Interference with contract/ prospective advantage.(In The Courts)

A franchisor's privilege to interfere with the sale of a franchise is limited there is no privilege to use improper methods to prevent a sale or to act maliciously to prevent a sale.

KMS Restaurant Corp. v. Wendy's International, Inc., 2004 WL 396472 (11th Cir., March 4, 2004). Plaintiff KMS Restaurant Corporation (KMS) sought to purchase 27 Wendy's Old Fashioned Hamburger restaurants in Florida from Citicorp, North America, Inc., and entered into a contract for that purpose. Because Wendy's restaurants are franchises of Wendy's International, Inc., the contract was made contingent on Wendy's approval of KMS as a franchisee. Wendy's did not provide its approval, and this litigation ensued.

One of the counts of plaintiffs complaint was a claim that Wendy's tortiously interfered with KMS' contract with Citicorp. Specifically, KMS alleged that Wendy's took certain steps to destabilize KMS' corporate structure and then cited the company's lack of stability as the basis for denying franchisee approval of KMS, thus enabling Wendy's to buy the restaurants itself.

The federal district court granted the defendant's motion to dismiss the claim. The court held that KMS could not prevail on its claim under Florida law without proving both that Wendy's used improper methods to interfere with the contract between KMS and Citicorp and that its motive was solely malicious, i.e., that it had no legitimate business reasons for its actions. The Eleventh Circuit Court of Appeals disagreed with this interpretation of Florida law and reversed.

The elements of a claim …