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The Franchise Memorandum

Posts from May 2008 - Issue 107.
Posted in Damages

In Novus Franchising, Inc. v. Oksendahl, 2008 WL 835681 (D. Minn. March 27, 2008), the court awarded attorneys’ fees to a franchisor that prevailed on a motion for preliminary injunction against a former franchisee. Gray Plant Mooty represented the franchisor. The parties’ franchise agreement provided that the “prevailing party” on a motion for injunctive relief would be awarded its attorneys’ fees. Relying on that language, the franchisor sought an award of fees from the court. The franchisee claimed, however, that it actually was the prevailing party, as the court ...

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Posted in Damages

In Bennigan’s Franchising Company v. Swigonski, 2008 WL 648936 (N.D. Tex. Feb. 26, 2008), the U.S. District Court for the Northern District of Texas awarded a franchisor, Bennigan’s Franchising Company, over $1.2 million in lost future profits and attorneys’ fees following a bench trial regarding a contractual dispute between the parties. In doing so, the court held that Bennigan’s proved by a preponderance of the evidence that the franchisees had materially breached a development agreement between the parties. It should be noted that the defendants were not ...

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In Cottman Transmission Systems, LLC v. Kershner, 2008 WL 583894 (E.D. Pa. March 3, 2008), several former franchisees sued their franchisor alleging that it failed to make a good faith effort to establish a chain of successful franchise stores and, instead, engaged in a nefarious scheme to “churn” franchises and profit at the franchisees’ expense. Based upon the franchisor’s alleged conduct, the franchisees filed a lawsuit claiming, among things, that the franchisor violated the covenant of good faith and fair dealing.

In response to the lawsuit, the franchisor moved to ...

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Posted in RICO

A recent decision by the United States District Court for the Northern District of Illinois in Wooley v. Jackson Hewitt, Inc., 2008 WL 836010 (N.D. Ill. March 25, 2008), granted in part a franchisor’s motion to dismiss a class action suit brought against a tax service franchisor under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq.

The plaintiff engaged a franchisee of Jackson Hewitt, Inc. to prepare his taxes for 2003. The taxpayer paid an extra fee for Jackson Hewitt’s “Gold Guarantee,” which was supposed to provide the ...

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Posted in Noncompetes

In late March, the United States District Court for the District of New Jersey denied a defendant-franchisee’s motion for reconsideration of a grant of summary judgment, finding the court’s previous decision that the franchisee had violated its post-termination covenant not to compete was correct as a matter of law. Jackson Hewitt Inc. v. Childress, 2008 WL 834386 (D.N.J. March 27, 2008). The court’s initial ruling granting plaintiff-franchisor Jackson Hewitt Inc.’s (“JHI”) motion for summary judgment and enjoining the franchisee from further competition for a ...

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The United States District Court for the District of Colorado recently denied The Quizno’s Franchise Company LLC’s motion to dismiss claims brought by a class of Quizno’s franchisees under Colorado statutory and common law. Bonanno v. The Quizno’s Franchise Co. LLC, 2008 WL 638367 (D. Colo. March 5, 2008). Plaintiffs allege that Quizno’s, its affiliated entities, and individuals who control and operate the Quizno’s franchise system fraudulently induced plaintiffs to “purchase franchises for between $20,000 - $25,000 per franchise when they knew that the ...

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Posted in Antitrust

The United States District Court for the Northern District of Illinois recently dismissed federal and state antitrust claims brought by a class of Quizno’s franchisees against Quizno’s Franchise Company and related entities. Siemer v. Quizno’s Co. LLC, 2008 WL 904874 (N.D. Ill. March 31, 2008). The plaintiffs alleged that the defendants violated federal and Illinois antitrust laws by exercising substantial economic power within the “Quick Service Toasted Sandwich Restaurant Franchises market” to coerce franchisees to purchase essential goods from Quizno’s ...

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Posted in Antitrust

In Partner & Partner, Inc. v. ExxonMobil Oil Corp, 2008 WL 896052 (E.D. Mich. March 31, 2008), the court dismissed the plaintiff’s breach of contract and antitrust claims. The plaintiff was a direct ExxonMobil gasoline dealer until the defendant decided to stop selling gasoline directly to dealers and opted to work with distributors who would purchase gasoline from ExxonMobil and then sell it to individual dealers. ExxonMobil then allowed plaintiff and other dealers to purchase the stations they were leasing previously. The plaintiff purchased its station and entered into a ...

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Posted in Damages

In Days Inn Worldwide, Inc. v. BFC Management, Inc., 2008 WL 619210 (D.N.J. March 4, 2008), the court awarded the hospitality franchisor treble damages for trademark infringement claims and also awarded full liquidated damages in accordance with the franchise agreement. Even after it was terminated, the franchisee continued to use the franchisor’s trademarks on its exterior signage as well as on the cups, toiletries, and other items in the facility for almost three months. The court held that the franchisee’s unauthorized use of the marks created a likelihood of confusion and ...

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Posted in Procedure

In a separate order in R&K Lombard Pharmacy Corp. v. Medicine Shoppe International, 2008 WL 648506 (E.D. Mo. March. 5, 2008), the court sided with defendant Medicine Shoppe International, the franchisor of the “Medicine Shoppe” system, and granted its motion for a more definitive statement regarding the allegations contained in the complaint filed against it by 25 franchisees. The plaintiffs’ complaint contained roughly 20 pages of general allegations, which were then incorporated by reference into each of the 19 counts asserted against the defendant. The franchisor ...

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Posted in Procedure

A trio of recent decisions addresses issues of personal jurisdiction in the franchise context. In Noble Roman’s, Inc. v. French Baguette, LLC, 2008 WL 975078 (S.D. Ind. April 8, 2008), Noble Roman’s brought suit against terminated franchisees in Indiana, which was franchisor Noble Roman’s home state. The franchisees sought to dismiss that action, arguing that they were Florida residents with no contacts with the state of Indiana. The court disagreed and found that Noble Roman’s had demonstrated that defendants had sufficient contacts with Indiana to justify the ...

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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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