2012-00124579-CU-BC

Kahala Franchising, LLC vs. Atlas Opportunities, LLC

Nature of Proceeding: Motion for Summary Judgment and/or Adjudication

Filed By: Cooper, Neil J. Plaintiff Kahala Franchising, LLC’s (“Kahala”) Motion for Summary Judgment of the
First Amended Complaint is denied.

Plaintiff’s Evidentiary Objections to the Declaration of Benmira

Sustained: Nos. 1, 6, 7, 8, 9, 12, 17, 18, and 19.
Overruled: Nos. 2, 3, 4, 5, 10, 11, 13, 14, 15, and 16.

Kahala alleges causes of action for breach of franchise agreement and breach of
personal guarantee. Defendant Atlas Opportunities, LLC (“Atlas”) purchased a Cold
Stone Creamery franchise from plaintiff in December of 2010, entitling Atlas to operate
a Store at Lake Crest Village Shopping Center for an initial ten year term. Defendant
Benmira, the sole member of the LLC, personally guaranteed Atlas’ obligations under
the Franchise and related agreements. (FAC ¶ 11) The franchise agreement required
Atlas to pay 6% royalties and 3% advertising fees on gross sales. Further, Atlas
agreed that in the event of default, royalties would be increased to 18% during the
period of the breach and a $100 a week late fee would be charged. An additional
$100 late fee was charged if the Franchisee did not submit weekly sales reports. The
Franchise Agreement also contained other fees involving participation in charitable
programs. Kahala contends that beginning September 27, 2011, Atlas breached the
Franchise agreement by failing to pay the required fees. Benmira states he ceased
operating the store on November 6, 2012. Atlas did not submit sales reports after
November 6, 2012.

Kahala moves for summary judgment on the individual defendant’s breach of the
guaranty.

Plaintiff contends that Atlas breached the Franchise agreement by failing to pay the
required fees. Plaintiff seeks $34,894.85 in royalty and advertising fees, late fees of
$12,000 (different than the Complaint’s allegation of $17,300), simple interest at the
rate of 18% in the amount of $8,284.50, POS polling fees of $585, and a Charitable
Make a Wish donation of $550, for a total of $56,314.36. The moving papers are
supported by the Declaration of Alex Neville who is the “Director of Asset
Management.” Neville states that “Except for matters asserted on information and
belief, of which I am informed and believed to be true, I make this declaration of my
personal knowledge and, if called as a witness, I could and would testify competently
to the facts set forth herein.” Other than stating that he is the director of asset
management, there are no statements to provide foundation for the statement that he
has personal knowledge of the events surrounding the parties’ dispute.

In opposition, Benmira, in propria persona, contends that Kahala breached the
Franchise Agreement by failing to offer the required training and support to the
Franchisee. Benmira states in his declaration that he failed the post-training test and
was denied more training time. He states he was compelled to take the test right away
by the in-store trainer and that the training provided was not sufficient to operate a
franchise location. (Benmira Decl. para. 1-7)

Benmira further contends that the Franchise Agreement requires that spouses sign the
agreement, however the area developer merely wrote “N/A” in the spot where the
spouse’s signature is to be placed. (Benmira decl. ¶¶ 15-21.) However, the contracting
parties were limited to Kahala Franchising and Atlas Opportunities, LLC of which Benmira is the sole owner and managing member, his spouse’s signature was not
required on the Franchise agreement. Benmira disputes that the guarantee was
signed “On or about December 29, 2010,” contending that it was signed “after the end
of December 2010” (Declaration Benmira ¶ 15) However, this is not a material
dispute, because he does not dispute that the agreement was signed shortly
thereafter.

Benmira has presented evidence that Kahala misrepresented the sales potential of the
franchise location. (Decl. ¶ 8) Benmira contends that the store was in a bad location
that would not support an ice cream shop and that Kahala knew this due to the two
prior failed businesses. (Decl. ¶ 9) Benmira alleges he was told that the lease was
good for an additional year, with an automatic renewal of three more years. In reality
the Landlord stated that plaintiff did not have an option to renew the lease. (Decl. of
Benmira, ¶ 11 Ex. A) . At paragraph 22 of his declaration, Benmira sets forth a list of
obligations that the Kahala purportedly failed to perform pursuant to the franchise
agreement. Although the evidentiary objections to many of those statements have
been sustained, Benmira has raised a triable issue of fact as to the amount of
damages sought, precluding summary judgment on the breach of the guaranty.

Benmira has presented evidence that the accounting set forth in the chart attached to
Neville’s declaration as Ex. B is in error. For example, he states that the sales figures
set forth for the week September 18th, 2012 is in error. The prior and subsequent
weeks showed sales of around $2,300, but the figure noted for the week of the 18th
was incorrectly stated as $7,527.48. Benmira states that this figure would only apply
to the summer time and not the middle of September. Benmira also challenges the
amount of late fees assessed, including fees for not sending sales reports in
November of 2012. Benmira has presented evidence that the store closed November
6, 2012. Therefore, he has submitted evidence that the penalty for not submitting
sales reports in November were in error. (Benmira Decl. ¶ 27)

“[F]rom commencement to conclusion, the party moving for summary judgment bears
the burden of persuasion that there is no triable issue of material fact and that he is
entitled to judgment as a matter of law…There is a triable issue of material fact if, and
only if, the evidence would allow a reasonable trier of fact to find the underlying fact in
favor of the party opposing the motion in accordance with the applicable standard of
proof.” (Aguilar v. Atlantic Richfield Co . (2001) 25 Cal.4th 826, 850.)

In ruling on a motion for summary judgment, the court must consider all the evidence
and all of the inferences reasonably drawn therefrom, and must view such inferences
in the light most favorable to the opposing party. CCP 437c(c); Aguilar v Atlantic
th
Richfield Co. (2001) 25 Cal.4 826, 843

A plaintiff or cross-complainant has met his or her burden of showing that there is no
defense to a cause of action if that party has proved each element of the cause of
action entitling the party to judgment on that cause of action. Once the plaintiff or
cross-complainant has met that burden, the burden shifts to the defendant or cross-
defendant to show that a triable issue of one or more material facts exists as to that
cause of action or a defense thereto. CCP 437c(p)(1). Although defendant did not file
proper evidentiary objections, defendant has challenged the Declaration of Neville and
the accounting calculations attached to his declaration as being “woven from the air.”
Neville’s declaration provides no foundation or factual basis for his personal knowledge
as to who prepared Exhibit B to his declaration and how that person acquired personal knowledge of the amounts due.

The motion for summary judgment is denied on the ground there are triable issues of
material fact as to the amount due under the Franchise Agreement. Because there is
a triable issue on what is owed under the Franchise Agreement, there is a triable issue
of material fact as to what is owed on the guaranty.

The prevailing party is directed to prepare a formal order complying with C.C.P. §437c
(g) and C.R.C. Rule 3.1312.