A company who is injured by another entity or individual’s breach of a contract is generally entitled to recover damages. In Hardee’s Food Systems. Inc. v. Hallbeck, the District Court for the Eastern District of Missouri explains that in addition to recovering based on the immediate economic damage caused by a contract breach, a plaintiff may also seek to recoup the loss of future or expected income.
Defendants are five individuals who owned a Hardee’s fast food restaurant franchise in Ottawa, Illinois. They first opened the Ottawa franchise in the early 1970’s and owned 21 Hardee’s restaurant franchises over the following decades. By 2008, however, the Ottawa restaurant was the last remaining Hardee’s in its market area. Defendants closed this restaurant in February 2009.
Plaintiff, which operates and licenses others to operate Hardee’s restaurants, filed this action alleging that Defendants violated a five-year Renewal Franchise Agreement (Agreement) between the parties by closing the Ottawa franchise more than a year before the Agreement expired. Plaintiff seeks damages in the amount of approximately $50,000 in lost royalty and advertising fees, allegedly due under the Agreement. In response, Defendants filed a motion for summary judgment, arguing that the Agreement’s fees provision was terminated when they closed the restaurant, that the fees sought are speculative and that enforcement of the fee provision is against public policy.
The court denied Defendant’s summary judgment motion, ruling that prospective royalty and advertising fees that Plaintiff argues it would have earned if the franchise remained open may be recoverable. Noting that the Agreement provided that any disputes be governed by Missouri law, the court held that “[a] fact finder could reasonably find that absent the closure, some revenue would have been realized from continued operation, and the length of operations and amount of revenue that might have been derived are fact issues.” While it was not certain that Plaintiff would ultimately be able to recover damages here, there was, according to the court, “a genuine issue of material fact… as to whether lost royalties and advertising fund contributions in the event of a breach were reasonably within parties’ contemplation at the time they entered into the Agreement.”
The court further ruled that the damages sought were not merely speculative because Plaintiff based the figure on projected sales, applicable fee rates and the time value of money. Finally, the court noted that it was confident that the same conclusion would be reached if the matter was subject to Illinois law.
While the rules of contract interpretation vary from state to state, all states provide remedies for people and business entities that have been damaged as a result of a breach of contract. An experienced business litigation attorney can provide vital assistance to a company who has been injured by a breach of contract. At Lubin Austermuehle, our business dispute attorneys are focused on complex disputes. When the stakes and risks are the highest, we are at our best. In addition to our courtroom skills, we have also achieved dramatic wins for our clients in mediation.
Related blog posts: