Blandino Jr. v. Guerrero

DECISION & ORDER   A franchisor must reserve certain controls in a franchise agreement to protect the franchisor’s trademarks and goodwill, and the value of the franchise brand (see Zeidman & Lowell, Legal Aspects of Selling and Buying, §9:85 [3d ed]). The reservation of controls over a franchised business, however, may invite the question of whether the franchisor possesses such power over the franchised business that the franchisor should be vicariously liable for the tortious conduct of the franchisee. The present motion tests whether the franchisor of a ubiquitous New York City franchise — Mister Softee — is vicariously liable for the negligence of its franchisee or the franchisee’s lessees in the manner in which they drove an ice cream truck associated with a Mister Softee franchised business. Factual & Procedural Background On August 14, 2014, plaintiff was a passenger in a vehicle operated by defendant Perez. That vehicle was involved in an accident with an ice cream truck that was parked near the intersection of East 156th Street and Bruckner Boulevard in Bronx County. The ice cream truck, which was occupied by defendants Guerrero and Zambrano, bore a Mister Softee logo. Plaintiff commenced several actions to recover damages for personal injuries he allegedly sustained as a result of the accident, and the actions were ultimately consolidated. In addition to the driver of the vehicle in which plaintiff was a passenger (defendant Perez) and the occupants of the ice cream truck (defendants Guerrero and Zambrano), plaintiff named as defendants an individual and several entities associated with the ice cream truck and the business related thereto: Pancho, Southern Blvd. Depot, Inc. (“Southern Blvd. Depot”), Spabo Ice Cream Corp. (“Spabo”), and Mister Softee Inc., Mister Softee Franchise LLC and Mister Softee Franchises LLC (“the Mister Softee defendants”).¹ Depositions of the parties shed considerable light on the relationships among the entities and individuals associated with the ice-cream-truck business operation. Conway, a vice president of defendant Mister Softee Inc., testified that Mister Softee Inc. is a franchise company that builds and sells specially fitted and painted ice cream trucks to Mister Softee franchisees. (A Mister Softee franchisee must purchase its ice cream truck from the Mister Softee defendants.) Although it is the franchisor, defendant Mister Softee Inc. does not issue franchises to franchisees; the selection of suitable franchisees and the issuance of franchises to such franchisees is performed by defendant Spabo, an independent “distributor,” under an operating agreement between Mister Softee Inc. and Spabo.² According to Conway, Spabo is neither owned nor controlled by the Mister Softee defendants. Conway testified that the Mister Softee defendants offer ice-cream-truck maintenance and repair services for Mister Softee franchisees, but the franchisees need not use those services. Conway explained that, by virtue of the franchise agreements between Spabo and the franchisees, franchisees are generally required to purchase their inventory (e.g., ice cream, supplies) from a designated supplier, defendant Southern Boulevard Depot, which is neither owned nor controlled by the Mister Softee defendants. The Mister Softee defendants do not sell or otherwise offer inventory for ice cream trucks. Conway’s testimony disclosed that the Mister Softee defendants derive revenue from the sale of trucks, the provision of maintenance and repair services, and receipt of royalty payments called for by the operating agreement with Spabo and the individual franchise agreements between Spabo and the franchisees. Defendant Pancho testified that he was a Mister Softee franchisee at the time of the accident, and that he owned and procured insurance for the ice cream truck involved in the accident, a 1983 GMC. Although defendant Pancho rented an ice cream truck to defendant Guerrero, Pancho asserted that he did not rent the ice cream truck involved in the accident to Guerrero; Pancho believed that Guerrero and Zambrano used the ice cream truck involved in the accident without his permission.³ Defendant Pancho testified that the Mister Softee defendants did not own or control the ice cream truck involved in the accident. Defendant Guerrero was inside the ice cream truck involved in the accident at the time the accident occurred, preparing the truck to conduct business that day. According to defendant Guerrero, defendant Pancho held a Mister Softee franchise and owned the ice cream truck involved in the accident, and that Guerrero rented that truck from Pancho. Defendant Guerrero also testified that, under his arrangement with defendant Pancho, Guerrero was responsible for maintaining the ice cream truck involved in the accident. Defendant Guerrero stated that the Mister Softee defendants neither owned nor controlled the ice cream truck involved in the accident. Defendant Zambrano, who was defendant Guerrero’s wife, was inside the ice cream truck with Guerrero at the time of the accident. Defendant Zambrano testified that defendant Guerrero was largely responsible for the couple’s ice cream business, and that she assisted him with the business. The operative franchise agreement between defendant Spabo (as sub-franchisor) and defendant Pancho (as franchisee) was produced during discovery.⁴ The agreement, which granted defendant Pancho a Mister Softee franchised business within a certain Bronx territory, contained the following acknowledgments and provisions that are material to the present motion: the Mister Softee defendants developed a business system for the distribution of ice cream from specially-equipped vehicles bearing “Mister Softee” marks (and playing a copyrighted jingle), and defendant Spabo had the exclusive right to grant franchises to qualified individuals to distribute approved ice-cream products using the Mister Softee business system; the franchised business had to be operated in strict conformity with the franchise agreement, which incorporated by reference the terms of the Mister Softee defendants’ confidential operations manual, to maintain the franchise’s standards of quality, cleanliness, appearance and service, and, ultimately, enhance the reputation, stature and value of the Mister Softee brand; the Mister Softee defendants would provide defendant Pancho with an “initial training program,” and, potentially, additional training programs, refresher courses or both; in light of the nature of the franchised business (e.g., food service provided in a motor vehicle), the Mister Softee defendants and defendant Spabo reserved the right to require defendant Pancho to terminate any ice cream truck operator who did not maintain a well-groomed appearance, caused a hazard to the public, behaved in a manner that was detrimental to the reputation of the Mister Softee brand, or violated the provisions of the franchise agreement; the Mister Softee defendants and defendant Spabo reserved the right to inspect defendant Pancho’s ice cream truck to ensure that it was being maintained in accordance with the franchise agreement; defendant Spabo (not the Mister Softee defendants) had the power to terminate the franchise agreement in various situations; defendant Pancho was responsible for obtaining all permits and licenses necessary to operate the franchised business, complying with all laws and regulations regarding the operation of the business, and paying all taxes due as a result of the operation of the business; defendant Pancho was required to use materials, products, supplies, signs, and equipment, prescribed by the Mister Softee defendants, and employ methods of production and preparation prescribed by or in conformity with the Mister Softee defendants’ standards and specifications; defendant Pancho was responsible for maintaining liability insurance for his truck, and ensuring that the Mister Softee defendants and defendant Spabo were named as additional insureds; Spabo had to approve of a potential liability insurance carrier, and Spabo had the right to increase or otherwise modify the minimum liability insurance requirements for the truck; defendant Pancho was required to defend, indemnify and hold harmless the Mister Softee defendants and defendant Spabo from any claims and lawsuits arising, in whole or in part, from the operation of the franchised business; defendant Pancho was required to identify himself as the owner of the franchised business, and to use Mister Softee proprietary marks only for the purposes of advertising and operating the business; the agreement was “a personal contract” and it was presumed that defendant Pancho would be the operator of the truck; defendant Pancho’s rights under the agreement were “personal,” and he was not permitted to transfer or assign those rights without defendant Spabo’s prior written approval; and the agreement expressly provided that defendant Pancho was “an independent contractor responsible for full control over the internal management and daily operation of the franchised business,” and stated that neither defendant Spabo nor the Mister Softee defendants “shall … be liable by reason of any of [Pancho's] acts or omissions in the operation of the franchised business for any claim or judgment arising therefrom against [Pancho], Spabo or [the] Mister Softee [defendants]” (id at 15.1). The Mister Softee Defendants’ Motion The Mister Softee defendants seek summary judgment dismissing the complaint as against them and the cross claims against them, arguing that they have no direct or vicarious liability for the subject accident. The Mister Softee defendants highlight that they did not own the ice cream truck at the time of the accident, and that neither defendant Guerrero nor defendant Zambrano was employed by or an agent of the Mister Softee defendants. The Mister Softee defendants highlight also that they have no contractual relationship with defendant Guerrero or defendant Zambrano. Because they are franchisors that neither owned the ice cream truck nor controlled the day-to-day operations of the truck, the Mister Softee defendants maintain that they are not liable to plaintiff. Plaintiff opposes the Mister Softee defendants’ motion, arguing that the motion is premature because the moving defendants have not complied with discovery orders. Regarding the substance of the motion, plaintiff contends that vicarious liability may be imposed on the Mister Softee defendants for the negligence of defendants Guerrero and Zambrano because the Mister Softee defendants knew or should have known that their franchisees “often rented Mister Softee [ice cream trucks] to third parties,” and the Mister Softee defendants exercised “considerable control over the day to day operations of the franchisee” under the franchise agreement between defendant Spabo and defendant Pancho. Defendants Guerrero and Zambrano oppose the Mister Softee defendants’ motion, arguing that, based on Conway’s deposition testimony and the franchise agreement, triable issues of fact exist as to whether the Mister Softee defendants controlled the day-to-day operations of the franchisees’ ice-cream-truck businesses. Defendants Guerrero and Zambrano argue too that triable issues of fact exist as to whether an apparent or ostensible agency relationship existed between the Mister Softee defendants and the franchisees. Defendant Perez essentially adopts defendants Guerrero and Zambrano’s arguments. Analysis The main subject in dispute on this motion is whether vicarious liability may be imposed on the Mister Softee defendants because they are the franchisors of the franchised business whose ice cream truck was involved in the accident.⁵ “The mere existence of a franchise agreement is insufficient to impose vicarious liability on the franchisor for the acts of its franchisee; there must be a showing that the franchisor exercised control over the day-to-day operations of its franchisee” (Martinez v. Higher Powered Pizza, Inc., 43 AD3d 670, 671 [1st Dept 2007]; see Hernandez v. Denny’s Corp., 177 AD3d 1372, 1376 [4th Dept 2019]; see also Stern v. Starwood Hotels and Resorts Worldwide, Inc., 149 AD3d 496, 497 [1st Dept 2017]; Baker v. Getty Oil Co., 242 AD2d 644, 645 [2d Dept 1997]). “[T]he most significant factor is the degree of control that the franchisor maintains over the daily operations of the franchisee or, more specifically, the manner of performing the very work in the course of which the accident occurred” (Khanimov v. McDonald’s Corp., 121 AD3d 1050, 1051 [2d Dept 2014]; Hart v. Marriott Intl., Inc., 304 AD2d 1057, 1058 [3d Dept 2003] [internal quotation marks omitted]). Here, the Mister Softee defendants made prima facie showings that they did not exercise control over the day-to-day operations of the franchised business, generally, and did not exercise control over the manner in which the ice cream truck was driven by the franchisee and his lessees, specifically. Under the franchise agreement, defendant Pancho was to identify himself as the owner of the franchised business, and the agreement stated that Pancho was “an independent contractor responsible for full control over the internal management and daily operation of the franchised business” (emphasis added) (see Martinez v. Higher Powered Pizza, Inc., 43 AD3d at 671; Hart v. Marriott Intl., Inc., 304 AD2d at 1058). Defendant Pancho was presumed to be the one who would operate the subject truck under the franchise agreement, and he was the one who decided to permit defendants Guerrero and Zambrano to lease from him the franchised business.⁶ Moreover, defendant Pancho was responsible for obtaining liability insurance for the ice cream truck, and complying with all laws and regulations regarding the operation of the franchised business. The franchise agreement affords the Mister Softee defendants numerous rights and powers with respect to the franchised business. The majority of those rights and powers, however, relate to ensuring the safety and quality of the products sold, and promoting efficient, clean and courteous customer service (see Martinez v. Higher Powered Pizza, Inc., 43 AD3d at 671). The Mister Softee defendants did not retain control over the manner in which the ice cream truck was driven by the franchisee and his lessees (see id. at 671-672; Hernandez v. Denny’s Corp., 177 AD3d at 1376; Tobacco v. North Babylon Fire Dept., 251 AD2d 398, 399-400 [2d Dept 1998]; see also Giordano v. Sheridan Maintenance Corp., 38 AD3d 552, 553 [2d Dept 1971]). That is to say, the Mister Softee defendants lacked the requisite control over the alleged cause of plaintiff’s injuries, i.e., the manner in which the subject truck was driven (see Khanimov v. McDonald’s Corp., 121 AD3d at 1051). Neither the Mister Softee defendants’ right to require defendant Pancho to terminate any ice cream truck operator who did not maintain a well-groomed appearance, caused a hazard to the public, behaved in a manner that was detrimental to the reputation of the Mister Softee brand, or violated the provisions of the franchise agreement, nor their right to inspect the ice cream truck to ensure that it was being maintained in accordance with the franchise agreement, provides a basis for imposing liability on them (see Schoenwandt v. Jamfro Corp., 261 AD2d 117, 117 [1st Dept 1999]). Such reserved rights, which may or may not be exercised by the franchisor, do not evince control over day-to-day operations of the franchised business. Ultimately, the Mister Softee defendants established, prima facie, that they did not hire the operators of the subject truck, maintain control over the franchisee’s hiring practices, or maintain the right to direct and control the manner in which the ice cream truck was driven (see Andreula v. Steinway Baraqafood Corp., 243 AD2d 596, 596 [2d Dept 1997]). In opposition, the non-moving parties failed to raise a triable issue of fact as to whether the Mister Softee defendants exercised control over the day-to-day operations of defendant Pancho’s franchised business, generally, and whether the Mister Softee defendants exercised control over the manner in which the ice cream truck was driven by Pancho and defendants Guerrero and Zambrano, specifically. To the extent defendants Guerrero and Zambrano assert that summary judgment should be denied to the Mister Softee defendants because a triable issue of fact exists regarding whether an apparent or ostensible agency relationship existed between the Mister Softee defendants and defendant Pancho, that assertion is without merit. In opposition to the Mister Softee defendants’ prima facie showing that no such relationship existed, the non-moving parties offered no evidence suggesting that plaintiff relied on any representation or conduct by the Mister Softee defendants related to the manner in which the ice cream truck would be operated (see generally Hart v. Marriott Intl., Inc., 304 AD2d at 1059 n 1; Balsam v. Delma Engineering Corp., 139 AD2d 292, 297 [1st Dept 1988]). Lastly, plaintiff’s argument that the Mister Softee defendants’ motion is premature because they owe discovery is not persuasive. Plaintiff does not identify any specific outstanding discovery that is material to the Mister Softee defendants’ motion (see Billy v. Consolidated Mach. Tool Corp., 51 NY2d 152, 163-164 [1980]). Accordingly, it is hereby ORDERED that the motion of defendants Mister Softee Inc., Mister Softee Franchise LLC and Mister Softee Franchises LLC, seeking summary judgment dismissing the complaint as against them and all cross claims against them is granted, and the complaint as against them and all cross claims against them are dismissed; and it is further ORDERED that the clerk is directed to enter judgment dismissing the complaint as against defendants Mister Softee Inc., Mister Softee Franchise LLC and Mister Softee Franchises LLC, and all cross claims against them. The parties are reminded of the June 19, 2020 compliance conference before the undersigned. This constitutes the decision and order of the court. Dated: March 9, 2020