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The Franchise Memorandum

Posts from July 2008 - Issue 109.
Posted in Arbitration

Choice Hotels International, Inc.'s arbitration award against a franchisee was recently vacated by the United States District Court for the District of New Jersey. In Bapu Corp. v. Choice Hotels Int'l, Inc., 2008 WL 2559306 (D.N.J. June 24, 2008), a hotel franchisee filed suit against Choice Hotels requesting relief from an arbitration award and relief under the franchise agreement.

Choice Hotels in 2006 had won an arbitration award of $142,560 in liquidated damages against the franchisee after the franchisee had been terminated for failing to make renovations to its hotel by a ...

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Posted in Arbitration

Franchisee Celine Gueyffier’s attempted opening of an Ann Summers store in Los Angeles was a failure, leading each party to file an arbitration claim asserting that the other had breached the parties’ franchise agreement. The arbitrator found for Gueyffier, concluding that Ann Summers did not provide promised training, guidance, and assistance. In his written award, the arbitrator held that Gueyffier’s failure to give Ann Summers notice of the breach and an opportunity to cure was immaterial because the breaches were incurable.

In Gueyffier v. Ann Summers, Ltd., 2008 WL ...

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Posted in Arbitration

In a non-franchise case, the court in Liebrand v. Brinker Rest. Corp., 2008 WL 2445544 (Cal. App. 4 Dist. June 18, 2008), upheld the trial court’s denial of Brinker’s motion to compel arbitration, concluding it had failed to meet its burden of proving Liebrand agreed to arbitrate an employment dispute. The trial court determined that the arbitration agreement was void because it was both procedurally and substantively unconscionable, specifically because it was an adhesion contract that mandated arbitration take place in Texas and required that Liebrand share the costs. On ...

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Posted in Trademarks

In Molly Maid v. Carlson, 2008 WL 2620109 (E.D. Mich. July 1, 2008), the United States District Court for the Eastern District of Michigan recently granted Molly Maid’s motion for preliminary injunction to restrain its former franchisee from infringing on Molly Maid’s trademarks. This decision provides good support to franchisors who wish to avoid customer confusion when a former franchisee, in operating a competing business, continues to use a telephone number that had been associated with the terminated franchise.

In granting the franchisor’s motion, the court first ...

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Posted in Antitrust

The United States District Court for the District of New Jersey recently dismissed federal antitrust claims brought by a pizza franchisee and its individual owners against its franchisor and the franchisor’s managing member. Beuff Enterprises Florida, Inc. v. Villa Pizza, LLC, 2008 WL 2565008 (D.N.J. June 25, 2008).

The plaintiffs alleged that: (1) the defendants violated Sherman Act § 2 by maintaining a monopoly in a “conglomeration of unique products, trade dress, services, methods, ingredients, recipes, menus and packaging, quality and quantity control strategies ...

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Posted in Contracts

A three-judge panel of the Eighth Circuit Court of Appeals has ruled that Domino’s Pizza may specify a particular new computer system developed by Domino’s for system-wide use under the terms of its franchise agreement. Bores, et al. v. Domino’s Pizza, LLC, 2008 WL 2467983 (8th Cir. June 20, 2008). By reversing and instructing the district court to enter judgment in favor of Domino’s, the appellate court decided the last remaining claim in the case. A Domino’s motion for summary judgment dismissing all of the franchisees’ other claims had been granted in May of 2007.

The ...

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Posted in Settlement

In Bath Junkie Branson, L.L.C. v. Bath Junkie, Inc., 2008 WL 2330749 (8th Cir. June 9, 2008), the Eighth Circuit Court of Appeals affirmed a federal court’s enforcement of the parties’ settlement agreement. Franchisor Bath Junkie, Inc. had appealed the district court’s decision to enforce a settlement agreement on the grounds that the court had erred in refusing to hold an evidentiary hearing as to whether there was a “meeting of the minds” on that settlement. Applicable case law provides for an evidentiary hearing when there is a dispute as to settlement. The Eighth ...

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Posted in Contracts

In De Walsche v. Togo’s Franchised Eateries LLC, No. CV-07-2901 (C.D. Cal. July 21, 2008), a federal court in California granted a defense motion for summary judgment on the franchisee’s claims that Togo’s had breached the franchise agreement and the implied covenant of good faith and fair dealing in requiring an English Language Proficiency Assessment (“ELPA”) as a condition for the transfer of his shop to two buyers. The franchisee also claimed that Togo’s ELPA discriminated against the buyers in violation of California’s Civil Rights Act. (Gray Plant Mooty ...

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Posted in Trademarks

 In Pinnacle Pizza Co., Inc. v. Little Caesar Enterprises. Inc., 2008 WL 2381678 (D.S.D. June 5, 2008), a Little Caesar’s® pizza franchisee sued the franchisor for claims related to the franchise system’s use and federal registration of the trademark HOT N’ READY. The franchisee began using the mark HOT N’ READY in 1997 to advertise promotional offers for ready-to-takeaway pizza. Based on the success of the promotion, the franchisee shared the promotional concept with other franchisees. In 2000, the franchisor began distributing an implementation guide for the ...

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Posted in Antitrust

In Sheridan v. Marathon Petroleum Co., LLC, 2008 WL 2486581 (7th Cir. June 23, 2008), a Marathon gasoline dealer filed suit against Marathon to challenge a provision of the dealer’s franchise agreement. The franchise agreement required the dealer to process credit card purchases made on credit cards issued by Marathon through specified credit card processing equipment. The franchisee remained free to process payments made by other credit cards through a different processing system if he so chose. The franchisee claimed that Marathon had effectively tied the processing of all ...

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Posted in Noncompetes

In Atlanta Bread Company International, Inc. vs. Lupton-Smith et al., 2008 WL 2264863 (Ga. Ct. App. June 4, 2008), the Georgia Court of Appeals affirmed the trial court’s grant of summary judgment holding that the in-term and post-term non-compete covenants in the franchise agreements between Atlanta Bread Company International, Inc. (“ABCI”) and various companies owned by Sean Upton-Smith were unenforceable. The in-term non-compete covenant prohibited Upton-Smith from owning or engaging in any “bakery/deli business whose method operation is similar to that ...

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Posted in Arbitration

In June the United States District Court for the Eastern District of Louisiana held that a franchisee who had initiated an arbitration and later withdrew the proceeding had not waived his right to compel another arbitration after the franchisor filed an action against him in federal district court. The case is Planet Beach Franchising Corp. v. Richey, 2008 WL 2598907 (E.D. La. June 25, 2008).

The franchisee in this action initiated the arbitration proceedings pursuant to the arbitration clause in the franchise agreement three years into the relationship with Planet Beach ...

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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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