Prudence Corporation v. Shred-It America, Inc.

This disposition is not appropriate for publication and is not precedent except as*
provided by 9th Cir. R. 36-3.
The panel unanimously concludes this case is suitable for decision without oral**
argument. See Fed. R. App. P. 34(a)(2).
The Honorable Ralph R. Beistline, United States District Judge for the District of***
Alaska, sitting by designation.
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NOT FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
PRUDENCE CORPORATION,
Plaintiff/Appellee,
v.
SHRED-IT AMERICA, INC.,
Defendant/Appellant.
No. 08-56759
D.C. No. CV-07-00555-AG-RNB
MEMORANDUM *
Appeal From the United States District Court
for the Central District of California
Andrew J. Guilford, District Judge, Presiding
Submitted February 11, 2010**
Pasadena, California
Before: THOMAS and SILVERMAN, Circuit Judges, and BEISTLINE, Chief***
District Judge.
Shred-it America, Inc. (SAI) appeals the district court’s judgment in favor of
FILED
FEB 18 2010
MOLLY C. DWYER, CLERK
U .S. C OU R T OF APPE ALS

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Prudence Corporation (Prudence) in Prudence’s diversity action alleging breach of
a franchise agreement between SAI, the franchisor, and Prudence, the franchisee.
The district court determined that SAI had breached the franchise agreement by
failing to timely submit proposed renewal terms to Prudence. The district court
ordered the renewal of the franchise agreement under specific performance and
declaratory relief, and awarded attorneys’ fees and costs to Prudence. SAI
challenges the court’s finding of breach, and argues that the court’s order of
specific performance constitutes an improper rewriting of the contract. We
disagree.
There is substantial evidence to support the court’s finding of breach. SAI’s
delay of well over a year in even attempting to renew the franchise agreement was
entirely unreasonable and harmful to Prudence. None of SAI’s excuses for delay
are legitimate.
Moreover, the district court acted properly when it ordered specific
performance at the original royalty rate. According to the express terms of the
franchise agreement, where a party improperly withholds its approval of any action
provided for in the contract, specific performance is the proper remedy. Therefore,
the court had discretion to fashion an equitable remedy of specific performance, and
it did not abuse that discretion when it ordered renewal at the original royalty rate.

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See Rogers v. Davis, 34 Cal. Rptr. 2d 716, 720 (Cal. Ct. App., 1994) (quoting
Restatement (First) of Contracts, § 359(2)) (noting that “a ‘decree [of specific
performance] need not be absolute in form, and the performance that it requires
need not be identical with that promised in the contract; it may be so drawn as best
to effectuate the purposes for which the contract was made, and it may be granted
on such terms and conditions as justice requires.’”); see also Restatement (Second)
of Contracts § 358(1). Furthermore, by improperly delaying renewal of the
agreement, SAI waived its right to negotiate more generous terms than those
provided for in the original agreement. See Engalla v. Permanente Med. Group,
Inc., 938 P.2d 903, 924 (Cal. 1997) (holding that a party’s “course of delay” in
performing the terms of the contract, when “unreasonable or undertaken in bad
faith, may provide sufficient grounds” for a finding of waiver).
The award of fees and costs should also be upheld. According to Cal. Civ.
Code § 1717(a), all attorneys’ fees provisions in the contract are made reciprocal
between the parties. Also, any fees provisions which are limited to certain sections
of the contract must be applied to the entire contract “unless each party was
represented by counsel in the negotiation and execution of the contract, and the fact
of that representation is specified in the contract.” Cal. Civ. Code § 1717(a). The
franchise agreement does not specifically note that the parties were represented by

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counsel. Thus, the provisions that permit SAI to collect attorney's fees in certain
instances are made applicable to this suit won by Prudence. The award of fees and
costs was therefore proper.
AFFIRMED.

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