Irwin Barkan and D&dbarkan LLC v. Dunkin' Donuts, Inc. and Baskin-Robbins USA, Co.

United States Court of Appeals
For the First Circuit
No. 10-1247
IRWIN BARKAN AND D&D BARKAN LLC,
Plaintiffs, Appellants,
v.
DUNKIN' DONUTS, INC. AND BASKIN-ROBBINS USA, CO.,
Defendants, Appellees.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
[Hon. Ronald R. Lagueux, Senior U.S. District Judge]
Before
Boudin, Selya and Stahl, Circuit Judges.
Ronald W. Dunbar, Jr., with whom Andrew Goloboy, William
Bagley and Dunbar Law P.C. were on brief for appellants.
Arthur L. Pressman with whom Jeffrey S. Brenner and Nixon
Peabody LLP were on brief for appellees.
December 6, 2010

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Barkan does not appeal the dismissal of any of the other 1
claims.
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STAHL, Circuit Judge. On February 8, 2005, Plaintiffs-
Appellants Irwin J. Barkan and D&D Barkan LLC (collectively
"Barkan") filed suit against Defendants-Appellees Dunkin' Donuts,
Inc. and Baskin-Robbins USA, Co. (collectively "Dunkin' Donuts") in
the United States District Court for the District of Rhode Island.
Barkan alleged, among other claims, that Dunkin' Donuts breached 1
a contract in which it had promised to work with Barkan and the CIT
Group ("CIT") to refinance Barkan's debt to CIT. At trial, the
district court excluded the testimony of Barkan's expert and
granted, pursuant to Federal Rule of Civil Procedure 50(a),
judgment as a matter of law in favor of Dunkin' Donuts. Barkan now
appeals both decisions. Because Barkan failed to present
sufficient evidence of causation, we affirm the district court's
judgment as a matter of law.
I. FACTS AND BACKGROUND
A. The Evidence Presented at Trial
Because this is an appeal of a judgment as a matter of
law, we set forth the evidence "'in the light most favorable to'
the nonmoving party." See Malone v. Lockheed Martin Corp., 610
F.3d 16, 20 (1st Cir. 2010) (quoting Espada v. Lugo, 312 F.3d 1,
2 (1st Cir. 2002)) (affirming renewed motion for judgment as a
matter of law under Rule 50(b)).

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In late 2001 and early 2002, Barkan became a Dunkin'
Donuts franchisee when he purchased five stores for $1.5 million.
Simultaneously, Barkan obtained from Dunkin' Donuts a Store
Development Agreement ("SDA") giving him the right, subject to
various limitations, to develop additional stores in a specified
area of downtown Providence. To finance these purchases, Barkan
secured several loans from CIT through a program established to
facilitate financing for Dunkin' Donuts' franchisees. Pursuant
to this program, Dunkin' Donuts guaranteed the loans and promised
to make "cure payments" to CIT if Barkan failed to meet his
obligations.
Shortly after this initial transaction, Barkan
purchased three additional SDAs from Dunkin' Donuts for $100,000
each. These SDAs gave Barkan the right to open stores in other
specified locations in Rhode Island. Like the Providence SDA
acquired at the time of the initial transaction, these new
contracts also contained various restrictions to his right to
develop, including a requirement that Barkan be "qualif[ied] for
expansion" under Dunkin' Donuts' "franchise performance rating
system."
Pursuant to these development rights, Barkan eventually
opened new stores in Burrillville, Warwick, and the Providence
Place Mall. To finance this expansion and his Dunkin' Donuts
franchise operations, Barkan testified that he borrowed $1.4

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By May 2004, Dunkin' Donuts had made roughly $160,000 in cure 2
payments to CIT.
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million from the DMS Group, which eventually sued Barkan to
recover much of this allegedly unpaid debt. At about the same
time, Barkan also began preparations to open a handful of
additional stores in areas covered by his SDAs. These
preparations included acquiring property, negotiating leases,
researching neighborhoods, and navigating the zoning processes.
Throughout 2003, Barkan's existing stores struggled to
satisfy Dunkin' Donuts' inspections, thereby jeopardizing
Barkan's right to develop under the SDAs. Inspectors cited the
stores for failing to comply with various Dunkin' Donuts
regulations, including food-safety requirements.
Barkan's network of stores also struggled financially,
and ultimately Barkan closed two of the locations. Throughout
2002 and 2003, Barkan repeatedly contacted Dunkin' Donuts
representatives to express concern about the financial health of
his operations. Barkan suggested various avenues to
profitability, including restructuring his CIT loans. By the end
of 2003, however, Barkan's financial difficulties had become so
acute that he had ceased paying his monthly obligations to CIT,
forcing Dunkin' Donuts to make cure payments. Barkan also fell 2
behind on payments to Dunkin' Donuts for royalty fees,
advertising fees, and the remaining purchase price of the SDAs.

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The Agreement also required Barkan to execute franchise 3
termination letters for Dunkin' Donuts to hold in escrow. In the
event of Barkan's breach, Dunkin' Donuts was authorized to utilize
these letters after giving Barkan notice and seven days to cure.
Although it uses the term "refinancing," the Agreement only 4
required Dunkin' Donuts to help restructure Barkan's loans' terms
to give him more time to repay the balance and to temporarily limit
his monthly obligations to interest-only payments. Dunkin' Donuts
did not agree to assist Barkan with anything that would have
resulted in Barkan securing additional financing from CIT.
Accordingly, in effect Barkan sought merely a debt restructuring,
and we will refer to it as such for the remainder of this opinion.
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Finally, in June 2004, Dunkin' Donuts and Barkan
entered into a Settlement Agreement ("Agreement") in an effort to
resolve the disputes that had arisen between them and to improve
the financial condition of Barkan's operations. Under the
Agreement, Barkan promised to, among other things, timely make
all future payments to CIT and release Dunkin' Donuts from any
claims Barkan might have against it. In exchange, Dunkin' 3
Donuts agreed to some modifications of the SDAs and, under
Section 4 of the Agreement, promised the following:
[Dunkin' Donuts] hereby agrees to work with
[Barkan] and CIT to attempt to re-finance
such existing debt. Specifically, [Dunkin'
Donuts] will request that CIT issue a new
note for the current balance of the
financing, including interest and cure
payments, with interest only payments for 18
months, except for reimbursement to [Dunkin'
Donuts] for the above cure payments, such
reimbursement to be made at the time of
refinancing. . . . . [Dunkin' Donuts] makes
no representation that CIT will provide such
refinancing.4

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The precise timing and nature of much of the communication 5
between CIT, Blowers, and Barkan is not entirely clear, as Barkan
only introduced testimony from himself and Shelly Rush at trial.
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In keeping with this promise, Dunkin' Donuts assigned
Betheny Blowers to work with Barkan and CIT. In March 2003,
before the Agreement was even finalized, Blowers contacted Laura
Sneed at CIT about Barkan's debt restructuring. Blowers learned 5
that the maximum amount of time for which CIT would permit
interest-only payments was four months, and that Barkan would
need to fill out a "rewrite form" requiring documentation about
his credit history and overall finances. Barkan testified that,
in April 2004, he faxed the rewrite form to CIT along with
fifteen pages of attachments that specified his restructuring
request, listed his creditors, estimated his personal net worth,
and summarized the financial condition of his operations.
Over the next few months, Blowers continued her efforts
to facilitate the restructuring. At Barkan's request, Blowers
spoke with Sneed about CIT waiving its refinancing fee and
increasing the period of time for which CIT would accept
interest-only payments. Blowers also notified Barkan of CIT's
request for a business plan and financial statements. In
response, Barkan provided Blowers with what he termed a "brief
narrative and supporting projections," which Blowers forwarded to
CIT.

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Shelly Rush -- the vice president of the portfolio unit
at CIT -- was the ultimate decision maker on this particular
restructuring request. Prior to her involvement with Barkan's
restructuring, she was made aware of his failure to make the
monthly payments due to CIT. Rush's deposition testimony, which
was read at trial, indicated that she was frustrated with the
information, or lack thereof, available to assist with her
decisionmaking. This frustration apparently began when she
received what she found to be incomprehensible financial
documentation about Barkan's operations. Specifically, she was
given a two-inch-thick pile of spreadsheets, completely lacking
the type of "summary information" -- such as a balance sheet or
income statement -- that she typically relied on in analyzing a
restructure request. Rush claimed she never saw the seventeen-
page rewrite application that Barkan testified he faxed to CIT.
In what was the only conversation Rush would ever have
with a Dunkin' Donuts representative pertaining to Barkan's
restructuring efforts, Rush and Sneed called Blowers to clarify
their confusion about this mass of information. Rush testified
that Blowers was "vague" and "not forthcoming" on the phone. In
response to Rush's complaint about the lack of clarity in the
documentation, Blowers said she could not share any more
information. Rush asked if any of Barkan's stores had closed
and, after an initially "evasive" response, Blowers told Rush

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Barkan testified that he did in fact inform CIT about at 6
least one of these closures.
Rush testified that, under the terms of the Dunkin' Donuts- 7
CIT financing program, "once [a franchisee's] stores are closed,
those accounts need to be repurchased by Dunkin' Donuts" and, at
that point, "cure payments [are] no longer available."
Rush did not recall Blowers ever expressly requesting that 8
the loan be restructured.
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that Barkan had closed two stores in the prior months. At that
point, Rush expressed disappointment that she had not been
notified about these closures, which had significant 6
implications for Barkan's existing debt. Rush testified that 7
the store closures were "a red flag that there's a lot of
activity happening out there that isn't been [sic] defined or
shared . . . ." Toward the end of the phone call, Rush told
Blowers that she could not act on the application without better
information. No additional information was ever provided, 8
however, and CIT did not approve the restructuring.
Although Barkan promised in the Agreement to make
timely payments to CIT, he failed to do so. Similarly, Barkan
continued to fail to make payments on other debts he owed to
Dunkin' Donuts and the DMS Group. Eventually, in January 2005,
Dunkin' Donuts sent Barkan a notice to cure. In February 2005,
Barkan filed for bankruptcy, and eventually his remaining stores
were sold for $4.025 million.

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B. The District Court's Exclusion of the Expert
Testimony and Judgment as a Matter of Law
After almost six days of trial, the district court
considered the admissibility of the testimony of Barkan's
purported expert, Frank Torchio. Barkan's theory of damages was
that his inability to restructure his debt prevented him from
developing additional stores under the SDAs, and Torchio was
prepared to testify about the profits Barkan would have realized
from operating those stores. Torchio's proposed testimony was
limited to the issue of damages -- he disavowed any opinion as to
whether Dunkin' Donuts' conduct prevented Barkan from
restructuring or opening new stores. After a hearing outside the
presence of the jury, the district court excluded his testimony
because Torchio's opinions were (1) based on facts not in the
record, and (2) irrelevant in light of the lack of evidence that
Barkan would have opened additional stores but for the denial of
the debt restructuring.
After Torchio's testimony was excluded, Barkan rested
and Dunkin' Donuts moved for a judgment as a matter of law. The
district court granted the motion on three grounds: (1)
insufficient evidence that Dunkin' Donuts breached the Agreement,
(2) "no evidence" that the alleged breach "caused CIT not to
restructure the loan[,]" and (3) "no evidence that . . . . [the
alleged breach] caused Barkan any loss."

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II. DISCUSSION
This court reviews de novo a district court's decision
to grant a judgment as a matter of law. See J.R. v. Gloria, 593
F.3d 73, 78 (1st Cir. 2010).
Judgment as a matter of law is only appropriate if the
evidence would preclude a reasonable jury from finding in favor
of the non-moving party. See Fed. R. Civ. P. 50(a); Malone, 610
F.3d at 20 (affirming judgment as a matter of law granted under
Rule 50(b)); Trigano v. Bain & Co., 380 F.3d 22, 28 (1st Cir.
2004). "If instead fair-minded persons could draw different
inferences from the evidence presented at trial, the matter is
for the jury[.]" Espada, 312 F.3d at 2 (citing Santiago Hodge v.
Parke Davis & Co., 909 F.2d 628, 634 (1st Cir. 1990)).
Accordingly, the court "may not consider the credibility of
witnesses, resolve conflicts in testimony, or evaluate the weight
of the evidence." See Richmond Steel, Inc. v. Puerto Rican Am.
Ins. Co., 954 F.2d 19, 22 (1st Cir. 1992). A non-moving party
with the burden of proof must, however, "present 'more than a
mere scintilla' of evidence and may not rely on conjecture or
speculation." Katz v. City Metal Co., 87 F.3d 26, 28 (1st Cir.
1996) (quoting Richmond Steel, 954 F.2d at 22).

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Neither party disputes that Rhode Island substantive law 9
governs this claim. See LaChapelle v. Berkshire Life Ins. Co., 142
F.3d 507, 509 (1st Cir. 1998) (substantive state law applies to
breach of contract claim brought under diversity jurisdiction
(citing Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78 (1938))).
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To succeed on a breach of contract claim under Rhode
Island law, a plaintiff must prove that (1) an agreement existed 9
between the parties, (2) the defendant breached the agreement,
and (3) the breach caused (4) damages to the plaintiff. Petrarca
v. Fid. & Cas. Ins. Co., 884 A.2d 406, 410 (R.I. 2005) (citing
Rendine v. Catoia, 158 A. 712, 713 (R.I. 1932)); see Zuromski v.
Lukaszek, 20 A.2d 685, 686 (R.I. 1941).
Barkan asserts that Dunkin' Donuts breached its
obligations under the Agreement when Blowers failed to request
expressly the restructuring, responded to Rush's questions with
evasive and unhelpful answers, and failed to act on Rush's
request for better information. Barkan argues that this breach
caused CIT to refuse his restructuring request, which in turn
caused him to lose his opportunity to develop additional stores
under the SDAs.
Putting aside whether Dunkin' Donuts breached the
Agreement, we turn to the third element of a breach of contract
action: causation. To establish causation, the plaintiff must
prove that the defendant's breach was the "but for" cause of the
alleged damages. See Wells v. Uvex Winter Optical, Inc., 635
A.2d 1188, 1191 (R.I. 1994). Consequently, for Barkan's claim to

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survive a Rule 50(a) motion under his theory of damages, the
record must have included some evidence that Barkan would have
developed additional stores but for Dunkin' Donuts' breach. More
specifically, Barkan was required to offer support for two causal
links: (1) but for Dunkin' Donuts' breach, CIT would have
restructured the loans, and (2) but for the lack of debt
restructuring, Barkan would have developed the additional stores.
Barkan failed, however, to present sufficient evidence of either
one, and judgment as a matter of law was therefore appropriate.
A. CIT's Debt Restructuring Decision
As to the first link, no reasonable jury could have
concluded that CIT would have restructured the debt but for
Blowers' purported failures. To begin with, Rush never suggested
that Dunkin' Donuts could have done anything to persuade her to
approve the restructuring. To be sure, Rush testified that she
received evasive answers to her questions, informed Blowers that
she wanted more concise financial information, and never received
the information she sought. Rush's refusal to move forward with
the restructuring request without better information does not,
however, prove that she would have agreed to restructure if she
had received that information. In fact, implicit in her quest
for a financial summary of Barkan's operations was that Rush
would have only agreed to the restructuring if she was
comfortable with what she learned from that summary. Barkan,

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At oral argument, Barkan asserted that a jury could infer, 10
from his previous success in obtaining loans from CIT and his
"forty year[]" history of obtaining financing from other lenders,
that CIT would have approved this restructuring but for Dunkin'
Donuts' breach. Barkan's ability to secure financing for projects
in the past, however, has little bearing on whether Rush would have
approved this particular restructuring request in 2004.
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however, presented no evidence that his operations could have
withstood such scrutiny.10
Not only did Barkan fail to present direct evidence of
Rush's willingness to restructure these loans, the trial record
was replete with evidence suggesting that Rush would be reluctant
to do so. Specifically, Barkan's operations were rife with
financial problems, Barkan had failed to meet his existing
obligations to CIT for months, and Barkan had shuttered two
stores (a development which raised a "red flag" with Rush).
Although its guarantee of the debt could lead to
speculation that a well-orchestrated lobbying effort by Dunkin'
Donuts would have resulted in CIT restructuring the loans,
nothing in the record actually speaks to how CIT would have
reacted to aggressive pressure, or at least better assistance,
from Blowers or Dunkin' Donuts. If anything, the fact that CIT
demanded detailed financial information from Barkan, even though
the debt was guaranteed, suggests that CIT would not have been
particularly susceptible to arm-twisting from Dunkin' Donuts.

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B. Barkan's Development of Additional Stores
Although Barkan's failure on the first causal link
suffices to affirm the district court's judgment as a matter of
law, we nonetheless also find that Barkan failed to present
sufficient evidence that Barkan would have successfully opened
additional stores but for CIT's refusal to restructure the debt.
By 2004, Barkan's network of stores was plagued by
financial difficulty, and Dunkin' Donuts representatives had
threatened to block his development of new stores because of what
they viewed as substandard conditions at his existing locations.
Although Barkan may have taken preliminary steps to develop
additional stores throughout Rhode Island, he failed to
demonstrate how, given the struggles his franchises faced, the
restructuring could have put him in a position to take the next
step and actually open the additional stores. For example, other
than the unsubstantiated suggestion that the DMS Group would have
continued to finance him, Barkan offered no evidence as to how he
would have obtained the significant capital presumably required
to open any new location. As noted by the district court, the
restructuring itself would not have infused Barkan with
additional money, but would only have temporarily decreased his
monthly obligations -- which by 2004 he was not paying anyway.
Under these circumstances, a jury could not reasonably conclude

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that this particular restructuring would have resulted in any
expansion of Barkan's network of stores.
In sum, Barkan failed to provide sufficient evidence of
either link required to prove that Dunkin' Donuts' alleged breach
caused damages. It follows that the lack of such causation proof
also made the expert evidence as to damages irrelevant and
potentially misleading; but, even had it been admitted, the
outcome on the Rule 50 motion would have had to be the same.
III. CONCLUSION
For the foregoing reasons, we affirm the district
court's judgment as a matter of law.

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