Manager for Southland. This meeting is often called the "Go/No Go" meeting because the Market Manager has the discretion to approve or discontinue the franchising process at this point. The meeting went well, and the Traumann's application received a "Go" from Chaplin.
Shortly after the meeting, Sweet received a memo from Chaplin indicating that the Traumanns had been approved to proceed with the qualification process to take over an existing franchise in Petaluma, California. Sweet called the Traumanns to relay the good news. The substance of Sweet's phone call is disputed by the parties. Southland claims that Sweet notified the Traumanns that they had received a "Go," and that they had been approved for the Petaluma Store, up to that point in the process. Plaintiffs claim that Sweet told them during this phone call that they had been accepted, the store was theirs, and that the only ones who could back out of the deal now were the Traumanns themselves. According to Southland, Sweet merely informed the Traumanns that they had reached an important and necessary juncture in their qualification process, with many important steps still to come.
At this time, the Traumanns again reviewed a copy of the Franchise Agreement. They asked Sweet to clarify the Agreement language which described Southland's right to disqualify potential franchisees. The Traumanns claim that Sweet told them not to worry about the disqualification provision, that the training was just a "formality," and that if either of them failed the training, Southland would franchise the passing spouse and allow the other one to re-take the training. Sweet claims that he did reassure them that he felt sure they would pass, but did not promise that they could re-take the course. Sweet notes that he understood Mr. Traumann to be concerned about the bookkeeping aspects of the store training, and that they never discussed the possibility that the Traumanns might be disqualified during training for subjective reasons, such as attitude or an inability to work with others.
On February 28, 1992, the Traumanns went to the Southland offices and signed the Franchise Agreement. At the time the Traumanns signed the Agreement, Assistant Secretary Jerry Hook's signature was already on several of the contract pages. Included was a financing agreement, also signed by Jerry Hook, which acknowledged that Southland had entered into a contract with the Traumanns.
After the Agreement was signed, Sweet handed the Traumanns a letter signed by Chaplin which welcomed the Traumanns to the 7-Eleven Franchise system. The letter stated in part: "I would like to extend my congratulations on your acceptance as the Franchisee of the above referenced 7-Eleven store." At this time, Sweet also told the Traumanns to begin hiring employees. Because of Sweet's statements and Chaplin's letter, the Traumanns were under the impression that they had been finally accepted by Southland as of this date.
Sweet arranged for the Traumanns to begin their four week store training in the first week of March, 1992. The Traumanns completed three of these weeks. On March 24, 1992, the second day of the final week, however, the Traumanns received a letter signed by Sweet and Chaplin, informing them that Southland had "elected" to discontinue the franchising process with them. The Traumanns were not informed at that time of the basis of Southland's election; a week later they discovered that they had been evaluated as having antisocial personality traits unsuited to successful Southland franchisees.
The Traumanns have sued Southland for breach of contract and negligent and intentional misrepresentation, among other things. In this motion, Southland seeks partial summary judgment as to the Traumanns' claims that Southland breached the contract by terminating them, that Southland employees fraudulently misrepresented the contract to them, and that Southland breached the implied covenant of good faith and fair dealing by abusing its discretionary power to terminate their contract. Southland asserts that the parol evidence rule excludes all evidence of Plaintiffs' alleged "final acceptance" by Southland.
1. The applicable standard
A. Summary judgment
Federal Rule of Civil Procedure 56 provides for partial or complete summary judgment where no genuine issue of material fact exists. In examining a summary judgment motion, the Court must view all evidence presented in the light most favorable to the non-movant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 91 L. Ed. 2d 202, 106 S. Ct. 2505 (1986).
B. The parol evidence rule
The parol evidence rule prohibits the introduction of oral or written evidence to vary or contradict the terms of an integrated written contract. Masterson v. Sine, 68 Cal. 2d 222, 65 Cal. Rptr. 545, 436 P.2d 561 (1968). The rule is based on the premise that the written agreement constitutes the final and absolute expression of the result of all negotiations. Gerdlund v. Electronic Dispensers Int'l, 190 Cal. App. 3d 263, 235 Cal. Rptr. 279 (1987).
The parol evidence rule will only apply to exclude extrinsic evidence if the contract at issue is integrated. The question of whether the parties intended the written instrument to be an integration, i.e., the complete and final expression of their agreement, is one of law for the Court. FPI Development, Inc. v. Nakashima, 231 Cal. App. 3d 367, 282 Cal. Rptr. 508 (1991). A court must not only consider "whether the written instrument contains an integration clause, but also examine the collateral agreement itself to determine whether it was intended to be part of the bargain." Wagner v. Glendale Adventist Medical Center, 216 Cal. App. 3d 1379, 1386, 265 Cal. Rptr. 412 (1989). The integration analysis examines such prior or contemporaneous representations only if they do not directly contradict the express terms of the written agreement. Gerdlund, 190 Cal. App. 3d at 271.
2. The parol evidence rule is applicable here.
A. The Franchise Agreement is an integrated contract.
The Franchise agreement contains an integration clause. It reads, in relevant part:
Complete Agreement. This agreement, any other agreements specified in Exhibit D, and the Exhibits, Amendments, and Addenda (which are incorporated herein by this reference and made a part of this Agreement) contain all Agreements between Franchisee and 7-Eleven and cover their entire relationship concerning the Store, all prior or contemporaneous promises, representations, agreements or understandings being expressly merged or superseded.