Donald F. Hogans v. United Franchise Owners; Mote F. Malhas; America's Favorite Chicken Company; Rod Jarboe
Published: Jan. 24, 1998 | Result Date: Jul. 25, 1997 | Filing Date: Jan. 1, 1900 |Case number: BC125955 Bench Decision – $760,000
Judge
Court
L.A. Superior Central
Attorneys
Plaintiff
Steven J. Shapero
(Shapero & Shapero)
Defendant
Facts
This action arose out of a prior action entitled Hogans v. Malhas, Los Angeles Superior Court No. BC099788 (the Malhas action). Plaintiff Donald Hogans sold defendant Mote Malhas a Pioneer Chicken business, including Pioneer Chicken Franchise #106 (the Malhas franchise). The consideration for the purchase was Malhas' assumption of loans to Hogans guaranteed by the Small Business Administration and secured by real property owned by Hogans. On Jan. 24, 1991, prior to the Malhas action, The Pioneer Chicken Company, the master franchisor, went bankrupt. Subsequently, defendant United Franchise Owners (UFO) acquired the rights to Pioneer Chicken and was organized as a master franchisor of Pioneer in Southern California. Malhas later became qualified as a "franchisee" of UFO and was deemed to hold an Allowed Class 5 Claim entitling him to 10 shares of UFO stock. Subsequently, plaintiff claimed that pursuant to a Conversion Agreement entered into between UFO and America's Favorite Chicken (AFC), the franchisor of Popeye's and the owner of the Popeye's trademark, qualifying Pioneer franchisees in Southern California, including Malhas, were eligible to become Popeye's franchisees. At trial, Malhas testified that he attended Popeye's training and received Popeye's related items such as cooking utensils, equipment, etc. Malhas defaulted in paying on the Hogan loans, leaving approximately $250,000 unpaid. Malhas failed to make payments on the loan he had assumed for several years, but neither the lender nor the SBA advised Hogans of that fact until a demand for several hundred thousand dollars was made on Hogans. Hogans sued Malhas for rescission, tracing and damages. The Malhas action was tried on Oct. 17, 1994. Plaintiff's counsel, Shapero advised the court of AFC's agreement to stay neutral and await resolution of the Malhas action. The judge ruled in favor of Hogans and a proposed judgment of rescission was prepared and submitted. Notwithstanding the agreement by AFC to stay the conversion pending the outcome of the Malhas action and the court's granting of rescission to plaintiff, AFC and UFO did not issue a Popeye's franchise to Hogans. Instead, AFC and UFO stated that the Malhas franchise had been terminated prior to Hogans being awarded judgment. Plaintiff claimed he collected nothing while AFC and UFO gained a valuable franchise. Plaintiff Hogans contended that the purported termination of the Pioneer or Popeye's franchise was nothing more than a scheme by defendants to deprive him of his rights pursuant to the judgment. Plaintiff then brought this action alleging causes of action for tortious interference with economic relationship, fraudulent transfer and conversion. Defendant's demurrer was granted as to plaintiffs' claimes for tortious interference, and overruled as to fraudulent conveyance and conversion. Plaintiff proceeded to trial on the two remaining claims. Defendants filed a motion for summary judgment which was denied on June 10, 1997.
Settlement Discussions
The plaintiff made a settlement demand for $50,000 at trial (disputed). Defendant claimed that prior to trial, plaintiff never demanded less than $1 million. The defendants made a settlement offer of $30,000.
Damages
The plaintiff requested compensatory damages of $750,000 and punitive damages in unstated amounts. The compensatory damage figure was based on expert valuation of the subject restaurant as a going Popeye's.
Result
The jury arrived at its decision awarding $760,000 for plaintiff. However, at the end of plaintiff's case, defendants had made a motion for nonsuit which the judge had taken under submission. Two weeks after the jury completed deliberations, the judge granted defendant's motion for nonsuit, effective as of the close of the plaintiff's case. Plaintiff has appealed that ruling.
Other Information
The verdict was reached approximately two years and three months after the case was filed. A settlement conference was held before retired Judge Dion Morrow, resulting in no settlement.
Deliberation
two days
Poll
11-1
Length
17 days
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