Opinion · Court of Appeals for the Eighth Circuit
Holiday Inns Franchising, Inc. v. Branstad
29 F.3d 383
- Type
- Opinion
- Court
- Court of Appeals for the Eighth Circuit
- Jurisdiction
- Federal
- Date
- 1994-07-07
- Topic
- general
How later courts describe this case
- explaining "that if the party to the contract who is complaining could have seen it coming, it cannot claim that its expectations were disappointed"
Citator
UpLaw has not yet analyzed Holiday Inns Franchising, Inc. v. Branstad. The absence of a flag is not a finding that it is good law.
- Authority status
- pending
- Cited by
- 27 opinions
HOLIDAY INNS FRANCHISING, INC. v. BRANSTAD,29 F.3d 383(8th Cir. 1994)
HOLIDAY INNS FRANCHISING, INC., AND HOLIDAY INNS, INC., APPELLEES, v. TERRY
BRANSTAD, GOVERNOR OF THE STATE OF IOWA, APPELLANT, JOHN Q. HAMMONS AND
OMAHA HOTEL, INC., DEFENDANTS, IOWA FRANCHISEE ASSOCIATION, INTERVENOR.
McDONALD'S CORPORATION, APPELLEE, v. STEVEN NELSON AND TASS ENTERPRISES,
INC., DEFENDANTS, McDONALD'S CORPORATION, APPELLEE, v. STEVEN NELSON AND
TASS ENTERPRISES, INC., DEFENDANTS, STATE OF IOWA, INTERVENOR, IOWA
FRANCHISEE ASSOCIATION, APPELLANT.
STATE OF IOWA, APPELLANT, IOWA FRANCHISEE ASSOCIATION, INTERVENOR.
HOLIDAY INNS FRANCHISING, INC., AND HOLIDAY INNS, INC., APPELLEES, v. TERRY
BRANSTAD, GOVERNOR OF THE STATE OF IOWA; JOHN Q. HAMMONS; AND OMAHA HOTEL,
INC., DEFENDANTS, IOWA FRANCHISEE ASSOCIATION, APPELLANT.
Nos. 93-2606, 93-2607, 93-2609.
United States Court of Appeals, Eighth Circuit.
Submitted January 12, 1994.
Decided July 7, 1994.
Page 384
Brent R. Appel, Des Moines, IA, argued, for Iowa Franchisee Ass'n.
Alan Silberman, Chicago, IL, argued, for McDonald's Corp.
John G. Parker, Atlanta, GA, argued, for Holiday Inns; Robert T. Joseph, William T. Barker, Jill A. Thompson, Ronald T. Coleman, Janet L. Kishbaugh and Edward W. Remsburg, on briefs, for appellees.
Before BEAM and MORRIS SHEPPARD ARNOLD, Circuit Judges, and STROM,fn*District Judge.
I.
[2] We do not think that it can be seriously contested that the retroactive feature of the relevant Iowa legislation substantially impaired the obligations previously owed to the plaintiffs in this case, or that this dispute is ripe for adjudication. We therefore do not see that any useful purpose would be served by a re-examination of the applicable legal principles so ably canvassed and applied by the district court.
[3] We do offer, however, some observations on a very troublesome aspect of current Contract-Clause jurisprudence. The Supreme Court has held that in determining whether an impairment is substantial, and thus unconstitutional, a court should take into account whether the kind of contract or relationship that furnishes the subject matter of the dispute had previously been the subject of regulation. InAllied Structural Steel Co. v.Spannaus,438 U.S. 234,250,98 S.Ct. 2716,2725,57 L.Ed.2d 727(1978), for instance, the Court said that the relevant inquiry was whether the disputed legislation operated "in an area already subject to state regulation at the time the company's contractual obligationsPage 385were originally undertaken," or whether, instead, it "invaded an area never before subject to regulation by the State." A later case states the matter a little differently and, perhaps, more narrowly. InEnergy Reserves Group, Inc. v. Kansas Power andLight Co.,459 U.S. 400,411,103 S.Ct. 697,704,74 L.Ed.2d 569(1983), the Court indicated that the proper consideration was "whether the industry the complaining party has entered has been regulated in the past." The idea, evidently, is that if the party to the contract who is complaining could have seen it coming, it cannot claim that its expectations were disappointed. To put it in economic terms, a party's evaluation of the possibility of interference is reflected in the negotiated price, and thus the value of performance to it is not reduced, if it can more or less accurately value the risk of that interference. We believe that this is the principle that the Supreme Court is developing in its cases.
[4] We also believe that the appellees here cannot reasonably be said to have had a fair and appreciable warning of an impending intervention into their agreements. It is true, as appellants point out, that other franchise arrangements of at least five different varieties had been regulated previously in Iowa. But what appellants fail to note is that only one of those statutes purported to be retroactive and then not generally so: Its retrospective effect was limited to franchise agreements that had an indefinite term.SeeIowa Code Ann. §§ 322F.1-322F.9. The other such statutes either contain no reference to retroactivity or contain express provisions limiting them to prospective application only. (For an example of the latter type,seeIowa Code Ann. §§ 323.1-323.14.) Appellants also cite to a plethora of statutes from other jurisdictions that they claim are similar to the one under consideration here. The infirmity in this argument is that almost none of those statutes purports to be retrospective. It is absolutely plain, moreover, that the retrospective application of statutes similar to the one here, and in the circumstances that are present in this case, has almost uniformly been held unconstitutional, and this is a datum on which franchisers are presumably allowed to rely while bargaining and in fixing the prices of their licenses.See,e.g., Northshore Cycles, Inc. v. Yamaha Motor Corp., U.S.A.,919 F.2d 1041(5th Cir. 1990) (per curiam), andMorgan v. KemperInsurance Companies,754 F.2d 145(4th Cir. 1985).
[5] We therefore see no merit in appellants' argument that the plaintiffs are chargeable with notice of a reasonable possibility that the legislature would enact Iowa Code Ann. §§ 523H.1-523H.17 and make those sections retroactively applicable to existing franchise contracts.
II.
[6] We therefore affirm the district court.