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Kfc Corporation v. Kazi

United States District Court, W.D. Kentucky, Louisville

November 19, 2014

KFC CORPORATION, Plaintiff,
v.
ZUBAIR M. KAZI, Defendant. KFC NATIONAL COUNCIL & ADVERTISING COOPERATIVE, INC., Plaintiff,
v.
ZUBAIR M. KAZI, Defendant.

MEMORANDUM OPINION AND ORDER

JOHN G. HEYBURN, Senior District Judge.

This matter is before the Court on KFC National Council & Advertising Cooperative, Inc.'s ("NCAC") summary judgment motion regarding Zubair Kazi's liability for personal guaranties ("the Guaranties") he signed as well as damages possibly owed for those guaranties. This was originally a stand-alone case, but the Court consolidated it with a Kentucky Fried Chicken Corporation ("KFCC") suit against Kazi to enforce similar guaranties. The Court has already determined Kazi's liability under the KFCC guaranties, and it has denied Kazi's requests for more discovery and to assert his affirmative defenses against KFCC. Likewise, for the reasons explained below, the Court now finds that Kazi is liable under the Guaranties he signed with NCAC. At a later time, the Court will decide the damages issue for both NCAC and KFCC.

I.

As this Court has already described the facts of this case, the Court now lists only those facts essential for understanding this opinion. Zubair Kazi is the founder, Chairman, and CEO of Kazi Foods, Inc. Before bankruptcy proceedings in the Eastern District of Michigan, he owned four Kazi franchisee entities[1] that operated 142 KFC restaurants in several states. The franchise agreements with KFCC required these franchisee entities to pay monthly advertising contributions to NCAC.

But in 2010 the Kazi entities fell behind on their monthly advertising contributions to NCAC. Three of the entities-Kazi Florida, Kazi New York, and Kazi Annapolis-entreated with NCAC to sign promissory notes ("the Notes") rather than make immediate payments. The Notes were executed in December 2010. They established a payment schedule for the delinquent advertising payments and obligated the Kazi entities to begin making payments in January 2011. The Kazi Florida Note was for the principal amount of $511, 228.70, Kazi New York's Note was for the principal amount of $1, 893, 857.36, and Kazi Annapolis' Note was for $480, 117.49. These Notes were of great import to Kazi-signing them meant that the Kazi entities were no longer in breach of their NCAC obligations and, thus, would not be in breach of their franchise agreements with KFCC.

NCAC demanded more, however, than just the Notes. As consideration and additional security for its willingness to forbear its enforcement of the Kazi entities' past due payment obligations, NCAC required Kazi personally to sign the Guaranties on each Note. Kazi Florida made the first two payments, but then failed to make all subsequent payments. Kazi Annapolis and Kazi New York made the first three payments, but then missed all subsequent payments. Despite the Guaranties that Kazi signed he has not made any payments to NCAC. NCAC now asks the Court for summary judgment on Kazi's liabilities under the Guaranties. It requests an order upholding Kazi's liabilities on his Guaranties with NCAC, denying his requests for discovery relating to certain affirmative defenses, and enumerating damages.

II.

Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Fed.R.Civ.P. 56(c). The Court must determine whether "the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Patton v. Bearden, 8 F.3d 343, 346 (6th Cir. 1993) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)). Viewing this case in the light most favorable to Kazi, the non-movant, and drawing all reasonable inferences in his favor, the Court concludes that genuine issues of material fact do not exist and grants NCAC's motion for summary judgment in regards to Kazi's liability under the Guaranties and denies further discovery relating to affirmative defense. See Bender v. Southland Corp., 749 F.2d 1205, 1210-11 (6th Cir. 1984).

A.

The first question is whether these Guaranties are enforceable. NCAC's motion for summary judgment takes for granted that Kazi's liability under the Guaranties is already established. Yet this Court has only addressed his liability on a different set of guaranties-the guaranties Kazi signed with KFCC guaranteeing his entities' debts under the franchise agreements. The Court now determines that the Guaranties pertinent to this opinion are also enforceable under Kentucky law.

Kentucky's guaranty statute provides three ways for a guaranty to be enforceable:

No guaranty of an indebtedness which either is not written on, or does not expressly refer to, the instrument or instruments being guaranteed shall be valid or enforceable unless it is in writing signed by the guarantor and contains provisions specifying the amount of maximum aggregate liability of the guarantor thereunder, and the date on which the guaranty terminates.

KRS ยง 371.065(1). If any one of the three prongs is met, the statute is satisfied and the guaranty is valid and enforceable. Wheeler & Clevenger Oil Co., Inc. v. Washburn, 127 S.W.3d 609 (Ky. 2004). Unlike the guaranties this Court addressed in the KFCC portion of this case, the Guaranties Kazi signed with NCAC were written on the Notes his entities executed. Therefore, the Guaranties are enforceable under Kentucky law. Moreover, Kazi admits that he signed the Guaranties. And the Kazi entities did not ...


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