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Do I Have Standing To Bring A Declaratory Judgment Action? – Franchising


Ohio

Unambiguous Contract Language

Lake Breeze Condo. Homeowner’s Ass’n v.
Eastlake Ohio Developers, LLC
, 11th Dist. Lake No.
2022-Ohio-3002.

In this case the Eleventh Appellate District affirmed in part
and reversed in part a trial court’s decision granting judgment
to a Home Owner’s Association on its complaint for damages.
Regarding a claim for interim road contribution fees, the court
found the plain language of a temporary easement did not permit
recovery of such fees.

The Bullet Point: In a breach of contract
action, the parties are bound by the express terms of a contract.
“In construing a written instrument, the primary and paramount
objective is to ascertain the intent of the parties to give effect
to that intent.” “When the terms of a contract are
unambiguous, courts will not, in effect, create a new contract by
finding an intent not expressed in the clear language employed by
the parties.” “If a contract is clear and unambiguous,
the court need not go beyond the plain language of the agreement to
determine the parties’ rights and obligations; instead, the
court must give effect to the agreement’s express
terms.”

Conversion

Barnosky v. Barnosky, 11th Dist. Portage, No.
2022-Ohio-2928.

The Eleventh Appellate District affirmed the trial court’s
judgment in favor of the plaintiff on its conversion claim.

The Bullet Point: Conversion is defined as
“the wrongful exercise of dominion over property to the
exclusion of the rights of the owner, or withholding it from his
possession under a claim inconsistent with his rights.” The
elements of conversion are commonly stated as: “(1) the
plaintiff’s ownership and right to possess the property at the
time of the conversion; (2) the defendant’s conversion by
wrongful act of plaintiff’s property rights; and (3)
damages.” Moreover, a plaintiff does not have to demand return
of the property to state a claim for conversion. Instead,
“[a]ny wrongful exercise of dominion over chattels in
exclusion of the rights of the owner, or withholding of them from
his possession under a claim inconsistent with his rights,
constitutes a conversion”.

Declaratory Judgment

Honeywell Int’l Inc. v. Vanderlande Industries,
Inc.,
12th Dist. Warren No. 2022-Ohio-2986

In this appeal, the Twelfth Appellate District affirmed a trial
court’s decision to dismiss a declaratory judgment claim for
lack of standing.

The Bullet Point: Standing is a jurisdictional
requirement that a party has a sufficient stake in an otherwise
justiciable controversy to obtain judicial resolution of that
controversy. Standing is defined as” ‘[a] party’s
right to make a legal claim or seek judicial enforcement of a duty
or right.'” R.C. 2721.03 specifically provides that
“any person interested” under a written contract
“may have determined any question of construction or validity
arising under the * * * contract, * * * and obtain a declaration of
rights, status, or other legal relations under it.” “[A]
declaratory-judgment action may be filed only for the purpose of
deciding an ‘actual controversy, the resolution of which will
confer certain rights or status upon the litigants.'” A
plaintiff lacks standing if he or she is not a party to a written
agreement to bring a declaratory judgment claim related to the
written agreements.


Florida

Fiduciary Capacity Exception

Spring Valley Produce, Inc., et al v. Nathan Aaron
Forrest, et al, No. 21-12133 (11th Cir. August 31,
2022)

The Eleventh Circuit adopted a three-part test for determining
whether a debtor is acting in a fiduciary capacity under 11 U.S.C.
§ 523(a)(4) in relation to a creditor.

The Bullet Point: Section 523 of the Bankruptcy
Code lists various exceptions to the general rule that an
individual debtor’s pre-bankruptcy debts are dischargeable in a
Chapter 7 bankruptcy case. The “Fiduciary Capacity
Exception” codified in 11 U.S.C. § 523(a)(4) provides
that debts “for fraud or defalcation while acting in a
fiduciary capacity” cannot be discharged. In this opinion, the
Eleventh Circuit adopted the following three-part test for a court
to analyze when determining whether a debtor is acting in a
“fiduciary capacity” under the Fiduciary Capacity
Exception in relation to a creditor: (1) the fiduciary relationship
must have a trustee who holds an identifiable trust res for the
benefit of an identifiable beneficiary or beneficiaries; (2) the
fiduciary relationship must define sufficient trust-like duties
imposed on the trustee with respect to the trust res and
beneficiaries to create a technical trust, with the strongest
indicia of a technical trust being the duty to segregate trust
assets and the duty to refrain from using trust assets for a
non-trust purpose; and (3) the debtor must be acting in a fiduciary
capacity before the act of fraud or defalcation creating the
debt.

The Eleventh Circuit confirmed this analysis should apply
equally to statutory trusts, trusts created by contract, or express
trusts. Additionally, it cautioned that courts should be wary of
parties using labels like “trust” or
“beneficiary” in contracts and, just like a statute,
should ensure that the contract meets all the requirements of a
technical trust before applying the exception.

Concerted Action Under the Sherman Act

Jarvis Arrington, et al v. Burger King Worldwide,
Inc., et
al, No. 20-13561 (11th Cir.
August 31, 2022)

The Eleventh Circuit concluded that a complaint plausibly
alleged that a “No-Hire Agreement” between a corporation
and its franchisees qualified as concerted activity under Section 1
of the Sherman Act.

The Bullet Point: Section 1 of the Sherman Act
prohibits any “contract, combination in the form of trust or
otherwise, or conspiracy” that restrains trade or commerce. A
plaintiff raising a Section 1 challenge must sufficiently allege
concerted action taken by the defendant. In determining whether an
arrangement rises to the level of concerted action, a court must
consider whether there is a contract, combination, or conspiracy
among separate economic actors pursuing separate economic interests
that deprive the marketplace of independent decision-making
centers.

At issue in this appeal was whether Burger King and its
franchisees’ “No-Hire Agreement” arrangement
constituted concerted action under Section 1. The Eleventh Circuit
concluded that it did, reasoning that the No-Hire Agreement at
issue deprives the marketplace of independent decision-making about
hiring because it prohibits Burger King and its franchisees from
enticing current employees to leave one Burger King restaurant and
join another, as well as from hiring any Burger King employee
within six months after leaving another Burger King restaurant. The
Eleventh Circuit elaborated that this is because Burger King and
its franchisees compete against each other and have separate and
different economic interests. This independence expressly extends
to hiring decisions. Accordingly, the Eleventh Circuit reversed the
district court’s order dismissing the complaint to the extent
it was based on the concerted action element for a Section 1
violation.

Safe Harbor Exception for Financing Statements

1944 Beach Boulevard, LLC v. Live Oak Banking
Co.
, No. SC21-1717 (Fla. August 25, 2022)

The Florida Supreme Court concluded that the Florida Secured
Transaction Registry’s failure to employ a “standard
search logic” precludes the application of the safe harbor
exception to financing statements that fail to name the debtor
correctly.

The Bullet Point: The safe harbor exception
codified in section 679.5061(3), Florida Statutes, provides that a
financing statement with errors or omissions in naming the debtor
will still be adequate to perfect a security interest so long as
“a search of the records of the filing office under the
debtor’s correct name, using the filing office’s standard
search logic, if any, would disclose” the financing statement.
In this opinion, the Florida Supreme Court determined that the
filing office’s use of a standard search logic is necessary to
trigger the safe harbor protection and concluded the Florida
Secured Transaction Registry’s failure to employ a
“standard search logic” precludes the safe harbor from
applying in the first instance. In reaching this conclusion, the
Court adopted the definition of “standard search logic”
accepted in the secured transactions industry, which requires a
search procedure that identifies the specific set of financing
statements on file that constitutes hits for the search. Under that
definition, the Court found the Florida Secured Transaction
Registry does not employ a “standard search logic”
because a search of the Registry returns an index of all the
financing statements in the Registry rather than a finite list of
hits.

Accordingly, because this case was before the Florida Supreme
Court on review of questions certified by the Eleventh Circuit
concerning the proper scope of the “search,”

the Court held that it was unnecessary to reach the Eleventh
Circuit’s certified questions. The Court further stated that
unless and until the Registry employs a standard search logic, any
financing statement that fails to name the debtor correctly is
“seriously misleading” and, therefore, ineffective.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.



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