Marcus Beasley v. Arcapita Incorporated , 436 F. App'x 264 ( 2011 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 09-1125
MARCUS BEASLEY; DENISE BEASLEY,
Plaintiffs – Appellants,
v.
ARCAPITA INCORPORATED; CAJUN HOLDING COMPANY; CAJUN
OPERATING COMPANY; CRESCENT CAPITAL INVESTMENTS,
INCORPORATED,
Defendants – Appellees.
Appeal from the United States District Court for the District of
Maryland, at Baltimore. Richard D. Bennett, District Judge.
(1:08-cv-00804-RDB)
Argued: March 25, 2011 Decided: June 23, 2011
Before MOTZ, GREGORY, and SHEDD, Circuit Judges.
Affirmed by unpublished opinion. Judge Shedd wrote the majority
opinion, in which Judge Motz joined. Judge Gregory wrote a
dissenting opinion.
ARGUED: Erin M. Tanner, WAKE FOREST UNIVERSITY, School of Law,
Winston-Salem, North Carolina, for Appellants. James Charles
Rubinger, PLAVE KOCH PLC, Reston, Virginia, for Appellees. ON
BRIEF: Paul M. Vettori, John J. Kenny, KENNY & VETTORI, LLP,
Towson, Maryland, for Appellants. Benjamin B. Reed, PLAVE KOCH
PLC, Reston, Virginia, for Appellees.
Unpublished opinions are not binding precedent in this circuit.
2
SHEDD, Circuit Judge:
Marcus and Denise Beasley appeal the district court’s order
dismissing their claim against Arcapita Incorporated, Cajun
Holding Company, Cajun Operating Company, and Crescent Capital
Investments, Incorporated (collectively “Arcapita”). For the
reasons set forth below, we affirm the judgment of the district
court.
I.
The Beasleys are the sole shareholders of Beasley Food
Ventures, Inc. (“Ventures”). On December 17, 2004, Ventures
entered into a franchise agreement (“the Agreement”) with AFC
Enterprises, Inc. to own and operate a Church’s Chicken
restaurant at the Baltimore/Washington International Airport.
The Agreement states that it is “between AFC Enterprises
Inc. . . . and Beasley Food Ventures, Inc., a Maryland
corporation . . . (“Franchisee”).” Supp. J.A. 6. In two
internal sections of the Agreement, the Beasleys signed or
initialed above the printed term “franchisee” without a
corporate designation. However, on the signature page, Denise
Beasley executed the Agreement in her corporate capacity as
President of Ventures, and Marcus Beasley signed only as a
witness. Additionally, Marcus and Denise Beasley individually
executed a separate Guaranty and Subordination Agreement
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personally obligating themselves for Ventures’ debts arising
under the Agreement.
In December 2004, Arcapita acquired the Church’s Chicken
business from AFC. Subsequently, although the menu AFC had
provided to Ventures included pork products, Arcapita banned the
sale of pork in Church’s Chicken restaurants. Arcapita
permitted Church’s Chicken restaurants that had previously sold
pork products to continue doing so. However, Arcapita refused
to allow new restaurants that had not previously sold pork
products to do so in the future.
The Beasleys, who are African-American, brought this action
asserting a single count of racial discrimination in violation
of 42 U.S.C. § 1981. The Beasleys allege that they were the
only existing franchise that was forbidden to sell pork products
and that Arcapita forbade them from doing so because of their
race. Consequently, they assert that their franchise failed
because of their inability to sell pork products. Relying on
the Supreme Court’s holding in Domino’s Pizza, Inc. v. McDonald,
546 U.S. 470 (2006), the district court found that the Beasleys
could not bring a § 1981 claim because they were not parties to
the Agreement and, thus, had no rights under the Agreement.
Therefore, the court dismissed their case for failure to state a
claim.
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II.
We review de novo a district court's order dismissing a
claim under Federal Rule of Civil Procedure 12(b)(6). See
Duckworth v. State Admin. Bd. of Election Laws, 332 F.3d 769,
772 (4th Cir. 2003). To survive a Rule 12(b)(6) motion, a
plaintiff must allege enough facts “to raise a right to relief
above the speculative level” and must provide “enough facts to
state a claim to relief that is plausible on its face.” Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). When
considering an order dismissing a claim under Rule 12(b)(6), we
assume all factual allegations in the pleadings to be true.
Erickson v. Pardus, 551 U.S. 89, 94 (2007). “[W]hen a defendant
attaches a document [such as the Agreement] to its motion to
dismiss, a court may consider it in determining whether to
dismiss the compliant if it was integral to and explicitly
relied on in the complaint and if the plaintiffs do not
challenge its authenticity.” Am. Chiropractic Ass’n v. Trigon
Healthcare Inc., 367 F.3d 212, 234 (4th Cir. 2004)(internal
citations omitted).
III.
In Domino’s Pizza, the Supreme Court held that a
corporation’s sole shareholder could not bring a § 1981 action
pursuant to a franchise agreement because he was not a party to,
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and did not have rights under, the contract. The Court
expressly limited relief under § 1981 to parties with rights
under a contract, stating:
[A] plaintiff cannot state a claim under § 1981 unless
he has (or would have) rights under the existing (or
proposed) contract that he wishes “to make and
enforce.” Section 1981 plaintiffs must identify
injuries flowing from a racially motivated breach of
their own contractual relationship, not of someone
else’s.
Domino’s Pizza, 546 U.S. at 479-80. The Court based this
ruling, in part, on basic precepts of corporate law. “[I]t is
fundamental corporation and agency law — indeed, it can be said
to be the whole purpose of corporation and agency law — that the
shareholder and contracting officer of a corporation has no
rights and is exposed to no liability under the corporation’s
contracts.” Id. at 477.
The Beasleys argue that the district court erred in
dismissing their claim because they are parties with rights
under the Agreement consistent with Domino’s Pizza.
Specifically, they assert that by virtue of the Guarantee of
Franchisee Agreement, they have taken on significant financial
obligations under the Agreement that entitle them to bring a §
1981 claim. Additionally, the Beasleys contend that they are
individually parties to the Agreement pursuant to Section XXV.
In particular, they point to language stating that they have
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“individually, and jointly and severally, executed this
Agreement.” Supp. J.A. 43.
We find both arguments to be without merit. First, any
obligations the Beasleys have under the Guarantee of Franchise
Agreement do not create any rights for them under the Agreement,
which the Supreme Court has explicitly required for a claim of
relief under § 1981. Second, Section XXV does not establish
that the Beasleys are individually parties to the Agreement.
This section only applies when the franchisee is a corporation,
thus defeating the Beasleys’ claims that they are individual
franchisees or parties to the Agreement.
Moreover, the specific language referenced by the Beasleys
stating that they “individually . . . executed this Agreement”
does not establish that they are parties to the Agreement
because, factually, the Beasleys did not individually execute
the Agreement. First, Marcus Beasley did not execute the
Agreement in any manner. Second, Denise Beasley signed above
the notation “President.” Thus, she executed the Agreement only
in her corporate – not individual – capacity. Signing in this
representative capacity does not make her an individual party to
the Agreement, and, therefore, no representation in the
Agreement applies to her as an individual. See Ga. Code Ann. §
11-3-402(b) (if an authorized representative signs on behalf of
another person or entity, the representative is not personally
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liable); Dewberry Painting Centers, Inc. v. Duron Inc., 508
S.E.2d 438 (Ga. App. 1998) (holding that where corporate
president “signed the document only in his representative
capacity,” the president was not personally liable under the
document). 1
In short, we hold that, according to the terms of the
Agreement, Ventures is the franchisee. 2 Therefore, Ventures is
the named party with rights under the Agreement. In contrast,
the Beasleys, as sole shareholders of Ventures, are neither the
franchisee nor a named party with rights under the Agreement.
Therefore, pursuant to Domino’s Pizza, the Beasleys cannot bring
a § 1981 claim.
1
In his dissent, our colleague suggests that the
implication of our decision is that Denise Beasley would need to
sign the Agreement twice to be bound as an individual. That is
not so. Denise Beasley could have noted she was also signing in
her individual capacity, or she could have signed without noting
that she was doing so in her corporate capacity.
2
The identity of the franchisee is unambiguous. Despite
the fact that the Beasleys signed or initialed above the printed
term ‘franchisee,’ the Agreement when read as a whole is only
capable of being read as a contract between Arcapita and
Ventures. See Gen. Steel, Inc. v. Delta Bldg. Sys. Inc., 676
S.E.2d 451, 453 (Ga. App. 2009)(pursuant to Georgia law, which
controls the Agreement, “no ambiguity exists where, examining
the contract as a whole . . . the contract is capable of only
one reasonable interpretation.”).
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IV.
For the foregoing reasons, we affirm the district court’s
order dismissing the Beasleys’ complaint. 3
AFFIRMED
3
Arcapita moved to dismiss this appeal on res judicata
grounds. We deny the motion. See Pueschel v. United States,
369 F.3d 345, 356 (4th Cir. 2004) (recognizing the claim
splitting waiver exception to res judicata).
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GREGORY, Circuit Judge, dissenting:
The majority opinion comes to the unfortunate conclusion
that contracts simply do not mean what they say. In reviewing
this motion to dismiss, we must accept the facts in the
complaint as true, and draw all reasonable inferences in favor
of the Beasleys. Ashcroft v. Iqbal, --- U.S. ---, 129 S.Ct.
1937, 1949-50 (2009). While we need not accept as true any
legal conclusions, id., in a contract dispute, we must construe
any ambiguous provisions in the Agreement against Arcapita as
the drafter. Department of Community Health v. Pruitt Corp.,
673 S.E.2d 36, 39 (Ga. App. 2009). Most importantly in this
case, even if we may foresee the claim’s later failure at the
summary judgment stage, we must refrain from examining its
underlying merits. Republican Party of North Carolina v.
Martin, 980 F.2d 943, 952 (4th Cir. 1992).
As drafted by Arcapita, the plain language of the Agreement
makes clear that Ms. Beasley’s signature alone was sufficient to
in fact make her “individually” a party to the Agreement. J.A.
43. Section 25 states in part that:
In the event Franchisee named herein is a corporation
at the time of the execution of this Agreement, it is
warranted, covenanted and represented to Franchisor
that:
. . .
25.02 The above-named person or persons[,] [Ms.
Beasley,] has (have) individually, and jointly and
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severally, executed this Agreement, and such person,
or one of such persons, [Ms. Beasley,] is and shall be
the chief executive officer of the Franchisee
corporation[,] [Ventures] . . . .
J.A. 43 (emphasis added). Section 25 only applies when the
franchisee is a corporation because it creates another layer of
liability for the individual signatory, which would otherwise be
unnecessary in circumstances where the lone franchisee is an
individual person. Section 25.02 is a guarantee that the person
“above-named” -- Ms. Beasley’s name appears without title
several times in the preceding parts of the Agreement, J.A. 41-
42 –- will execute the Agreement as an individual, and as the
chief executive of the corporation. It therefore establishes
obligations under the Agreement for both the signatory as an
individual and as a representative of the corporation.
Thus, through her single signature, Ms. Beasley bound
herself as an individual and her corporation, Ventures, to the
Agreement. J.A. 44; see also Restatement (Second) of Contracts
§ 289(1) (1981) (“Where two or more parties to a contract
promise the same performance to the same promisee, each is bound
for the whole performance thereof, whether his duty is joint,
several, or joint and several.”). Ms. Beasley therefore had the
same specific rights and duties under the Agreement as Ventures,
rights which were enforceable under § 1981. See Domino’s Pizza,
Inc. v. McDonald, 546 U.S. 470, 476-80 (2006) (“Section 1981
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offers relief when racial discrimination . . . impairs an
existing contractual relationship, so long as the plaintiff has
or would have rights under the existing or proposed contractual
relationship.”). Indeed, at oral argument, no one seemed to
doubt that if Ms. Beasley had in some way failed to perform
under the Agreement, Arcapita could use section 25.02 to hold
both her and Ventures liable.
Nonetheless, the majority holds that this language did not
make Ms. Beasley a party to the Agreement because “factually,
[she] did not individually execute the agreement.” See Op. at -
-. The majority believes that Ms. Beasley had to either sign
the Agreement twice, once as an individual and again as the
President of Ventures, or somehow otherwise note that she was
also signing the Agreement in her individual capacity. See Op.
at -- n.1. And yet, the terms of the Agreement did not
necessitate two signatures, and, given that Arcapita clearly
included section 25.02 as a means of securing Ms. Beasley’s
individual liability, any further notation would have been
superfluous. ∗ Again, that section states that Ms. Beasley –- who
∗
The suggestion that an amendment was somehow needed in
order for Ms. Beasley to obtain standing under the Agreement is
absurd. Section 25.02 clearly means that there was no manner in
which Ms. Beasley could have signed the Agreement that would
have prevented her from being held individually liable. Ms.
Beasley’s mere execution of the Agreement was her representation
to Arcapita that she would be held individually liable, and that
(Continued)
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is the actual signatory, and is repeatedly “above-named” without
title, J.A. 41-42 -– has “individually” executed the Agreement.
In fact, the Georgia law cited by the majority provides
still more interpretive presumptions in favor of Ms. Beasley’s
claim. Dewberry Painting Centers, Inc. v. Duron Inc. supports
my position in so far as it holds that the act of signing above
the title “President” will not, as a matter of law, preclude
personal liability. 508 S.E.2d 438, 440-41 (Ga. App. 1998).
Similarly, my colleagues mistakenly rely on Ga. Code Ann. § 11-
3-402(b), which applies only where a contract is “unambiguous.”
The Agreement is, at best, ambiguous, and thus we should instead
apply Ga. Code Ann. § 11-3-402(b)(2), which instructs us to
presume that the corporate representative is individually liable
on the instrument.
Mr. Beasley similarly became a party to the contract
through his repeated initialing of the Agreement as a
“franchisee.” See J.A. 41, 42. Further, since the Beasleys
she was able to bind Ventures as its chief executive officer.
The presence of a title beneath her signature was therefore
unnecessary and redundant. Thus, the Agreement would need to
have been amended so as to preclude her individual liability,
not to create it, and Ms. Beasley probably would have welcomed
such an amendment.
And yet, Arcapita likely required her to execute the
unmodified Agreement as a precondition to obtaining a franchise;
thereby making it impractical or impossible for her to have
insisted on any amendments.
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also functioned as sureties through the Guarantee of Franchise
Agreement, they likely have an alternative ground to claim
§ 1981 standing. See, e.g., RBA Capital, LP. v. Anonick, No.
3:08cv494, 2009 WL 960090, at *2 (E.D. Va. April 8, 2009)
(noting that “conceptually” a contract surety could bring a
lawsuit on behalf of the principal (citing Smith Setzer & Sons,
Inc. v. South Carolina Procurement Review Panel, 20 F.3d 1311,
1317 (4th Cir.1994))); see also Denny v. Elizabeth Arden Salons,
Inc., 456 F.3d 427, 436 (4th Cir. 2006) (permitting third-party
beneficiaries to bring § 1981 actions).
The Beasleys sought to pursue their American dream of
owning and operating a business franchise. However, according
to the allegations in the complaint, the discriminatory actions
of Arcapita kept their franchise from ever growing beyond its
infancy. Given the clarity of section 25.02 and the deference
we must give to the complaint at this early juncture, I am
convinced that the Beasleys factually were parties to the
Agreement. They are therefore entitled to the opportunity to
vindicate their rights under § 1981 in the district court.
Regrettably, however, the majority’s decision will bar any
court from ever reaching the merits of the Beasleys’ racial
discrimination claim. While the lawsuit may ultimately prove to
be unsuccessful, at present, there is no just basis for this
Court to hold that the Beasleys lack standing. For these
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reasons, I cannot join the “factual” analysis of the majority,
and must dissent.
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