Court of Appeals
Tenth Appellate District of Texas
10-24-00282-CV
Cheyenne Partners, LLC and Jason Alan Kitts,
Appellants
v.
Rainbow International, LLC and The Grounds Guys, LLC,
Appellees
On appeal from the
170th District Court of McLennan County, Texas
Judge Jim Meyer, presiding
Trial Court Cause No. 2017-2979-4
JUSTICE SMITH delivered the opinion of the Court.
MEMORANDUM OPINION ON REHEARING
On March 5, 2026, this Court issued a memorandum opinion and
judgment in this case. See Cheyenne Partners, LLC v. Rainbow Internat’l, LLC,
No. 10-24-00282-CV, 2026 WL 621055 (Tex. App.—Waco March 5, 2026, no pet.
h.) (mem. op.). In that opinion, we determined that Appellants’ issues three
and four were waived. Appellants filed a motion for rehearing complaining of
our disposition of those two issues. After reviewing the motion for rehearing and response thereto, we grant the motion for rehearing solely with respect to
Appellants’ request for this Court to review their issues three and four on the
merits. We deny Appellants’ motion for rehearing in all other respects.
Accordingly, we withdraw this Court’s opinion and judgment dated March 5,
2026 and substitute this opinion and its associated judgment in their place.
Cheyenne Partners, LLC and Jason Alan Kitts appeal from the trial
court’s judgment rendered in favor of Rainbow International, LLC and The
Grounds Guys, LLC’s suit involving a Michigan Franchise Agreement. In four
issues, Appellants contend Michigan law applies to this dispute, the evidence
is insufficient to support the finding of breach of contract, Appellants
established defenses precluding judgment, and Appellants established their
counterclaims. We affirm.
BACKGROUND
Jason Kitts acquired a Rainbow franchise in Monroe, Michigan in 2009
and a second franchise in Oakland, Michigan in 2014. In late 2014, he acquired
a Grounds Guys franchise. Kitts assigned the franchises to his company,
Cheyenne Partners, but Kitts is the personal guarantor. While Appellants’
franchises were financially successful, Kitts had a contentious relationship
with Rainbow. On September 5, 2017, following months of unproductive
communications between Kitts and Rainbow, Appellees filed their original
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 2 petition in the 170th District Court in Waco. Rainbow sent a “Notice of Default
and Intent to Terminate Franchise Agreements,” dated September 8, 2017,
specifying defaults and giving Appellants thirty days to remedy the defaults.
Thereafter, Rainbow sent a “Notice of Final Termination of Franchise
Agreement” to Appellants dated November 16, 2017.
In April 2018, Appellants filed a “Notice of Removal” in the United States
District Court for the Western District of Texas, Waco Division. In December
2018, that court remanded the case back to the 170th District Court. A trial
before the court was eventually held in June 2024. The trial court found that
Appellants breached their contract with Rainbow and abandoned their
Grounds Guys franchise and awarded damages to Appellees.
CHOICE OF LAW
In their first issue, Appellants contend that the trial court erred in failing
to apply Michigan law, which provides protections to the franchise
relationship. Without specifying which defenses and issues, they assert that
Michigan’s franchise protections should apply to specific defenses and issues
arising under its statutory scheme.
Under Rule of Evidence 202, a party may compel a trial court to take
judicial notice of another state’s law by filing a motion, giving notice to other
parties, and furnishing the court with sufficient information to enable it to
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 3 properly comply with the request. TEX. R. EVID. 202; Daugherty v. S. Pac.
Transp. Co., 772 S.W.2d 81, 83 (Tex. 1989). To have foreign law applied to a
case, a party must file a preliminary motion requesting application of foreign
law in addition to the request to take judicial notice. Pittsburgh Corning Corp.
v. Walters, 1 S.W.3d 759, 769 (Tex. App.—Corpus Christi-Edinburg 1999, pet.
denied). Choice of law issues can be waived if not properly invoked. Kubbernus
v. ECAL Partners, Ltd., 574 S.W.3d 444, 473 (Tex. App.—Houston [14th Dist.]
2018, pet. denied). Further, to preserve an issue for appellate review, a party
must make its complaint known to the trial court by a timely request or
objection that is specific enough for the trial court to be aware of the complaint
and then receive a ruling from the trial court. TEX. R. APP. P. 33.1.
Appellants assert that they adequately apprised the court of a choice of
law dispute by raising the issue and providing the court sufficient information
to conduct a choice of law analysis. They cited to several documents in the
record arguing that in those documents they asserted that Michigan law
applies, asked the court to apply it, provided the court with specific statutes on
which they relied, and pointed out the differing standards under each state’s
laws.
The documents Appellants cited are: Defendant’s Original Answer and
Counterclaims filed in the United States District Court for the Western
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 4 District of Texas, Waco Division; Defendant’s Supplemental Response to
Plaintiffs’ Opposed Motion to Remand filed in the United States District Court
for the Western District of Texas, Waco Division; Defendant’s Response to
Plaintiffs’ No-Evidence Motion for Summary Judgment; Defendants’
Objections to Plaintiffs’ Motion for Entry of Judgment and Proposed Judgment;
and Defendants’ Motion for New Trial.
Two of the documents Appellants rely on were filed in federal court and
there is nothing in the record indicating those documents were seen by the
judge of the 170th District Court. Of the documents filed in the 170th District
Court, one was filed after the trial and one was filed after the trial court
rendered judgment, therefore both were untimely for purposes of raising a
choice of law issue. See DaimlerChrysler Motors Co., LLC v. Manuel, 362
S.W.3d 160, 196-97 (Tex. App.—Fort Worth 2012, no pet.); Colvin v. Colvin,
291 S.W.3d 508, 514 (Tex. App.—Tyler 2009, no pet.) (motion to apply
Louisiana law filed after jury was seated and with a trial set to begin within
the hour was untimely); Walters, 1 S.W.3d at 769-70 (motions to apply Virginia
law filed on eve of trial were untimely). The final document Appellants rely on
is their response to Appellees’ No-Evidence Motion for Summary Judgment.
In their response, Appellants asserted Texas law, with one exception. While
they cited to Section 445.1527 of the Michigan Franchise Investment Law,
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 5 asserting they have sufficient evidence of violations of that law, they did not
raise the issue of choice of laws or address differences between Michigan and
Texas law.
It is undisputed that Appellants did not file a Rule 202 motion requesting
the court take judicial notice of Michigan law. Although Michigan franchise
law was mentioned at trial, that is insufficient to constitute a request to take
judicial notice or to raise a choice of law issue. Furthermore, while cross
examining a witness, Appellants’ counsel asked a question referencing a
Michigan law that voids any provision in a franchise agreement requiring
arbitration or litigation to be conducted outside Michigan. Appellees’ counsel
objected, telling the court that Appellants did not follow the process of
informing the court of Michigan law. Appellants’ counsel did not correct him.
We conclude that nothing in the record shows that Appellants asked the court
to apply Michigan law. Accordingly, Appellants’ contention that Michigan law
applies has been waived. See Kubbernus, 574 S.W.3d at 473. We overrule
Appellants’ first issue.
BREACH OF CONTRACT
In part A of their second issue, Appellants argue that “many of the
alleged breaches, resulting in termination and damages, are legally invalid as
no notice or opportunity to cure were given.” Noting that the trial court did
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 6 not specify which contractual term was breached, or “articulate which theory
the judgment rested [on]—including legally invalid ones for which no notice or
opportunity to cure were provided,” Appellants argue that “the judgment comingles and rests on legally invalid theories of recovery,” requiring reversal
and remand of the case for a new trial.
Apparently, Appellants’ argument that some theories presented to the
trial court are legally invalid rests on the application of Michigan law. As
explained above, Appellants never asked the trial court to apply Michigan law.
Even assuming Appellants’ characterization of some theories as constituting
legally invalid theories is accurate, the theories based on Michigan law were
never presented to the trial court.
Appellants label their complaint in this issue a Casteel problem. See
Crown Life Ins. Co. v. Casteel, 22 S.W.3d 378, 387-89 (Tex. 2000) (op. on reh’g)
(held that a jury charge is erroneous when a jury answers a single broad-form
liability question affirmatively, the single liability question incorporates
multiple legal theories, and at least one of those legal theories does not support
liability as a matter of law and therefore is invalid). Appellants argue that comingling of legally invalid theories of recovery makes it impossible for
Appellants or a reviewing court to discern whether the findings and judgment
are predicated on a legally valid theory.
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 7
The parties’ Franchise Agreement required notice and an opportunity to
cure some of the alleged breaches but not all of the alleged breaches. Also,
Appellants were given the opportunity to cure some alleged breaches.
Appellants do not explain how those theories of breach requiring notice and an
opportunity to cure fail to support liability as a matter of law as opposed to
merely failing to support liability because they lack evidentiary support. The
Texas Supreme Court has clarified that whether the Casteel presumption of
harm applies, because a broad-form charge commingled legally valid theories
or allegations with legally invalid theories or allegations, or does not apply,
because the charge commingled valid theories or allegations with theories or
allegations that were invalid only because the evidence did not support them,
the question on review is whether the charge probably caused an improper
judgment or probably prevents the appellant from properly presenting the case
on appeal. Horton v. Kansas City S. Ry. Co., 692 S.W.3d 112, 145-46 (Tex.
2024). This was a nonjury trial. For purposes of our discussion, we assume
the same reasoning applies in a trial before the court. See Zaidi v. Shah, 502
S.W.3d 434, 440 (Tex. App.—Houston [14th Dist.] 2016, pet. denied).
Here, as explained below, there is sufficient evidentiary support for some
of the theories on which Appellees relied and presented to the trier of fact.
Therefore, even assuming the theories requiring notice and an opportunity to
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 8 cure can be labeled as invalid, comingling of those theories with other theories
not requiring notice and an opportunity to cure did not cause an improper
judgment or prevent Appellants from properly presenting their case on appeal.
See Horton, 692 S.W.3d at 145-46.
In part B of their second issue, mentioning only the four alleged defaults
named in Rainbow’s November 16, 2017 termination letter, Appellants assert
the evidence is legally and factually insufficient to support a finding of breach
of contract.1 They argue that “[t]he question is what evidence if any, supports
the conclusion that Rainbow notified Kitts of defaults which he then failed to
cure.” Regarding the allegation of failure to make note payments, Appellants
assert that the testimony presented by Appellees was a guess, not based on
personal knowledge. Regarding the alleged lack of tax documents, and
considering testimony that Kitts did not submit the precise letters from his
accountant that Rainbow wanted, Appellants contend they were in substantial
compliance with the contractual requirements.
1 In its findings of fact, the trial court found that Appellants breached the terms of the agreements
with both Rainbow and Grounds Guys. However, Appellants never mention Grounds Guys in their argument in support of their second issue. Therefore, we construe the complaint to be directed solely at the breach of contract finding regarding the contract with Rainbow. However, to the extent Appellants may be asserting the evidence is insufficient to support the breach of contract finding regarding their contract with Grounds Guys, that complaint has no merit. Mary Thompson and Josh Sevick, employees of the parent company, testified that Appellants abandoned their Grounds Guys contract. Pursuant to Section 11.1.4 of the Franchise Agreement, the franchisor may terminate the franchise without notice if the franchisee abandons the franchised business.
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 9 Standard of Review
In an appeal of a judgment rendered after a bench trial, the trial court’s
findings of fact have the same weight as a jury’s verdict, and we review the
legal and factual sufficiency of the evidence used to support them just as we
would review a jury’s findings. In re Doe, 19 S.W.3d 249, 253 (Tex. 2000). We
review the trial court’s conclusions of law de novo; that is, we review the trial
court’s legal conclusions drawn from the facts to determine their correctness.
See BMC Software Belg., N.V. v. Marchand, 83 S.W.3d 789, 794 (Tex. 2002).
A party who challenges the legal sufficiency of the evidence to support
an issue upon which it did not have the burden of proof at trial must
demonstrate on appeal that there is no evidence to support the adverse finding.
Exxon Corp. v. Emerald Oil & Gas Co., 348 S.W.3d 194, 215 (Tex. 2011).
Evidence is legally sufficient if it would enable reasonable and fair-minded
people to reach the verdict under review. Id. We credit favorable evidence if
a reasonable finder of fact could, and disregard contrary evidence unless a
reasonable finder of fact could not. Id. If there is any evidence of probative
force to support the finding, i.e. more than a scintilla, we will overrule the
issue. Haggar Clothing Co. v. Hernandez, 164 S.W.3d 386, 388 (Tex. 2005) (per
curiam).
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 10
If a party is attacking the factual sufficiency of the evidence to support
an adverse finding on an issue on which the other party had the burden of
proof, the attacking party must demonstrate that there is insufficient evidence
to support the adverse finding. Capps v. Nexion Health at Southwood, Inc.,
349 S.W.3d 849, 855 (Tex. App.—Tyler 2011, no pet.). The verdict should be
set aside only if it is so contrary to the overwhelming weight of the evidence as
to be clearly wrong and unjust. Cain v. Bain, 709 S.W.2d 175, 176 (Tex. 1986)
(per curiam). In reviewing the factual sufficiency of the evidence, we must
examine the entire record, considering both the evidence in favor of, and
contrary to, the challenged findings. See Mar. Overseas Corp. v. Ellis, 971
S.W.2d 402, 406-07 (Tex. 1998); Cain, 709 S.W.2d at 176. The reviewing court
may not substitute its opinion for that of the trier of fact, as it is the factfinder’s
role to judge the credibility of witnesses, to assign the weight afforded their
testimony, and to resolve inconsistencies within or conflicts among the
witnesses’ testimony. Golden Eagle Archery, Inc. v. Jackson, 116 S.W.3d 757,
761 (Tex. 2003); Ford v. Panhandle & Santa Fe Ry. Co., 252 S.W.2d 561, 563
(Tex. 1952).
Applicable Law
The essential elements of a breach of contract claim are: (1) the existence
of a valid contract; (2) performance or tendered performance by the plaintiff;
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 11 (3) breach of the contract by the defendant; and (4) damages sustained as a
result of the breach. Woodhaven Partners, Ltd. v. Shamoun & Norman, L.L.P.,
422 S.W.3d 821, 837 (Tex. App.—Dallas 2014, no pet.). The last element
encompasses a causation requirement. Velvet Snout, LLC v. Sharp, 441
S.W.3d 448, 451 (Tex. App.—El Paso 2014, no pet.).
Discussion
In arguing the evidence is insufficient to support the breach of contract
finding, Appellants mention the four alleged defaults named in the November
16, 2017 letter: failure to make note payments, submit royalty reports, provide
tax returns, and maintain insurance. The failure to make note payments and
maintain insurance were not alleged as grounds for breach of contract in
Appellees’ petition. Therefore, it was not necessary to present evidence of those
two failures.
Reports
Pursuant to Sections 3.6 and 5.7.1 of the Franchise Agreement, sales
reports and license fee payments were required to be made weekly. Mary
Thompson, Chief Operating Officer of Rainbow’s parent company at the time,
testified that between May 2016 and December 2016, Kitts did not submit
reports. In 2017, there were twenty-three times he did not submit reports on
time. He stopped reporting in March 2017. As of the date of termination, he
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 12 owed eighteen reports for 2017 for his Monroe territory and thirty-five weeks
of reports for his Oakland territory. When Kitts failed to send in reports, he
also failed to send in required license fees. In July 2017, Rainbow sent email
notifications to Kitts identifying missing reports. Pursuant to Sections 11.1
and 11.1.11 of the Franchise Agreement, the franchisor may terminate the
agreement without providing the franchisee with notice and the opportunity to
cure when he fails to comply with reporting requirements. Section 11.2.1
requires the franchisor to provide notice and an opportunity to cure for failure
to promptly pay any monies owing to the franchisor. The September 8, 2017
notice of default and intent to terminate named the failure to make payments
due in breach of Section 3 of the Franchise Agreement as a basis for default.
Financial Statements
Section 5.7.3 of the Franchise Agreement requires the franchisee to
timely submit an income and expense statement and a balance sheet, and upon
demand by the franchisor, financial statements audited by an independent
certified public accountant. Thompson testified that Kitts failed to provide the
audited financial statements. Pursuant to Section 11.1.10 of the Franchise
Agreement, the franchisor may terminate the agreement without providing the
franchisee with notice and the opportunity to cure when he fails to provide the
required audited financial statements.
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 13 Goodwill
Liberty Mutual Insurance Company had an agreement with Rainbow
whereby Rainbow franchisees would provide services for Liberty Mutual
insureds. Participation by franchisees is optional but if they opt in, they must
comply with the insurance company’s requirements. Appellants participated
in the program but failed to comply with Liberty Mutual’s requirements.
Therefore, Liberty Mutual suspended Kitts and Rainbow. Thompson testified
that the suspension caused Rainbow to lose a substantial amount of business
and damaged Rainbow’s goodwill. Sections 11.1 and 11.1.8 of the Franchise
Agreement provide that the franchisor need not provide the franchisee with
notice and the opportunity to cure if the franchisee materially impairs
Rainbow’s goodwill.
Appellants’ Evidence
Kitts was asked by Appellees’ counsel why he did not timely submit the
weekly sales analysis reports. He responded with, “I don’t recall exactly why
each event. There was probably different reasons for each time.” Kitts testified
that, although the reports were delayed, he turned in the missing reports along
with checks for money due. He also provided tax returns. He testified that
after he received the notice of default, he cured everything.
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 14 Conclusion
There is more than a scintilla of evidence to show that Appellants
breached the Franchise Agreement by failing to submit reports timely, failing
to pay all fees due, failing to provide audited financial statements, and by
impairing Rainbow’s goodwill. See Hernandez, 164 S.W.3d at 388. Although
Kitts presented some evidence that he attempted to cure the alleged defaults,
he fails to acknowledge that the Franchise Agreement allows termination
without notice and the opportunity to cure when the franchisee has failed to
timely submit reports or audited financial statements, or if the franchisee
materially impairs Rainbow’s goodwill. Even considering Kitts’ attempts to
cure, the verdict is not so contrary to the overwhelming weight of the evidence
as to be clearly wrong and unjust. See Cain, 709 S.W.3d at 176. We overrule
Appellants’ second issue.
AFFIRMATIVE DEFENSES
In their third issue, Appellants assert that the evidence established their
affirmative defenses of “fraud (including by non-disclosure),” “breach of
Michigan law and the Franchise Agreement” by “obtaining an invalid release,”
and “prior material breach” by Appellees. They contend reversal and rendition
of judgment is proper.
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 15 Standard of Review
An affirmative defense is by nature one of confession and avoidance and
does not seek to defend by merely denying the plaintiff’s claims but rather
seeks to establish an independent reason why the plaintiff should not recover.
Dixie Carpet Installations, Inc. v. Residences at Riverdale, LP, 599 S.W.3d 618,
631 (Tex. App.—Dallas 2020, no pet.). The party asserting an affirmative
defense bears the burden of pleading and proving its elements. Compass Bank
v. MFP Fin. Servs., Inc., 152 S.W.3d 844, 851 (Tex. App.—Dallas 2005, pet.
denied).
A party attacking the legal sufficiency of the evidence supporting an
adverse finding on an issue on which the party bore the burden of proof must
demonstrate all vital facts in support of the issue were established as a matter
of law. Dow Chem. Co. v. Francis, 46 S.W.3d 237, 241 (Tex. 2001) (per curiam).
The analysis requires that we first examine the record in the light most
favorable to the verdict for some evidence supporting the finding, crediting
evidence favoring the finding if a reasonable fact finder could and disregarding
contrary evidence unless a reasonable fact finder could not. City of Keller v.
Wilson, 168 S.W.3d 802, 807, 822 (Tex. 2005). We must indulge every
reasonable inference that would support the verdict. Id. at 822. Some
evidence, meaning more than a scintilla, exists when the evidence supporting
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 16 the finding "rises to a level that would enable reasonable and fair-minded
people to differ in their conclusions." Merrell Dow Pharms., Inc. v. Havner, 953
S.W.2d 706, 711 (Tex. 1997).
If, however, no evidence appears to support the finding, we then examine
the entire record to determine whether the contrary proposition is established
as a matter of law; the issue will be sustained only if the contrary proposition
is conclusively established. PlainsCapital Bank v. Martin, 459 S.W.3d 550,
557 (Tex. 2015); Francis, 46 S.W.3d at 241. A proposition is established as a
matter of law when a reasonable fact finder could draw only one conclusion
from the evidence presented. See City of Keller, 168 S.W.3d at 814-16.
Discussion
Fraud
Regarding the fraud claim, Appellants assert that Appellees secretly
sued Appellants without any notice required by contract, concealed it, had him
sign a release, and then terminated him. Specifically, they complain that
Appellees filed a lawsuit against them on September 5, 2017, but “concealed”
it from Kitts until after he signed a release of all claims Kitts might have
against Appellees. They contend that the mandatory dispute resolution
provision in the Franchise Agreement created a duty to provide them with
written notice of the dispute. Asserting that Kitts relied on the fraud by nonCheyenne Partners, LLC v. Rainbow Int’l, LLC Page 17 disclosure to his detriment, Appellants contend that they waived key legal
rights they would not have waived but for the absence of knowledge of the
pending lawsuit. They assert they had to litigate a “fraudulent release” for
years.
Fraud by non-disclosure, a sub-category of fraud, occurs when a party
has a duty to disclose certain information and fails to disclose it. Bombardier
Aerospace Corp. v. SPEP Aircraft Holdings, LLC, 572 S.W.3d 213, 219 (Tex.
2019). To establish fraud by non-disclosure, Appellants must show: (1)
Appellees deliberately failed to disclose material facts; (2) Appellees had a duty
to disclose such facts to Appellants; (3) Appellants were ignorant of the facts
and did not have an equal opportunity to discover them; (4) Appellees intended
Appellants to act or refrain from acting based on the nondisclosure; and (5)
Appellants relied on the non-disclosure, which resulted in injury. Id. at 219-20.
Regarding the duty to disclose element, Appellants argue that the
Franchise Agreement requires Appellees to give them written notice of any
dispute. Section 13 of the Franchise Agreement, entitled “Dispute Resolution,”
provides that if a dispute arises, the initiating party shall give written notice
to the other party, describing the nature of the dispute. However, Section 13.7
of the Franchise Agreement provides for an exception to that requirement
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 18 “should a situation arise relating to Franchisee’s use of the Marks, the System
or Franchisor’s Confidential Information or trade secrets” and the Franchisor
believes it will suffer irreparable loss or damage if it does not take immediate
action. In that situation, the Franchise Agreement allows the Franchisor to
seek restraining orders, preliminary injunctive relief and other interim relief
without complying with the provisions of Section 13. Appellees filed suit
seeking injunctive relief because, they alleged, Appellants violated a covenant
not to compete and misappropriated trade secrets. Therefore, due to
application of Section 13.7, Appellants did not establish as a matter of law that
Appellees had a duty under the Franchise Agreement to provide notice to
Appellants before filing the suit. See Francis, 46 S.W.3d at 241.
Additionally, Appellants assert they met the harm element because they
waived key legal rights when they signed the release. The release was one
paragraph contained within an amendment to the Franchise Agreement which
Kitts voluntarily signed in order to participate in the Preferred Lead Program.2
Appellants cite to Kitts’ testimony that he would not have signed the
amendment containing the release if he had known about the lawsuit. But the
mere act of waiving one’s rights does not constitute harm. See LaLonde v.
Gosnell, 593 S.W.3d 212, 218-19 (Tex. 2019) (held that waiver is the intentional
2 The Preferred Lead Program permits a franchisee to perform services in a defined area outside of its
territory under certain circumstances.
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 19 relinquishment of a known right or intentional conduct inconsistent with
claiming that right). We conclude that Appellants have not identified record
evidence of the element of harm or injury.
Because they failed to prove Appellees had a duty to disclose the fact
they filed a lawsuit and Appellants did not show that the alleged nondisclosure resulted in injury, Appellants did not prove entitlement to the
defense of fraud by non-disclosure as a matter of law. See Bombardier
Aerospace Corp., 572 S.W.3d at 219-20; Francis, 46 S.W.3d at 241.
Breach of Michigan Law and the Franchise Agreement
Appellants assert that Michigan law prohibits blanket waivers
purporting to release franchisees’ rights. Appellants contend that having Kitts
sign the release in the amendment to the Franchise Agreement violated
Michigan law and “violated the parties’ agreement that specifically noted that
it was subject to the protections of the Michigan Franchise Investment Act.”
Thus, they argue that obtaining the release constituted a prior breach of the
Franchise Agreement by Appellees.
As argued by Appellants, the Michigan Franchise Investment Law
provides that a requirement that a franchisee agree to a release which deprives
it of rights and protections provided by Michigan law is void. MICH. COMP.
LAWS SERV. § 445.1527(b). However, as explained above, Appellants did not
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 20 properly request the trial court apply Michigan law. See TEX. R. EVID. 202.
Furthermore, the document Appellants cite as noting the application of
Michigan law is a federally mandated franchise disclosure document. See 16
C.F.R. §436.2. That document is not part of the parties’ Franchise Agreement
and cannot create contractual obligations between Appellants and Appellees.
Appellants cannot claim as an affirmative defense that a provision in the
amendment is void based on a violation of a law they have not appropriately
invoked or on the fiction that inclusion of the release in the amendment
constitutes a prior material breach of the Franchise Agreement by Appellees.
Appellants did not demonstrate as a matter of law all vital facts in support of
their affirmative defense of breach of Michigan law and the Franchise
Agreement. See Francis, 46 S.W.3d at 241.
Prior Material Breach
Appellants assert that Appellees’ prior material breach of the Franchise
Agreement should have precluded the breach of contract judgment in
Appellees’ favor. When one party to a contract commits a material breach of
that contract, the other party is discharged or excused from further
performance. Hernandez v. Gulf Group Lloyds, 875 S.W.2d 691, 692 (Tex.
1994).
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 21
Failure to notify Kitts of the lawsuit and requiring Kitts to sign the release
Appellants assert that Appellees’ failure to notify Kitts of the lawsuit,
filed on September 5, 2017, breached the Franchise Agreement. As explained
above, pursuant to Section 13.7 of the Franchise Agreement, Appellees were
not required to notify Appellants before filing this suit.
Additionally, Appellants contend that Appellees required Kitts to sign a
“fraudulent release” on September 6, 2017 and assert this was a prior breach
of the agreement. As explained above, the reference to Michigan law in the
federally mandated disclosure document does not add terms to the parties’
Franchise Agreement. Inclusion of the release in the amendment did not
constitute a breach of the Franchise Agreement.
Furthermore, as explained above, the evidence shows that Appellants
breached the Franchise Agreement in 2016 and 2017 when they impaired
Rainbow’s goodwill and failed to submit reports timely, provide audited
statements, and pay all fees due. Therefore, even assuming failure to notify
Appellants of the lawsuit and obtaining Kitts’ signature on a document
containing a release are breaches of the Franchise Agreement, the acts
constituting Appellants’ breaches of the agreement occurred before the
amendment was signed and the lawsuit was filed. Neither the failure to
provide notice nor obtaining Kitts’ signature on a release can retroactively
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 22 excuse Appellants’ breaches. See Bartush-Schnitzius Foods Co. v. Cimco
Refrigeration, Inc., 518 S.W.3d 432, 437 (Tex. 2017) (per curiam) (held that a
material breach excuses future performance, not past performance).
Terminating the agreement absent notice and opportunity to cure
Appellants contend that Appellees terminated the Franchise Agreement
without providing them with notice and the opportunity to cure the alleged
defaults and that action constitutes a prior material breach precluding the
breach of contract judgment in favor of Appellees. As explained above,
Appellees terminated the Franchise Agreement because Appellants failed to
timely send in required reports and payments due, failed to provide required
financial statements, and impaired Rainbow’s goodwill. Of those contractual
requirements, only the failure to make payments when due required notice and
the opportunity to cure. Appellants received notice and the opportunity to cure
their failure to make timely payments when Appellees sent the September 8,
2017 notice of default. Appellees terminated the Franchise Agreement on
November 16, 2017. Therefore, Appellees did not terminate the agreement
without first providing Appellants with notice and the opportunity to cure as
required by the Franchise Agreement. Appellants did not demonstrate as a
matter of law all vital facts in support of their affirmative defense of prior
material breach. See Francis, 46 S.W.3d at 241.
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 23 Conclusion
The evidence is insufficient to establish Appellants’ affirmative defenses
of fraud, breach of Michigan law and the Franchise Agreement, and prior
material breach. We overrule Appellants’ third issue.
APPELLANTS’ COUNTERCLAIMS
In their fourth issue, Appellants contend the trial court erred in
rendering a take nothing judgment against them on their counterclaims. They
assert that the evidence conclusively established their counterclaims for fraud,
breach of contract, and violations of the Texas Deceptive Trade Practices Act
warranting reversal of the trial court’s judgment.
Standard of Review
When a party challenges the legal sufficiency of an adverse finding on an
issue on which it bore the burden of proof at trial, such as a finding against a
defendant on a counterclaim, that party must demonstrate on appeal that the
evidence establishes as a matter of law, all vital facts in support of the issue,
and the party may prevail on appeal only if no evidence supports the trial
court’s adverse finding and the contrary position is conclusively established.
See Francis, 46 S.W.3d at 241. A matter is conclusively established only if
reasonable people could not differ as to the conclusion to be drawn from the
evidence. City of Keller, 168 S.W.3d at 816.
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 24 Fraud
Appellants assert that they conclusively established each element of a
fraud claim based on violations of Michigan franchise law, suing Kitts without
providing the notice required by the contract and then concealing it from
Appellants, and having Kitts sign a release of all claims against Appellees.
Appellants do not present argument, supporting authority, or record citations
to sway us that the record conclusively established fraud. Instead, they refer
us to a previous section of their brief where they asserted that they established
their affirmative defense of fraud by nondisclosure.
As explained above, Appellants did not properly request the trial court
apply Michigan law. See TEX. R. EVID. 202. Further, the Franchise Agreement
does not include a provision banning releases or incorporating Michigan law.
As explained above, the Franchise Agreement’s requirement to provide
notice before filing suit was inapplicable due to the application of the exception
in Section 13.7. Thus, Appellants did not prove Appellees had a duty to provide
notice to Appellants before filing the suit. See Bombadier Aerospace Corp., 572
S.W.3d at 219.
Kitts voluntarily signed the amendment containing the release. Merely
including a release paragraph in a contract does not constitute fraud.
Appellants have not proven the harm element of fraud by nondisclosure. See
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 25 id. Accordingly, Appellants have not demonstrated that the evidence
establishes as a matter of law all vital facts in support of their fraud claim. See
Francis, 46 S.W.3d at 241.
Breach of Contract
Appellants contend the evidence established each element of their
breach of contract claim against Rainbow. In their abbreviated argument, they
assert they established violations of Michigan law, failure to provide notice and
comply with the dispute resolution procedure, and termination of the
Franchise Agreement without notice, opportunity to cure, or good cause, which,
they contend, all constitute breach of the Franchise Agreement.
To prevail on its breach of contract claim, a party must establish (1) a
valid contract; (2) performance or tendered performance under the contract; (3)
a breach by the other party; and (4) damages resulting from the breach. See
Woodhaven Partners, Ltd., 422 S.W.3d at 837.
As explained above, in addition to the fact that application of Michigan
law was not properly presented to the trial court, the complained-of provision
of the Michigan statute is not incorporated into the Franchise Agreement. Any
violation of that provision would not constitute a breach of contract. Under the
facts of this case, Appellees were not required to provide notice and comply
with the dispute resolution procedure before filing suit. Instead, they complied
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 26 with the provision for emergency relief set out in Section 13.7 of the Franchise
Agreement. Further, Appellees were not required to provide notice before
terminating the Franchise Agreement if the franchisee materially impaired
Rainbow’s goodwill or failed to comply with reporting requirements or audited
financial statements. Appellees complied with the required notice provisions
for failure to pay monies owed to the franchisor. Therefore, Appellants have
not established their claims for breach of contract against Rainbow as a matter
of law. See Francis, 46 S.W.3d at 241; Woodhaven Partners Ltd., 422 S.W.3d
at 837.
Appellants contend that Grounds Guys breached its contract by simply
cutting off Appellants. They contend Grounds Guys never sent a default notice
or terminated the agreement. Appellants assert that they continued to do
business, send payments, and seek help yet Grounds Guys denied their access
to software and provided little support.
The trial court rendered a take nothing judgment on Appellants’ breach
of contract claim against Grounds Guys and simultaneously found that
Appellants abandoned their Grounds Guys franchise. To constitute
abandonment, there must be both an intention to abandon and an actual
relinquishment of the contractual enterprise or obligation. Jacobs v. Robinson,
241 S.W. 241, 243 (Tex. App.—Dallas 1922), aff’d 254 S.W. 309 (Tex. 1923).
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 27 Intent may be inferred from the conduct of the parties. See Maples v.
Henderson Cty., 259 S.W.2d 264, 267 (Tex. App.—Dallas 1953, writ ref’ d
n.r.e.).
The Franchise Agreement between Appellants and Grounds Guys
provides that:
Franchisee shall be deemed to be in default of this
Agreement, and Franchisor may terminate the
Agreement, without affording Franchisee an
opportunity to cure the default, . . . if:
Franchisee abandons the Franchised Business or
forfeits the right to transact business or otherwise
ceases to operate the Franchised Business for seven (7)
consecutive days (excluding normal vacations and
holidays) when, in Franchisor’s opinion, the ability of
Franchisee to resume an effective operation has been
substantially impaired or operations are otherwise not
likely to resume . . . .
Josh Sevick, corporate representative for Grounds Guys, testified that
they considered Kitts to have abandoned the franchise because he no longer
engaged with them, was not paying them for anything his contract required
him to pay, and he was not reporting. The record shows that Grounds Guys
sent over a hundred emails to Kitts regarding his franchise, attempting to
resolve problems.
While Kitts testified that he did not have access to Grounds Guys’
software system, the trial court may have determined that Grounds Guys was
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 28 not at fault for that issue. See City of Keller, 168 S.W.3d at 822. Kitts testified
that he ran out of money and had to stop operating. Coupled with Appellants’
failure to comply with the terms of the Franchise Agreement, the trial court
could interpret Kitts’s statement to mean that Kitts abandoned the Grounds
Guys franchise. See id.; Maples, 259 S.W.2d at 267.
Accordingly, the evidence shows that Appellants did not perform their
contractual obligations, an element necessary to prove entitlement to
judgment on their breach of contract claim. Woodhaven Partners Ltd., 422
S.W.3d at 837. Appellants did not demonstrate as a matter of law all vital
facts in support of their counterclaim that Grounds Guys breached the
Franchise Agreement. See Francis, 46 S.W.3d at 241.
Deceptive Trade Practices Act
Appellants contend that the evidence established entitlement to
judgment on their claim for violations of the Texas Deceptive Trade Practices
Act (DTPA). They assert that Appellees made various misrepresentations and
engaged in fraud, including by non-disclosure of the lawsuit, fraudulent
release, violations of Michigan law, and termination without notice and an
opportunity to cure in violation of the DTPA. See TEX. BUS. & COM. CODE ANN.
§§ 17.41-17.63.
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 29
As explained above, there is no merit to any of these contentions, and
therefore, no violation of the DTPA. Appellants did not demonstrate that the
evidence establishes as a matter of law all vital facts in support of their DTPA
claim. See Francis, 46 S.W.3d at 241.
Conclusion
Appellants have not shown entitlement to judgment on any of their
counterclaims. Accordingly, we overrule their fourth issue.
CONCLUSION
The trial court did not err in failing to apply Michigan law, the evidence
is sufficient to show Appellants breached the Franchise Agreement, and the
evidence is insufficient to support Appellants’ affirmative defenses or their
counterclaims. Accordingly, we affirm the trial court’s judgment.
STEVE SMITH
Justice
OPINION DELIVERED and FILED: July 9, 2026
Before Chief Justice Johnson,
Justice Smith, and
Justice Harris
Affirmed
CV06
Cheyenne Partners, LLC v. Rainbow Int’l, LLC Page 30