$4 Million Settlement of Breach of Franchise Agreement

Our client, Cal, owned an oil change business which was a franchisee of a major oil company.  Under the franchise agreement, Cal had the right to grow his company by opening more and more stores, and then to sell the whole business back to the franchisor (the major oil company).  The language of the franchise agreement in this regards was ambiguous and certainly susceptible of different meanings.  The oil company claimed that Cal was limited in the number of stores he could open and sell back.  The reason the interpretation of the contract was so important is that, if our client was correct, the oil company would owe many millions of dollars.

The entire case hinged on the meaning of the word “or.”  That is, does the work “or” mean “and/or” or does it have only the disjunctive meaning of “or.”

Litigation was hard-fought.  The oil company hired one of the country’s largest law firms, who fought tooth and nail on every issue.  We took depositions around the country, seeking to prove that the oil company executives had the same understanding of the contract that Cal did.   Through these depositions — using key correspondence and notes written by the oil company executives — we were able to make a very good case that the word “or” as used in the parties’ contract meant “and/or,” which meant Cal could open many stores and then sell them all back to the company under a contractual formula that made such a transaction very valuable for our client.

Before trial, the major oil company paid my client $4 million to settle.