Burger King Corp. v. Family Dining, Inc.

426 F.Supp. 485 (E.D. Pa. 1977)

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Nature of the Case

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Facts

Burger King Corp. (P) signed an agreement with Family Dining, Inc. (D) and gave them an exclusive territorial license to operate Burger King Restaurants. The contract called for D to open one a new restaurant every year for 10 years, and to operate at least 10 for the next 80 years. D did not strictly comply with these terms, but P did not object. The parties entered into a Modification of the Territorial Agreement whereby P agreed to waive D's failure to comply with the development rate. There is nothing contained in the record which indicates that Burger King received anything of value in exchange for entering this agreement. While behind the original schedule it was recognized that D was a competent franchisee. In August 1970, a location selected by D was rejected by the National Development Committee. The reasons offered in support of the decision was it was an exercise of discretion. The only plausible reason was that the site was 2.7 miles from another Burger King franchise operated by Pete Miller outside D's exclusive territory. P management was well aware, where it was one thing to select a location and quite another to actually develop it. Local governing bodies were taking a much stricter view toward allowing this type of development. The eighth Restaurant was opened ahead of schedule on October 7, 1970, at 601 South Broad Street in Lansdale, Pennsylvania. And in December 1971, P approved D's proposed sites for two additional Restaurants. In early 1972, P's management agreed that even though behind schedule, D was in compliance with the original agreement. P was in the process of developing four sites at that time (two more than required). In April 1973, P approved a proposed site. But as of May 10, 1973 (the time in the original letter), neither the ninth or the tenth Restaurant had been opened or under active construction. P complained to D by letter. Eventually, after some internal issued at P, P considered the Territorial Agreement terminated in its letter of November 6, 1973. The parties attempted to negotiate their differences with no success. The reason for the lack of success is understandable given that P from the outset considered exclusivity a non-negotiable item. On September 7, 1974, D began actual construction of the ninth Restaurant. In February 1975, P notified D that a franchise agreement (license) had to be entered for the additional Restaurant without which D would be infringing P's trademarks. A similar notice was given in April 1975, in which P indicated it would retain counsel to protect its rights. Nevertheless, D proceeded with its plans to open the Restaurant. In May 1975, P filed a complaint seeking to enjoin the use of P trademarks by D at the Warminster Restaurant. A TRO was granted, and on May 13, 1975, the parties reached an agreement on terms under which the trademarks could be used at the Warminster Restaurant. P filed an amended complaint seeking the instant declaratory relief. D opened its tenth Restaurant in Willow Grove, Pennsylvania, the construction of which began on March 28, 1975.