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Court News Ohio

Wendy’s Franchise Owner’s $510,000 Judgment Against Bowling Green Reversed

When Bowling Green State University learned its students were spending $1.2 million at the Wendy’s in the student union, most of it with meal plan funds that could be used at university dining halls, it cut off Wendy’s from the meal cards.

The Wendy’s franchise owner, who won a contract from Bowling Green to be the only non-university, owned restaurant in their newly refurbished student union more than 12 years ago, sued the university in 2010 and was awarded $460,000 in damages plus interest from the Ohio Court of Claims. The 10th District Court of Appeals this week overturned the Court of Claims declaring that the university never promised Wendy’s it would always have access to the meal plan funds.

Rebecca Williams, owner of Pertoria, Inc, a Wendy’s franchise owner in the Bowling Green area, responded to a request for proposal by Bowling Green to put a national brand restaurant in the student union to go alongside the food courts and cafes the university was placing in the student union. The request said food purchases would be allowed by cash, credit, the BGSU Big Charge or meal plan debit purchases. For access to the students’ charge cards and meal plans, Pertoria had to install prescribed computerized cash registers and pay 3 percent of the Wendy’s profits to Bowling Green to cover administrative costs. In addition, Wendy’s paid rent to the university.

Williams testified that at the time of the agreement, there was no discussion that at any time the access to the meal plan debits could be discontinued. She said there would be no reason to have a Wendy’s in the student union if there was not access to the meal cards.

Six months after the student union reopened, the university revised its meal plan as university officials deemed too much money was being spent at the student union dining areas including the Wendy’s and not at the dining halls. It revised its meal plan to limit the amount of meal plan funds could be used at the union, and the court noted that Williams did not renegotiate the terms of her agreement after the change.

In 2009, the school sought a review of the dining operations by the National Association of College and University Food Services. The association reported that the Wendy’s generated more than $1.2 million and if the university managed the Wendy’s, after expenses it could secure about $375,000 in additional revenue for the dining services. Subsequently, the university informed Williams that the meal plan funds could no longer be used at the Wendy’s and she sued the university for breach of contract and tortious interference with a business relationship.

The Court of Claims found for Pertoria on both the breach of contract, based on the breach of an implied duty of good faith and fair dealing, and tortious interference claims. It set a separate trial to determine damages and Pertoria only pursued the breach of contract claim. The court awarded Pertoria about $460,000 in damages and $51,000 in pre-judgment interest. The university appealed.

Writing for the court Judge Amy C. O’Grady said the contract never guaranteed Wendy’s would have access to the meal plan funds, or that the university was restricted in its ability to curtail the use of the plans.  The court noted that while the contract required Wendy’s to install certain equipment to take the meal plan card does not imply Wendy’s was guaranteed access to the meal plans. And since the equipment reads other credit cards and the BGSU Big Charge, the equipment was not useless.

“It was apparent from the inception of the parties’ relationship that they would be competitors for the business of students, faculty, non-teaching staff and others on the BGSU’s campus,” she wrote. “Pertoria could have contemplated action by BGSU, its competitor, to increase BGSU’s profits at the expense of Pertoria profits by eliminating the use of the meal plan funds at Wendy’s.”

The court said if Pertoria knew the meal plan access was essential to its decision whether to open in the student union, it should have negotiated for guaranteed access to those funds. “The implied duty of good faith is ‘limited in scope and cannot create rights and duties not otherwise provided in the contract,’” O’Grady wrote. “Pertoria could have contemplated its competitor’s decision to prohibit the use of the meal plan funds at Wendy’s and cannot now use the implied duty of good faith to include a provision in the operating agreement for which it failed to negotiate.”

Pertoria maintained that even if the appeals court overruled the breach of contract, it could still allow it to recover damages for tortious interference. But the court noted Pertoria “explicitly” advised the Court of Claims it was only seeking damages on the breach of contract, and the appeals court rejected their request for damages.

Judges Lisa L. Sadler and Gary Tyack concurred in the decision.

Pertoria, Inc. v Bowling Green State Univ., 2014-Ohio-3793
Civil Appeal From: Court of Claims of Ohio
Judgment Appealed From Is: Reversed
Date of Judgment Entry on Appeal: September 2, 2014

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