United States District Court, D. Maryland
JOS. A. BANK CLOTHIERS, INC., Plaintiff,
J.A.B.-COLUMBIA, INC. et al., Defendants.
LIPTON HOLLANDER, UNITED STATES DISTRICT JUDGE.
case arises from a dispute concerning three franchise
agreements. Plaintiff Jos. A. Bank Clothiers, Inc.
(“Jos. A. Bank” or “JAB”) is a
men's clothing store with more than 500 locations, of
which fourteen are franchised. ECF 1, ¶¶ 7, 9.
Defendants J.A.B.-Columbia, Inc.; J.A.B.-Harbison, Inc.; and
J.A.B.-Forest Drive, Inc. (collectively, the
“Franchisees”) own three of Jos. A. Bank's
franchise stores. Id. at 1. The Franchisees'
initial franchise term is at an end, and the parties disagree
on whether the Franchisees are entitled to more than one
renewal of their franchise term. ECF 1; ECF 10.
filed a Complaint seeking a declaratory judgment. ECF
It asks the Court to declare that the franchise agreements in
issue provide for only a single franchise renewal and not
unlimited or perpetual franchise renewals; that the
Franchisees' failure to execute the form of successor
franchise agreement offered to them by Jos. A. Bank, without
further renewals, constitutes an election by them not to buy
a successor franchise; and that the Franchisees' election
not to buy a successor franchise allows JAB to terminate the
franchises of the Franchisees at any time. Id. at
9-10. JAB appended the three franchise agreements to its
Complaint. ECF 1-1; ECF 12; ECF 1-3.
Franchisees have pleaded three counterclaims, two of which
remain. ECF 10, ¶¶ 33-41. The first is for a
declaratory judgment that the Franchisees are entitled to a
renewed franchise agreement on the same terms as their
original franchise agreement, including its renewal clause.
Id. ¶¶ 28, 37. The second counterclaim is
for breach of contract, which the Franchisees allege occurred
when Jos. A. Bank tendered the improper successor franchise
agreement to the Franchisees. Id. ¶ 40. The
Franchisees seek “not less than $75, 000.00” in
damages as a result of the breach. Id.
lengthy and contentious discovery period, JAB filed a motion
for summary judgment as to all claims and counterclaims. ECF
63. The motion is supported by a memorandum of law (ECF 63-1)
(collectively, the “JAB Motion”) and ten
exhibits. The Franchisees oppose the JAB Motion and filed a
cross-motion for summary judgment. ECF 68. That motion is
also supported by a memorandum (ECF 68-1) (collectively, the
“Franchisees' Motion”) and many
exhibits. Jos. A. Bank filed a combined opposition
to the Franchisees' Motion and a reply in support of its
own summary judgment motion. ECF 73. The Franchisees replied
(ECF 74) and requested a hearing. ECF 75.
hearing is necessary to resolve the motions. See
Local Rule 105.6. For the reasons that follow, I shall deny
The Franchise Partnership
Bank, a men's retail clothier, first began franchising in
the early 1990s. ECF 68-2 (Declaration of John W. Bell, III),
¶ 9. In 1991, JAB hired John W. Bell, III, to recruit
franchisees. Id. ¶ 11; ECF 68-9 (Deposition of
John W. Bell, III) at 4. Bell became Jos. A. Bank's first
franchise owner when he converted his family's business
to JAB's first franchise locations in Asheville, North
Carolina, and Knoxville, Tennessee in 1992. ECF 68-2, ¶
in the 1990s, Bell partnered with John A. Batt, Jr., and John
F. French-who together owned a Jos. A. Bank franchise store
in New Orleans (id. ¶ 12)-to open more stores.
Id. ¶ 13. Bell, Batt, and/or French, sometimes
with other co-owners, control thirteen of Jos. A. Bank's
fourteen franchise stores, and Bell provides management
services to all fourteen franchise stores. Id.
¶ 5. In addition to the locations mentioned, these
include stores in Jackson, Mississippi; Montgomery, Alabama;
Augusta, Georgia; Baton Rouge, Louisiana; and Metairie,
Louisiana. Id. ¶¶ 12-13. From 1998 to
2005, Jos. A. Bank did not establish any new franchise
stores. Id. ¶ 14.
Bank entered franchise agreements with the Franchisees
beginning in August 2005, when Bell, Batt, and French agreed
with Jos. A. Bank to open a franchise store in Columbia,
South Carolina. See ECF 1-1; ECF 63-2 at 13-14
(deposition of Charles Frazer, Esq.). Then, in October 2009
and April 2010, Jos. A. Bank and Bell, Batt, and French
agreed to open two more stores in Columbia, South Carolina:
one on Harbison Boulevard (“Harbison”) and one on
Forest Drive in Trenholm Plaza (“Forest Drive”).
See ECF 1-2; ECF 1-3; see also ECF 63-2 at
14-16. These three South Carolina franchise stores are the
defendants- counterclaimants in this suit. The
Franchisees' initial franchise agreements expired on
August 31, 2015. See ECF 1-1 at 5; ECF 1-2 at 6; ECF
1-3 at 6.
Batt, and French also opened a franchise in West Knoxville,
Tennessee, which is the subject of parallel litigation.
See ECF 68-38 (West Knoxville franchise agreement);
see also J.A.B. - West Knoxville, Inc. v. Jos. A. Bank
Clothiers, Inc., ELH-16-2667. In August 2011, JAB
granted one more franchise, for a store located in
Mandeville, Louisiana, part of the New Orleans market. ECF
63-2 at 20 (list of franchises by origination date); ECF 73-6
at 24 (deposition of Charles Frazer, Esq.). The Mandeville
franchise agreement did not provide for any renewals.
See ECF 68-25 at 30 (Mandeville franchise
2014, Jos. A. Bank was acquired by The Men's Wearhouse,
Inc. (“Men's Wearhouse”). See ECF 73
at 22. JAB maintains that it is no longer “in the
franchising business.” ECF 63-1 at 8. The Franchisees
agree that JAB “clearly wants to get out of
franchising, ” but note that it has not yet done so.
ECF 68-1 at 10.
The Renewal Process
substance of Jos. A. Bank's franchise agreements has
remained largely the same since the 1990s. Although the
standard agreement was reorganized and revised in 1996
(see ECF 68-33, Montgomery franchise agreement), the
provisions are similar to the earlier agreements.
early 2000s, the periods of the initial agreements, which
provided for ten-year terms, began to expire. ECF 68-2,
¶¶ 17-20. It appears that Jos. A. Bank renewed
those franchises for ten year periods without requiring the
franchisees to negotiate or execute a new franchise
agreement, instead merely requiring a notice of renewal and
receipt of a franchising fee. Id. ¶¶
20-24. The Franchisees refer to this practice as
“rolling renewals, ” and assert that it has been
the universal practice of Jos. A. Bank to allow franchisees
to repeatedly exercise the renewal option contained in their
original franchise agreement. ECF 68-1 at 16.
least two instances, however, Jos. A. Bank and a franchisee
confronted the issue of whether the renewed agreement would
itself allow for further renewals. When the Asheville and
Knoxville franchises came up for renewal in 2002, Jos. A.
Bank struck a deal with the franchise owners: One more
renewal (from 2012 to 2022) would be allowed, and on the same
general terms as the original franchise agreement, but only
in consideration for the waiver of a right of first refusal
provided for in the Asheville franchise agreement. ECF 73-6
at 63 (letter from Frazer to Bell, dated June 19, 2002, about
JAB-Knoxville and JAB-Asheville). In another instance, the
New Orleans store was granted a third term, but that term was
limited to less than six years, and did not mention a further
right to renew. Id. at 67 (email from Frazer to
the Mandeville franchise was granted, Jos. A. Bank renewed
five franchises, including the one for the New Orleans store.
ECF 68-2, ¶¶ 27-31. The most recent, in the fall of
2014, was for the Jackson, Mississippi store, originally
opened in 1994. Id. ¶ 31. The Jackson store was
renewed on its original terms, without execution of a new
February 5, 2015, the Franchisees notified JAB in writing of
their desire to renew the franchises for the three stores.
See ECF 1, ¶ 20. On March 30, 2015, JAB
informed the Franchisees that they each could purchase a
ten-year successor franchise. ECF 63-5 at 2 (letter from
Frazer). JAB offered the Franchisees an updated version of
the Mandeville agreement (the “Mandeville Form”)
for each of the stores. Id. at 3. This agreement was
largely similar to the Franchisees' original agreement,
but it did not provide for any renewals. Id. The
Franchisees claimed that they were entitled to franchise
agreements that gave them the right to another ten-year
renewal after 2025. See ECF 63-7 at 2-3
(letter of April 24, 2015). They objected to the proposed
franchise agreements by letter of June 19, 2015. See
ECF 63-6 at 2-6. JAB rejected the Franchisees' position
in a letter of July 8, 2015, but extended the deadline for
the Franchisees to execute the proposed agreements until July
22, 2015. ECF 63-8. The Franchisees declined to sign
JAB's proposed agreements. See ECF 1, ¶ 28.
suit followed on October 9, 2015. ECF 1. As in the
parties' earlier correspondence, JAB contends, inter
alia, that the Franchisees are entitled only to a single
renewal. Id. at 9-10. Moreover, Jos. A. Bank insists
that the Mandeville Form is the appropriate renewal form. ECF
73 at 22-23. The Franchisees counter that they should be
allowed to renew on the same terms as their original
agreements from 2005, 2009, and 2010, including those
agreements' renewal clauses providing for a subsequent
franchise renewal. ECF 63-6; ECF 10. In the alternative, the
Franchisees assert that, under the language of the original
agreements, they should be offered the terms of the franchise
agreement most recently used by a renewing franchise-in this
case, the Jackson franchise (the “Jackson Form”).
ECF 68-1 at 38.
The Franchise Agreements
central question in this case is one of contract
interpretation. There are several provisions of the franchise
agreements relevant to the disposition of the motions. For
purposes of this matter, the relevant language is the same in
each of the three franchise agreements (hereinafter
collectively referred to as the
Section 2.01 of the Agreement, Jos. A. Bank grants the
Franchisees “the right . . . to sell the Products at
the Store and use the System in connection therewith, for a
term starting on the date of this Agreement and expiring on
August 31, 2015 (the ‘Term').” ECF 1-1 at 5.
16, which is titled “Renewal Rights, ” is the
focus of the parties' arguments. Section 16.01 states, in
relevant part: “Franchisee has the right, subject to
the conditions contained in Section 16, to buy a successor
franchise for the Store on the terms and conditions of
Franchisor's then current form of franchise agreement, if
upon expiration of the Term” the franchisee is in
compliance with the Agreement and agrees to keep the store
updated to Jos. A. Bank's specifications. Id. at
16.03 states, in relevant part, id. at 28:
If Franchisee has the right to buy a successor franchise in
accordance with Section 16.01 and states its desire to
exercise that right . . ., Franchisor and Franchisee . . .
will execute the form of franchise agreement (which may
contain provisions, including royalty fees, materially
different from those contained herein) and all ancillary
agreements . . . which Franchisor then customarily uses, or
most recently used, in granting franchise rights for Jos. A.
Bank Stores . . . . Failure by Franchisee . . . to sign such
agreements . . . within 30 days after delivery shall be
deemed an election by Franchisee not to buy a successor
franchise for the Store.
phrase “then current form” in Section 16.01 and
the phrases “then customarily uses” and
“most recently used” in Section 16.03 are not
defined. Their meaning is disputed.
19.07, titled “Waiver of Obligations, ” discusses
the effect of Jos. A. Bank's actions in relation to other
franchisees. It states, in relevant part, id. at 34:
Franchisor and Franchisee shall not be deemed to have waived
any right reserved by this Agreement by virtue of any custom
or practice of the parties at variance with it; any failure,
refusal or neglect by Franchisee or Franchisor to exercise
any right under this Agreement . . . or to insist upon exact
compliance by the other with its obligations hereunder; any
waiver, forbearance, delay, failure or omission by Franchisor
to exercise any right, whether of the same, similar or
different nature, with respect to other Jos. A. Bank Stores;
or the acceptance by Franchisor of any payments due from
Franchisee after any breach of this Agreement.
19.01 provides that the Agreement shall be governed by the
laws of Maryland. Id. at 33. Section 19.02 provides
for exclusive jurisdiction in the state where Jos. A. Bank
has its principal place of business. Id. Section
19.09 provides that the language of the Agreement
“shall be construed according to its fair meaning and
not strictly against any party.” Id. at 35.
Section 19.09 also includes an integration clause, specifying
that “this Agreement . . . constitutes the entire
agreement of the parties. Except as otherwise expressly
provided herein, there are no other oral or written
agreements, understandings, representations or statements . .
. that either party may or does rely on or that will have any
force or effect.” Id.