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The Franchise Memorandum

Posts from February 2008 - Issue 104.
Posted in Contracts

In R & F, LLC v. Brooke Corporation, 2008 WL 294517 (D. Kan. Jan. 31, 2008), the federal district court in Kansas granted a franchisor defendant’s motion in part and issued a stay to provide an opportunity for the parties to mediate the dispute, as required by their franchise agreement. Plaintiff R & F, LLC brought suit alleging that franchisor Brooke Corporation breached the franchise agreement by failing to provide contacts with insurance companies in the markets where R & F conducts its business, in order for R & F to offer insurance products to its customers and potential customers ...

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A recent federal court decision illustrates the judiciary’s occasional reluctance to take judicial notice of the nature of the franchise relationship.  In Patterson v. Denny’s Corp., 2008 WL 250552 (W.D. Pa. Jan. 30, 2008), the plaintiff filed a complaint against Denny’s and its franchisee alleging a violation of the Fair and Accurate Credit Transactions Act (“FACTA”). Specifically, the plaintiff alleged that a franchised Denny’s location provided him with a credit card receipt that showed the last four digits and the expiration date of his Visa card, an alleged ...

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Posted in Noncompetes

Last month the United States District Court for the District of New Jersey granted franchisor Jackson Hewitt Inc.’s (“JHI”) motion for summary judgment against a former franchisee, finding that the franchisee had clearly violated the post-termination covenant not to compete in his franchise agreement and enjoining him from further competition for a period of 24 months. Jackson Hewitt Inc. v. Childress, 2008 WL 199539 (D.N.J. Jan. 22, 2008).

The franchisee had operated two JHI franchises in Alabama for four years before notifying the company of his intention to cease ...

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Posted in Contracts

The United States District Court for the District of Arizona recently denied a post-trial motion filed by Best Western International Inc. for a new trial and for judgment as a matter of law following a set of unfavorable jury verdicts in Best Western International, Inc. v. Patel, et al., 2008 WL 205286 (D. Ariz. Jan. 23, 2008). The hotel at issue had been operated for over 30 years under the Best Western trademarks but was terminated approximately a year after the current franchisees had purchased it. Best Western thereafter brought suit against the franchisees for failing to pay for ...

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In KC Leisure, Inc. v. Lawrence Haber, 2008 WL 195107 (Fla. App. 5 Dist. Jan. 25, 2008), a Florida appellate court reversed a trial court’s dismissal of a franchisee’s claims against a franchisor’s officers for violation of the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”) and for fraudulent inducement under the Florida Franchise Act. This case is significant because it holds that a franchisor’s employees can be found personally liable for their role in the franchisor failing to comply with disclosure laws.

In its complaint, the franchisee sought ...

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In a case of first impression in Kentucky, the state’s Supreme Court turned away from using a mixed bag of respondeat superior and ostensible agency principles and, taking a more precise approach given the ubiquity of the franchise method of doing business, adopted the emerging majority rule on the issue of franchisor vicarious liability. In Papa John’s Int’l, Inc. v. McCoy, 2008 WL 199716 (Ken. Jan. 24, 2008), the state supreme court reversed an earlier court of appeals decision and adopted what it considered the “emerging judicial consensus” by applying a franchisor ...

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Posted in Class Actions

In Good, et al. v. Ameriprise Financial, Inc., 2008 WL 185714 (D. Minn. Jan. 18, 2008), the United States District Court for the District of Minnesota denied class certification to the plaintiffs, two Ameriprise financial advisors who brought an action on behalf of a putative class of over 10,000 advisors – a class that would include franchisees. The plaintiffs alleged that Ameriprise failed to pay its financial advisors the full amount of the commissions to which they were entitled under their contracts.  

Ameriprise argued that the case did not present a question of law or fact ...

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Posted in Antitrust

Distinguishing the situation in Queen City Pizza as a “contractually-created market power” (which cannot lead to antitrust liability), the United States Court of Appeals for the Ninth Circuit restored claims under the Sherman Antitrust Act in Newcal Industries, Inc. v. Ikon Office Solution, 2008 WL 185520 (9th Cir. Jan. 23, 2008). While this case is not brought against a franchisor, the court’s renewed affinity for the Kodak-based theory of a single-brand market could be cited against franchisors in some scenarios. Ikon, the defendant in this case, saw its district court ...

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Posted in Arbitration

In In re Bath Junkie Franchise, Inc., 2008 WL 324760 (Tex. Ct. App. Feb. 7, 2008), a Texas Court of Appeals held that a dispute arising from a franchisor and franchisee’s mutual termination agreement was subject to the arbitration provision contained within the parties’ franchise agreement. The franchisee filed the lawsuit seeking damages after the franchisor failed to make the required “buy out” payment pursuant to the mutual termination agreement executed by the parties. Approximately 14 months after the franchisee commenced its lawsuit, the franchisor moved to ...

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About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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