Morris v. International Yogurt Co.
Morris v. International Yogurt Co.
Opinion of the Court
On June 21, 1977, International Yogurt Company (IYC) entered into a franchise agreement with Vernon and Marilyn Morris, granting them the right to operate a restaurant under the company's trade name. The agreement also provided for initial training and continuing guidance, a comprehensive advertising program, and the right to use IYC's yogurt mix. The mix had been developed by Darigold, according to IYC specifications, but Darigold was also selling it to other customers. The franchise offering circular described the mix as a "unique and special formula" and said it was considered a trade secret. Neither it nor the agreement stated that the mix was also available to nonfranchisees.
The Morrises held the franchise for approximately 3 years. However, the business never became financially successful, and they sold it in June 1980, for a loss.
The Morrises argue first that because IYC's yogurt mix was available to nonfranchisees, it was not unique and had, therefore, been misrepresented. However, a product may be unique and still widely available. All that is required is that it be different from other products, the sole one of its kind. See Webster's Third New International Dictionary (1969). The evidence showed that Darigold and the Hanna brothers (IYC's founders) had spent many months developing the mix, that the proportions of ingredients differed from other mixes, and that IYC's yogurt had a distinctive taste. This evidence was buttressed by the fact that both Darigold and IYC took special precautions to limit access to the formula. The trial judge found that IYC's yogurt mix was a "unique product." There being substantial evidence in the record to support this finding, it will not be disturbed. Golberg v. Sanglier, 96 Wn.2d 874, 639 P.2d 1347, 647 P.2d 489 (1982).
The Morrises next contend that under the Franchise Investment Protection Act,
Moreover, even if IYC had violated the act, it could be held responsible only for those damages resulting from its illegal acts. RCW 19.100.190(2).
We are also unconvinced that IYC violated FIPA registration requirements.
(ii) (A) has and is offering for sale fewer than ten franchises within the state of Washington under franchise agreement; and
(B) does not advertise, using radio, television, newspaper, magazine, billboard, or other advertising medium the principal office of which is located in the state of Washington or Oregon, concerning the sale of or offer to sell franchises;. . .
Sometime between April and July 1977, IYC arranged for an ad in the "Restaurants" section in the yellow pages of the Tacoma telephone directory. The ad said:
Yogurt Stand the
Frozen Yogurt
Business Opportunities
5115-101 Street S.W.—584-3535
However, the directory was not distributed until August. "Advertise" means to "tell about or praise . . . publicly." See Webster's New World Dictionary (3d ed. 1979). Under this definition, advertising requires dissemination.
The Morrises next contend that the trial judge should not have admitted exhibits that IYC omitted from
Finally, we find nothing improper in the award of attorney's fees to the defendants in the amount of $5,000. An award of fees is permitted under FIPA (RCW 19.100-.190(3)), but the award of fees is discretionary.
IYC has also requested fees for this appeal. They are allowed under RAP 18.1 and RCW 19.100.190(3). See Huebner v. Sales Promotion, Inc., 38 Wn. App. 66, 684 P.2d 752 (1984). We award $8,456.
Affirmed.
Reed, A.C.J., concurs.
It appears from the record that the Morrises spent approximately $62,724, including the franchise fee, in acquiring the business. They sold it for $37,500.
RCW 19.100.170 states in pertinent part:
"It is unlawful for any person in connection with the offer, sale, or purchase of any franchise directly or indirectly:
"(2) To sell or offer to sell a franchise in this state by means of any written or oral communication which includes an untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made in light of the circumstances under which they were made not misleading."
RCW 19.100.190(2) provides, in part:
"Any person who sells or offers to sell a franchise in violation of this chapter shall be liable to the franchisee or subfranchisor who may sue at law or in equity for damages caused thereby for rescission or other relief as the court may deem appropriate." (Italics ours.)
Had the Morrises been able to prove IYC had violated the Franchise Investment Protection Act, they might have been able to obtain rescission of the agreement, even without proof of damages. However, since they had sold the business, this remedy was no longer available to them.
The trial judge found that IYC was exempt from registration. Although the Morrises have challenged only one of two similar findings, the nature of their
Case law almost invariably defines the term with reference to its capacity for providing information to the public. See, e.g., Bissell Carpet Sweeper Co. v. Masters Mail Order Co. of Washington D.C., Inc., 140 F. Supp. 165, 173 (D. Md. 1956); Planned Parenthood Comm. of Phoenix, Inc. v. Maricopa Cy., 92 Ariz. 231, 375 P.2d 719, 722 (1962); Sassone v. Board of Chiropractic Examiners, 201 Cal. App. 2d 165, 20 Cal. Rptr. 231, 235 (1962); State v. Cusick, 248 Iowa 1168, 84 N.W.2d 554, 556 (1957); Deer Creek Constr. Co. v. Peterson, 412 So. 2d 1169, 1173 (Miss. 1982); People ex rel. Moffitt v. Wendelken, 10 Misc. 2d 442, 156 N.Y.S.2d 129, 131 (1956).
The Morrises object to 17 exhibits, but our consideration is directed only to the five which are relevant to issues raised on appeal.
RCW 19.100.190(3) provides in pertinent part:
"(3) The suit authorized under subsection (2) of this section may be brought to recover the actual damages sustained by the plaintiff and the court may in its discretion increase the award of damages to an amount not to exceed three times the actual damages sustained. Provided, That the prevailing party may in the discretion of the court recover the costs of said action including a reasonable attorneys' fee."
The franchise agreement also provided:
" Attorneys Fees. If either party institutes an action to enforce its rights under this agreement, the losing party shall pay to the prevailing party the attorneys' fees and costs incurred hy the prevailing party in such action, including any appeal thereof."
The respondents have argued that attorney's fees should have been awarded to defendants under Washington's so-called "long-arm statute." RCW 4.28.185. Fees are permitted under that statute if a defendant is served outside the state. The corporate defendant, IYC, was served in Washington and thus the statute would be inapplicable to that defendant. Some individual defendants were apparently served in Oregon and, therefore, fees could be awarded to them pursuant to the statute. However, the award of fees under that statute is also permissible rather than mandatory. Absent some special circumstances, we find no abuse of discretion in failing to award fees under the long-arm statute to defendants served in a neighboring state.
Concurring Opinion
(concurring)—I disagree with the majority's determination that failure to disclose the fact that the yogurt mix was readily available to nonfranchisees was not a violation of the Franchise Investment Protection Act (FIPA).
The act makes it unlawful for one to omit "to state a material fact necessary in order to make the statements made in light of the circumstances under which they were made not misleading." (RCW 19.100.170(2)); footnote 2. The majority points out that the franchisor was "required to disclose only those facts which it could assume reasonably are material to the transaction and unknown to the
It may be true that the particular yogurt mix was unique as that term is defined by Webster. Nevertheless, the statement that there was available a unique product to a franchisee who paid a fee and agreed to the terms of a franchise agreement is at the least misleading without disclosing the fact that the same product which is the essence of the franchise is available to anyone for the asking.
In my view this information would be a critical factor in deciding whether or not to purchase the franchise. The fact that there was no guaranty that they would have the only yogurt stand franchise in a given area does not buttress the majority's position. In such an event, the Morrises would be on a more equal footing with another franchisee burdened with comparable fees and restrictions imposed by the franchise agreement.
Nevertheless I agree with the majority's holding that the Morrises failed to establish that the damages they suffered resulted from this undisclosed material fact as well as all other aspects of the opinion. Consequently, I concur with the affirmance of the judgment below and the award of attorney’s fees on appeal.
Review granted by Supreme Court October 30, 1985.
Reference
- Full Case Name
- Vernon M. Morris, Et Al, Appellants, v. International Yogurt Company, Et Al, Respondents
- Cited By
- 3 cases
- Status
- Published