Appeal submissions — McDonald's

Fax received from : 01 45.33 6? 133 MEDONALDS FRANCE: SESOL RS O LES PINS COLLORAFI PARIS COURT OF APPEAL 16°m° CHAMBER A RESPONSE SUBMISSIONS FOR: The public limited company MCDONALD'S FRANCE Respondent Having as its avoué the SCP FISSELIER, BOULAY. CHILOUX AGAINST: 1) Monsieur Bernard COLLORAFI 2) The S.A. SEBOL 3) The SARL B&O 4) The SARL LES PINS Appellants Having as avoué, Maître PAMART Having as counsel Maître CLEMENT, member of the Bar MAY IT PLEASE THE COURT This case returns before your Court following your judgment of 9 December 1998, ruling on the inadmissibility of the appellants' claims seeking - the requalification as commercial leases of the agreements submitted to the Court: • the nullity of these agreements for non-application of the law of 20 March 1956, fraud, error or lack of cause. The framework of the dispute is therefore strictly contractual: the appellants' alternative invocation of “tortious liability” (no doubt they meant quasi-tortious) is beside the point. Indeed, the Court rejected the claim for nullity and is henceforth divested of any claim falling outside the contractual field The principle of non-cumulation of contractual liability and tortious liability is certain, and if the invocation of quasi- tortious liability could be understood at the time when the appellants claimed to maintain, among other things, the nullity of the agreements. this reference is today manifestly erroneous Reading the operative part of the submissions that have just been served by the opponent leads one to observe that the appellants appear to attach little importance to the legal basis of their claims (see page 77 of their submissions "...whatever the liability regime adopted... in any event ": page 78: * in any event and whatever the solution given to the dispute On the other hand. they constantly raise the amount of their claims, which now stand at more than 68 million francs Fax received from : 81.45.27 6Z_133 16:112? _ .. Capitalisation of losses margins over the duration of the agreements Operating losses Enforcement of the decision of the Tribuna: (?) Cumulative salaries of Mr Colorati Over 18 3DS ' Non-material loss | Article 700 Seboi BaO Les Pins M. Collorati i.e. 13 590.86₴ Before even going into the discussion of the arguments put forward by the appellants to try to establish the liability of McDONALD's and without it being necessary to discuss their amount, it appears that these claims are • purely hypothetical and drawn from mere extrapolations as regards the losses of cumulative margins of the companies and the cumulative salary losses of Mr COLLORAFI: * incoherent (one example, among many others: the appellants repeat an erroneous reasoning of Mr GANDUR on page 34 of his work: he used, for LES PINS, a duration of 19.3 years, whereas the agreement of that company had a duration of 3 years - see document E) : • contrary to the nature of the relations between the parties Si en constant, Das ps ue en faire sueue key ene, their profits, , the notion of non-material loss is totally foreign to business relations. T5X 13.20 51133 26.11/9.-7.19:15 The appellants are moreover so little able to argue about the losses they invoke that they suggest to the Court that it order a new expert report to “determine the loss” (their submissions, p. 78) One would think that the appellants find it in their interest for the proceedings to continue indefinitely, in which they perhaps seek a notoriety of dubious quality Mr COLLORAFI has indeed taken the initiative of disseminating on the Internet all the procedural documents of the whole dispute since the outset, the submissions and briefs of the parties sent to the experts, as well as letters exchanged between the appellants and their lawyer. He offers all of this on 5 sites: http://www.multimania.com/bernardcollorafi • http://defense.fr.fortunecity.com - http://cellorafi bizland com • http://www.ifrance.com/collorafi - http://bemardcollorafi.citeglobe.com MCDONALD's reserves the right to have this conduct of Mr COLLORAFI penalised by any competent courts. But today the problem submitted to the Court is to know whether one or other of the parties has breached its obligations as defined by the agreements and as they must be performed pursuant to articles 1134 and 1135 of the Civil Code 5. The agreements in question were precisely analysed by the Court's judgment of 9 December 1998 on pages 16 and 17 The validity of these agreements and their legal nature (agreement of lease-management of a business combined with a trademark licence agreement) are established in the proceedings, the Court having ruled on these points. 26/11/99_ 19:15 Pg: This simple finding, together with the fact that the appellants do not dispute their debts of fees, the non-payment of which triggered the implementation of the termination clause, will suffice to uphold the judgment of the Commercial Court once it has been shown that performance in bad faith is the doing of the appellants and not of McDONALD's. The agreements in question are those signed by McDONALD's - in August 1987, concerning Antibes 1 (or Antibes Carrefour or Antibes town-centre shopping centre or Antibes Mall in the parties' writings), for which Mr COLLORAFI substituted the company SEBOL, in his rights and obligations towards McDONALD's, with the latter's agreement; • on 9 October 1996, concerning Antibes Nord, : Monsieur COLLORAFI substituting, in the rights and obligations arising from the agreement, the EURL B&O, with the agreement of MCDONALD'S : • on 18 June 1997, concerning Antibes Ouest, Monsieur COLLORAFI substituting, in the rights and obligations arising from the agreement, the EURL LES PINS, with the agreement of MCDONALD'S T. Each of these agreements contains an express clause: “The Lessor does not guarantee either the present or future value or profitability of the said business” (see clause 4.1 of each agreement). This clause, between professionals, is perfectly valid. It expresses the reality, common to any lease-management agreement (already expressed above no. 3), according to which the lessee operates at his own risk and peril, just as the owner finances it at his own risk and peril This makes it possible to answer the question that the Court put in its judgment of 9 December 1998, in the penultimate paragraph of the 170th page. The profitability forecasts over ten years can only have the value of mere information, and are devoid of any contractual character: • by reason of clause 4.1 of the agreements, referred to above; - because these forecasts carry a statement expressly indicating their non-contractual nature : Fax received from : 81 45 27 67.133 26/11/92_ 12:15 .Ps: • because the law of 31 December 1989, obviously not applicable to the agreement of 1857, requires no provision of forecast accounts, since everyone knows that profitability depends not only on the quality of the know-how of the trademark holder and on the reputation of the latter (quality and reputation that nobody disputes in McDONALD's), but also on the economic climate, on the initiatives of competition, on consumer behaviour and also on the energy and skill of the lessee-manager, moreover the action submitted to the Court is not founded on any breach whatsoever of the law of 31 December 1989, art 1, or of its implementing decree of 4 August 1991, but on an alleged poor performance of the agreement; the pre-contractual information documents given to Mr COLLORAFI for Antibes Nord and Antibes Ouest were not challenged. One will read with interest what the appellants' Counsel wrote in the article published by him in La Gazette du Palais 1391. : 294, left-hand column, antepenultimate paragraph “when the economic operator has very precisely handed over the pre-contractual information document and the draft agreement to his future partner within the time limits provided, and when this document is sincere, the associated partner will no longer be able, a few months or a few years later, to maintain that he was deceived and that he was drawn into an adventure with no future” To finish with this question, it must be observed, as a surplus point, since no defect of consent can be invoked, that Mr COLLORAFI was an experienced businessman when he dealt with McDONALD's in 198. the signing of the agreement followed a training period of 9 months, during which Monsieur COLLORAFI had every opportunity to get to know numerous lessee-managers and the economic conditions of their activity. Monsieur COLLORAFI was manager of a bank branch in Moulins after having worked 18 years at BNP (see document CA - Application file of Monsieur COLLORAFI to obtain the Antibes Ouest restaurant) and had therefore, better than anyone, the training necessary to assess the chances and risks of a commercial operation. the opposing submissions give (page 7) a misleading presentation of document 25. a handwritten document without it being possible to identify its authors t last line is manifestly not in the same handwriting (slanting!) fli that (upright) of the figures entered on the document. It is in no case a contractual document but a projection on a working document of the operations advisers. Monsieur GIBSON having never been “manager at head office” but simply “operations advisor” in 1987. not even “senior operations advisor” (see document CB - Attestation of Madame WILMET) te It may be added that Monsieur GIBSON, after eight years of salaried duties in the company MCDONALD'S, became a lessee-manager in Aiberville, just like Monsieur GIlARSKi, cited by the appellants (p. 11 - 1.3.1. 1st and 3rd paragraphs), in Cannes, which proves that MCDONALD'S executives do not hesitate to become lessee-managers, which they would not do if their experience of the whole network had made them find the operation of a MCDONALD'S restaurant as a lessee-manager perilous on documents 26 and 12 of the opponents cited on pages 9 and 11 of their submissions, it is a great pity that their photocopier made disappear, at the bottom of the page, the statement “this document does not in any way constitute a commitment by MCDONALD'S FRANCE S.A.” i What has just been recalled shows the lack of seriousness of the appellants' argumentation, who in truth engage in a criticism of the McDONALD's system, whose effectiveness, however, no longer needs to be demonstrated and which the appellants are ill- placed to criticise in this case The performance of the McDONALD's network cannot be denied; at 1 January 1999. this network comprises in France - 709 restaurants (which moreover represent only 4.1% of the turnover of out-of-home catering), of which 637 are managed by 236 lessee-managers (i.e. an average of 2.7 per lessee-manager) : none of these lessee-managers in business is in litigation with McDONALD's, which has to deplore only two disputes with former lessee- managers, one is Mr COLLORAFI, the other is Mr Patrick de TOURRIS (case still at the expert examination stage), who ceased to be a lessee-manager in 1993 . • for 19 years, no restaurant under the McDONALD'S sign has filed for bankruptcy, contrary to the pessimistic assertions of the appellants on page 18 in fine of their submissions The prosperity of the network is obviously shared between McDONALD's and its lessee-managers Fax .45 27 61_133 Py: It is the appellants' lawyer who wrote: “the very essence of franchising is indeed to practise a partnership developing a synergy enabling the franchisee to ensure and repeat a success. a profitability and therefore profits, and the franchisor to draw profit from it by means of the fee. The one and the other are bound together and make money only if the franchisee makes money.” (Gaz Pal 1991, I, p. 288, right-hand column, penultimate paragraph) 11. The criticisms of Mr COLLORAFI expressed in his submissions, complaining of alleged unilateral decisions by MCDONALD's, are in total contradiction with the course of events: Mr COLLORAFI insisted on being appointed lessee-manager of the Antibes Ouest site and of that of Vallauris The Court knows with what determination Mr COLLORAFI expresses himself in his letters: - on 16.12.96 (opponents' document 4), concerning Antibes Ouest: "I have a team to ensure development in one town and I need other restaurants to offset the impacts on turnover and to absorb the fixed costs. Thus I will have the means to ensure the QSC that is expected of my units and to increase sales, on 10.0i.97 (opponents' document €) concerning Antibes Ouest and Vallauris " for which I am a candidate for lease-management. If the decision not to allocate these two restaurants to me were confirmed, I would consider that this is a veritable casus belli" • on 31.0' 97 (opponents' document 7) concerning Antibes Ouest “I take note of this allocation and thank you warmly for the confidence you show me”. Concerning Vallauris, allocated to Mr Gilarsky: “I persist in asking that Vallauris also be allocated to me” Document CA is edifying. It is the application file submitted by Monsieur COLLORAFI to obtain the Antibes Ouest restaurant. Fax received from : 01 45 2? 6? 133 - 19:15. Fy: 16 Monsieur COLLORAFI expresses therein: • his well-determined wish to take this restaurant on lease-management. • his perfect knowledge of the so-called impact phenomenon (temporary decrease in the sales of a restaurant at the time of the opening of another located nearby) which does not discourage him from applying to take Antibes Ouest on lease-management. because he knows that the densification of the network generates an increase in turnover : - the economies of scale achieved when one and the same professional manages several restaurants There is therefore a total contradiction between the letters of Mr COLLORAFI, who insists strongly on obtaining the restaurants ANTIBES NORD ANTIBES OUEST and his current position, which is to claim that this was done “against his will” (sic). He seems to have been vexed to see a colleague, Mr GILARSKI, preferred to him for VALLAURIS (is this the cause of the crisis that will occur at Mr COLLORAFI's?). But there is no favouritism towards Mr GILARSKI, as appears from reading the distribution of the restaurants of the region RESTAURANT ¡Antibes Mandelieu | Grasse | Cagnes Cannes Antibes Nord Cagnos Plage Vallauris Antibes Quest Mougins OPENING DATE FRANCHISEE ¡Bernard COLLORAFI Bernard ROCHET ! Eric DAUFES vean-Pierre ANDREIS Patrick GILARSKI Bernard COLLORAFI Jean Pierre ANDREIS Patrick GILARSKI Bernard COLLORAFI Patrick GILARSKI .!.. • 27 67 133 25/11/99- 19:15 Py: 13 Messieurs COLLORAFi and GILARSKI each have 3 restaurants. Mr ANDREIS 2. Messieurs ROCHET and DAUFÉS 1. Mr COLLORAFI seems to resent Mr GILARSKi for having been Vice-President of MCDONALD'S FRANCE. It is rather a good sign to see a high-level executive become a lessee-manager. This shows that the profession must be good 12. It is impossible for Mr COLLORAI to claim vigorously and obstinately the status of lessee-manager of restaurants to be opened and then to complain of having obtained satisfaction. !! is requested of the Court to kindly note this inconsistency. renewed in 1998 after the termination of the agreements by the effect of the termination clause: despite the occurrence of the termination of 2 January 1998, the appellants remained in businesses that did not belong to them, benefited without right or title from the reputation of the McDONALD'S sign, from the investments and the know-how of McDONALD's it took the Enforcement Judge of the Regional Court of Grasse refusing them the grace period they had requested for them to put an end to the assault (voie de fait) resulting from the occupation of the premises since 2 January. If operating a MCDONALD's restaurant was truly costly, why would they have remained in the premises beyond 2 January until 10 June? 13. When on page 60 of their submissions the appellants (at last) address the study of the contractual liability which they claim to attribute to MCDONALD'S, they find to reproach it only the absence of territorial exclusivity in the franchise agreements In disputing this, the appellants do, once again, no more than dispute their own signature Monsieur COLLORAFI learned perfectly well, during the 9 months of free training that was given to him before the signing of the first agreement, what he signed in each of the three agreements: no territorial exclusivity is ever practised in the network: Fax received from: 91 45.27 67_133 26/11/29 - 19:15 Py: 12 SEBOL Lease-management agreement, clause 7 - Non-exclusivity "7.1. The lessee-manager expressly acknowledges that this agreement grants him only the right to operate the Restaurant in the premises defined above for the agreed duration and confers on him no grant of territory, exclusivity or territorial protection. This agreement does not allow him to prevent or hinder the establishment or extension at any time of MCDONALD'S restaurants 7.2. The lessee-manager also acknowledges that the companies of the McDONALD's group may establish other McDONALD's restaurants without his being able to plead the loss caused to the business that is the subject of these presents" Licence agreement, clause 28 "The licensee acknowledges that: The licensor has made no statement, promise or guarantee as to the future profitability of the restaurant. Before the conclusion of this agreement, the licensee worked in a MCDONALD's restaurant and had the opportunity to come into contact with other licensees of the licensor and to verify all the information of the licensor concerning the McDONALD's system This agreement establishes a restaurant at the location specified in article 2 (a) paragraph (f) and only at that location, and does not in any way provide for “exclusivity” or “protection” of any right to a given territory B&O and LES PINS agreements Lease-management, Art. VII - Non-exclusivity: "VII.1 The lessee-manager expressly acknowledges that only the "Agreement" grants him the right to operate the restaurant in the premises defined above for the agreed duration and confers on him no grant of territory, exclusivity or territorial protection. The "Agreement" allows him neither to prevent nor to hinder the establishment or extension at any time of other McDONALD'S restaurants. VII.2 The lessee-manager also acknowledges that the lessor company may establish other McDONALD's restaurants without his being able to plead the loss caused to the business that is the subject of these presents" *** received from : $1 45 27 6I, 133 26-11/23- 13:15 Ps: 13 Licence agreement, art 28 "The licensee acknowledges that ) The licensor has made no statement, promise or guarantee as to the future profitability of the restaurant, This licence does not in any way provide for an “exclusivity” or a “protection” and gives no right over a given territory in an adjoining zone. 9) MCDONALD's expressly reserves the right to seek other licensees and/or partners for the management of restaurants in France. These clauses are perfectly valid and no breach of its undertakings can be alleged against the respondent 14. As for the “primary catchment area”, on which they constantly rely, it has no significance at McDONALD's, it being further observed that Mr COLLORAFI, in requesting the allocation of the Antibes Ouest and Vallauris restaurants, knew perfectly well where they were located. 15. The citation of the code of ethics of the Fédération française de la Franchise is in all respects without effect: the appellants are no doubt too far removed from that Federation to know that, since 1991, this text has been abandoned in favour of a European code of ethics for franchising. It appears that no contractual fault can be held against MCDONALD's in the performance of the agreements recognised as valid and perfectly characterised by the Court in its previous judgment 16. In truth what the appellants complain of is themselves, for they try to make it believed that the plurality of agreements wronged them, whereas they wanted (and with what force!) these agreements. The reality is that Mr COLLORAF! presents in a catastrophic light a situation which is not so and which is due to his decision alone when it presents unsatisfactory aspects _received from 01 45_2? 6Z133 - Pe 14 17. The Antibes 1 restaurant, opened in 1987, had two loss-making financial years. This is usual in any new business and the reputation of the McDONAi D's sign cannot go against this commercial constant. Mr COLLORAFI should have remembered this in 1997, instead of issuing the summons. But subsequently this restaurant was profitable, as the appellants acknowledge, so that Mr COLLORAFI obtained a particularly high return on investment. It is indeed necessary to draw up the picture of Mr COLLORAFI's situation throughout the life of the agreements, from 1987 to 1997, in relation to his initial investment. Mr COLLORAFI contributed in 1987 62,500 FRF, only partially paying up the capital of SEBOL. Then, he took from the profits to reinvest, moreover modestly: 856,000 FRF. According to his own documents 133, 134 and 135, he received with his wife from 1987 to 1997: Year Salary BC Wife Dividends Total 5 months 1987 ' 1894 ¡1997 : Total Opponents' documents: Document 135 Document 133 903,890 Document 134 Fax received from : 0i 45 27 67 133 26/11/93. 13:15 ..Pg: 15 i.e. over 10 years and 5 months = 11,455,160 or per year: 11,455,160 = 10,416 When one knows that Mr COLLORAFI • reinvested only 855,000 FRF (see report table p. 18 and p 49, last line). • emptied all his current accounts (see expert report, p. 65, 1st line), it appears that his situation is not the one described in his submissions 18. It will be added that Mr COLLORAFI took good care not to set up a holding company and preferred, with two EURLs, B&O and LES PINS, to give himself the status of individual trader. He thereby gained the ability to deduct the losses of these two companies, so that his tax burden (reduced by the 50% tax credit on the amount of the dividends in SEBOL) is reduced: • for 1995, for a taxable base of 3,240,517 FRF (the taxable base is the result of gains less allowances and deductions), he pays only 803,761 FRF. • for 1996, for a taxable base of 627,340 FRF, he pays nothing, but is reimbursed 293,076 FRF - for 1937 nothing again. (see document D1: report by Mr TOMAS, bailiff, of 19 11.99) The choice of the EURL form to operate Antibes Nord and Antibes Ouest thus takes its true meaning for Mr COLLORAFI: this form has the disadvantage, when the sole partner is a natural person, of bearing a heavier burden than corporation tax, if the company makes profits: it prohibits any tax consolidation whereas it is perfectly possible in the McDONALD's network to make the personal contribution necessary to sign “straight” type agreements (lease-management of a duration of 20 years) through a holding company (documents D4 and D5 attestations of Mr MORICEAU and PERGENT). Fax received from : 02 45 27 6? 133 26/11/99 _ 19:15 •Es: 1f Mr COLLORAFI cleverly chose this form, which is of interest only in the case of loss-making operation for natural persons, who can deduct the losses from their taxable income This is what Mr COLLORAFI did, as the report of Maître TOMAS (D1) proves. Mr COLLORAFI, a former banker, had no need of the advice of MCDONALD's to make this analysis. The account of 10 years and 5 months of collaboration with McDONALD's therefore stands as follows: • sums received (see table no. 17 above) : 11,455,160 FRF • initial contribution to SEBOL: 62,500 completed later to 250,000 for full payment of the capital • reinvestments (see report p. 48 table and last line p. 49) • current account taken back (p. 62 of the report, antepenultimate paragraph) - 250,000 FRF - 856,000 FRF + 684,$19 FRF i.e. with optimised... taxation. Mr COLLORAFI therefore has no reason to complain How could he describe himself as “ruined and indebted”? He does not even claim to have given his guarantee The allegation of abusive economic exploitation of a situation of dependence therefore appears laughable: one would first have to prove an infringement of free competition. Fax Les! de _ 133 Ztr 11/99 1715. Fs: 17 - It would then be necessary for there to have been abusive exploitation whereas if anyone abused the situation, it is indeed Mr COLLORAFI. the Court of Cassation judgment cited on page 65 of the opposing submissions has nothing to do with it: PRODIM held DUVAL's chequebooks, paid itself in this way and did not pay its competitors. 19. The misleading presentation of the facts is moreover the rule in the opposing submissions. Mr COLLORAFI claims there on two occasions not to have been informed of the need for the opening of Antibes Nord before August 1996. He forgets to tell the Court that this opening was planned and known to him at least since 17 April (see his letter of that day, annexed to the SEPT report) This letter like his application file for Antibes Ouest (document CA), shows his perfect knowledge of the impacts, on the restaurants in operation, of new openings 20. But Mr COLLORAFI, for reasons of his own (disappointment of self-esteem at not having been chosen for Vallauris? personal problems unrelated to his business and which he allegedly discussed with the President of MCDONALD'S FRANCE, as the opposing submissions let suppose page 14%) ceased, at the end of 1996 and beginning of 1997, to behave as a responsible company head and embarked on a suicidal policy of destruction of his collaboration with MCDONALD'S 21. The Court put to the experts the question whether reductions in salaries and dividends would have enabled the appellant companies to reach their profitability threshold. The experts carried out restatements (pp. 24 to 29) in which they do not take into account the salary of Mrs COLLORAFI, which increased the restated sum The result is: • a positive consolidated net result at 30 June 1997 of €7,000 FRF, instead of a negative result of 1,206,000 FRF. an additional cash position of 3,323,000 FRF The experts then make an error in the comparison with the debt of the appellants towards MCDONALD's, since in taking the cash position at 30 June 1997, the debt must be taken at the same date, and not at 31 December 1997 the additional cash position at 30 June would be 3,323,000 whereas that debt at the same time was, at 30 June: 1,64E 557 FRF (see opponent's document: 1. and our brief no. 3 to the experts, p. 6) Thus, the appellants could meet their commitments. It is through voluntary non-performance that they failed to do so. The experts compare the restated sum at 30 June with the debt at 31 December to say that “the additional cash position thus obtained proves just to offset the payment arrears at 31 December 1997” (p. 29, last But, as pointed out above, the comparison is wrong, the restated sum would have increased It clearly appears that the appellants could have paid the causes of the formal notices of November 1997 and avoided the termination of the agreements. They did not even pay instalments. 22. If one compares the additional cash position resulting from the restatement made at the request of the Court with the results of the 2nd half of 1997, one sees that page 55 of the report indicates Antibes 1 Antibes Nord Antibes Ouest i.e. for the year 1,099,900 Fax received from 45 27 67 133 The restated sum made it possible to cover 3 years of operation on the basis of the 2nd half of 1997. since 3,323,000 = 3.02 Yet, the operation of Antibes Ouest improved appreciably afterwards in the 2nd half of 1998: the result becomes positive + 129,728 (see expert report, p. 55, last line). The operation was becoming positive without it being necessary to wait 3 years. The other answers to the questions put by the Court show that MCDONALD's performed the agreements in good faith whereas the appellants, as confirmed now by what is studied above nos. 20 and 21, by a voluntary policy knowingly refused to perform their obligations towards MCDONALD's. The report indicates perfectly that the adjustment of SEBOL's fees took place at the right time, the experts write: “On the question whether the amendment took place at the right time, it is important to specify that the amendment signed on 10 June 1997 has retroactive effect from 1 January 1997. McDonald's alleges having sent this proposed amendment as early as 09/04/97 (cf. statement by Me Leloup dated 08/08/99) but Mr Collorafi was unable to specify on what date he received and then signed this document The amendment could not take place earlier insofar as B&O, having opened only in October 1996, a period of time seems necessary to draw up the finding of the financial difficulties of the company In his statement, dated 16/4/99, on this question, Me Leloup indicates that the profitability of a restaurant is as much linked to “the quality of the management of the company head” as to the level of the fee. The management of Mr Collorati will be studied in answer to question 7.” In this regard, it should be noted that B&O and Mr COLLORAF! did not hurry to sign the adjustment that was offered to them. Mr COLLORAFI received the amendment on 9 April and signed it only on 10 June 24. This is the occasion to show that the appellants make errors of fact on every aspect of the case. Thus for Antibes Nord: Fax received from : 81 45.27 67 133 3 _ 19:15 .. Ps: 20 - page 9, 2nd paragraph, of the opposing submissions, the photos appearing in the annex referred to are those of a former depot “Diffusion international du livre”, on the site of which the restaurant was built; • page 9. 5 lines before the end of the page the appellants refer to an advertising fee. It is not collected by McDONALD's, but set and collected by a GIE bringing together the lessee-managers. It is an entity independent of McDONALD's. 25. The experts note that the marginal cost of opening a second restaurant is low. The opening of Antibes Nord was therefore not fatal for the appellants But it should be noted that Mr COLLORAF!, at a time which he describes as difficult, far from reducing his withdrawals, which would have enabled the appellants to meet their commitments, increases his remuneration which, employer's social charges included, goes from 900 KF to 1,022 KF (see report, p 38) i.e. a 13.5% increase, which is not the attitude of a responsible company head 26. The other conclusions of the experts show that MCDONALD's performed in perfect good faith the agreements in question effective counter-attack by the opening of Antibes Nord (page 43). Antibes Ouest was viable. its profitability is positive from the 2nd half of 1998, i.e. 15 months after the opening and as soon as it was managed by the company MAR (see p. 44 and our brief no. 4 which shows that the sales of this restaurant increase in the 1st half of 1999 by 9% compared with the 1st half of 1998) : Antibes Ouest was not a poisoned chalice (see report, p. 47). One does not see how an expert can say that it was not an additional chance of pulling through when it has been seen above (no. 22) that, from the 2nd half of 1998, Antibes Ouest contributes to the improvement of its profitability; • Vallauris has poorer results than Antibes Ouest. Mr COLLORAF! cannot therefore complain of not being its lessee-manager 4527 67.133 2/11/27 - 19.15 P9: 21 27. On the other hand, nothing alters the reality, already presented above, of the bad faith of the appellants (see nos. 21, 22 and 25): the policy of personal withdrawals of Mr COLLORAFI led him not to honour his commitments The deterioration of the companies' resources is due “in equal parts”, say the experts: p. 49, to the policy of Mr COLLORAFI and to the fall in results But it is established (see nos. 21 and 22) that the policy of Mr COLLORAFI was to voluntarily stop paying the fees The experts indicate on p 49 “It appears that Mr Collorafi practised a policy of massive distribution from 1995, having the consequence of drying up own resources. this policy deprives the companies of available resources to invest and ensure their development, notably in a very competitive environment. In 1995 Mr Collorafi distributes 1.8 MF of dividends whereas a Quick restaurant was about to open 500 metres from his restaurant (the opening of the Quick occurred in July 1995) In June 199f Mr Collorafi distributes 1 MF of dividends whereas the opening of the Quick led to a decrease in the activity of the Carrefour shopping centre” (see annex E4 to the statement by Me Leloup, of 08/03/99) and a second McDonald's restaurant (Antibes Nord) was going to open 4 months later opposite the 28. The experts note perfectly well on p. 64 of their report: “Whereas the overall net result of the restaurants was in 1997 = -2.7 MF it is -1.4 MF in 1998. Consequently, this analysis highlights the fact that in a context of improving restaurant profitability, efforts on the part of the parties (adjustment of the fees and financial advice from MCDONALD'S to control fixed costs more), aware of an improvement in the situation of its restaurants by accepting a temporary loss of remuneration on the part of Mr Collorafi, could have enabled the companies to get through the “difficult patch” caused by the opening of a Quick restaurant in July 95 and by the strategic reply of McDonald's (opening of Antibes Nord in October 1996)” It is Mr COLLORAF! who refused to wait by issuing the summons in June 1997, having premeditated his action since at least January (see document D 3). 29. It therefore follows from the file that: - McDONALD's committed no fault and performed the agreement in good faith: Ce: 1e al 15 27 67 133 . 191 19.22 - Mr COLLORAFI enriched himself to the extent of 11,034,079 FRF : other companies. At that time, they were already premeditating their lawsuit, as shown by the letter from Mr COLLORAFI to his lawyer of 27 January 157 (document D3 disseminated on the internet) Mr COLLORAFI, who at that time (see above no. 11), vigorously demands Antibes Ouest, already speaks of the “course of this case”. To get past the “difficult patch” invoked on p. 55 of his submissions Mr COLLORAF: was late in returning the agreement adjusting the fees of Antibes Nord, signed by him on 10 June, whereas he issued the summons on the 26th, claiming 45 million. which he hoped would be more fruitful than an additional It is therefore rightly that the Court rejected the appellants' claims and upheld those of MCDONALD's, the implementation of the termination clauses being regular and uncontested 30. Account statements were sent regularly to SEBOL (see our documents 5 to 8) as to B & O (documents 9 to 12), then a registered letter of 22 September relating to SEBOL and B & O (document 13) and yet another on 22 October relating to the three Companies (document 14) A financial audit, planned for October, was postponed at the request of Mr COLLORAFI (who was far from regularly sending his operating accounts to MCDONALD's, as the appellants try to make believed), to 17 November. It notably showed that Mr COLLORAFI would be reimbursed his current account in SEBOL (350,000 F) and had had an loan of the same amount taken out by SEBOL, but also that Mr COLLORAFi and his companies were perfectly able, as the restatement suggested by the Court proves, to meet his commitments. The sums due amounting at 30 November to - 1,628,100 F incl. VAT for SEBOL (document 15). .15_27 0? 133 Py: 23 - 1,409,184 F • 319 G3TF incl. VAT for B & O (document 16) incl. VAT for LES PINS (document 17) 31. TEBOL: er di22 pour on et le serres des contais se d acu of the companies on 27 November. No useful reaction from Mr COLLORAFI and his companies occurred during the month of the formal notice Consequently the termination took place automatically, in accordance with the text of the agreements recalled below. For SEBOL: "art.110 At the initiative of the Lessor Company and without any judicial formality one month after a simple formal notice to pay any sum or to perform any obligation which has remained without effect and indicating the Lessor Company's intention to invoke the benefit of this clause in the event of non-compliance by the Lessee-Manager with any stipulation whatsoever of this agreement and notably default in payment of the fees at the agreed due dates For B &) and LES PINS: "art. XI 2.2: Non-compliance with contractual provisions / Events affecting the operation of the business that is the subject of these presents. The notification by the Lessor Company, sent to the Lessee-Manager by registered letter with acknowledgment of receipt, made one month after a formal notice that remained fruitless and indicating the Lessor Company's intention to rely on this clause, shall suffice to put an end to the "Agreement", automatically and without any judicial formality, in any of the following cases (a) Non-compliance by the Lessee-Manager with any of the contractual provisions, notably: - non-payment of the fees to the Lessor Company or of any sum due on the occasion of this "Agreement" as well as to a natural or legal person whom the Lessor Company would have substituted for itself. P'g: 24 - non-compliance with any of the obligations arising from the Licence annexed hereto (Annex A), notably any acts or omissions of the Lessee-Manager by virtue of which the Lessor Company and/or McDonald's Corporation would be 32. Consequently, by a clear and precise provision of the agreements which is binding on the parties as on the judge, these agreements came to an end on 2 January 1998 It was therefore sufficient for the Court to note the termination by application of the termination clause contained in the agreements, with its corollary the payment of the arrears of fees. and its consequence, the taking back of the businesses by their owner = MCDONALD'S 33. The debts of the three Companies are not contested. Besides the fact that the one-month period of the formal notice was not put to use by the debtors to raise any objection whatsoever against the sums then due (30 November), the sums increased by the fees for December and are at the end of December SEBOL 1,867,247.84 F (see documents 49 to 59). B&0: 1,535,548.87 F (see documents 60 to 67), LES PINS : 504,474.02 F (see documents 68 to 77). i.e. 3,905,271.13 F as the Court rightly judged These sums are not contested. Mr Collorafi having even written on 5 January 1998 (document 75) "The sums that the Commercial Court will not fail to award me can only be infinitely greater than the fees you claim" and es concluie la verses de ce mure insta pet en si en a besoin e ui lecume oleinement si en dat besan i automatic termination of the agreement. 34. The appellants remained in the 3 restaurants belonging to the respondent and operated without right or title, under a sign that they no longer had the right to use Fax received from : 81 15 27 67_ 133 Py: 25 They continued this assault (voie de fait) beyond the judgment until 10 June, while complaining today of their losses of 1999/ At that date, MCDONALD's agreed to take back from them their fixed assets at their book value, i.e. 4,523,333 FRF in total, already paid by set-off against, to that extent, the debts of the appellant companies. The experts moreover omitted to take account of this takeover on page 65 of their report, which reduces by as much the cumulative negative capital of the appellant companies As the first judges decided, the appellants therefore owe an occupation indemnity It is with this indemnity in mind that the opponents introduced into their submissions of 1998 the singular concept of “reasonable fee”, for they know full well that the judge, who has no power to modify the terms of an agreement, can freely set the amount of an occupation indemnity. But it is out of the question to treat an occupant without right or title, guilty of an assault (voie de fait) and infringing the property of another, better than a lessee-manager or as a lessee-manager. The experts' answers to the question put by the Court concerning management during the 1st half of 1998 provide no element capable of reducing the occupation indemnities. The experts' calculations for the 1st half of 1998 are not representative, the fees taken into account were not collected by McDONALD's, the Court must not forget that the appellants kept the entirety of the turnover achieved during the unlawful operation of the 3 restaurants from 2 January to 10 June 1998 That is why the judgment setting at: 16,000 F per day for SEBOL, 14,000 F per day for B&O. 16,000 F per day for LES PINS. the amount of the daily occupation indemnity, that is to say double the contractual fee, calculated on the turnover of 1997, and this from 2 January to 9 June inclusive, i.e. 159 days, should be upheld fax 15.27 b? 133 26/11/93_ 19.15.F9: 26 FOR THESE REASONS Dismiss Monsieur COLLORAFI and the companies SEBOL, B&O, LES PINS from all their claims, purposes and submissions. Uphold in all its provisions the judgment of the Commercial Court of Paris of 18 May 1998 Order jointly and severally the companies SEBOL, B&O, LES PINS and Monsieur COLLORAFI to pay to the SA MCDONALD'S FRANCE a sum of 200,000 F under article 700 of the N.C.P.C. Order them to pay all costs, which shall include in particular the expert fees, and authorise the SCP FISSELER - CHILLOUX - BOULAY to apply article 599 of the N.C.P.C WITHOUT PREJUDICE TO ALL RIGHTS DOCUMENTS communicated: Loan agreement from MCDONALD'S to SEBOL of 16 December 1988 Loan agreement from MCDONALD'S to SEBOL of 1 January 1990 Letter from COLLORAFI to MCDONALD'S of 31 January 1997 Letter from Monsieur GILARSKI - MCDONALD'S CANNES to Monsieur COLLORAFI - MCDONALD'S ANTIBES of 5 April 1997 Account statement sent by MCDONALD'S to SEBOL on 18 March 1997 Account statement sent by MCDONALD'S to SEBOL of 15 April 1997 Account statement sent by NICDONALO'S to SEBOL of 26 May 1997 Account statement sent by MCDONALD'S to SEBOL of 25 June 1997 Account statement sent by MCDONALD'S to E & O of 19 March 1997 Account statement sent by NCDONALD"5 to B & O of 15 April 1997 Account statement sent by MCDONALD'S to B $ O of 26 May 1987 Account statement sent by MCDONALD'E to 8 & O of 26 June 1997 Registered letter from MCDONALD'S to Monsieur COLLORAFI, in his capacity as manager of the companies SEBOL and E & O of 22 September 1987 T6t. Registered letter from MCDONALD'S to SEBOL and B & 0 of 20 October 1897 Formal notice from MCDONALD'S to SEBOL of 27 November 1997 Formal notice from MCDONALD'S to E & O of 27 November 1999 Formal notice from MCDONALD'S to SARL LES PINS of 27 November 1997 Evolution of the consolidated turnover of the three restaurants managed by Monsieur COLLORAFI Summary table of the remuneration of the operation of SEBOL (Mr COLLORAFI) from 1987 ≥ 1996 Income statement of the company SEBOL for 1987 Income statement of the company SEBOL for 1988 Income statement of the company SEBOL for 1989 Income statement of the company SEBOL for 1990 Income statement of the company SEBOL for 1591 Income statement of the company SEBOL for 1992