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Fantastic Sams Salons Corp. v. Pstevo, LLC

United States District Court, N.D. Illinois, Eastern Division

March 22, 2017

FANTASTIC SAMS FRANCHISE CORP., Plaintiff,
v.
PSTEVO, LLC and JEREMY BAKER, Defendants.

          OPINION AND ORDER

          SARA L. ELLIS United States District Judge.

         Plaintiff Fantastic Sams Franchise Corp. (“FSF”)[1] brings this breach of contract action against Defendants PSTEVO, LLC (“PSTEVO”) and Jeremy Baker (collectively, “Defendants”), seeking damages for PSTEVO's breach of two Salon License Agreements (“SLAs”) with FSF and Baker's failure to honor his obligation to guarantee PSTEVO's debts to FSF. FSF moves for summary judgment [60] on these claims and on Defendants' counterclaims against FSF for breach of contract and unjust enrichment. Because FSF has established that it is entitled to summary judgment on all claims and counterclaims, and because Defendants have not filed any response to the motion for summary judgment, the Court grants FSF's motion for summary judgment.

         BACKGROUND[2]

         FSF is a franchisor of the Fantastic Sams Salons brand of haircare salons. FSF enters into SLAs with franchisees. In 2012 FSF entered into a Multi-Unit Development Agreement (“MUDA”) and SLA with PSTEVO that granted PSTEVO a franchise to operate a Fantastic Sams Salon in Elgin, Illinois for a ten-year term. The SLA granted PSTEVO the right to use FSF's proprietary systems and marks in connection with the operation of the salon. In late 2013, FSF and PSTEVO entered into a second SLA, granting PSTEVO a franchise to open a salon in Algonquin, Illinois for a ten-year period.

         Pursuant to both agreements, PSTEVO agreed to make weekly payments to FSF for licensing fees (“WLF”) and national advertising fees (“NAF”). PSTEVO also agreed to purchase FSF branded products as well as other products FSF has established purchasing arrangements for. Baker personally guaranteed PSTEVO's obligations under both SLAs. At the time the parties entered into the SLAs, they agreed to abate all but $100 of the WLF for a term that was ultimately extended, through subsequent agreements, through January 26, 2017. Under the terms of the abatements, FSF continued to accrue the full WLF amount owed by PSTEVO, but agreed to ultimately waive collection of that amount if PSTEVO continued to comply with all terms of the SLAs.

         At the end of January 2015, PSTEVO stopped paying its NAF. On February 20, 2015, FSF notified PSTEVO that its failure to pay the NAF is an act of default and afforded PSTEVO thirty days to cure their failure to pay. PSTEVO and Baker refused to cure the default. On April 10, 2015, Defendants closed the Algonquin, Illinois salon, and on April 18, 2015 they closed the Elgin, Illinois salon. FSF notified Defendants on May 1, 2015 that their abandonment of the salons terminated the SLAs. At the time Defendants closed the salons, FSF had abated $25, 115 in WLF and Defendants had not paid $3, 436 in NAF. Between the closing of the salons and the filing of FSF's summary judgment motion, an additional $72, 223.78 in unpaid fees accrued. Furthermore, between the filing of the motion and the contractual end date of the SLAs, which were set to end on December 26, 2022 and October 30, 2023, Defendants would have to pay a total of $369, 658.87. This figure is calculated using the average Consumer Price Index increase over the last ten years and reduces the total to their net present value using a discount rate of 3%. FSF seeks to recover all $470, 433.65 of these unpaid fees as damages.

         The agreements also state that if either party institutes a legal action to enforce its rights under the agreements, the prevailing party is entitled to recover its attorneys' fees, court costs, and other litigation expenses from the other party.

         LEGAL STANDARD

         Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56. To determine whether a genuine issue of fact exists, the Court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits, if any, that are part of the record. Fed.R.Civ.P. 56 & advisory committee's notes. The party seeking summary judgment bears the initial burden of proving that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). In response, the non-moving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above to identify specific material facts that demonstrate a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the Court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

         Where a party does not respond to a motion for summary judgment, their failure to do so does not automatically entitle the moving party to judgment on its claims, as the Court must still ensure that the moving party is entitled to judgment as a matter of law. Keeton v. Morningstar, Inc., 667 F.3d 877, 884 (7th Cir. 2012).

         ANALYSIS

         I. Breach of Contract Claims

         FSF moves for summary judgment on its breach of contract claims against PSTEVO and Baker. To succeed on a breach of contract claim in Illinois, a plaintiff must establish “(1) offer and acceptance, (2) consideration, (3) definite and certain terms, (4) performance by the plaintiff of all required conditions, (5) breach, and (6) damages.” Ass'n Benefit Servs., Inc. v. Caremark Rx, Inc., 493 F.3d 841, 849 (7th Cir. 2007) (citations omitted).

         A. Breach of Contract ...


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