Facts

Plaintiff Parlour Enterprises Inc. contracted with Kirin Group Inc. for the exclusive right to franchise "FarrellÆs Ice Cream Parlours" in California. The deal called for Parlour to open its first franchise by December 2001 and its second no later than December 2002. Parlour complied with the first deadline but had trouble with the second. Kirin granted Parlour a one-year extension and Parlour agreed to pay certain additional franchise fees and costs related to the extension. The payments were to be made in two installments. Parlour paid the first installment. Prior to the due date for the second installment, a dispute arose resulting in Kirin ordering Parlour to cease development of additional franchises until the default was resolved. Although Parlour paid the second installment, Kirin claimed that Parlour owed an additional $19,000 in attorney fees and canceled the franchise agreement. Parlour and two franchising partnerships filed suit, alleging breach of contract, fraud, negligent misrepresentation, intentional interference with business relations, and defamation. Kirin cross-complained alleging breach of contract, fraud, and violation of Business and Professions Code Section 17200.

PLAINTIFFS' CONTENTIONS:
Parlour contended that Kirin failed to act in a timely manner to fulfill its obligations. Parlour claimed Kirin also continually thwarted its efforts to develop franchises, including refusing to approve site locations for franchises. Parlour argued Kirin did so to further its own interest in building competing restaurants. Parlour contended that Kirin was intent on cutting Parlour out of the California market. Parlour further contended that Kirin had improperly sent emails to ParlourÆs investors stating that Parlour was in default and generally disparaging ParlourÆs business practices. Parlour denied owing Kirin attorney's fees and asserted Kirin canceled the franchise agreement without a legitimate basis. The plaintiffs' expert estimated future lost income at just under $8,000,000.

DEFENDANTÆS CONTENTIONS:
Kirin denied wrongdoing and contended that ParlourÆs principals misrepresented their level of experience and their ability to obtain funding when they entered into the contract. Kirin claimed Parlour defaulted on the contract both by failing to pay the $19,000 in disputed attorney's fees and by failing to open a second franchise within the specified time. Kirin disputed ParlourÆs expertÆs calculations of future lost profits but did not offer its own calculation.

Damages

The plaintiffs sought just under $8,000,000 in damages based upon their experts estimation of future lost profits and $200,000 for out-of-pocket expenses. Kirin claimed damages but no amount was specified.

Result

The jury returned a verdict in favor of Parlour on all counts except the cause of action for defamation. The jury awarded Parlour a total amount of $6,600,000. The jury also found for Parlour on KirinÆs cross-complaint.

Other Information

The defendants filed motions for new trial and JNOV, which were denied. The Court awarded Parlour $150,000 in attorney's fees. The Court also ordered a receiver appointed to collect and dissolve Kirin's assets, and for Kirin to assign the trademark rights to the receiver. The defendants have appealed the Judgment and the Court Orders.

Deliberation

three

Poll

12-0

Length

10 days