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QFA Royalties LLC v. ZT Investments LLC

United States District Court, D. Colorado

August 28, 2018

QFA ROYALTIES, LLC, THE QUIZNOS MASTER, LLC, Plaintiffs,
v.
ZT INVESTMENTS, LLC, and THOMAS KAMAU, Defendants.

          ORDER GRANTING SUMMARY JUDGMENT AND TERMINATING CASE

ORDER

         This is a dispute between a franchisor and a former franchisee. Plaintiff QFA Royalties, LLC, “is the franchisor of the network of franchised Quiznos Sub restaurants.” (ECF No. 36 at 3, ¶ 1.) Plaintiff The Quiznos Master, LLC, “owns and licenses to QFA the intellectual property used in connection with QFA's franchising program.” (Id. ¶ 2.) The Court will refer to the two Plaintiffs collectively as “Quiznos.” The Defendants are ZT Investments, LLC (“ZTI”), a Missouri limited liability company, and its owner, Thomas Kamau (“Kamau”).

         At the outset of this lawsuit, Quiznos accused Defendants of operating a restaurant that was, in effect, an unauthorized Quiznos franchise. Pending before the Court, however, is Quiznos' Partial Motion to Dismiss Pursuant to Rule 41(a)(2) (“Rule 41 Motion”). (ECF No. 62.) In that filing, Quiznos announces that Defendants have closed the infringing restaurant, thus mooting all of Quiznos' claims for prospective relief. (Id. ¶ 5.) Given this, and in light of the Court's previous default judgment against ZTI (see ECF No. 55), Quiznos requests dismissal of all of its causes of action asserted against Kamau save for Claim VI, which alleges breach of a guaranty agreement. (ECF No. 62 ¶ 7; see also ECF No. 1 ¶¶ 72-75.) Claim VI, as it turns out, is also the only claim at issue in Quiznos' other pending motion, i.e., its Motion for Partial Summary Judgment Against Defendant Thomas Kamau (“Summary Judgment Motion”). (ECF No. 57.)

         For the reasons stated below, the Court will grant both the Rule 41 Motion and the Summary Judgment Motion, direct entry of final judgment against Kamau, and direct the Court to terminate this case.

         I. SUMMARY JUDGMENT MOTION

         For arcane procedural reasons explained in Part II, below, the Court will resolve the Summary Judgment Motion before it resolves the Rule 41 Motion.

         Kamau filed no response to the Summary Judgment Motion. The Court must nonetheless satisfy itself that Quiznos is entitled to judgment as a matter of law. See Reed v. Bennett, 312 F.3d 1190, 1194-95 (10th Cir. 2002) (“If the nonmoving party fails to respond [to a summary judgment motion], the district court may not grant the motion without first examining the moving party's submission to determine if it has met its initial burden of demonstrating that no material issues of fact remain for trial and the moving party is entitled to judgment as a matter of law. If it has not, summary judgment is not appropriate, for no defense to an insufficient showing is required.” (internal quotation marks omitted; alterations incorporated)).[1] Accordingly, the following findings of fact and conclusions of law result from the Court's independent review of the record.

         A. Summary Judgment Standard

         Summary judgment is warranted under Federal Rule of Civil Procedure 56 “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-50 (1986). A fact is “material” if, under the relevant substantive law, it is essential to proper disposition of the claim. Wright v. Abbott Labs., Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). An issue is “genuine” if the evidence is such that it might lead a reasonable trier of fact to return a verdict for the nonmoving party. Allen v. Muskogee, 119 F.3d 837, 839 (10th Cir. 1997).

         In analyzing a motion for summary judgment, a court must view the evidence and all reasonable inferences therefrom in the light most favorable to the nonmoving party. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). In addition, the Court must resolve factual ambiguities against the moving party, thus favoring the right to a trial. See Houston v. Nat'l Gen. Ins. Co., 817 F.2d 83, 85 (10th Cir. 1987).

         B. Undisputed Facts

         On May 24, 2013, Kamau executed a series of contracts by which he became Quiznos' new authorized franchisee for an existing Quiznos restaurant in St. Louis, Missouri. (ECF No. 57 at 2-4, ¶¶ 9, 14-18.) The contracts became effective June 5, 2013, when Quiznos countersigned. (Id. ¶¶ 14-18.)

         Of those contracts, two are most relevant here. The first relevant contract is the Franchise Agreement. (ECF No. 6-2 at 2-48.) Under the Franchise Agreement, Kamau himself (i.e., not a business entity) became the Quiznos franchisor. (See id.

         at 48.) The second relevant contract is the “Guaranty and Assumption of Franchisee's Obligations” (“Guaranty”). (ECF No. 6-2 at 59-60.) There, Kamau agreed to “personally and unconditionally” guarantee the franchisee's obligations-that is, his own obligations-including agreeing to be “personally ...


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