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Forsyth Consulting Inc. v. Zoe's Kitchen Inc.

United States District Court, N.D. Alabama, Southern Division

April 10, 2017

FORSYTH CONSULTING, INC., Plaintiff/Counterclaim Defendant,
v.
ZOE'S KITCHEN, INC., Defendant/Counterclaim Plaintiff.

          MEMORANDUM OPINION AND ORDER [1]

          JOHN H. ENGLAND, III UNITED STATES MAGISTRATE JUDGE

Plaintiff Forsyth Consulting, Inc. (“Plaintiff” or “Forsyth”) initiated this breach of contract action against Defendant Zoe's Kitchen, Inc. (“Defendant” or “Zoe's”) in the Circuit Court of Jefferson County, Alabama. (Doc. 1-1). Zoe's removed the action to this Court based on diversity of citizenship, and it asserts counterclaims against Forsyth for tortious interference with business relations and breach of contract. (Docs. 1 & 6). The parties have filed cross-motions for summary judgment, and Forsyth has moved to strike. (Docs. 29, 33 & 55). The motions are fully briefed and ripe for review. (Docs. 29, 30, 33-35, 47-51, 55 & 57-61). For the reasons stated below, the court DENIES Forsyth's motion to strike, finds that Forsyth's motion for summary judgement is due to be GRANTED IN PART and DENIED IN PART, and finds that Zoe's motion for partial summary judgment is due to be DENIED.

         I. Standard of Review [2]

         Under Rule 56(a) of the Federal Rules of Civil Procedure, summary judgment is proper “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.” Rule 56 “mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 447 U.S. 317, 322 (1986). The moving party bears the initial burden of proving the absence of a genuine issue of material fact. Id. at 323. The burden then shifts to the nonmoving party, who is required to “go beyond the pleadings” to establish there is a “genuine issue for trial.” Id. at 324. (citation and internal quotation marks omitted). A dispute about a material fact is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

         The Court must construe the evidence and all reasonable inferences arising from it in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, (1970); see also Anderson, 477 U.S. at 255 (all justifiable inferences must be drawn in the non-moving party's favor). Any factual disputes will be resolved in Plaintiff's favor when sufficient competent evidence supports Plaintiff's version of the disputed facts. See Pace v. Capobianco, 283 F.3d 1275, 1276-78 (11th Cir. 2002) (a court is not required to resolve disputes in the non- moving party's favor when that party's version of the events is supported by insufficient evidence). However, “mere conclusions and unsupported factual allegations are legally insufficient to defeat a summary judgment motion.” Ellis v. England, 432 F.3d 1321, 1326 (11th Cir. 2005) (per curiam) (citing Bald Mtn. Park, Ltd. v. Oliver, 836 F.2d 1560, 1563 (11th Cir. 1989)). Moreover, “[a] mere ‘scintilla' of evidence supporting the opposing party's position will not suffice; there must be enough of a showing that the jury could reasonably find for that party.” Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990) (citing Anderson, 477 U.S. at 252).

         II. Summary Judgment Facts

         This action arises from a dispute over an agreement between the parties for the provision of background music in Zoe's restaurants. Zoe's Kitchen, Inc. operates Mediterranean-inspired restaurants and originated as an Alabama corporation in 1995. (Doc. 28 at Exh. 2; Doc. 35 at 1, ¶ 1; Doc. 50 at 1, ¶ 1).[3] The Alabama corporation dissolved in April 2006, and Zoe's is now a Delaware corporation, which formed in October 2007. (Doc. 28 at Exh. 2). Forsyth Consulting is an Alabama corporation in the business of providing music and music-related services to restaurants and other businesses, and it is only licensed to do business in Alabama. (Id. at Exh. I, pp. 20-21, 26).

         Greg Dollarhyde, Zoe's former CEO, wanted to unify the music played in its restaurants, and he learned about Forsyth when he met Kevin Forsyth, its President. (Doc. 28 at Exh. 4, pp. II, 13-14). Then, sometime prior to January 2009, Kevin Forsyth contacted Archie Andrews, Director of Construction for Zoe's, about providing music and music-related services to Zoe's restaurants. (See Doc. 28 at Exh. 1, pp. 64-65; Exh. 3, p. 49; Exh. 5, p. 1). Forsyth presented Zoe's with an agreement entitled Foreground Music Services Agreement and dated January 3, 2009 (the “Agreement”). (Id. at Exh. 5, p. 1). The Agreement provides in pertinent part as follows:

This Agreement is made this 3rd day of January, 2009 between Forsyth Consulting, Inc., an Alabama corporation, . . . (hereinafter called Company) and Zoe's Kitchen, Inc., an Alabama corporation, the owner and operator of (locations shown on Addendum A attached) . . . (hereinafter called Subscriber).

         Wherein it is mutually agreed:

1. Company hereby agrees to make available to Subscriber, at the above designated premises, the Company Program Service . . . . Subscriber agrees to and does hereby accept the Company Program Service . . . .
2. Company Program Service to be provided: digital internet controlled music service (2 zones) provided through Subscriber owned digital music server and speaker system. Company Program Service includes copyrighted music, internet based control of all programming features including all future updates, training, and custom programming assistance along with insertion of Subscriber provided WAV file ads. Any locations opened by Subscriber will install Company Program Service permitting Company to provide Proprietary Pricing of Company Program Service.
3. Subscriber hereby agrees to pay to Company . . . the following: $[X][4] per location payable hereof at the beginning of each year during the term of this Agreement. . . .
4. This Agreement shall become effective on the commencement date indicated below and shall remain in effect for successive sixty (60) month periods unless terminated by either party at the end of any such period by written notice sent to the other by registered mail not later than ninety (90) days prior to the expiration thereof.[5] . . .
[ . . . ]
11. Entire Agreement: All representations and promises of every kind are merged into this Agreement which constitutes the entire and only Agreement between the Subscriber and Company . . . and no modification or failure to enforce any of the provisions thereof shall be valid or deemed a waiver hereof unless made in writing and signed by an officer of Company. . . .
Commencement Dated: March 1, 2009[6]

(Doc. 28 at Exh. 5, pp. 1-2) (emphasis in original omitted).

         Kevin Forsyth drafted the Agreement without the help of an attorney, and he testified that the Agreement was one he used with other customers. (Id. at Exh. 1, p. 63). Andrews did not negotiate any changes to the Agreement before signing it. (Id.). Andrews signed the Agreement on January 4, 2009, on behalf of Zoe's, although he did not have express authority to execute contracts for Zoe's.[7] (Id. at Exh. 4, pp. 15, 18; Exh. 5, p. 2). No one else from Zoe's was present when Andrews signed the Agreement. (Id. at Exh. 1, p. 64). Along with executing the Agreement, Andrews also signed Addendum A to the Agreement, which listed Zoe's locations to receive music services from Forsyth. (Id. at Exh. 5, p. 3). Andrews executed revisions to Addendum A on March 4, 2009 and June 30, 2009; the revisions added new locations to receive music services from Forsyth. (Id.).

         Jason Morgan, Zoe's former CFO, learned about the Agreement after Andrews signed it; neither Morgan nor counsel for Zoe's reviewed the Agreement before it was executed.[8] (See Doc. 28 at Exh. 4, p. 18). Morgan informed both Andrews and Forsyth that Andrews did not have authority to sign the contract. (Id., pp. 18-19). Morgan also testified that he told Forsyth that Zoe's was not bound by the Agreement because Andrews had signed it, but that Zoe's “agreed to honor” the Agreement. (Id., pp. 23, 27). Between July 14, 2009 and December 16, 2009, Morgan signed at least six revised versions of Addendum A to the Agreement, which added new locations to be serviced by Forsyth. (Id. at Exh. 5). Morgan had authority to sign contracts and addenda to contracts on Zoe's behalf.[9] (Id., pp. 15, 2).

         Pursuant to the Agreement, Forsyth provided internet-based music programming, which is defined in the Agreement as the Company Program Service, for Zoe's restaurants. (Doc. 28 at Exh. 5, p. 1). The Company Program Service Forsyth provided was a product owned by American Music Environments (“AME”), and Forsyth was authorized to provide the AME product pursuant to the terms of a Distribution Agreement between Forsyth and AME. (Id. at Exh. 1, pp. 27-28, 31; Exh. 20). The Distribution Agreement set the price Forsyth paid to AME for the Company Program Service, which was less than the amount Forsyth charged Zoe's for the Service. (Id. at Exh. 20, p. 7). The Distribution Agreement also provided that all information contained in the agreement is proprietary and confidential, and it recognized all music service agreements between Forsyth and its customers are “proprietary in nature.” (Id. at p. 4). Finally, the Distribution Agreement provided Forsyth with an exclusive right to sell the Company Program Service in Alabama and to certain “exclusive authorized chain accounts.” (Id. at pp. 1-2).

         Forsyth initially provided the password to control the music programming to Dollarhyde and worked with Dollarhyde on the original music selections. (Doc. 28 at Exh. 1, p. 69; Exh. 3, p. 56; Exh. 4, p. 11). Additionally, although the Agreement did not provide for the sale or purchase of music equipment, Zoe's initially purchased the digital music servers for each of its locations from Forsyth. (See Id. at Exh. 1, pp. 94, 217; Exh. 5). Finally, Zoe's installed the music services in the locations identified in Addendum A of the Agreement and paid Forsyth for the services. (See Id. at Exh. 4, pp. 31-32; Doc. 29 at ¶ 47; Doc. 47 at ¶ 47).

         By 2012, Zoe's relationship with Forsyth had deteriorated because Zoe's found Kevin Forsyth difficult to work with, and Zoe's attempted to obtain the AME music services directly from AME or from another vendor. (Doc. 28 at Exh. 3, pp. 60-61; Exh. 4, pp. 52-53; Exh. 10). Accordingly, in or around August 2012, Morgan told Kevin Forsyth that Zoe's was unhappy with its relationship with Forsyth and wanted to talk about lower pricing and getting the AME service from a different source. (Id. at Exh. 4, pp. 51-53). Around the same time, Randy Barnett, Zoe's Director of IT, called Kevin Forsyth and told him that Zoe's “was going to “bid out the music and sound systems, ” and Barnett also told him that Forsyth needed to lower its prices for the music services and equipment.[10] (Id. at Exh. 1, pp. 163-164; Doc. 34 at Exh. A-23). After Barnett talked with Kevin Forsyth, Morgan sent an email to Kevin Forsyth stating in part:

[I]t appears [Zoe's has] a five year [A]greement that expires in January 2014. I'm requesting that we relook at the [A]greement and that you give us your best price for the annual music service. I'm open to extending the term, but would need to see a price savings. Otherwise, we will do an RFP for music service and take the best provider/price in January 2014.

(Doc. 28 at Exh. 13, p. 2).

         Zoe's then bid out the provision of music equipment through a request for proposal (“RFP”) process in October 2012, but it did not bid out the music services at that time.[11] (Id.; Doc. 28 at Exh. 4, p. 63; Doc. 34 at Exh. D-31). Forsyth participated in Zoe's RFP process for music equipment, but Zoe's did not select Forsyth's proposal; instead, selecting Advanced Pro Solutions (“APS”) to provide its music equipment. (Doc. 28 at Exh. 1, pp. 157-59; Doc. 34 at Exh. A-8; Exh. A-23).

         In 2013, Rachel Phillips-Luther, Zoe's Vice President of Marketing, took over responsibility for handling music services for its restaurants. (Doc. 28 at Exh. 4, p. 82; Exh. 7, pp. 9, 13). By mid-2013, Zoe's decided to do a RFP for music services at its restaurants.[12] (See Id. at Exh. 7, pp. 27-28; Doc. 34 at Exh. A-26). Kevin Forsyth travelled to Dallas, Texas in August 2013, to meet with Kevin Miles, Zoe's President and CEO, to make a “pitch” for Forsyth's services. (Doc. 28 at Exh. 1, pp. 174-75; Exh. 3, p. 15). Miles testified that he and Kevin Forsyth discussed the RFP process during the meeting and that “[i]t was known in the RFP, that if he could not compete with others, then there would be a new contract with him or with someone else, so he fully understood that he either participated in that and won the business or didn't.” (Doc. 28 at Exh. 3, pp. 94-96). At that time, Kevin Forsyth understood that Zoe's would honor the Agreement through the end of the initial term and after that the provider of music services would be up for bid. (Id. at Exh. 1, p. 175). However, Kevin Forsyth also testified that he was not sure if Zoe's music service provider after February 2014, would be determined by the RFP process. (See Id. at p. 176). Additionally, Miles testified that the RFP process did not necessarily mean Zoe's would terminate the Agreement with Forsyth. (Id. at Exh. 3, p. 69).

         Prior to August or September 2013, Phillips-Luther identified another potential vendor of music services, Ambiance Radio, LLC, and she provided it with the formal requirements of the RFP for music services. (See Doc. 28 at Exh. 7, pp. 27-28). Additionally, Phillips-Luther sent Kevin Forsyth an email in September 2013, stating in pertinent part:

I have been working to secure a competitive overview of music services and to adequately compare all vendors I'd love the following:
Summary of your approach to building play lists . . . Proposal for music services beyond our current agreement (which expires in Feb 2014). Proposal should include annual fee for service of two zones on existing players and cost to install new locations. . . . Please base on 3-year agreement.

(Doc. 34 at Exh. A-32).

         Forsyth submitted a proposal to Phillips-Luther dated October 16, 2013, for the provision of music services beyond February 2014. (Doc. 34 at Exh. A-37). The proposal's logistics and pricing summary includes three different proprietary pricing options: (1) $775.00 per year for a sixty-month term; (2) $795.00 per year for a thirty-six-month term; or (3) $825.00 per year for a twenty-four-month term. (Id.). After receiving Forsyth's proposal, Phillips-Luther had a phone conversation with Kevin Forsyth in late 2013, to discuss the proposal and “demo the revised music selections[.]” (Doc. 28 at Exh. 7, p. 33). During the conversation, Phillips-Luther told Kevin Forsyth that the pricing in Forsyth's proposal was more than the other vendor's proposal and that “if he couldn't come down on his pricing, that there was no way that [she] could even consider him for a new agreement[.]”[13] (Id. at Exh. 7, p. 34). Kevin Forsyth testified that Phillips-Luther did not tell him anything definitive during the conversation about the results of Zoe's RFP. (Id. at Exh. 1, pp. 192, 211-12). Kevin Forsyth sent a letter to Phillips-Luther dated January 13, 2014, referencing the proposal for services Forsyth submitted in October 2013, and stating that Forsyth's “proven track record along with over $400, 575.00 in saving should provide [Zoe's] with the confidence to modify our existing Agreement going forward.”[14] (Doc. 34 at Exh. A-49). After Plaintiff and Ambiance Radio submitted their proposals, Phillips-Luther eventually selected Ambiance Radio to provide music services for Zoe's restaurants.[15]

         On February 3, 2014, Phillips-Luther sent Kevin Forsyth an email regarding music services and attaching documents entitled “Forsythe [sic] Consulting Notice” and “Transition Plan Music Services.” (Doc. 28 at Exh. 14). Phillips-Luther's email states in full as follows:

As you are aware, we have spent the better part of six months investigating and researching music solutions for Zoes Kitchen. AME/Forsythe Consulting has been a valued partner and we are appreciative of the energy, support and time invested in our business but we have identified an alternate service provider that can best suit our needs in the coming years.
Please accept the attached letter as formal notice of termination of services .
We are very appreciative of all you and your team have done to contribute to our success and wish you only the best in your future endeavors.

(Id.). The letter attached to the email reiterates that Zoe's identified an alternative provider of music services and states that “[p]er the [A]greement dated January 1, 2009 [sic], we will continue to open new locations and renewals with [Forsyth] through March 31, 2014. As of April 1st, new locations will no longer be serviced by [Forsyth].” (Id. at Exh. 15). Phillips-Luther drafted the letter without assistance, and she characterized it as a “transition letter” in her deposition. (Id. at Exh. 7, pp. 74-76).

         The day after receiving the February 3, 2013 letter from Phillips-Luther, Forsyth sent a letter back to her expressing his surprise “to receive an email concerning early termination of music services” and stating that the Agreement required “a minimum ninety (90) day termination notice [] prior to expiration.” (Doc. 28 at Exh. 16). The letter further states:

Based on recent discussions and correspondence, cost-savings proposals presented last October, and the latest positive feedback regarding your preference for our music program, along with the recent executions of Addendums providing services to new locations, [Forsyth] believed it was your intent to continue services with Forsyth Consulting [].

(Id.).[16]

         On March 27, 2014, Forsyth's former counsel sent letters to Ambiance Radio and APS, the company responsible for installing equipment and Ambiance Radio service in Zoe's restaurants. (Doc. 28 at Exhs. 17 & 18). The letters advise Ambiance Radio and APS that Forsyth has “a guaranteed, long-term contract to provide background music services to [Zoe's] at all existing and newly opened locations” and demand that Ambiance Radio and APS cease all activities with Zoe's. (Id.). This action followed.

         III. Analysis

         Forsyth asserts two breach of contract claims against Zoe's based on allegations that Zoe's breached the Agreement by improperly terminating it in violation of paragraph 4 and by not paying Forsyth for certain invoices. (Doc. 1-1). For its part, Zoe's asserts two counterclaims against Forsyth: one claim for tortious interference with business relations based on the letters sent to Ambiance Radio and APS, and a second claim for breach of contract. (Doc. 6). In its counterclaim for breach of contract, Zoe's alleges Forsyth breached the contract by failing to provide it with training, custom programming assistance, and proprietary pricing for the music ...


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