The Franchise Memorandum

A federal court in Colorado recently denied franchisor KFC’s motions to set aside a jury award for damages resulting from KFC’s breach of its duty of good faith and fair dealing. Kazi v. KFC US, LLC, 2021 WL 6081832 (D. Colo. Dec. 22, 2021). A jury found that KFC had breached the duty of good faith and fair dealing implied in the franchise agreement when it licensed a new franchise near Kazi’s franchised location, awarding Kazi $792,239 in lost future profits. KFC renewed the motion it had made during trial for judgment as a matter of law, adding an alternative request for a new trial.

KFC argued that under Kentucky law, Kazi had to prove that KFC had breached its duty of good faith and fair dealing by having acted dishonestly and deceitfully. Kazi responded that the consulting company KFC used for impact assessments always provided KFC with favorable reports. Further, KFC failed to consider any information that would be construed against its interests. KFC then argued that Kazi had not proved lost profits, although a forensic economist testified that there was evidence of up to a 26% impact on Kazi’s franchise. The court denied KFC’s motion for judgment as a matter of law because there was evidence from which a reasonable jury could rule in favor of Kazi as to both the alleged breach of the covenant of good faith and fair dealing and the amounts of lost profits. The court denied KFC’s motion for a new trial because Rule 59(e) is not a vehicle to revisit issues already decided by the court. The court stated that because there were no changes in the law, new evidence or need to correct an error, the motion could not be granted.