Reference no: EM131675644

Question: COUSINS SUBS SYSTEMS, INC. v. MICHAEL R. MCKINNEY U.S. DISTRICT COURT FOR THE EASTERN DISTRICT OF WISCONSIN

FACTS: Cousins Subs Systems entered into an agreement with Michael McKinney, a Minnesota businessman who owned a company that operated a chain of gas stations, for McKinney to operate several Cousins submarine sandwich shops. The sub shops were to be placed in the gas stations. In April 1998, McKinney became disillusioned with the agreement and terminated the agreement. McKinney claimed that Cousins guaranteed him annual sales at each of his franchises ranging from $250,000 to $500,000. Furthermore, McKinney argued that Cousins promised to provide advertising for the franchises. McKinney also claimed that Cousins guaranteed it would provide assistance in recruiting other franchises. McKinney alleges that he terminated the agreement because Cousins failed to uphold these promises. In June 1998, Cousins fi led suit against McKinney for wrongfully terminating the agreement with Cousins. Later in 1998, McKinney fi led a counterclaim against Cousins. Cousins fi led a motion to dismiss the counterclaim.

ISSUE: Did Cousins Subs Systems make misleading statements of material facts?

REASONING: McKinney alleges that Cousins violated the Minnesota statute prohibiting businesses from using false statements of material facts (or omissions of material facts) to sell franchises. McKinney claims that Cousins made false verbal statements of material facts; however, when an alleged verbal statement contradicts a written contract, the written contract carries more weight. In this case, the written contracts, signed by McKinney and Cousins and later entered as exhibits, contradict the verbal statements McKinney claims Cousins made. The contracts state that no promises were made regarding the profi t McKinney would earn, that advertising was McKinney's responsibility, and that the contracts contained all terms, conditions, and promises made by Cousins.

DECISION AND REMEDY: As demonstrated by the contracts McKinney signed, Cousins did not make any misleading statements of material facts. The counterclaim was dismissed.

SIGNIFICANCE: It is unclear whether Cousins made the verbal promises alleged by McKinney. Regardless, McKinney did sign contracts that contradicted the alleged verbal promises. This case demonstrates how important it is for businesspeople to read contracts thoroughly and to ensure that all terms, conditions, and promises are contained in those contracts.

CRITICAL THINKING: What are the primary facts of this case? How would you word the issue of the case in your own words? The judge stated that the written terms of the contracts between Cousins and McKinney were inconsistent with any alleged oral agreements that they made. Do you agree that written contracts should overrule oral agreements in most instances? Why or why not?

ETHICAL DECISION MAKING: The court ruled in favor of Cousins. Who are the primary stakeholders affected by the court's ruling for Cousins?