Preview
FILED
DALLAS COUNTY
12/17/2013 3:56:36 PM
GARY FITZSIMMONS
DISTRICT CLERK
CAUSE NUMBER DC-12-07867
RED MANGO FC, LLC § IN THE DISTRICT COURT
Plaintiff/Counter Defendant, §
§
vs. §
§ 160th JUDICIAL DISTRICT
HOWARD GROSSER §
Defendant §
and § DALLAS COUNTY, TEXAS
PHROZEN ASSETS LLC §
Third-Party Plaintiff. §
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION
TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS
Respectfully submitted,
______________________________
Christianne Edlund
Texas State Bar No. 24072083
Cheryl Mullin
Texas State Bar No. 24037807
2425 N. Central Expy., Suite 200
Richardson, Texas 75080
(972) 852-1708 – Telephone
(972) 931-0124 – Facsimile
COUNSEL FOR PLAINTIFF
i
TABLE OF CONTENTS
I. SUMMARY ........................................................................................................................................ 1
II. ARGUMENTS AND AUTHORITIES ............................................................................................. 1
A. Red Mango objects and has filed a corresponding Objection, Special Exceptions, and
Motion to Strike Grosser’s Response and all of Grosser’s summary-judgment evidence. ............. 1
a. All of Phrozen Assets’ claims are barred as a matter of law ................................................ 3
b. Mr. Grosser’s Count I – Breach of Sections 3.1, 3.2, and 3.4, of the Franchise Agreement
fail because these provisions do not impose contractual obligations on Red Mango .................. 4
B. Mr. Grosser’s unjust enrichment claim fails as a matter of law pursuant to the valid and
enforceable Franchise Agreement ........................................................................................................ 6
C. Grosser’s tort claims fail as a matter of law under the economic loss doctrine ...................... 6
D. Mr. Grosser’s fraudulent misrepresentation claims fail as a matter of law ............................ 8
E. Grosser’s out-of-state, post-contractual claims are barred as a matter of law because the
parties expressly agreed that Texas law would govern all claims arising out of, or related to, the
Franchise Agreement and their relationship thereunder ................................................................. 13
F. Texas common-law duty of good faith and fair dealing does not exist between franchising
parties .................................................................................................................................................... 14
G. Mr. Grosser’s Texas DTPA claim is barred as a matter of law under the Large
Transactions Exemption ...................................................................................................................... 15
III. ARGUMENTS AND AUTHORITY – NO EVIDENCE SUMMARY JUDGMENT................. 16
A. Grosser challenges Red Mango’s no-evidence summary judgment motion solely on grounds
that the motion failed to meet technical requirements. .................................................................... 16
B. Red Mango reiterates its argument that Grosser has proffered no admissible evidence to
support claims of fraud or negligent misrepresentation. ................................................................. 18
C. Red Mango reiterates its argument that Grosser has failed to raise any genuine issue of
material fact with respect to this Affirmative Defenses. .................................................................. 23
a. Failure of Consideration..................................................................................................... 23
b. Fraud .................................................................................................................................... 24
c. Estoppel ................................................................................................................................ 24
d. Unclean Hands ..................................................................................................................... 25
e. Illegality................................................................................................................................ 25
f. Violation of Federal and State Laws ................................................................................. 25
IV. CONCLUSION ................................................................................................................................. 26
ii
TABLE OF AUTHORITIES
Cases
Bartlett v. Schmidt 33 s.w.3d 35 (Tex.App.—Corpus Christi 2000, pet. denied) ...................................... 22
Beyers v. Roberts, 199 S.W.3d 354, 358 (Tex. App.-- Houston [1st Dist.] 2006, pet. denied) .................. 26
Carter v. PeopleAnswers, Inc. 312 S.W.3d 308, 312 (Tex. App. – Dallas 2010, n.p.h.). .......................... 24
Crim Truck & Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591 (Tex. 1992) ........................ 14
English v. Fischer, 660 S.W.2d 521 (Tex.1983) ........................................................................................ 14
Exxon Corp. v. Emerald Oil & Gas Co. 348 S.w.3d 194 (Tex. 2011) ................................................. 20, 21
Fry v. Farm & Ranch Healthcare, Inc., 2007 Tex. App. LEXIS 9731 (Tex. App. Amarillo Dec. 13, 2007)
.......................................................................................................................................................... 19, 20
Greever v. Persky, 156 S.W.2d 566, 569 (Tex.Civ.App. Fort Worth 1941), aff'd 140 Tex. 64, 165 S.W.2d
709 (1942) .............................................................................................................................................. 25
In re Lyon Fin. Servs., 257 S.W.3d 228 (Tex. 2008).................................................................................. 14
Johnson v. Brewer & Pritchard, P.C., 73 s.w.3d 193 (Tex.2002) ............................................................. 17
Lewis v. Davis, 145 Tex. 468, 199 S.W.2d 146, 1148-49 (1947) ............................................................... 25
Maness v. Reese, 489 S.W.2d 660 (Tex. Civ. App.--Beaumont 1972, writ ref'd n.r.e.) ............................. 19
Marsaglia v. UTEP, 22 s.w.3d 1 (Tex.App—El Paso 1999, pet. denied) .................................................. 17
McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787 (Tex. 1999) .............. 21
MCI Telecomm. Corp. v. Texas Util. Elec. Co., 995 S.W.3d 647 (Tex. 1999) ........................................ 3, 4
Montgomery v. Browder, 930 S.W.2d 772, 778 (Tex.App.-Amarillo 1996, writ denied). ........................ 25
National Newspaper Enterprises, Inc. v. Chitwood, 68 S.W.2d 264 (Tex. Civ. App.--Dallas 1934, writ
dism'd) .................................................................................................................................................... 19
Ortega v. City Nat'l Bank, 97 S.W.3d 765 (Tex.App.-Corpus Christi 2003, no pet.) .................................. 7
Rice v. Metro Life Ins. Co., 324 S.W.3d 660 (Tex. App. – Ft. Worth 2010, no pet.)................................... 6
Southstar Corp. v. St. Paul Surplus Lines Ins. Co., 42 S.W.3d 187 (Tex.App.-Corpus Christi 2001, no
pet.) ........................................................................................................................................................... 7
Stewart v. United States Leasing Corp., 702 S.W.2d 288, 290 (Tex.App.-Houston [1st Dist.] 1985, no
pet.). ........................................................................................................................................................ 23
Trenholm v. Ratcliff, 646 S.W.2d 927 (Tex. 1983) .................................................................................... 19
Universal Health Servs., Inc. v. Renaissance Women’s Grp., P.A., 121 S.W. 3d 742 (Tex. 2001) ............. 6
Zar v. Omni Industries, Inc., 813 F.2d 689 (5th Cir. 1987)........................................................................ 19
Regulations
16 C.F.R. § 436.5(g) ................................................................................................................................... 18
iii
CAUSE NUMBER DC-12-07867
RED MANGO FC, LLC § IN THE DISTRICT COURT
Plaintiff/Counter Defendant, §
§
vs. §
§ 160th JUDICIAL DISTRICT
HOWARD GROSSER §
Defendant §
and § DALLAS COUNTY, TEXAS
PHROZEN ASSETS LLC §
Third-Party Plaintiff. §
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION
TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS
Plaintiff Red Mango FC, LLC (“Red Mango”) submits this Reply to Defendant Howard
Grosser’s and Third-Party Plaintiff Phrozen Assets LLC’s (collectively “Grosser”) Opposition to
Plaintiff’s Traditional Motion for Partial Summary Judgment (“Grosser’s Response”) and respectfully
requests that Grosser’s Response be denied and Red Mango’s Traditional and No-Evidence Motion for
Partial Summary Judgment be granted in its entirety.
I. SUMMARY
Notwithstanding a 132-page Response, Grosser has failed to demonstrate why Red Mango is not
entitled to summary judgment on all claims. The bulk of Grosser’s Response consists merely of
conclusory statements unsupported by summary-judgment evidence. As set forth in Red Mango’s
summary-judgment motion and the reply below, Red Mango is entitled to summary judgment on both its
traditional and no-evidence motion for partial summary judgment.
II. ARGUMENTS AND AUTHORITIES
A. Red Mango objects and has filed a corresponding Objection, Special Exceptions, and Motion to
Strike Grosser’s Response and all of Grosser’s summary-judgment evidence.
1. Red Mango objects to the evidence proffered in Grosser’s Response on grounds stated in Red
Mango’s Motion for Sanctions, Objections, Special Exceptions, and Motion to Strike Defendant’s
Summary-Judgment Response and Summary-Judgment Evidence, being filed contemporaneously
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 1
herewith and incorporated herein by reference.1 As described in that Motion, Grosser cannot prove that
Red Mango is not entitled to summary judgment, in part, because the “evidence” relied on his Response
is admissible for the reasons stated in the Motion for Sanctions, and therefore may not be considered by
the Court.
Traditional Summary Judgment - Red Mango’s Causes of Action against Mr. Grosser and Phrozen
Assets:
2. Red Mango is entitled to summary judgment on its affirmative claims for breach of contract and
fraudulent inducement because Mr. Grosser failed to meet his burden of proving that a genuine issue of
material fact exists on either of these claims.
3. Specfically, Red Mango claims that Grosser breached the parties’ Franchise Agreement by
failing to pay the Franchise Fees and Interest due thereunder.
4. Grosser admits in his Response that he did not pay the royalty fees and ad fund fees
contemplated in the Franchise Agreement,2 but claims that he is entitled to set-off the amount of fees
owed by Red Mango by amounts that Red Mango owes to him.
5. The Franchise Agreement contained a no set-off provision, which provided in relevant part:
“No Set-Off Rights. You may not set off, deduct, or otherwise withhold fees or other
amounts due Mango under this Agreement on grounds of alleged nonperformance by
Mango of any of its obligations or for any other reason…”
6. Grosser’s Response does not address why the no-set off provision should not apply, but merely
concludes that “Grosser’s Affirmative Defenses show why Mango is not entitled to anything based upon
Mango’s fraud, violation of federal and state laws, breach of contract and breach of the covenant of good
faith and fair dealing.”3
7. Grosser does not explain how, or under what theory of law, his affirmative defenses negate the
no-set off provision in the Franchise Agreement, nor has Grosser identified any evidence to support such
1
See Pl.’s Objections to Def.’s Summ. J. Evidence and Mot. to Strike.
2
Grosser App. 334 ¶ 188 (“I told Mango that if it would not refund the $32,100 that it owed to me it should use this
as a credit as to any money that I would owe to Mango and when that credit is exhausted, I would pay Mango
directly for all monies due.”).
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 2
contention.
8. Red Mango also claims that Mr. Grosser fraudulently induced Red Mango into awarding him a
franchise by providing false answers to pre-sale Franchisee Questionnaire designed to alert Red Mango
of any pre-sale representations that perhaps should not have been made. Mr. Grosser admits that he
provided false answers to the Franchisee Questionnaire under the belief that if he did not lie on the
questionnaire, Red Mango would not have awarded him a franchise.4
9. Thus it appears from Mr. Grosser’s own statements that no genuine issue of material fact exists
as to Red Mango’s two affirmative claims, and that Red Mango is entitled to summary judgment on both
claims.
Traditional Summary Judgment – Grosser’s Claims against Red Mango:
a. All of Phrozen Assets’ claims are barred as a matter of law
10. Phrozen Assets is not a signatory on the Franchise Agreement 5 and, therefore, has no standing to
bring a claim against Red Mango for breach of the Franchise Agreement or for fraudulent inducement as
it relates to signing the Franchise Agreement. Phrozen Assets does not assert that it was a party to the
Franchise Agreement or that it had any other contractual relationship with Red Mango (because it did
not). Phrozen Assets asserts only that it has standing to assert claims, perhaps as a third-party beneficiary
of the Franchise Agreement, because it contracted with certain of “Mango’s vendors” relating to store
build out and construction, and because Red Mango allegedly “knowingly accepted payments from
Phrozen Assets for obligations due from Howard Grosser.”6
11. There is a presumption against, not in favor of, third party beneficiary agreements.7 Absent clear
indication in the contract that the parties intended to confer a direct benefit to the third party, the third
3
Grosser Resp. p. 69 ¶ 106.
4
Grosser App. pp. 326-327 ¶¶ 88-96.
5
See Exhibit 1A – Franchise Agreement to Pl.’s Trad. and No-Evid. Mot. Partial Summ. J., pp. 4, 5, 32, 35, 39, 48,
49.
6
Grosser Resp. p. 83 ¶ 192.
7
MCI Telecomm. Corp. v. Texas Util. Elec. Co., 995 S.W.3d 647, 652 (Tex. 1999).
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 3
party may not maintain an action as a third-party beneficiary.8 The fact that a non-party might receive an
incidental benefit from a contract bestows no right of action to enforce the contract. 9 A third party may
recover on a contract made by other parties only if the parties intended to secure some benefit to that
third party, and only if the parties entered into the contract directly for the third party’s benefit.10
12. Grosser does not allege (and proffers no evidence to support) that Red Mango entered into the
Franchise Agreement for the benefit of Phrozen Assets; therefore, Phrozen Assets, at most, is an
incidental – not intended – beneficiary to the Franchise Agreement and lacks standing to enforce it.
13. Moreover, Phrozen Assets does not assert that any of the purported misrepresentations were
made to Phrozen Assets (which was not even formed until May 16, 2011 – three months after the
Franchise Agreement was signed)11.
14. Thus, Red Mango is entitled to summary judgment in its favor as to all claims asserted by
Phrozen Assets on grounds that Phrozen Assets has no standing to assert such claims.
b. Mr. Grosser’s Count I – Breach of Sections 3.1, 3.2, and 3.4, of the Franchise
Agreement fail because these provisions do not impose contractual obligations on
Red Mango
15. Grosser alleges generally that Red Mango violated Sections 3.1, 3.2, and 3.4 of the Franchise
Agreement.12 Grosser does not, however, allege a breach of the express terms of any of these provisions.
16. Specifically, Section 3.1 provides:
3.1. Site Selection. You must identify and acquire a site for the Store by the Control Date
specified in the Summary Pages. The site must be located within the Site Selection Area
identified in the Summary Pages, must meet Mango’s then-current site selection criteria,
and must otherwise be mutually acceptable to you and to Mango. Mango may assist you
in site selection, in its sole discretion, which assistance may include making available to
you the services of our designated tenant representative consulting firm. If Mango
requires you to use the services of its designated tenant representative consulting firm,
you agree to work with the consultant/broker and to pay the Project Management Fee in
8
Id.
9
Id. at 651.
10
Id.
11
See a true and correct copy of Public Records Report for Phrozen Assets, LLC attached as Exhibit A.
12
Howard Grosser and Phrozen Assets, LLC v. Red Mango FC, LLC, Case 3:12-cv-02691-N, Order on Def.’s Mot.
to Dismiss (Apr. 25, 2013).
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 4
the amount set forth in the Summary Pages (which Mango may impose and collect on the
firm’s behalf). Ultimate site selection is solely your responsibility.
17. Section 3.2. provides, in relevant part:
3.2. Franchise Site Application. For each proposed site that you identify, you must
deliver to Mango a completed franchise site application if a form Mango prescribes …
Mango will approve or refuse to approve a proposed site within 30 days after the receipt
of these documents and any additional information as Mango may reasonably require.
Mango’s failure to provide notification within this time period shall not be considered
either approval or disapproval. The parties acknowledge and agree that Mango’s site
approval is not an assurance that the Store will achieve a certain sales volume or level of
profitability; it means only that the proposed site meets Mango’s minimum criteria for
RED MANGO Stores.
18. Section 3.4. provides, in relevant part:
3.4. Store Design and Build Out. You shall follow Mango’s procedures for Store
construction and build out, shall construct and build out the Store according to Mango’s
standard and specifications for design, décor and layout, and shall equip the Store
according to Mango’s requirements for fixtures, furnishing, equipment, interior and
exterior signage, artwork and graphics, and awnings…
19. In his affidavit Grosser alleges generally that Red Mango required him to use a particular real
estate broker to select the site for his Red Mango store, that Red Mango incompetently negotiated his
lease, and that Red Mango required him to use incompetent third party contractors.13
20. The express provisions of the Franchise Agreement, however, contain no promise to provide site
selection or store build out assistance. They do not require Red Mango to provide the services of a broker
(or a broker with any particular skill level). They do not require Red Mango to provide any lease
negotiation assistance (nor do they restrict Grosser from hiring a legal or real estate professional to help
him negotiate his own lease). They do not promise or represent any particular level of competency or
skill on the part of Red Mango’s designated or approved contractors, and they provide no guarantee that
there will be no construction delays.
21. This Court should not imply a promise by Red Mango to provide competent assistance and issue-
free construction services where the express terms of the contract explicitly provide that ultimate site
selection and store construction is Grosser’s sole responsibility. To do so would imply an obligation
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 5
contradictory to the express terms of the Franchise Agreement.14
22. Thus, Red Mango is entitled to summary judgment as to Grosser’s claims that it breached
Sections 3.1., 3.2., and 3.4 of the Franchise Agreement because Grosser alleges no facts to support that
Red Mango owed him a contractual duty, or that Red Mango breached such a duty.
23. Accordingly, Red Mango is entitled to summary judgment in its favor as to Grosser’s claims that
Red Mango breached Sections 3.1., 3.2., and/or 3.4. of the Franchise Agreement.
B. Mr. Grosser’s unjust enrichment claim fails as a matter of law pursuant to the valid and
enforceable Franchise Agreement
24. Red Mango argues in itsmotion that there can be no recovery under the doctrine of unjust
enrichment when a valid, express contract “covers the subject matter of the parties’ dispute.”
25. Grosser proffers no arguments or evidence to dispute this argument.
26. Accordingly, Red Mango is entitled to summary judgment in its favor as to Grosser’s unjust
enrichment claim.
C. Grosser’s tort claims fail as a matter of law under the economic loss doctrine
27. Red Mango argues in its motion that the economic-loss doctrine bars Mr. Grosser’s claims under:
Count IV (Fraud), Count V (Promissory Fraud), Count VI (Negligent Misrepresentation), and Count VII
(Texas Deceptive Trade Practices Act)15 (collectively “Mr. Grosser’s Tort Claims”).
28. Under the economic-loss doctrine, a plaintiff is barred from bringing tort claims (other than
fraudulent inducement) when the only economic loss to the plaintiff is the subject matter of a contract. 16
When the injury is only the economic loss to the subject of a contract itself the action sounds in contract
13
Grosser App. pp. 329-331 ¶¶ 146-163.
14
See Universal Health Servs., Inc. v. Renaissance Women’s Grp., P.A., 121 S.W. 3d 742, 747 (Tex. 2001) (stating
that an implied covenant “must rest entirely on the presumed intention of the parties as gathered from the terms as
actually expressed in the written instrument itself”); See also Rice v. Metro Life Ins. Co., 324 S.W.3d 660, 669 (Tex.
App. – Ft. Worth 2010, no pet.) (“It is typically not proper for us to imply terms that contradict a contract’s express
language.”).
15
It is unclear from Grosser’s pleading if he is claiming DTPA violations for representations allegedly made by Red
Mango prior to, or after, the Franchise Agreement was signed. The Economic Loss Doctrine bars Grosser’s DTPA
claim for any alleged representations made after the Franchise Agreement was signed.
16
Id.
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 6
alone. If a tort claim arises solely from the parties' contractual relationship, Texas courts disallow such a
claim.17
29. In his Response, Grosser argues that the economic-loss doctrine does not apply to these counts
because misrepresentations Red Mango allegedly made after Grosser signed the Franchise Agreement
“give rise to damages wholly distinct from the ‘benefit of the bargain’ or the profits Grosser expected to
make after signing the Franchise Agreement.”18
30. Grosser fails, however, to articulate what those other damages actually are in this case, and
instead points to two “examples”:
Example 1. Mango represented that it would hold the $7,500 in escrow, but then failed to do
so. As a result,Grosser lost his $7,500 and had to pay additional money to complete the
work that Mango’s contractor should have performed.
Example 2. Mango also misrepresented the expected results for the Galleria Mall location,
causing Grosser to accept a specific site that was doomed to fail. For this claim, Grosser does
not seek to recover the profits he would have made from the pro forma profits. 19
31. Example 1 merely identifies an oral agreement to hold monies in escrow, and claims breach of
contract damages flowing from Red Mango’s alleged failure to perform the terms of the escrow
agreement. The economic loss rules applies in this context to prevent Grosser from recovering anything
other than breach of contract damages for what is, in essence, a breach of contract claim.
32. To the extent that the allegations stated in Example 2 purport to support a misrepresentation
claim, the economic loss rule applies only to the extent that Grosser seeks benefit-of-the bargain damages
on a claim that is subject to a contract. Other than the foregoing, nonbinding statement as to what he is
not seeking, Grosser proffers no admissible evidence to support that he suffered an independent injury as
a result of such alleged misrepresentation.
17
See, e.g., Ortega v. City Nat'l Bank, 97 S.W.3d 765, 777 (Tex.App.-Corpus Christi 2003, no pet.); Southstar Corp.
v. St. Paul Surplus Lines Ins. Co., 42 S.W.3d 187, 193–94 (Tex.App.-Corpus Christi 2001, no pet.).
18
Grosser Resp. p. 63 ¶ 78.
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 7
33. To the extent that Grosser’s Response fails to address any other than these two purportedly
illustrative claims, Grosser has failed to meet his burden of proving that summary judgment should be
denied with respect to such other claims.
D. Mr. Grosser’s fraudulent misrepresentation claims fail as a matter of law
34. In Grosser’s Response, Mr. Grosser points to a series of alleged misrepresentations that were
allegedly material to Mr. Grosser’s purchase of the franchise were made with the intent to defraud him
and to induce him to rely upon them in making his decision to purchase the Red Mango franchise.20
35. A closer look at these allegations, however, reveal that all of the alleged representation were
made after the Franchise was signed and, therefore, could not have induced him to sign the Franchise
Agreement.21
36. Presumably, such omission constituted an egregious oversight on the part of Grosser’s counsel.
37. In fairness to Grosser, therefore, we look to Grosser’s affidavit to determine whether he alleges
that any representations were made before the Franchise Agreement was signed.
38. Paragraphs 57 through 79 of Mr. Grosser’s affidavit appear to contain all of the evidence
proffered by Mr. Grosser concerning alleged pre-sale representations.
39. To the extent that Grosser’s fraud claims are based on any of the following statements, the claims
must fail because (i) the statements themselves contradict the express terms of the fully integrated
Franchise Agreement and, therefore, are inadmissible under the parol evidence rule; and/or (ii) the
representation contained in Item 19 of Red Mango’s Franchise Disclosure Document that:
“Except for the information presented above [referring to the earnings information
contained in Item 19 of the FDD, itself],we do not make any representations about a
franchisee’s future financial performance or the past financial performance of company-
owned or franchised Stores. We also do not authorize our employees or representative to
make any such representations orally or in writing...”:
Plus the franchisee representation contained in Section 16.2.3. of the Franchise Agreement:
19
Id.
20
Id. at pp. 59-61 ¶¶ 68-70.
21
Id.
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 8
16.2.3. Except for representations contained in Mango’s Franchise Disclosure
Document provided to you in conjunction with this franchise offering, you represent that
neither Mango nor its agents or representations [sic] have made any representations, and
you have not relied on representations made by Mango or its agents or representatives,
concerning actual or potential gross revenue, expenses or profit of a RED MANGO ®
store.
Coupled with the language in Section 18.1. that the Franchise Agreement and its attachments “represent
the entire fully integrated agreement between the parties and supersede all other negotiations,
agreements, representations, and covenants, oral or written” negate the reasonable or justifiable reliance
element of any fraud claim.
s themselves are inadmiss
40. For these reasons, Red Mango is entitled to summary judgment on all fraud claims based on any
of the following representations:
“Mango produced an delivered to me prior to my purchase of Mango’s franchise a pro forma
projection stating that the location it approved would enable me to have at least $687,000 of sales
per year” 22
This sworn statement is the subject of Red Mango’s motion for sanctions.
Uncontroverted evidence and Mr. Grosser’s own testimony clearly establish that any pro
forma provided by Red Mango was provided approximately six weeks after the franchise
agreement was signed. This is a fraudulent and material statement made under oath
concerning one of the most significant claims in this this case.
Bob DeBartelomeo, Mango’s franchise sales, induced me to purchase Mango’s franchise by
providing false information as to the prospective expenses, revenues and the cost of operation of
the franchise. 23
“The average Mango store does $520,000 in annual sales”24
“The average Mango store is now up to $550,000 in annual sales”25
22
Grosser App. p. 320 ¶ 35.
23
Id. at p. 318 ¶ 18.
24
Id. at p. 315 ¶ 10.
25
Id.
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 9
“The average cost of operating an average Mango store is 90% of sales”26
“The cost of goods is 28% to 32% of sales”27
“Mango lied to me by stating that the average profit generated was 10% of revenue;”28
“Mango lied to me as to the amount that I could expect for gross sales of my store;” 29
“Mango lied to me as to the amount that I could expect for net profit of my store.”30
These claims further fail because Grosser does not allege in his response what the actual representations
were, who made the statements, or how they were false.
41. The Franchise Agreement is a fully integrated agreement that contains all of the contractual
obligations between the parties. Accordingly, Red Mango also is entitled to summary judgment on all
claims based on the following representations, which also contradicts the express terms of the Franchise
Agreement:
“Mango’s own web site to induce people to purchase its franchise states “We’re committed to
helping your business thrive, from providing industry-leading site selection to highly effective
marketing initiatives to drive sales” 31 and “”I purchased a Mango franchise specifically because
of Mango’s alleged expertise in site selection” 32
“Mango lied to me as to the services they would provide to me”33
“Mango lied to me as to the support they would provide to me.”34
These claims further fail because Grosser does not allege in his response what the actual representations
were or how they were false. 35
26
Id.
27
Id.
28
Id. at p. 322 ¶ 59.
29
Id. at ¶ 60.
30
Id. at p. 323 ¶ 61.
31
Id at p. 318 ¶ 15.
32
Id. at p. 319 ¶ 26.
33
Id. at p. 323 ¶ 62.
34
Id. at ¶ 63.
35
See Exhibit 1A – Franchise Agreement to Pl.’s Trad. and No-Evid. Mot. Partial Summ. J. p. 30.
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 10
42. The following statements appears to allege that Red Mango’s Franchise Disclosure Document 36
contained incorrect information. Any fraud claims based on the following representations fail as a matter
of law because: (i) they do not state why or how it was false, or (ii) why the statement was material or
that Grosser relied on the statement in any particular way, or (iii) why it was reasonable for Mr. Grosser
to rely on the statement.
43. To the extent that any fraud claims are based on allegations that Mr. Grosser’s store construction
costs exceeded the “Estimated Initial Investment” figures reflected in Item 7 of Red Mango’s Franchise
Disclosure Document, such claims fail because estimated figures are not a guarantee or representation of
existing fact sufficient to support a fraud claim.
44. Accordingly, Red Mango also is entitled to summary judgment on all fraud claims based on any
the following statements:
“No Mango store has ever closed or abandoned a location” 37
“Many stores are company-owned” 38
The total investment necessary to begin operation of a Traditional Mango store ranges from
$262,100 to $456,600; nontraditional ranges from $180,000 to $354,50039
“Mango lied to me as to the number of franchises it had sold”40 (Item 20 of Red Mango’s FDD
disclosed that there were 68 franchised locations in operation as of September 30, 2010. Mr.
Grosser proffers no evidence to support why or how this information was false.
“Mango lied to me as to the cost to take the steps to build out and open the store.”41 Mr. Grosser
admits having received a copy of Red Mango’s franchise disclosure document,42 which (in Item
7) disclosed certain “Estimated Initial Investment.”
36
Id.
37
Grosser App. p. 315 ¶ 10.
38
Id.
39
Id.
40
Id. at p. 322 ¶ 56.
41
Id. at ¶ 57.
42
See Exhibit 1A – Franchise Agreement to Pl.’s Trad. and No-Evid. Mot. Partial Summ. J. p. 30.
PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S
OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 11
“The Franchise Disclosure Document that Mango provided to me stated that Permits would cost
$1,500 - $5,000,” and “These permits cost me $6,577.34;43
“I was charged in excess of an additional $1,000 for permits that were paid by my contractor and
billed to me”;44
the “Franchise Disclosure Document that Mango provided to me stated that interior
improvements and lighting would cost $50,000 - $110,000” and “These items cost me
$221,695;”45
the “Franchise Disclosure Document that Mango provided to me stated that kitchen equipment,
smallwares and furniture would cost $50,000 - $100,000” and “The items cost me
$127,449.98;”46
the “Franchise Disclosure Document that Mango provided to me stated that typical rent costs
usually range from $2.00 to $8.00 per square foot per month” and “Mango negotiated a lease for
me that cost more than $10.26 per square foot per month.”47 (Grosser proffers no evidence here
to show that typical rent did not fall within the stated range.)
“The Franchise Disclosure Document that Mango provided to me stated that the total investment
necessary to begin operation of a traditional store ranges from $262,100 to maximum of
$496,600,” “The location and layout of my store is a ‘non-traditional’ store. The FDD that
Mango provided to me states the total investment necessary t
Preview
FILED DALLAS COUNTY 12/17/2013 3:56:36 PM GARY FITZSIMMONS DISTRICT CLERK CAUSE NUMBER DC-12-07867 RED MANGO FC, LLC § IN THE DISTRICT COURT Plaintiff/Counter Defendant, § § vs. § § 160th JUDICIAL DISTRICT HOWARD GROSSER § Defendant § and § DALLAS COUNTY, TEXAS PHROZEN ASSETS LLC § Third-Party Plaintiff. § PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS Respectfully submitted, ______________________________ Christianne Edlund Texas State Bar No. 24072083 Cheryl Mullin Texas State Bar No. 24037807 2425 N. Central Expy., Suite 200 Richardson, Texas 75080 (972) 852-1708 – Telephone (972) 931-0124 – Facsimile COUNSEL FOR PLAINTIFF i TABLE OF CONTENTS I. SUMMARY ........................................................................................................................................ 1 II. ARGUMENTS AND AUTHORITIES ............................................................................................. 1 A. Red Mango objects and has filed a corresponding Objection, Special Exceptions, and Motion to Strike Grosser’s Response and all of Grosser’s summary-judgment evidence. ............. 1 a. All of Phrozen Assets’ claims are barred as a matter of law ................................................ 3 b. Mr. Grosser’s Count I – Breach of Sections 3.1, 3.2, and 3.4, of the Franchise Agreement fail because these provisions do not impose contractual obligations on Red Mango .................. 4 B. Mr. Grosser’s unjust enrichment claim fails as a matter of law pursuant to the valid and enforceable Franchise Agreement ........................................................................................................ 6 C. Grosser’s tort claims fail as a matter of law under the economic loss doctrine ...................... 6 D. Mr. Grosser’s fraudulent misrepresentation claims fail as a matter of law ............................ 8 E. Grosser’s out-of-state, post-contractual claims are barred as a matter of law because the parties expressly agreed that Texas law would govern all claims arising out of, or related to, the Franchise Agreement and their relationship thereunder ................................................................. 13 F. Texas common-law duty of good faith and fair dealing does not exist between franchising parties .................................................................................................................................................... 14 G. Mr. Grosser’s Texas DTPA claim is barred as a matter of law under the Large Transactions Exemption ...................................................................................................................... 15 III. ARGUMENTS AND AUTHORITY – NO EVIDENCE SUMMARY JUDGMENT................. 16 A. Grosser challenges Red Mango’s no-evidence summary judgment motion solely on grounds that the motion failed to meet technical requirements. .................................................................... 16 B. Red Mango reiterates its argument that Grosser has proffered no admissible evidence to support claims of fraud or negligent misrepresentation. ................................................................. 18 C. Red Mango reiterates its argument that Grosser has failed to raise any genuine issue of material fact with respect to this Affirmative Defenses. .................................................................. 23 a. Failure of Consideration..................................................................................................... 23 b. Fraud .................................................................................................................................... 24 c. Estoppel ................................................................................................................................ 24 d. Unclean Hands ..................................................................................................................... 25 e. Illegality................................................................................................................................ 25 f. Violation of Federal and State Laws ................................................................................. 25 IV. CONCLUSION ................................................................................................................................. 26 ii TABLE OF AUTHORITIES Cases Bartlett v. Schmidt 33 s.w.3d 35 (Tex.App.—Corpus Christi 2000, pet. denied) ...................................... 22 Beyers v. Roberts, 199 S.W.3d 354, 358 (Tex. App.-- Houston [1st Dist.] 2006, pet. denied) .................. 26 Carter v. PeopleAnswers, Inc. 312 S.W.3d 308, 312 (Tex. App. – Dallas 2010, n.p.h.). .......................... 24 Crim Truck & Tractor Co. v. Navistar Int'l Transp. Corp., 823 S.W.2d 591 (Tex. 1992) ........................ 14 English v. Fischer, 660 S.W.2d 521 (Tex.1983) ........................................................................................ 14 Exxon Corp. v. Emerald Oil & Gas Co. 348 S.w.3d 194 (Tex. 2011) ................................................. 20, 21 Fry v. Farm & Ranch Healthcare, Inc., 2007 Tex. App. LEXIS 9731 (Tex. App. Amarillo Dec. 13, 2007) .......................................................................................................................................................... 19, 20 Greever v. Persky, 156 S.W.2d 566, 569 (Tex.Civ.App. Fort Worth 1941), aff'd 140 Tex. 64, 165 S.W.2d 709 (1942) .............................................................................................................................................. 25 In re Lyon Fin. Servs., 257 S.W.3d 228 (Tex. 2008).................................................................................. 14 Johnson v. Brewer & Pritchard, P.C., 73 s.w.3d 193 (Tex.2002) ............................................................. 17 Lewis v. Davis, 145 Tex. 468, 199 S.W.2d 146, 1148-49 (1947) ............................................................... 25 Maness v. Reese, 489 S.W.2d 660 (Tex. Civ. App.--Beaumont 1972, writ ref'd n.r.e.) ............................. 19 Marsaglia v. UTEP, 22 s.w.3d 1 (Tex.App—El Paso 1999, pet. denied) .................................................. 17 McCamish, Martin, Brown & Loeffler v. F.E. Appling Interests, 991 S.W.2d 787 (Tex. 1999) .............. 21 MCI Telecomm. Corp. v. Texas Util. Elec. Co., 995 S.W.3d 647 (Tex. 1999) ........................................ 3, 4 Montgomery v. Browder, 930 S.W.2d 772, 778 (Tex.App.-Amarillo 1996, writ denied). ........................ 25 National Newspaper Enterprises, Inc. v. Chitwood, 68 S.W.2d 264 (Tex. Civ. App.--Dallas 1934, writ dism'd) .................................................................................................................................................... 19 Ortega v. City Nat'l Bank, 97 S.W.3d 765 (Tex.App.-Corpus Christi 2003, no pet.) .................................. 7 Rice v. Metro Life Ins. Co., 324 S.W.3d 660 (Tex. App. – Ft. Worth 2010, no pet.)................................... 6 Southstar Corp. v. St. Paul Surplus Lines Ins. Co., 42 S.W.3d 187 (Tex.App.-Corpus Christi 2001, no pet.) ........................................................................................................................................................... 7 Stewart v. United States Leasing Corp., 702 S.W.2d 288, 290 (Tex.App.-Houston [1st Dist.] 1985, no pet.). ........................................................................................................................................................ 23 Trenholm v. Ratcliff, 646 S.W.2d 927 (Tex. 1983) .................................................................................... 19 Universal Health Servs., Inc. v. Renaissance Women’s Grp., P.A., 121 S.W. 3d 742 (Tex. 2001) ............. 6 Zar v. Omni Industries, Inc., 813 F.2d 689 (5th Cir. 1987)........................................................................ 19 Regulations 16 C.F.R. § 436.5(g) ................................................................................................................................... 18 iii CAUSE NUMBER DC-12-07867 RED MANGO FC, LLC § IN THE DISTRICT COURT Plaintiff/Counter Defendant, § § vs. § § 160th JUDICIAL DISTRICT HOWARD GROSSER § Defendant § and § DALLAS COUNTY, TEXAS PHROZEN ASSETS LLC § Third-Party Plaintiff. § PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS Plaintiff Red Mango FC, LLC (“Red Mango”) submits this Reply to Defendant Howard Grosser’s and Third-Party Plaintiff Phrozen Assets LLC’s (collectively “Grosser”) Opposition to Plaintiff’s Traditional Motion for Partial Summary Judgment (“Grosser’s Response”) and respectfully requests that Grosser’s Response be denied and Red Mango’s Traditional and No-Evidence Motion for Partial Summary Judgment be granted in its entirety. I. SUMMARY Notwithstanding a 132-page Response, Grosser has failed to demonstrate why Red Mango is not entitled to summary judgment on all claims. The bulk of Grosser’s Response consists merely of conclusory statements unsupported by summary-judgment evidence. As set forth in Red Mango’s summary-judgment motion and the reply below, Red Mango is entitled to summary judgment on both its traditional and no-evidence motion for partial summary judgment. II. ARGUMENTS AND AUTHORITIES A. Red Mango objects and has filed a corresponding Objection, Special Exceptions, and Motion to Strike Grosser’s Response and all of Grosser’s summary-judgment evidence. 1. Red Mango objects to the evidence proffered in Grosser’s Response on grounds stated in Red Mango’s Motion for Sanctions, Objections, Special Exceptions, and Motion to Strike Defendant’s Summary-Judgment Response and Summary-Judgment Evidence, being filed contemporaneously PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 1 herewith and incorporated herein by reference.1 As described in that Motion, Grosser cannot prove that Red Mango is not entitled to summary judgment, in part, because the “evidence” relied on his Response is admissible for the reasons stated in the Motion for Sanctions, and therefore may not be considered by the Court. Traditional Summary Judgment - Red Mango’s Causes of Action against Mr. Grosser and Phrozen Assets: 2. Red Mango is entitled to summary judgment on its affirmative claims for breach of contract and fraudulent inducement because Mr. Grosser failed to meet his burden of proving that a genuine issue of material fact exists on either of these claims. 3. Specfically, Red Mango claims that Grosser breached the parties’ Franchise Agreement by failing to pay the Franchise Fees and Interest due thereunder. 4. Grosser admits in his Response that he did not pay the royalty fees and ad fund fees contemplated in the Franchise Agreement,2 but claims that he is entitled to set-off the amount of fees owed by Red Mango by amounts that Red Mango owes to him. 5. The Franchise Agreement contained a no set-off provision, which provided in relevant part: “No Set-Off Rights. You may not set off, deduct, or otherwise withhold fees or other amounts due Mango under this Agreement on grounds of alleged nonperformance by Mango of any of its obligations or for any other reason…” 6. Grosser’s Response does not address why the no-set off provision should not apply, but merely concludes that “Grosser’s Affirmative Defenses show why Mango is not entitled to anything based upon Mango’s fraud, violation of federal and state laws, breach of contract and breach of the covenant of good faith and fair dealing.”3 7. Grosser does not explain how, or under what theory of law, his affirmative defenses negate the no-set off provision in the Franchise Agreement, nor has Grosser identified any evidence to support such 1 See Pl.’s Objections to Def.’s Summ. J. Evidence and Mot. to Strike. 2 Grosser App. 334 ¶ 188 (“I told Mango that if it would not refund the $32,100 that it owed to me it should use this as a credit as to any money that I would owe to Mango and when that credit is exhausted, I would pay Mango directly for all monies due.”). PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 2 contention. 8. Red Mango also claims that Mr. Grosser fraudulently induced Red Mango into awarding him a franchise by providing false answers to pre-sale Franchisee Questionnaire designed to alert Red Mango of any pre-sale representations that perhaps should not have been made. Mr. Grosser admits that he provided false answers to the Franchisee Questionnaire under the belief that if he did not lie on the questionnaire, Red Mango would not have awarded him a franchise.4 9. Thus it appears from Mr. Grosser’s own statements that no genuine issue of material fact exists as to Red Mango’s two affirmative claims, and that Red Mango is entitled to summary judgment on both claims. Traditional Summary Judgment – Grosser’s Claims against Red Mango: a. All of Phrozen Assets’ claims are barred as a matter of law 10. Phrozen Assets is not a signatory on the Franchise Agreement 5 and, therefore, has no standing to bring a claim against Red Mango for breach of the Franchise Agreement or for fraudulent inducement as it relates to signing the Franchise Agreement. Phrozen Assets does not assert that it was a party to the Franchise Agreement or that it had any other contractual relationship with Red Mango (because it did not). Phrozen Assets asserts only that it has standing to assert claims, perhaps as a third-party beneficiary of the Franchise Agreement, because it contracted with certain of “Mango’s vendors” relating to store build out and construction, and because Red Mango allegedly “knowingly accepted payments from Phrozen Assets for obligations due from Howard Grosser.”6 11. There is a presumption against, not in favor of, third party beneficiary agreements.7 Absent clear indication in the contract that the parties intended to confer a direct benefit to the third party, the third 3 Grosser Resp. p. 69 ¶ 106. 4 Grosser App. pp. 326-327 ¶¶ 88-96. 5 See Exhibit 1A – Franchise Agreement to Pl.’s Trad. and No-Evid. Mot. Partial Summ. J., pp. 4, 5, 32, 35, 39, 48, 49. 6 Grosser Resp. p. 83 ¶ 192. 7 MCI Telecomm. Corp. v. Texas Util. Elec. Co., 995 S.W.3d 647, 652 (Tex. 1999). PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 3 party may not maintain an action as a third-party beneficiary.8 The fact that a non-party might receive an incidental benefit from a contract bestows no right of action to enforce the contract. 9 A third party may recover on a contract made by other parties only if the parties intended to secure some benefit to that third party, and only if the parties entered into the contract directly for the third party’s benefit.10 12. Grosser does not allege (and proffers no evidence to support) that Red Mango entered into the Franchise Agreement for the benefit of Phrozen Assets; therefore, Phrozen Assets, at most, is an incidental – not intended – beneficiary to the Franchise Agreement and lacks standing to enforce it. 13. Moreover, Phrozen Assets does not assert that any of the purported misrepresentations were made to Phrozen Assets (which was not even formed until May 16, 2011 – three months after the Franchise Agreement was signed)11. 14. Thus, Red Mango is entitled to summary judgment in its favor as to all claims asserted by Phrozen Assets on grounds that Phrozen Assets has no standing to assert such claims. b. Mr. Grosser’s Count I – Breach of Sections 3.1, 3.2, and 3.4, of the Franchise Agreement fail because these provisions do not impose contractual obligations on Red Mango 15. Grosser alleges generally that Red Mango violated Sections 3.1, 3.2, and 3.4 of the Franchise Agreement.12 Grosser does not, however, allege a breach of the express terms of any of these provisions. 16. Specifically, Section 3.1 provides: 3.1. Site Selection. You must identify and acquire a site for the Store by the Control Date specified in the Summary Pages. The site must be located within the Site Selection Area identified in the Summary Pages, must meet Mango’s then-current site selection criteria, and must otherwise be mutually acceptable to you and to Mango. Mango may assist you in site selection, in its sole discretion, which assistance may include making available to you the services of our designated tenant representative consulting firm. If Mango requires you to use the services of its designated tenant representative consulting firm, you agree to work with the consultant/broker and to pay the Project Management Fee in 8 Id. 9 Id. at 651. 10 Id. 11 See a true and correct copy of Public Records Report for Phrozen Assets, LLC attached as Exhibit A. 12 Howard Grosser and Phrozen Assets, LLC v. Red Mango FC, LLC, Case 3:12-cv-02691-N, Order on Def.’s Mot. to Dismiss (Apr. 25, 2013). PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 4 the amount set forth in the Summary Pages (which Mango may impose and collect on the firm’s behalf). Ultimate site selection is solely your responsibility. 17. Section 3.2. provides, in relevant part: 3.2. Franchise Site Application. For each proposed site that you identify, you must deliver to Mango a completed franchise site application if a form Mango prescribes … Mango will approve or refuse to approve a proposed site within 30 days after the receipt of these documents and any additional information as Mango may reasonably require. Mango’s failure to provide notification within this time period shall not be considered either approval or disapproval. The parties acknowledge and agree that Mango’s site approval is not an assurance that the Store will achieve a certain sales volume or level of profitability; it means only that the proposed site meets Mango’s minimum criteria for RED MANGO Stores. 18. Section 3.4. provides, in relevant part: 3.4. Store Design and Build Out. You shall follow Mango’s procedures for Store construction and build out, shall construct and build out the Store according to Mango’s standard and specifications for design, décor and layout, and shall equip the Store according to Mango’s requirements for fixtures, furnishing, equipment, interior and exterior signage, artwork and graphics, and awnings… 19. In his affidavit Grosser alleges generally that Red Mango required him to use a particular real estate broker to select the site for his Red Mango store, that Red Mango incompetently negotiated his lease, and that Red Mango required him to use incompetent third party contractors.13 20. The express provisions of the Franchise Agreement, however, contain no promise to provide site selection or store build out assistance. They do not require Red Mango to provide the services of a broker (or a broker with any particular skill level). They do not require Red Mango to provide any lease negotiation assistance (nor do they restrict Grosser from hiring a legal or real estate professional to help him negotiate his own lease). They do not promise or represent any particular level of competency or skill on the part of Red Mango’s designated or approved contractors, and they provide no guarantee that there will be no construction delays. 21. This Court should not imply a promise by Red Mango to provide competent assistance and issue- free construction services where the express terms of the contract explicitly provide that ultimate site selection and store construction is Grosser’s sole responsibility. To do so would imply an obligation PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 5 contradictory to the express terms of the Franchise Agreement.14 22. Thus, Red Mango is entitled to summary judgment as to Grosser’s claims that it breached Sections 3.1., 3.2., and 3.4 of the Franchise Agreement because Grosser alleges no facts to support that Red Mango owed him a contractual duty, or that Red Mango breached such a duty. 23. Accordingly, Red Mango is entitled to summary judgment in its favor as to Grosser’s claims that Red Mango breached Sections 3.1., 3.2., and/or 3.4. of the Franchise Agreement. B. Mr. Grosser’s unjust enrichment claim fails as a matter of law pursuant to the valid and enforceable Franchise Agreement 24. Red Mango argues in itsmotion that there can be no recovery under the doctrine of unjust enrichment when a valid, express contract “covers the subject matter of the parties’ dispute.” 25. Grosser proffers no arguments or evidence to dispute this argument. 26. Accordingly, Red Mango is entitled to summary judgment in its favor as to Grosser’s unjust enrichment claim. C. Grosser’s tort claims fail as a matter of law under the economic loss doctrine 27. Red Mango argues in its motion that the economic-loss doctrine bars Mr. Grosser’s claims under: Count IV (Fraud), Count V (Promissory Fraud), Count VI (Negligent Misrepresentation), and Count VII (Texas Deceptive Trade Practices Act)15 (collectively “Mr. Grosser’s Tort Claims”). 28. Under the economic-loss doctrine, a plaintiff is barred from bringing tort claims (other than fraudulent inducement) when the only economic loss to the plaintiff is the subject matter of a contract. 16 When the injury is only the economic loss to the subject of a contract itself the action sounds in contract 13 Grosser App. pp. 329-331 ¶¶ 146-163. 14 See Universal Health Servs., Inc. v. Renaissance Women’s Grp., P.A., 121 S.W. 3d 742, 747 (Tex. 2001) (stating that an implied covenant “must rest entirely on the presumed intention of the parties as gathered from the terms as actually expressed in the written instrument itself”); See also Rice v. Metro Life Ins. Co., 324 S.W.3d 660, 669 (Tex. App. – Ft. Worth 2010, no pet.) (“It is typically not proper for us to imply terms that contradict a contract’s express language.”). 15 It is unclear from Grosser’s pleading if he is claiming DTPA violations for representations allegedly made by Red Mango prior to, or after, the Franchise Agreement was signed. The Economic Loss Doctrine bars Grosser’s DTPA claim for any alleged representations made after the Franchise Agreement was signed. 16 Id. PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 6 alone. If a tort claim arises solely from the parties' contractual relationship, Texas courts disallow such a claim.17 29. In his Response, Grosser argues that the economic-loss doctrine does not apply to these counts because misrepresentations Red Mango allegedly made after Grosser signed the Franchise Agreement “give rise to damages wholly distinct from the ‘benefit of the bargain’ or the profits Grosser expected to make after signing the Franchise Agreement.”18 30. Grosser fails, however, to articulate what those other damages actually are in this case, and instead points to two “examples”: Example 1. Mango represented that it would hold the $7,500 in escrow, but then failed to do so. As a result,Grosser lost his $7,500 and had to pay additional money to complete the work that Mango’s contractor should have performed. Example 2. Mango also misrepresented the expected results for the Galleria Mall location, causing Grosser to accept a specific site that was doomed to fail. For this claim, Grosser does not seek to recover the profits he would have made from the pro forma profits. 19 31. Example 1 merely identifies an oral agreement to hold monies in escrow, and claims breach of contract damages flowing from Red Mango’s alleged failure to perform the terms of the escrow agreement. The economic loss rules applies in this context to prevent Grosser from recovering anything other than breach of contract damages for what is, in essence, a breach of contract claim. 32. To the extent that the allegations stated in Example 2 purport to support a misrepresentation claim, the economic loss rule applies only to the extent that Grosser seeks benefit-of-the bargain damages on a claim that is subject to a contract. Other than the foregoing, nonbinding statement as to what he is not seeking, Grosser proffers no admissible evidence to support that he suffered an independent injury as a result of such alleged misrepresentation. 17 See, e.g., Ortega v. City Nat'l Bank, 97 S.W.3d 765, 777 (Tex.App.-Corpus Christi 2003, no pet.); Southstar Corp. v. St. Paul Surplus Lines Ins. Co., 42 S.W.3d 187, 193–94 (Tex.App.-Corpus Christi 2001, no pet.). 18 Grosser Resp. p. 63 ¶ 78. PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 7 33. To the extent that Grosser’s Response fails to address any other than these two purportedly illustrative claims, Grosser has failed to meet his burden of proving that summary judgment should be denied with respect to such other claims. D. Mr. Grosser’s fraudulent misrepresentation claims fail as a matter of law 34. In Grosser’s Response, Mr. Grosser points to a series of alleged misrepresentations that were allegedly material to Mr. Grosser’s purchase of the franchise were made with the intent to defraud him and to induce him to rely upon them in making his decision to purchase the Red Mango franchise.20 35. A closer look at these allegations, however, reveal that all of the alleged representation were made after the Franchise was signed and, therefore, could not have induced him to sign the Franchise Agreement.21 36. Presumably, such omission constituted an egregious oversight on the part of Grosser’s counsel. 37. In fairness to Grosser, therefore, we look to Grosser’s affidavit to determine whether he alleges that any representations were made before the Franchise Agreement was signed. 38. Paragraphs 57 through 79 of Mr. Grosser’s affidavit appear to contain all of the evidence proffered by Mr. Grosser concerning alleged pre-sale representations. 39. To the extent that Grosser’s fraud claims are based on any of the following statements, the claims must fail because (i) the statements themselves contradict the express terms of the fully integrated Franchise Agreement and, therefore, are inadmissible under the parol evidence rule; and/or (ii) the representation contained in Item 19 of Red Mango’s Franchise Disclosure Document that: “Except for the information presented above [referring to the earnings information contained in Item 19 of the FDD, itself],we do not make any representations about a franchisee’s future financial performance or the past financial performance of company- owned or franchised Stores. We also do not authorize our employees or representative to make any such representations orally or in writing...”: Plus the franchisee representation contained in Section 16.2.3. of the Franchise Agreement: 19 Id. 20 Id. at pp. 59-61 ¶¶ 68-70. 21 Id. PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 8 16.2.3. Except for representations contained in Mango’s Franchise Disclosure Document provided to you in conjunction with this franchise offering, you represent that neither Mango nor its agents or representations [sic] have made any representations, and you have not relied on representations made by Mango or its agents or representatives, concerning actual or potential gross revenue, expenses or profit of a RED MANGO ® store. Coupled with the language in Section 18.1. that the Franchise Agreement and its attachments “represent the entire fully integrated agreement between the parties and supersede all other negotiations, agreements, representations, and covenants, oral or written” negate the reasonable or justifiable reliance element of any fraud claim. s themselves are inadmiss 40. For these reasons, Red Mango is entitled to summary judgment on all fraud claims based on any of the following representations: “Mango produced an delivered to me prior to my purchase of Mango’s franchise a pro forma projection stating that the location it approved would enable me to have at least $687,000 of sales per year” 22 This sworn statement is the subject of Red Mango’s motion for sanctions. Uncontroverted evidence and Mr. Grosser’s own testimony clearly establish that any pro forma provided by Red Mango was provided approximately six weeks after the franchise agreement was signed. This is a fraudulent and material statement made under oath concerning one of the most significant claims in this this case. Bob DeBartelomeo, Mango’s franchise sales, induced me to purchase Mango’s franchise by providing false information as to the prospective expenses, revenues and the cost of operation of the franchise. 23 “The average Mango store does $520,000 in annual sales”24 “The average Mango store is now up to $550,000 in annual sales”25 22 Grosser App. p. 320 ¶ 35. 23 Id. at p. 318 ¶ 18. 24 Id. at p. 315 ¶ 10. 25 Id. PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 9 “The average cost of operating an average Mango store is 90% of sales”26 “The cost of goods is 28% to 32% of sales”27 “Mango lied to me by stating that the average profit generated was 10% of revenue;”28 “Mango lied to me as to the amount that I could expect for gross sales of my store;” 29 “Mango lied to me as to the amount that I could expect for net profit of my store.”30 These claims further fail because Grosser does not allege in his response what the actual representations were, who made the statements, or how they were false. 41. The Franchise Agreement is a fully integrated agreement that contains all of the contractual obligations between the parties. Accordingly, Red Mango also is entitled to summary judgment on all claims based on the following representations, which also contradicts the express terms of the Franchise Agreement: “Mango’s own web site to induce people to purchase its franchise states “We’re committed to helping your business thrive, from providing industry-leading site selection to highly effective marketing initiatives to drive sales” 31 and “”I purchased a Mango franchise specifically because of Mango’s alleged expertise in site selection” 32 “Mango lied to me as to the services they would provide to me”33 “Mango lied to me as to the support they would provide to me.”34 These claims further fail because Grosser does not allege in his response what the actual representations were or how they were false. 35 26 Id. 27 Id. 28 Id. at p. 322 ¶ 59. 29 Id. at ¶ 60. 30 Id. at p. 323 ¶ 61. 31 Id at p. 318 ¶ 15. 32 Id. at p. 319 ¶ 26. 33 Id. at p. 323 ¶ 62. 34 Id. at ¶ 63. 35 See Exhibit 1A – Franchise Agreement to Pl.’s Trad. and No-Evid. Mot. Partial Summ. J. p. 30. PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 10 42. The following statements appears to allege that Red Mango’s Franchise Disclosure Document 36 contained incorrect information. Any fraud claims based on the following representations fail as a matter of law because: (i) they do not state why or how it was false, or (ii) why the statement was material or that Grosser relied on the statement in any particular way, or (iii) why it was reasonable for Mr. Grosser to rely on the statement. 43. To the extent that any fraud claims are based on allegations that Mr. Grosser’s store construction costs exceeded the “Estimated Initial Investment” figures reflected in Item 7 of Red Mango’s Franchise Disclosure Document, such claims fail because estimated figures are not a guarantee or representation of existing fact sufficient to support a fraud claim. 44. Accordingly, Red Mango also is entitled to summary judgment on all fraud claims based on any the following statements: “No Mango store has ever closed or abandoned a location” 37 “Many stores are company-owned” 38 The total investment necessary to begin operation of a Traditional Mango store ranges from $262,100 to $456,600; nontraditional ranges from $180,000 to $354,50039 “Mango lied to me as to the number of franchises it had sold”40 (Item 20 of Red Mango’s FDD disclosed that there were 68 franchised locations in operation as of September 30, 2010. Mr. Grosser proffers no evidence to support why or how this information was false. “Mango lied to me as to the cost to take the steps to build out and open the store.”41 Mr. Grosser admits having received a copy of Red Mango’s franchise disclosure document,42 which (in Item 7) disclosed certain “Estimated Initial Investment.” 36 Id. 37 Grosser App. p. 315 ¶ 10. 38 Id. 39 Id. 40 Id. at p. 322 ¶ 56. 41 Id. at ¶ 57. 42 See Exhibit 1A – Franchise Agreement to Pl.’s Trad. and No-Evid. Mot. Partial Summ. J. p. 30. PLAINTIFF’S REPLY TO DEFENDANT’S AND THIRD-PARTY PLAINTIFF’S OPPOSITION TO PLAINTIFF’S SUMMARY-JUDGMENT MOTIONS PAGE - 11 “The Franchise Disclosure Document that Mango provided to me stated that Permits would cost $1,500 - $5,000,” and “These permits cost me $6,577.34;43 “I was charged in excess of an additional $1,000 for permits that were paid by my contractor and billed to me”;44 the “Franchise Disclosure Document that Mango provided to me stated that interior improvements and lighting would cost $50,000 - $110,000” and “These items cost me $221,695;”45 the “Franchise Disclosure Document that Mango provided to me stated that kitchen equipment, smallwares and furniture would cost $50,000 - $100,000” and “The items cost me $127,449.98;”46 the “Franchise Disclosure Document that Mango provided to me stated that typical rent costs usually range from $2.00 to $8.00 per square foot per month” and “Mango negotiated a lease for me that cost more than $10.26 per square foot per month.”47 (Grosser proffers no evidence here to show that typical rent did not fall within the stated range.) “The Franchise Disclosure Document that Mango provided to me stated that the total investment necessary to begin operation of a traditional store ranges from $262,100 to maximum of $496,600,” “The location and layout of my store is a ‘non-traditional’ store. The FDD that Mango provided to me states the total investment necessary t