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The Franchise Memorandum

Posts from March 2008 - Issue 105.
Posted in Terminations

In Dunkin’ Donuts Franchised Restaurants v. Agawam Donuts, Inc., 2008 WL 619399 (D. Mass. March 5, 2008), a case being handled by Gray Plant Mooty, Dunkin’ Donuts seeks to enforce its termination of 52 franchise agreements entered into with the defendants. As Dunkin’ Donuts stated in its notices of termination and complaint, the terminations were based on the defendants’ failure to comply with specific provisions of the franchise agreements, including those prohibiting them from: (1) violating federal labor, tax, and immigration laws, (2) engaging in activities ...

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In Youngblood v. Higbee, 2007 WL 427765 (Idaho Feb. 19, 2008), the trial court had granted summary judgment in favor of the defendant franchisor on a negligence claim based on a franchised repair shop’s alleged service of the plaintiff’s vehicle brake system prior to an automobile accident. The plaintiff claimed that the franchisor failed to exercise due care when repairing the brake system, which caused the plaintiff’s injury. On appeal, the Idaho Supreme Court affirmed the summary judgment to the franchisor.

The high court noted that it could not sustain the plaintiff’s ...

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In Hyatt Corp. v. Epoch-Florida Capital Hotel Partners, Ltd., 2008 WL 490121 (M.D. Fla. Feb. 20, 2008), the United States District Court for the Middle District of Florida refused to dismiss a franchisee’s breach of contract claims against the franchisor’s parent corporation, finding that the parent was a “stranger” to the contract at the time it purchased the subsidiary franchisor such that breach of contract and tortious interference with business relationship actions could proceed against the company.

Hyatt Corporation purchased the AmeriSuites hotel chain and ...

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Posted in Contracts

In AAA Abachman Enterprises, Inc. v. Stanley Steemer Intern., Inc., 2008 WL 624040 (11th Cir. March 10, 2008), the plaintiff’s franchise agreement granted exclusive rights to use the Stanley Steemer trademarks in the carpet and upholstery cleaning business, within a specified territory. The franchisor later granted exclusive rights in the same territory to other companies to operate a “Stanley Steemer Duct Cleaning Business.” The plaintiff alleged that this grant of rights in connection with duct cleaning violated the exclusivity provision of plaintiff’s franchise ...

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Posted in Procedure

In a franchise termination case, the United States District Court for the Eastern District of Pennsylvania recently denied AAMCO’s motion for a protective order to stop the deposition of its in-house counsel who signed the termination letter, but granted the franchisor’s motion to strike the franchisee’s jury demand. AAMCO Transmissions, Inc. v. Baker, 2008 WL 509220 (E.D. Pa. Feb. 25, 2008).

AAMCO sought the admission of its vice president and general counsel, James Goniea, to practice before the court for the purpose of the case. The franchisee opposed the admission of Mr ...

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Posted in Antitrust

The United States Court of Appeals for the Fifth Circuit recently affirmed the dismissal of a distributor’s antitrust counterclaim against a franchisor in a lawsuit brought by the franchisor against the distributor. Schlotzsky’s, Ltd. v. Sterling Purchasing & National Distrib. Co., 2008 WL 588640 (5th Cir. March 5, 2008). The most important aspect of the case for franchisors is the analysis of relevant market issues in the franchise context.

Plaintiff Schlotzky’s is the franchisor for a quick-serve restaurant system and owner of the related trademarks and associated ...

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Posted in Arbitration

In Choice Hotels Int’l, Inc. v. SM Property Management, LLC, 2008 WL 518807 (4th Cir. Feb. 28, 2008), the franchisor had sought in federal court to confirm an arbitration award that it obtained by default against one of its franchisees. In response, the franchisee moved to vacate the arbitration award on the ground that it did not receive proper notice of the arbitration proceeding because no notice was ever sent to the franchisee’s designated representative, as required by the franchise agreement. The federal district court vacated the arbitration award upon determining that ...

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Posted in Contracts

A Pennsylvania federal court in Khan v. GNC Franchising LLC, 2008 WL 612749 (W.D. Pa. March 3, 2008), granted a partial victory to franchisor GNC Franchising seeking to terminate franchisees based on non-payment. The court, however, denied the franchisor’s summary judgment motion requesting breach of contract damages because they were not proved with certainty. The franchisees presented evidence showing that they paid some of the outstanding amount owed, although it was not clear how much they had paid. The decision is a reminder that damages even in non-payment cases must be ...

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Posted in Class Actions

In Issue 103 of The GPMemorandum, we reported that a federal court had granted a motion for class certification in Quadrel v. GNC Franchising, L.L.C., 2007 WL 4241839 (W.D. Pa. Nov. 29, 2007). On February 20, 2008, however, that court granted the defendant’s motion for reconsideration and dismissed the purported class action. Quadrel v. GNC Franchising, L.L.C., 2008 WL 474260 (W.D. Pa. Feb. 20, 2008). GNC’s motion for reconsideration of the class certification order argued that, after the court had certified the class, the single named class representative had settled his ...

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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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