United States District Court, W.D. Missouri, Western Division
AMENDED FINDINGS OF FACT AND CONCLUSIONS OF
KAYS, CHIEF JUDGE UNITED STATES DISTRICT COURT
case presents a series of business disputes involving
franchises that provide automobile cosmetic repairs.
Plaintiff Restored Images Consulting, LLC (“Restored
Images”), sued Defendant Dr. Vinyl & Associates,
Ltd. (“Dr. Vinyl”), which impleaded Restored
Images’s sole member, Third-Party Defendant Christopher
Collins (“Collins”). The parties tried eleven
claims to the Court on January 12 and 13, 2016. Having
considered the trial testimony and exhibits submitted, the
Court now finds the facts and states its conclusions of law.
explained more fully below, the Court finds that the only
party to prove any of its claims is Restored Images against
Dr. Vinyl on Count I. The Court awards damages in the amount
of $10, 000.00.
Court makes the factual findings below by giving substantial
weight to Collins’s testimony. Collins was confident
and well-poised, and his testimony was inherently believable.
Most of his testimony was uncontroverted, including by
Richard Reinders (“Reinders”), the other major
witness. The Court withholds weight only from his testimony
about calculations, where Collins seemed unsure and where the
numbers did not add up when the Court tried to verify
Court gives slightly less weight to Reinders’s
testimony. Much of Reinders’s testimony was
uncontroversial and uncontroverted, which the Court accepts
as true. Where Reinders testified contrary to Collins, the
Court generally believed Collins because Reinders did not
seem to thoroughly know his company’s operational
aspects even though he was the chief executive officer for
many years. He aptly summarized this ignorance at trial,
“The only thing I was aware of from 2009 with respect
to business to my franchise owners [was] that it was a total
mess. We lost in eight months about 40 percent of all our
sales. And the only thing I was doing here was being
motivational, because I really didn’t know what was
parts of Reinders’s testimony support his statement.
Reinders did not know whether Collins visited any franchisees
in Texas or Oklahoma. He did not know whether or how all Dr.
Vinyl payments were made to Restored Images. Reinders
believed that Dr. Vinyl was dramatically overpaying royalties
to Restored Images, but could not explain why he had made
such a large mistake for nine and a half years. His testimony
that he was not receiving daily updates on the
company’s finances is contradicted by Garringer, who
testified that she spoke with Reinders every day about Dr.
Vinyl business. While the downturn in Dr. Vinyl’s
business justifies Reinders’s ignorance, it does not
Reinders impeached himself. He testified that Restored Images
was not the procuring cause of the Shawn Morris sale, but
changed his testimony on cross-examination and admitted that
Restored Images did sell Shawn Morris’s franchise.
depositions are in evidence. The Court gives great weight to
the testimony of Jamie Lasher (“Lasher”). Lasher
was knowledgeable both as a Dr. Vinyl franchisee and as a Dr.
Vinyl corporate officer. His testimony corroborated much of
Collins’s, including the testimony regarding Dr.
Vinyl’s lack of advertising.
Court gives great weight to Sandra Garringer’s
testimony, mostly because she no longer works for Dr. Vinyl
and seems impartial in this dispute. The Court does discredit
her testimony that Dr. Vinyl was performing advertising
because it contradicts Collins’s and Lasher’s
testimony and because it was less specific than their
testimony. Otherwise, the Court finds her testimony to be
consistent with the other witnesses’.
Court gives moderate weight to the testimony of the remaining
deponents, Curtis Pribble, and Janet Pribble. The Court holds
against Curtis Pribble his refusal to answer some of opposing
counsel’s questions. The Court holds against Janet
Pribble her equivocation in answering many key questions,
declaring that she could not recall. But mostly, their
testimony is not relevant.
the Court finds the facts to be as follows.
Vinyl is a company headquartered in Lee’s Summit,
Missouri, that owns and franchises the “Dr.
Vinyl” brand. Dr. Vinyl is in the business of repairing
vinyl and other materials used in daily life. Despite the
name, the services offered by Dr. Vinyl go beyond vinyl. Dr.
Vinyl franchises dye leather and carpets, repair headliners,
deodorize interiors, and touch up paint chips. Its franchises
work in a decentralized fashion, servicing their customers
onsite everywhere from car dealerships to massage parlors.
Vinyl has structured its franchise model in two ways. It
sells franchises directly to individuals and also to master
franchises, which sell new franchises and promote existing
franchises but do not themselves perform Dr. Vinyl services.
Collins has served as both a Dr. Vinyl franchisee and a
master franchisee. His relationship with Dr. Vinyl began in
1996 when he bought a franchise in Texas. Collins and Dr.
Vinyl memorialized the purchase by signing a written
franchise agreement (“Franchise Agreement”).
Because he has previously gone by Chris Brown, Collins signed
many documents relevant to this case, including the Franchise
Agreement, with that name.
Franchise Agreement gave Collins the right to operate
Franchise #162, the territory of which was a swath of the
northern Dallas area roughly bounded by three freeways. Dr.
Vinyl promised to support this franchise by using a national
advertising fund to furnish Collins with marketing plans and
materials. (Ex. 1 ¶ 9(A)).
exchange, Collins agreed to pay Dr. Vinyl a monthly royalty
of 7% of gross sales, or $200, which is greater.
(Id. ¶ 6(B)). Collins had to supplement these
franchise fees with a monthly advertising fee of 1%, with a
penalty of 1.5% assessed on late payments. (Id.
received very little training from Dr. Vinyl. It gave him
only two weeks of initial training, during which he learned
the bare minimum about automobile surface repair. Since then,
Dr. Vinyl has provided no training to Collins except for a
wheel repair conference in 2014 that he learned nothing from.
Although Dr. Vinyl held annual conventions for training
purposes, Collins never learned techniques at those
Vinyl provides limited technical support for its franchisees.
It maintains a restricted-access website with certain useful
information, such as product descriptions, pertinent
Environmental Protection Agency rules, and safety
Collins learned his craft through self-instruction, for
example through internet applications like YouTube. He has
learned repair skills from suppliers, who demonstrate how to
use their products to franchisees at conventions.
Collins’s case was not unique; Jamie Lasher, a
franchisee in the Des Moines area and Dr. Vinyl’s
former chief operating officer, gained his knowledge the same
way. Because of Dr. Vinyl’s laissez-faire attitude
toward training, there is little difference between Dr. Vinyl
franchises and their competitors in terms of the services
Vinyl recognized how well Collins was doing on his own. It
asked Collins to teach seminars so that other franchisees
could learn from him, and specifically commended him in one
of its training booklets for developing a new way of
his repair skills, Collins built his customer base from
scratch. Franchise #162 had lain dormant for six months
before Collins bought it. Once he did, he began going
directly to dealerships, offering free demonstrations,
maximizing his face time with potential customers, and trying
to win their business. Collins quickly developed his book of
business, growing Franchise #162 more quickly than any other
Dr. Vinyl franchise in the United States.
found success even though Dr. Vinyl did not advertise for his
franchise-either nationally or in the north Dallas/Fort Worth
Metroplex-or provide any advertising materials. Dr. Vinyl
made no attempts to advertise for Collins. Notwithstanding,
through May 2014 Collins paid the monthly royalties and
advertising fees that the Franchise Agreement required of
Dr. Vinyl convention in early 2004, Collins met Richard
Reinders, Dr. Vinyl’s chief executive officer. Reinders
is from the Netherlands but lives in Austria, where Dr. Vinyl
maintains some corporate operations. At the time, Reinders
was looking to sell Dr. Vinyl master franchises. Thinking
Collins might be a suitable prospect, Reinders invited him to
the Dr. Vinyl center in Austria to discuss further.
went to Austria that year, where Reinders showed him the
company’s books and tried to sell him on becoming a
master franchisee. The men reached the outlines of a deal.
Reinders would sell Collins a master franchise territory that
was larger than his individual franchise territory,
comprising all of Texas and Oklahoma. Collins would receive a
percentage of the gross sales of the franchisees in that
territory. Although Collins had previously sold three
franchises to people he knew through his church, Reinders
told him that he could sell franchises, but did not
have to sell franchises.
Collins returned to Texas, he formed a limited liability
company called Restored Images Consulting, LLC, with the
intent that Restored Images, not him personally, would be the
master franchisee. On December 1, 2004, Dr. Vinyl and
Restored Images signed a written, multipart Master Franchise
Agreement (“MFA”). They supplemented the MFA with
an Addendum two months later.
requires Restored Images to do two relevant things: (1) sell
five franchises per year for five years, for a cumulative
total of twenty-five franchises (Ex. 2, Ex. B); and (2)
refrain from using “Confidential
Information”-defined as knowledge of and experience in
master franchise’s operation-“in any other
business or capacity.” (Id. ¶ 5(a)).
Vinyl, for its part, must do two relevant things. First, it
had to pay Restored Images $10, 000.00 for each franchise it
sells. (Ex. 3 ¶ 5). Second, it had to furnish Restored
Images with a Uniform Franchise Offering Circular
(“UFOC”) for the offer of Dr. Vinyl franchises.
(Ex. 2 ¶ 2(A)). A UFOC is a disclosure document that
sets out the franchisor’s financials so that a
prospective franchisee can make an informed decision about
whether to buy a franchise.
Dr. Vinyl had to pay annual royalties to Restored Images.
(Id. ¶ 8(B)). The formula for calculating
Restored Images’s royalties is confusing at first
glance and bears reproducing here:
shall pay a monthly royalty fee to Master Franchisee which
shall be a percentage of the actual royalty fees received by
Franchisor from franchisees sold by Master Franchisee in the
Exclusive Area pursuant to each Franchise Agreement entered
into between Franchisor and a franchisee operating a Dr.
Vinyl Franchise in the Exclusive Area, in an amount equal to
the following percentage of a franchisee’s annual Gross
Sales (as such term is defined in the Franchise Agreement) of
the Dr. Vinyl Franchise which is the subject of such
Franchise Agreement, during the period for which such fee is
payable, as follows:
Annual Royalty Fee Revenue Received by Us
Percentage of Annual Royalty Fee Received By Us and
Paid to You
$1 to $125, 000
$125, 001 to $200, 000
$200, 001 to $235, 000
$235, 001 and up
contains three relevant housekeeping measures: (1) it says
that the MFA constitutes the “entire full, complete
agreement” between Dr. Vinyl and Restored Images on the
MFA’s subject matter, and that it supersedes all prior
agreements (id. ¶ 17(M)); (2) it chooses
Missouri law to govern the MFA’s interpretation in the
event of litigation (id. ¶ 17(G)); and (3) if
Restored Images or Dr. Vinyl sues to enforce the MFA,
“the party prevailing in that proceeding is entitled to
reimbursement of its costs and expenses incurred, including
reasonable accounting and legal fees” (id.
the MFA was primarily a Dr. Vinyl-Restored Images contract,
Collins Dated:e part of it. He personally guarantees any
debts owed by Restored Images to Dr. Vinyl. (Id. Ex.
C). For two years after the MFA expired, he promised not to
divert business from Restored Images customers to any
competitors, nor to induce Dr. Vinyl employees to leave Dr.
was set to last for ten years, until November 30, 2014.
Restored Images had the right to unilaterally renew the MFA.
(Ex. 3 ¶ 13).
as Restored Images signed the MFA, it began traveling over
Texas and Oklahoma to visit franchise owners and help them
develop the quantity and quality of their business. What it
has not done is sell franchises. Restored Images has sold
only one, to Shawn Morris (“Morris”) in Oklahoma.
Dr. Vinyl did not pay Restored Images a commission for that
Restored Images has sold only one franchise, it has never met
the MFA’s Development Schedule. Dr. Vinyl asked
Restored Images about selling franchises, but Restored Images
never responded positively. Dr. Vinyl’s lack of
response to that inaction indicates that Dr. Vinyl did not
care that Restored Images was failing to sell franchises. For
example, just two months after Restored Images bought its
master franchise, Tom Buckley, Dr. Vinyl’s franchise
development director, invited Collins to a meeting where tips
for selling franchises would be discussed. Collins did not
go, believing he had no obligation to sell franchises. Dr.
Vinyl never protested his nonattendance. Its conduct
reflected apathy in this regard.
when Restored Images emailed Dr. Vinyl about an unrelated
issue, Reinders replied, “did you sell any franchises
at all except from the guy in ok??”, referring to the
Morris sale. Restored Images responded that it would not be
selling any more franchises for Dr. Vinyl because it was not
contractually obligated to do so. Reinders did not press the
point or otherwise insist on Restored Images complying with
the Exhibit B Development Schedule.
2010, Lasher, Dr. Vinyl’s then-chief operating officer,
came to Texas to encourage Restored Images to sell more
franchises. Restored Images reluctantly agreed to help sell
franchises, but told Lasher that it first needed to have
UFOCs in hand to offer prospective franchisees. Restored
Images claims it never received a UFOC despite asking several
Dr. Vinyl personnel. The Court finds that whether or not
Restored Images received a UFOC is irrelevant. Restored
Images later approached one of Collins’s friends in
Oklahoma to sell a franchise, but without a UFOC, Restored
Images told the friend that it could not make the sale.
Because Collins failed to describe this exchange in any
detail, no evidence establishes a real likelihood that he
would have made the sale but for lacking a UFOC.
Lasher’s visit, no one at Dr. Vinyl ever again asked
Restored Images to sell franchises. Dr. Vinyl knew that
Restored Images was not selling new franchises. Lasher told
Reinders about Restored Images’s noncompliance. Any new
franchises would have been paying royalties to Dr. Vinyl. The
Development Schedule established annual benchmarks that
Restored Images was not meeting. Further, Garringer told
Reinders when a master franchisee sold a franchise.
Therefore, Dr. Vinyl knew early on that Restored Images was
2006 to 2014, Dr. Vinyl paid Restored Images what both
parties believed were master franchise royalties.
Accompanying each payment was a schedule that indicated the
annual gross sales of each franchise owner in Texas and
Oklahoma and the franchise fees they paid to Dr. Vinyl. The
Court finds accurate Exhibits 4 and 517, which detail some of
these amounts. Dr. Vinyl paid Restored Images as follows:
Year of Sales
Royalties Paid by Dr. Vinyl to Restored Images
2013, Restored Images requested to extend the master
franchise. Dr. Vinyl acknowledged the request but never
affirmatively responded. Because Restored Images had the
unilateral right to renew the MFA, it effectively extended
the MFA through November 30, 2024.
2014, Collins attended a wheel training conference and spoke
with Reinders. Reinders gave Collins the previous
year’s numbers, and projected that Restored Images
would receive a considerably lower royalty payment. Collins
began to believe that Dr. Vinyl was shortchanging Restored
Images’s royalty payments. At the same time, Dr. Vinyl
began to suspect that it was overpaying Restored Images on
royalties. Dr. Vinyl had never suspected that until 2014,
which Reinders and Garringer later called a massive error.
Dr. Vinyl made its last payment to Restored Images that year.
deteriorating relations between Dr. Vinyl and Restored Images
mirrored what was happening between Dr. Vinyl and Collins as
an individual franchisee. In January 2015, Collins told Dr.
Vinyl that he was terminating the Franchise Agreement
retroactively to June 1, 2014, for Dr. Vinyl’s
purported breaches of that agreement. Collins made his
Franchise #162 fee payment in May 2014. From June 1, 2014,
through its expiration on December 31, 2015, the Franchise
Agreement called on Collins to pay Dr. Vinyl $121, 293.51,
which he did not pay.
renouncing the Franchise Agreement, Collins continued
providing automobile surface repairs just as he had as a Dr.
Vinyl franchisee, but now under the name Restored Images.
Restored Images signed a license agreement in November 2014
with Cody Agraz (“Agraz”), a Dr. Vinyl
subcontractor with whom Collins had worked when he was still
a Dr. Vinyl franchisee. The new contract scrubbed references
to Dr. Vinyl and contained only Restored Images’s name.
Restored Images signed similar agreements with Shelby Granger
(“Granger”) and Scott Barthel
(“Barthel”), also former subcontractors who
worked with Collins on Franchise #162 but then came aboard
Restored Images’s new venture.
the time Agraz, Granger, and Barthel worked as Dr. Vinyl
subcontractors and then as Restored Images contractors,
Collins taught them the repair techniques he had developed
over the years. Collins trained them differently than the way
Dr. Vinyl trains its employees. Granger alone received some
training from Dr. Vinyl, but the training he received was so
deficient, Collins had to retrain him.
litigation commenced on June 10, 2014, when Restored Images
sued Dr. Vinyl. Dr. Vinyl counterclaimed Restored Images and
Restored Images and Dr. Vinyl nominally brought eleven claims
to trial, the parties have not been clear about what,
exactly, they are suing over. For example, Restored Images
pled that its claim for unpaid royalties originated from an
oral contract that mirrored the written contract, but its
complaint identified only the oral contract as the one that
was breached. After trial, Restored Images decided that the
nonpayment of royalties was actually a breach of the
written contract, and asked the Court for permission
to transmogrify the oral contract breach claim into a
promissory estoppel claim. Restored Images has also waffled
between whether Missouri or Texas law applies.
Restored Images is not the only party guilty of confusion.
Dr. Vinyl asked for and received dismissal of Count III of
its complaint against Collins. But in the proposed
conclusions of law Dr. Vinyl submitted after trial, it urged
the Court to find for it on Count III. Dr. Vinyl also pled