Filed: Feb. 24, 2004
Latest Update: Feb. 21, 2020
Summary: F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS FEB 24 2004 TENTH CIRCUIT PATRICK FISHER Clerk WARDLEY CORPORATION, a Utah corporation, Plaintiff - Appellant, v. No. 03-4021 (D. Utah) MEREDITH CORPORATION; and D.C. No. 01-CV-496-K MEREDITH CORPORATION d/b/a BETTER HOMES & GARDENS REAL ESTATE SERVICE, Defendants - Appellees. ORDER AND JUDGMENT * Before LUCERO , TYMKOVICH , and PORFILIO , Circuit Judges. Wardley Corporation (“Wardley”) brought breach of contra
Summary: F I L E D United States Court of Appeals Tenth Circuit UNITED STATES COURT OF APPEALS FEB 24 2004 TENTH CIRCUIT PATRICK FISHER Clerk WARDLEY CORPORATION, a Utah corporation, Plaintiff - Appellant, v. No. 03-4021 (D. Utah) MEREDITH CORPORATION; and D.C. No. 01-CV-496-K MEREDITH CORPORATION d/b/a BETTER HOMES & GARDENS REAL ESTATE SERVICE, Defendants - Appellees. ORDER AND JUDGMENT * Before LUCERO , TYMKOVICH , and PORFILIO , Circuit Judges. Wardley Corporation (“Wardley”) brought breach of contrac..
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F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
FEB 24 2004
TENTH CIRCUIT
PATRICK FISHER
Clerk
WARDLEY CORPORATION, a Utah
corporation,
Plaintiff - Appellant,
v. No. 03-4021
(D. Utah)
MEREDITH CORPORATION; and D.C. No. 01-CV-496-K
MEREDITH CORPORATION d/b/a
BETTER HOMES & GARDENS
REAL ESTATE SERVICE,
Defendants - Appellees.
ORDER AND JUDGMENT *
Before LUCERO , TYMKOVICH , and PORFILIO , Circuit Judges.
Wardley Corporation (“Wardley”) brought breach of contract, negligent
misrepresentation, and fraud claims against Meredith Corporation (“Meredith”)
following Meredith’s sale of the rights to its Better Homes and Gardens
trademarks to GMAC Home Services (“GMAC”). The district court exercised
diversity jurisdiction over the matter pursuant to 28 U.S.C. § 1332(a)(1) and
*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
dismissed pursuant to Fed. R. Civ. P. 12(b)(6). Wardley appeals the dismissal as
well as the district court’s decision to grant Meredith’s motion to reconsider its
motion to dismiss. We AFFIRM.
I
Meredith, publisher of Better Homes and Gardens magazine since 1924,
began to develop a real estate franchising service in 1978; the franchising service
allowed member franchisees to use the trademarks (the “Marks”) owned by
Meredith and associated with Better Homes and Gardens. Wardley began to
participate in the service in 1983, and the relationship was covered by a series of
written contracts, the last of which was entered on May 1, 1998 (the “Contract”).
On June 29, 1998, Meredith announced the sale of its franchising service to
GMAC. The terms of the transfer provided that former franchisees could
continue to use the Better Homes and Gardens Marks temporarily, but it was
uncertain whether GMAC might ultimately require the franchisees to change to
GMAC Marks. In April 1999, Wardley learned that GMAC would indeed require
its franchisees to make the alteration, and that the change would be at Wardley’s
expense. Nonetheless, Wardley entered a new contract with GMAC. Notably,
GMAC is not a party to this litigation. Some time later, Wardley sold its real
estate service, allegedly because of the costs of changing its Marks.
Claiming that Meredith breached its contract by: (1) selling to GMAC, and
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(2) failing to “protect and defend” the Marks as required by the Contract, Wardley
sued Meredith for breach of contract, breach of the implied covenant of good
faith, promissory estoppel, and unjust enrichment. Wardley further asserted
claims of negligent misrepresentation and fraud, alleging that various officers of
Meredith orally represented that they would never sell, and that the decision to
sign the Contract was induced by those representations.
After a hearing, the district court initially dismissed a substantial portion of
Wardley’s claims, relying on several contractual provisions. First, Paragraph
16(a) of the Contract clearly allowed Meredith to transfer or assign its rights and
obligations: “Assignment. Better Homes and Gardens shall have the right to
transfer or assign all or any part of its rights or obligations under this Contract to
any person or legal entity.” Paragraph 3 required Meredith to “protect and
defend” the Marks: “Better Homes and Gardens will protect and defend the
Marks in order to maintain their value to [Wardley] and Better Homes and
Gardens.” Finally, Paragraph 20 of the Contract contained the following
integration clause: “[Wardley] acknowledges that neither Better Homes and
Gardens nor any of its employees has made representations, promises, or
agreements. . . not set forth in this Contract. . . and that this Contract is the entire
agreement of the parties.”
Based on Paragraph 16’s clear allowance of transfers and assignments, the
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district court dismissed Wardley’s claims to the extent that they relied on the
argument that Meredith breached by selling to GMAC. Troubled by Meredith’s
apparent obligation to “protect and defend” the Marks, though, the district court
initially refused to dismiss Wardley’s claims to the extent that they relied on that
language. Meredith moved for reconsideration of the district court’s refusal to
dismiss the claims that were based on the “protect and defend” language, pointing
to Paragraph 18 of the Contract, which states that “[a]fter termination, expiration,
transfer, or assignment of this Contract for any reason, Member shall cease to
have any right to use the Marks in any manner.”
Finding that language dispositive, the district court granted Meredith’s
motion for reconsideration and dismissed the remainder of Wardley’s contract-
based claims. In addition, the court found that even if Meredith had represented
to Wardley that it would never sell the Marks, the Contract’s language precluded
reasonable reliance on such statements; consequently, it dismissed Wardley’s
negligent misrepresentation and fraud claims. Wardley appeals.
II
We review claims dismissed pursuant to Fed. R. Civ. P. 12(b)(6) de novo.
Wark v. United States, 269 F.3d 1185, 1190 (10th Cir. 2001). Under the
principles of diversity jurisdiction, and because the choice of law provision in the
Contract provides that “the Contract shall be construed in accordance with the
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laws of the state in which Member is licensed to use the Marks,” we look to Utah
law for our review of the substantive claims in this case. See Lytle v. City of
Haysville, 138 F.3d 857, 868 (10th Cir. 1998).
A
With respect to Wardley’s breach of contract claim based on Meredith’s
sale of its service to GMAC, Paragraph 16(a) of the Contract specifically provides
that “Better Homes and Gardens shall have the right to transfer or assign all or
any part of its rights or obligation under this Contract to any person or legal
entity.” Moreover, Paragraph 20 contains a specific integration clause, thus
precluding any claim of breach based on extra-contractual representations; where,
as here, a contract is integrated, a party may not vary or modify its terms based on
parol evidence. See Lee v. Barnes, 977 P.2d 550, 552 (Utah Ct. App. 1999). The
plain language of the contract therefore compels us to agree with the district
court’s dismissal of Wardley’s claim based on Meredith’s sale to GMAC.
As to Wardley’s second claim, grounded in Meredith’s alleged failure to
“protect and defend” the Marks as required by Paragraph 16, the district court
initially refused to dismiss Wardley’s claims that relied on that language. After
granting Meredith’s motion for reconsideration, however, it looked to Paragraph
18, which states that “[a]fter termination, expiration, transfer, or assignment of
this Contract for any reason, Member shall cease to have any right to use the
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Marks in any manner.” The district court interpreted the language to eliminate all
of Wardley’s contractual rights following Meredith’s sale of the service to GMAC
and dismissed the remainder of Wardley’s claims.
To the extent that the district court reads Paragraph 18 to imply that
Wardley’s rights to the Marks terminated against all parties following Meredith’s
sale of the service to GMAC, we disagree. Such an interpretation would create
the possibility of an illusory obligation; we conclude that the most plausible
reading of Paragraph 18 is that Wardley’s rights to use the Marks would cease
only upon transfer or assignment by Wardley. Thus, even following the
assignment by Meredith, Wardley had a right to use the Marks; accordingly, the
new assignee of the obligations under the contract—GMAC—had an obligation to
protect and defend the Marks.
The action before us, however, is a complaint by Wardley not against
GMAC, but against Meredith. For us to find Meredith liable for a breach of
contract would require the counterintuitive conclusion that Meredith’s assignable
obligations under the Contract continued as to Meredith even after the transfer of
those obligations to GMAC. We draw no such conclusion. Meredith’s sale of the
service to GMAC included, among other things, an assignment of its obligation to
protect and defend the Marks. To the same effect, Wardley conceded at oral
argument that GMAC assumed the obligations under the Contract.
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Whether GMAC breached its obligation to protect and defend the Marks
once it had assumed the obligations under the contract is not before us. (At oral
argument it became apparent that Wardley initially took legal action against
GMAC and ultimately reached a settlement agreement.) Rather, we must decide
whether Meredith breached its contract with Wardley; we conclude that as
between Wardley and Meredith, no breach of contract occurred.
Turning to Wardley’s claims of breach of the implied covenant of good
faith and fair dealing, Utah law recognizes that the covenant of good faith and
fair dealing is implied in all contracts to effectuate their terms. See, e.g., Craner
v. Northwestern Mut. Life Ins. Co., 12 F. Supp. 2d 1234, 1242 (D. Utah 1998).
Thus, “where there is no breach of an express covenant in a contract, there can be
no cause of action for breach of an implied covenant arising therefrom.”
Id. As
described above, we have concluded that a breach of contract did not occur in the
instant case as between Wardley and Meredith; having so concluded, there can be
no breach of the implied covenant of good faith and fair dealing.
B
We proceed to the claims based on non-contract theories. With respect to
the promissory estoppel claims, Wardley contends that it reasonably relied on
Meredith’s oral promises; Wardley argues, therefore, that the principles of
promissory estoppel compel relief. However, promissory estoppel requires that
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reliance be reasonable, see, e.g., Petty v. Gindy Mfg. Corp., 404 P.2d 30, 32
(Utah 1965); when the alleged promises made are contrary to the terms of the
contract, reliance on such promises would be unreasonable. Under the contract
before us, Meredith could transfer or assign its rights and obligations. Any
reliance on statements that Meredith would never sell, or that its obligations
would continue after it assigned the obligations under the contract, would
therefore have been unreasonable. We accordingly affirm the district court’s
dismissal of Wardley’s promissory estoppel claims. 1
As to Wardley’s claims of negligent misrepresentation and fraud, such
claims are not cognizable under Utah law when they are based on the allegations
that are the gravamen of the contract claim, see Craner, 12 F. Supp. 2d at 1242; a
claim exists only if an independent breach of a duty is alleged. See, e.g., Beck v.
Farmers Ins. Exchange,
701 P.2d 795, 801 n.3 (Utah 1985). Once more, however,
reasonable reliance is a necessary element of any claim of negligent
misrepresentation or fraud, and as discussed above, any reliance upon
representations that Meredith would never sell or that it would continue to assume
obligations after it assigned the obligations under its contract would have been
unreasonable. Thus, we affirm the district court’s dismissal of the negligent
1
Wardley contends that in the unlikely event of a finding that no contract
exists, it should have a remedy in the doctrine of unjust enrichment. Because we
conclude that a contract existed, we affirm the dismissal of this claim.
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misrepresentation and fraud claims.
III
Finally, Wardley appeals the district court’s decision to grant
reconsideration of its initial refusal to dismiss Wardley’s claims based on the
“protect and defend” language. We review a district court’s grant of a motion for
reconsideration for an abuse of discretion; under that standard, we “will not
reverse unless the trial court has made an arbitrary, capricious, whimsical, or
manifestly unreasonable judgment.” Weitz v. Lovelace Health System, Inc., 214
F.3d 1175, 1181 (10th Cir. 2000) (quotation omitted). On the record before us,
we cannot conclude that the district court abused its discretion in granting
Meredith’s motion for reconsideration. Accordingly, we AFFIRM.
ENTERED FOR THE COURT
Carlos F. Lucero
Circuit Judge
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