Terra Cotta's Cafe, LLC v. Richard and Kaylynn Poole

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

05-191

TERRA COTTA'S CAFE, LLC

VERSUS

RICHARD AND KAYLYNN POOLE

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APPEAL FROM THE
FOURTEENTH JUDICIAL DISTRICT COURT
PARISH OF CALCASIEU, NO. 2001-5570
HONORABLE J. DAVID PAINTER, DISTRICT JUDGE

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OSWALD A. DECUIR
JUDGE

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Court composed of John D. Saunders, Oswald A. Decuir, and Marc T. Amy, Judges.

REVERSED AND RENDERED.

Jennifer Jones
Jones Law Firm
P. O. Drawer 1550
Cameron, LA 70631
(337) 775-5714
Counsel for Defendant/Appellant:
Richard and Kaylynn Poole

P. Jody Lavergne
Joel M. Lutz
Stutes, Fontenot, Lavergne & Lutz, LLC
P. O. Box 1644
Lake Charles, LA 70602
(337) 433-0022
Counsel for Plaintiff/Appellee:
Terra Cotta's Cafe, LLC

DECUIR, Judge.

This appeal stems from a non-compete agreement entered into by the buyer and

seller of a restaurant establishment. Terra Cotta’s Café sued Kaylynn and Richard

Poole for allegedly violating the terms of an agreement executed as part of the sale

of the Poole’s business in June of 2000. After granting an injunction against the

Pooles, the trial court rendered judgment in favor of Terra Cotta’s Café and awarded

damages in the amount of $67,320.00 and $35,621.77 in attorney fees and litigation

expenses. The court assessed damages in an amount which it considered to be the

value of the non-compete agreement. The Pooles perfected this appeal, alleging error

in the judgment of the trial court. For the following reasons, we reverse.

Kaylynn and Richard Poole successfully operated a restaurant known as

Kaylynn’s Kafe in downtown Lake Charles. In 2000, having to attend to medical

needs and wanting to travel, the Pooles decided to close their restaurant. They were

approached by Marcie Rome and Danette Kelemen who were interested in buying the

business and opening a restaurant to be called Terra Cotta’s Café. After negotiations,

the parties agreed on a price of $125,000.00, and a buy/sell agreement, drafted by the

buyers, was executed by the Pooles and Terra Cotta’s Café, LLC. Prior to the sale,

the buyers’ attorney also drafted a contract entitled Louisiana Covenant Not to

Compete and sent it to the Pooles for their review. The Pooles then discussed the

agreement with Terra Cotta’s attorney and ultimately signed it. When the sale was

passed, the buyers received the restaurant equipment and furnishings as well as the

goodwill of the business, the location and beneficial lease terms, minimal training by

Kaylynn Poole and her staff, the right to buy Kaylynn’s desserts, and the benefit of

the non-compete agreement. None of these items was assigned a particular value in

the sale documents.

The non-compete agreement contained the following provisions pertinent to

the matter before us:

1.

For purposes of this Agreement, the business of the Buyer is
defined as the operation and ownership of a restaurant establishment
which sells consumable food products and perishable consumer goods
to the public.

2.

Seller (and any person or any enterprise controlled by Seller) shall
not, directly or indirectly, (a) own, manage, operate, control, be
employed by, participate in, be connected with (whether as a proprietor,
owner, partner, stockholder, director, officer, employee, agent,
consultant, joint venturer, contractor, investor or other participant or
otherwise) an enterprise that carries on or engages in a business directly
or indirectly competitive with that of Buyer or which directly or
indirectly solicits for business directly or indirectly competitive with
that of Buyer, or (b) otherwise be involved or connected in any manner
with the ownership, management, operation, promotion, advertisement,
solicitation of customers, marketing or sales effort, control or otherwise
of or for any enterprise that carries on or engages in a business directly
or indirectly competitive with that of Buyer, or which directly or
indirectly solicits for business directly or indirectly competitive with
that of Buyer. In addition, without limiting the foregoing, it is also
agreed that Seller (and any person or enterprise controlled by Seller)
shall not, directly or indirectly, through Seller’s own efforts or by
assistance or encouragement from any other person or enterprise solicit
for hire or hire or retain any employee or independent contractor
employed by Buyer.

Notwithstanding the foregoing, Seller retains the right to
engage in the business of catering and, except as provided in Section
5 of this Agreement, wholesale sales of consumable food products, and
such business shall not be deemed to directly or indirectly be
competitive with the business of the Buyer. [Emphasis added.]

3.

The restrictions provided in Section 2 of this Agreement shall be
binding upon Seller for a period of two (2) years following the effective
date of this Agreement. In addition, the restrictions provided in Section
2 of the Agreement shall be operative with respect to activities which
occur, in whole or in part, in Calcasieu Parish, State of Louisiana.

....

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5.

5.1 Seller agrees that Seller will not offer pastries for wholesale
to any restaurant or other retail business located or operating within
Calcasieu Parish except for Buyer, and that Buyer will have the
exclusive right to purchase such pastries at wholesale from Seller,
subject to the terms and conditions set forth in this Section 5.

5.2 The obligation of Seller and the right of Buyer set forth in
Section 5.1 shall continue so long as Buyer purchases from Seller
pastries and other consumable food products with an average wholesale
value of SIX THOUSAND AND NO/100 DOLLARS ($6,000.00) per
month (the “Minimum Sales Quota”). The determination of whether
Buyer has met the Minimum Sales Quota shall be made quarterly
beginning September 15, 2000, by averaging the Buyer’s purchases of
pastries and other consumable food products from Seller over the
previous three months.

....

5.4 The obligation of Seller and the right of Buyer set forth in
Section 5.1 shall continue to apply to the following five (5) cakes, or any
substantially similar cakes, at all times, regardless of whether Buyer
meets the Minimum Sales Quota:

a. Red Velvet Cake
b. Hummingbird Cake
c. Chocolate Praline Cake
d. Italian Creme Cake
e. Coconut Creme Cake

The record before us shows that the Pooles opened a catering business out of

their home in Cameron Parish immediately after the sale of their restaurant to Terra

Cotta’s Café. The invoices and testimony indicate they primarily catered weddings,

provided quantity lunches to a few businesses in Lake Charles, and sold cakes to

individuals. All of the items sold were prepared pursuant to special orders placed

ahead of time by the customers, and most items were delivered to the customers by

the Pooles. There was testimony showing that the Pooles once sold cakes or pastries

at the Contraband Days Festival in Lake Charles and at least once sold a large

quantity of pies at a discounted price to a business for use as holiday gifts to its

customers. The Pooles also provided cakes for resale to a business called La

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Quicherie after Terra Cotta’s failed to fulfill the minimum sales quota, over several

months, as provided for in the non-compete agreement.

The trial court found the activities of the Pooles were in violation of the non-

compete agreement. In the initial injunction proceedings, the trial court set forth

certain definitions which were not part of the agreement but would thereafter govern

the parties. Specifically, the trial court chose to define the “business of catering” as

“the sale and delivery of cakes and/or pastries including the provision of labor to

serve the cakes and/or pastries.” The court defined the term “wholesale” as “a sale

for the purpose of resale or a sale for purposes other than resale, but at the price at

which retailers currently purchase the same or similar goods or commodities at

current wholesale prices, but only when the sale involves ten (10) or more cakes and

pastries.”

Pursuant to these definitions, the court then determined the Pooles were in

violation of the agreement every time they sold a cake or other item without providing

labor to serve the items. He also found violations when the Pooles sold to La

Quicherie and to the business which gave their pies as holiday gifts, notwithstanding

the uncontradicted evidence that Terra Cotta’s had never met the minimum sales

quota. Further, the trial court refused to allow as a witness a well known local caterer

whose testimony was offered to describe catering practices and the accepted use of

that term in the industry. The proffered testimony included a description of catering

as a “particular service specifically tailored to meet the wishes of a special client for

a special event.” The witness further stated that a “catering business does not have

a set menu that they instantly respond to when the phone rings. It takes planning to

buy the ingredients. Basically in my experience in the catering business, what was

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nice about it was that you sold your product before you ever bought your inventory

for the most part.”

The Louisiana Civil Code provides clear and explicit rules for the interpretation

of contracts. Article 2047 requires that the words of a contract be given their

generally prevailing meaning and that technical terms be given their technical

meaning when the contract involves a technical matter. Article 2053 states that

doubtful provisions must be interpreted in light of the nature of the contract, equity,

and usages, as well as the conduct of the parties. Article 2056 provides, “In case of

doubt that cannot be otherwise resolved, a provision in a contract must be interpreted

against the party who furnished its text.”

We find the trial court erred in its interpretation of the contract at issue. By

substituting its own definitions for the essential terms of the contract between the

parties, the court violated Article 2056’s contrary direction to construe doubt against

the party who furnished the text. The court’s interpretation would also permit

incongruous results, as in the case of Kite v. Gus Kaplan, Inc., 98-0715, 98-0751 (La.

11/17/99), 747 So.2d 503. There, a lease provided that the leased space may be

changed, and the trial court found the lease allowed any type of change. The

appellate court reversed and interpreted the broad and unspecific language to mean

that the space may be changed only within reason and with consideration for the

object of the contract, namely the operation of a fine jewelry department inside of a

store. In the instant case, the interpretation of the term “cater” suggested by the trial

court would require the Pooles to serve every cake or food item they sell, whether it

be for a wedding, an intimate family dinner, or an office birthday party.

Our review of the record before us reveals no violation of the non-compete

agreement by the Pooles. Damages were improperly awarded, as were attorney fees.

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Accordingly, the judgment appealed from is reversed, and judgment is hereby

rendered in favor of Kaylynn and Richard Poole, dismissing the claims brought by

Terra Cotta’s Café, at its cost.

REVERSED AND RENDERED.

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