Kenneth John Lecompte, Et Ux. v. Afc Enterprises, Inc.

STATE OF LOUISIANA
COURT OF APPEAL, THIRD CIRCUIT

14-242

KENNETH JOHN LECOMPTE, ET UX.

VERSUS

AFC ENTERPRISES, INC.

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APPEAL FROM THE
SIXTEENTH JUDICIAL DISTRICT
PARISH OF ST. MARTIN, DOCKET NO. 72391-E
HONORABLE KEITH R. J. COMEAUX, PRESIDING
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SYLVIA R. COOKS
JUDGE

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Court composed of Sylvia R. Cooks, Jimmie C. Peters and John E. Conery, Judges.

AFFIRMED.

Stan Gauthier, II
Michael G. Johnston, II
1405 W. Pinhook Rd., Suite 105
Lafayette, LA 70503
(337) 234-0099
ATTORNEY FOR PLAINTIFFS/APPELLANTS
Kenneth John LeCompte and Joanne Mathas LeCompte

Edmond L. Guidry, III
Guidry & Guidry
324 South Main Street
St. Martinville, LA 70582
(337) 394-7116
ATTORNEY FOR DEFENDANT/APPELLEE
AFC Enterprises, Inc.

COOKS, Judge.

FACTS AND PROCEDURAL HISTORY

Kenneth John LeCompte, was the principal, sole shareholder and director of

Atchafalaya Enterprises, Ltd., a Louisiana business corporation that owned and

operated two Popeyes Restaurants located in Henderson and St. Martinville,

Louisiana. This litigation stems from a failed attempt to acquire additional

Popeyes Restaurants in the surrounding area. LeCompte, his wife Joanne, and

Atchafalaya were named plaintiffs in the suit.

Plaintiffs stated on December 7, 2004, correspondence was received from

AFC which set forth that AFC was hoping to accelerate the development and

growth of the Popeyes brand throughout the country, including the region in which

Plaintiffs operated the St. Martinville and Henderson locations. The

correspondence in question was not personalized to Plaintiffs, but was addressed to

all “Popeyes Franchise Operator[s]”. Plaintiffs sought to acquire additional

Popeyes’ franchises in Scott, Maurice, and Duson, Louisiana.

Plaintiffs maintain on a January 26, 2006 phone conference with James

Lyons, AFC’s Chief Development Officer, LeCompte was told by Lyons that AFC

had denied the request to enter into a development agreement for new Popeyes

Restaurants. LeCompte was told AFC “did not want to grow with LeCompte with

a new store.” LeCompte specifically asked why AFC denied his request, but he

was only told AFC was not interested in growing with him. In correspondence

dated November 14, 2006, AFC similarly stated “we are not interested in

considering the LeComptes for growth in the POPEYES system. . . .”

Shortly after the receipt of the November 14, 2006 letter, LeCompte

received a business proposition from Stanley Ware, another Popeyes’ franchisee.

Ware offered to sell and transfer to Plaintiffs his two Popeyes’ franchises in

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Broussard, Louisiana and Breaux Bridge, Louisiana. Concerned about AFC’s

stated position regarding his acquisition of new franchises, LeCompte requested

his attorney ascertain AFC’s position regarding Plaintiffs’ desire to acquire

existing franchises. LeCompte received a letter from Lyons stating it was not

interested in considering Plaintiffs for “growth in the POPEYES system at this

time, whether through acquisition of existing franchises currently operated by other

franchisees of the POPEYES system or new development.”

Plaintiffs believed the refusals by AFC were the result of prior litigation

instituted by them against AFC. That litigation was resolved in Plaintiffs’ favor

after a mediation conference. According to Plaintiffs, this occurred despite being

assured at the conclusion of the mediation by John E. Fajfar, AFC’s Vice President

of New Business Development, that the litigation would not adversely affect their

ability to acquire additional restaurants.

The LeComptes filed a lawsuit against AFC, James Lyons and Stanley

Ware, claiming those defendants had improperly denied Plaintiffs the opportunity

to acquire additional or existing franchises.1 Specifically, it was asserted that

AFC’s refusal to “grow with” Plaintiffs by granting additional franchises or

approving the sale of existing restaurants, amounted to a violation of Louisiana’s

Unfair Trade Practices Act (LUPTA) and was a violation of the abuse of rights

doctrine. AFC filed exceptions of no right of action, no cause of action and a

motion for summary judgment. The district court granted AFC’s exception of no

right of action and gave Plaintiffs time to amend the pleadings to add Atchafalaya

Enterprises, Ltd. as a plaintiff and took the other matters under advisement. 2 The

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Lyons was dismissed from the suit on an Exception of Lack of Jurisdiction and the claims against Ware were
separated upon the grant of an Exception of Improper Cumulation of Actions. Writs taken on the judgments
granting the exceptions were denied by this court.
2
Atchafalaya Enterprises, which as set forth above is wholly owned by LeCompte, is the actual, named franchisee
of the St. Martinville Popeyes Restaurant.
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parties were allowed time to attempt to reach a settlement. In the interim, the

LeComptes filed an amending and supplemental petition adding Atchafalaya as a

plaintiff. After informing the court they were unable to reach a settlement, the

district court issued reasons for judgment granting AFC’s motion for summary

judgment and exception of no cause of action dismissing Plaintiffs’ claims.

Plaintiffs filed a devolutive appeal which was rejected by this court because

Atchafalaya was added as a party after the motion for summary judgment and

exception were filed. Upon remand, AFC again filed a motion for summary

judgment and exception of no cause of action against both the LeComptes and

Atchafalaya. By judgment dated September 17, 2012, the district court again

granted AFC’s motion for summary judgment and exception of no cause of action

dismissing Plaintiffs’ claims. This appeal followed, wherein Plaintiffs contend the

trial court erred in granting both the exception of no cause of action and motion for

summary judgment.

ANALYSIS

I. Exception of No Cause of Action.

A peremptory exception of no cause of action presents a question of law

which an appellate court will review de novo. Hawkins v. Evangeline Bank &

Trust Co., 01-1292 (La.App. 3 Cir. 2/06/02), 817 So.2d 141, writ denied, 02-658

(La. 5/24/02), 816 So.2d 308. No evidence is introduced to support or controvert

the exception. Rather, the exception is tried on the face of the petition, with

supporting documentation. For the purposes of determining the issues raised by

the exception, the well-pleaded facts in the petition must be accepted as true.

La.Code Civ.P. art. 931; City of New Orleans v. Bd. of Comm’rs, 93-690

(La.7/5/94), 640 So.2d 237; Hawkins, 817 So.2d 141. This exception is designed

to test the legal sufficiency of the petition to determine whether the plaintiff is

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afforded a remedy in law based on the facts alleged in the petition. Everything on

Wheels Subaru, Inc. v. Subaru South Inc., 616 So.2d 1234 (La.1993); Hawkins,

817 So.2d 141.

AFC’s exception of no cause of action addressed the allegation made by

Plaintiffs that AFC breached its contract with Ware by unreasonably denying the

sale and transfer of Ware’s two franchises to them, and that Plaintiffs were third

party beneficiaries under a stipulation pour autri contained in the contract. A

review of the district court’s reasons for judgment issued on August 22, 2012, in

response to AFC’s Motion for Reconsideration reveal the district court sustained

the exception of no cause of action on the basis there was no evidence to show that

Plaintiffs were a party to the Ware/AFC contract, and thus no stipulation pour autri

existed. The district court noted “the contract specifically provides that the

provisions of the contract are personal to the franchisee – in this instance, Stan

Ware, not plaintiffs.” We agree with the district court’s reasoning.

Plaintiffs were was not parties to Ware’s franchise agreements with AFC;

thus, they have no standing to assert a claim that AFC was unreasonable in

refusing to approve the sale of the franchises from Ware to Plaintiffs. There is a

provision in the AFC contract with Ware stating that AFC cannot unreasonably

withhold its consent to the transfer of Ware’s franchises to another party. As AFC

noted below, that provision is specific to the transferor franchisee, not the

transferee buyor as there is no privity of contract with the proposed transferee.

Such a claim must be asserted by Ware, and there is nothing in the record to

indicate he has made such a claim. The district court did not err in granting the

exception of no cause of action.

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II. Motion for Summary Judgment.

Summary judgments are reviewed de novo on appeal and the reviewing

court is governed by the same criteria as the trial court in determining whether the

mover is entitled to judgment as a matter of law. Schroeder v. Board of Sup’rs,

591 So.2d 342 (La.1991). Summary judgment is appropriate when there remains

no genuine issue as to material fact and the mover is entitled to judgment as a

matter of law. La.Code Civ.P. art. 966. Summary judgments are now favored in

Louisiana, and shall be construed to accomplish the ends of just, speedy, and

inexpensive determination of allowable actions. La.Code Civ.P. art. 966.

The mover bears the burden of proof. Once the mover has made a prima

facie showing that the motion shall be granted, the burden shifts to the adverse

party to present evidence demonstrating that material factual issues remain. Luther

v. IOM Company, LLC, 13-353 (La. 10/15/13), 130 So.3d 817. If the adverse party

fails to do so, there is no genuine issue of material fact and summary judgment will

be granted. Id.

A cause of action for unfair trade practices is governed by the provisions of

the Louisiana Unfair Trade Practices Act (LUTPA), La.R.S. 51:1401, et seq. In

particular, La.R.S. 51:1404(A) provides that “[u]nfair methods of competition and

unfair or deceptive acts or practices in the conduct of any trade or commerce are

hereby declared unlawful.” This legislation is “broadly and subjectively stated and

does not specify particular violations.” Levine v. First Nat’l Bank of Commerce,

06-394, p. 20 (La. 12/15/06), 948 So.2d 1051, 1065. “What constitutes an unfair

trade practice is determined by the courts on a case-by-case basis.” Id.

In its motion for summary judgment, AFC noted there was never a

Development Agreement entered into between itself and Plaintiffs. Without such

an agreement, AFC contended it was not obligated to allow Plaintiffs to acquire

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additional franchises. Plaintiffs do not dispute the lack of a Development

Agreement in this case. In its petition, Plaintiffs base the claim of unfair trade

practices on alleged intentional retribution by AFC against Plaintiffs for the prior

litigation between the parties. However, as AFC notes, Plaintiffs have provided no

facts in the petition to support the claim of intentional retribution.

Plaintiffs argued AFC acknowledged below that it intentionally retaliated

against Plaintiffs for the prior litigation between the parties. As the trial court

noted, this is incorrect. AFC only asserted “it would not matter if the decision was

in part motivated by a desire to punish the LeComptes for their prior litigation so

long as there was also a sound business reason for the decision.” No admission

was made by AFC that its decision was motivated by a desire to punish Plaintiffs.

The district court in granting the motion for summary judgment, noted the

granting of a franchise is a privilege, not a right, and it is generally understood that

“the franchisor reserves to itself the sole power to grant new franchises or to open

new outlets as company stores.” The courts have accepted the proposition that a

franchisor has the right to unilaterally select those with whom they choose to

engage in business. See Midwestern Waffles, Inc. v. Waffle House, Inc., 734 F.2d

705 (11th Cir. 1984). Further, the courts have consistently refused to find a

LUTPA violation when the alleged conduct was simply a “normal business

relationship.” Omnitech Int'l, Inc. v. Clorox Co., 11 F.3d 1316, 1332 (5th

Cir.1994); Monroe Medical Clinic, Inc. v. Hospital Corp. of America, 522 So.2d

1362, 1365 (La.App. 2 Cir.1988) (no LUTPA violation when conduct simply “the

appropriate exercise of good business judgment and the proper workings of free

enterprise.”)

“[A] practice is unfair when it offends established public policy and when

the practice is unethical, oppressive, unscrupulous, or substantially injurious.”

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Levine, 948 So.2d at 1065. To prevail on a LUFTA claim a plaintiff must “prove

some element of fraud, misrepresentation, deception or other unethical conduct.”

Cheramie Serv. Inc. v. Shell Deepwater Prod., 09-1633 (La. 4/23/10), 35 So.3d

1053, 1059. The district court found Plaintiffs failed to prove any specific actions

AFC committed which are violative of LUPTA. We agree.

In this case, Plaintiffs are entitled to the franchise locations they have, and

AFC is bound by the franchise agreements that were signed to address operations

at those locations. There have been no assertions that AFC has done anything to

impede Plaintiffs’ operations of those restaurants. As all parties acknowledge,

there was no Development Agreement entered into for any other franchises

between Plaintiffs and AFC. Without such an agreement there is no legal

obligation for AFC to grant Plaintiffs additional franchise locations. Furthermore,

as the franchisor AFC has the right to grant new franchises to whom it sees fit.

The record is simply devoid of any proof that AFC’s refusal to grant Plaintiffs’

additional franchises violates any LUPTA provisions.

Similarly, Plaintiffs’ abuse of rights claim is lacking. This court in Wagner

v. Fairway Villas Condominium Associates, Inc., 01-734, p. 6 (La.App. 3 Cir.

3/13/02), 813 So.2d 512, 518 discussed the abuse of rights doctrine, noting it “has

been invoked sparingly in Louisiana,” and “applies only when one of the following

conditions are met:

(1) the predominant motive for exercise of the right is to cause
harm;

(2) there is no serious or legitimate motive for exercise of the
right;

(3) the exercise of the right violates moral rules, good faith, or
elementary fairness; or

(4) the exercise of the right is for a purpose other than that for
which it was granted.”

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Plaintiffs presented no evidence that AFC’s refusal to “grow with” them was

motivated by a cause to harm, had no legitimate motive or was in bad faith.

Without a Development Agreement, AFC simply has no legal obligation to do

additional business with Plaintiffs. AFC does have an agreement with Plaintiffs

involving the two franchises granted and operated by Plaintiffs; and there is no

allegation that AFC has impeded Plaintiffs’ operation of their two restaurants in

any way. After reviewing the evidence, we do not find that any of the conditions

necessary to find an abuse of right has been met.

DECREE

For the foregoing reasons, the judgment of the lower court is affirmed. All

costs of this appeal are assessed to plaintiffs-appellants.

AFFIRMED.

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