUSAND EIGHT HUN-
DRED NINETY-SIX DOLLARS AND SIXTY-NINE
CENTS ($179,896.69) on Promissory Note No. 107727, to-
gether with interest thereon at the rate of twelve per-
cent (12%) per annum from November 1, 1981 until paid,
as provided by law.
3. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON and SZABO the sum of
THREE HUNDRED SIXTY-SIX THOUSAND THREE
HUNDRED EIGHTY-ONE DOLLARS AND SEVENTY-
SIX CENTS ($366,381.76) on Promissory Note No. 107733,
A79
together with interest thereon at the rate of twelve per-
cent (12%) per annum from November 1, 1981 until
paid, as provided by law.
4. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION ’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall re-
cover of Defendants MASON, HARDY and SZABO the
sum of ONE HUNDRED SEVENTEEN THOUSAND SIX
HUNDRED THIRTY-FIVE DOLLARS and SEVENTY-
SIX CENTS ($117,635.76) on Promissory Note No. 107734,
together with interest thereon at the rate of twelve per-
cent (12%) per annum from November 1, 1981 until paid,
as provided by law.
5. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants Mason, HARDY and SZABO the
sum of THREE HUNDRED THIRTY-ONE THOUSAND
FIVE HUNDRED EIGHTY-TWO DOLLARS AND FIFTY-
NINE CENTS ($531,582.59) on Promissory Note No.
107739, together with interest thereon at the rate of twelve
percent (12%) per annum from November 1, 1981 until
paid, as provided by law.
6. As to the provisions of Paragraphs 1 through 5 of
this Final Judgment, execution shall issue as provided by
law.
II. Final Judgment with Respect to Counts V-XXXI of
the Amended Second Amended Complaint
7. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION ’s March 16, 1981 Motion for Partial Sum-
A80
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, SZABO, PETERSON and
DAUPHIN FOODS CORP. +1 the sum of ONE THOU-
SAND NINE HUNDRED TWENTY-EIGHT DOLLARS
AND EIGHTY-THREE CENTS ($1,928.83) arising from
the operation of Burger King Restaurant +164, together
with interest thereon at the rate of twelve percent (12%)
per annum from and after the date hereof, as provided by
law.
8. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, SZABO, PETERSON and
DAUPHIN FOOD CORP. +1 the sum of TWO THOU-
SAND NINETY-SEVEN DOLLARS AND THIRTY-SIX
CENTS ($2,097.36) arising from the operation of Burger
King Restaurant +285, together with interest thereon at
the rate of twelve percent (12%) per annum from and
after the date hereof, as provided by law.
9. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION's March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY, SZABO, ALLI-
SON PARK CORP. +1 and B-K FOODS, INC. the sum
of TEN THOUSAND SIX HUNDRED THIRTY-TWO DOL-
LARS AND FIFTY-EIGHT CENTS ($10,632.58) arising
from the operation of Burger King Restaurant +463, to-
gether with interest thereon at the rate of twelve percent
(12%) per annum from and after the date hereof, as pro-
vided by law.
10. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
A8l
CORPORATION’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY, SZABO, PETER-
SON, SMITHFIELD CORP. and B-K FOODS, INC. the
sum of ELEVEN THOUSAND SIX HUNDRED FIFTY-
FIVE DOLLARS AND FORTY-TWO CENTS ($11,655.42)
arising from the operation of Burger King Restaurant
+837, together with interest thereon at the rate of twelve
percent (12°: ) per annum from and after the date hereof,
as provided by law.
11. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
- CORPORATION ’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, SZABO, PETERSON and
DAUPHIN FOODS CORP. +1 the sum of TWO THOU-
SAND TWO HUNDRED SEVENTY-ONE DOLLARS AND
THIRTY-SIX CENTS ($2,271.36) arising from the opera-
tion of Burger King Restaurant +1055, together with in-
terest thereon at the rate of twelve percent (12°) per
annum from and after the date hereof, as provided by law.
12. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY, SZABO, WASH-
INGTON CORP. +1 and B-K FOODS, INC. the sum of
FOUR THOUSAND NINE HUNDRED SEVEN DOLLARS
AND SIXTY-FOUR CENTS ($4,907.64) arising from the
operation of Burger King Restaurant +1127, together with
interest thereon at the rate of twelve percent (12%) per
annum from and after the date hereof, as provided by law.
13. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
A82
CORPORATION’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY, SZABO, SMITH-
FIELD CORP. and B-K FOODS, INC. the sum of FOUR
THOUSAND ONE HUNDRED FORTY-EIGHT DOLLARS
AND TWENTY-THREE CENTS ($4,148.23) arising from
the operation of Burger King Restaurant +1201, together
with interest thereon at the rate of twelve percent (12%)
per annum from and after the date hereof, as provided
by law.
14. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION’s March 16, 198 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY, SZABO and
JOHNSTOWN CORP. #2 the sum of FOUR THOUSAND
FIFTY-ONE DOLLARS AND ELEVEN CENTS ($4,051.11)
arising from the operation of Burger King Restaurant
+1253, together with interest thereon at the rate of twelve
percent (12%) per annum from and after the date here-
of, as provided by law.
15. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY, SZABO, WASH-
INGTON CORP. +1 and B-K FOODS, INC. the sum of
THREE THOUSAND FOUR HUNDRED TWENTY-ONE
DOLLARS AND FIFTY-THREE CENTS ($3,421.53) aris-
ing from the operation of Burger King Restaurant +1360,
together with interest thereon at the rate of twelve percent
(12% ) per annum from and after the date hereof, as pro-
vided by law.
A83
16. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION ’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY, SZABO, PETER-
SON, SMITHFIELD CORP. and B-K FOODS, INC. the
sum of SEVEN THOUSAND SEVENTY-FOUR DOLLARS
AND SIXTY-NINE CENTS ($7.074.69) arising from the
operation of Burger King Restaurant +1689, together with
interest thereon at the rate of twelve percent (12%) per
annum from and after the date hereof, as provided by law.
17. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION ’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY, SZABO, PETER-
SON, SMITHFIELD CORP. and B-K FOODS, INC. the
sum of THREE THOUSAND THREE HUNDRED THIRTY-
TWO DOLLARS AND FIFTEEN CENTS ($3,332.15) aris-
ing from the operation of Burger King urant +1791,
together with interest thereon at the rate oMtwelve percent
(12%) per annum from and after the date hereof, as pro-
vided by law.
18. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION ’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY and SZABO the
sum of FOUR THOUSAND FOUR HUNDRED FORTY-
SIX DOLLARS ($4,446.00) arising from the operation of
Burger King Restaurant +1802, together with interest
thereon at the rate of twelve percent (12%) per annum
from and after the date hereof, as provided by law.
A84
19. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CORPORATION ’s March 16, 1981 Motion for Partial Sum-
mary Judgment, BURGER KING CORPORATION shall
recover of Defendants MASON, HARDY, SZABO, PETER-
SON, SMITHFIELD CORP. and B-K FOODS, INC. the sum
of TWENTY THOUSAND EIGHT HUNDRED TWENTY-
SEVEN DOLLARS AND FORTY-SIX CENTS ($20,827.46)
arising from the operation of Burger King Restaurant
+ 1863, together with interest thereon at the rate of twelve
percent (12°) per annum from and after the date hereof,
as provided by law.
20. By reason of the August 4, 1980 jury verdict and
this Court’s May 20, 1981 Order granting BURGER KING
CO
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