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The Franchise Memorandum

Posts from February 2011 - Issue 139.
Posted in Antitrust

Two states reached different results last month concerning separate resale price controls. First, on January 11, California entered into a consent decree with a cosmetics manufacturer that had been prohibiting discounting by internet dealers. California v. Bioelements, Inc., No. 10011659 (Cal. Sup. Ct. Jan. 11, 2011). Although the manufacturer was required to stop controlling internet discounts, this result was achieved by settlement rather than a court decision, so its weight can be (and is being) questioned. Then, three days later, New York lost its court case against a ...

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Posted in Damages

In a case litigated by Gray Plant Mooty on behalf of Radisson Hotels International, Inc., a Minnesota federal court recently awarded more than $300,000 to compensate franchisor RHI for past due fees and liquidated damages owed by a former franchisee. In Radisson Hotels Int’l, Inc. v. KaanAm, LLC, 2011 U.S. Dist. LEXIS 3208 (D. Minn. Jan. 12, 2011), RHI had terminated a New York franchisee’s license agreement because of nonpayment. RHI sued in Minnesota seeking to recover past due fees owed for the time that the franchisee operated the hotel, along with liquidated damages for lost ...

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In Ellering v. Sellstate Realty Sys. Network, Inc., 2010 U.S. Dist. LEXIS 5015 (D. Minn. Jan. 19, 2011), a Minnesota federal court dismissed a claim by an area representative (the Ellerings) against the franchisor’s sales agent, Krien, finding that Krien did not tortiously interfere with an area representative agreement between the franchisor and the Ellerings that gave the Ellerings the exclusive right to represent the franchisor in soliciting prospective unit franchisees in Minnesota. After Krien allegedly solicited potential unit franchisees in Minnesota, the ...

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In Jackson Hewitt, Inc. v. DJSG Utah Tax Serv., LLC, 2011 U.S. Dist. LEXIS 2397 (D.N.J. Jan. 10, 2011), a New Jersey federal court issued a preliminary injunction against two former out-of-state tax services franchisees, denying their motions to dismiss or to transfer venue and ordering them to comply with their post-termination obligations. The former franchisees were located in Arizona and Utah, but their franchise agreements contained provisions in which they consented to personal jurisdiction in New Jersey and forum selection clauses designating the federal court in New ...

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Posted in Noncompetes

In Rita’s Water Ice Franchise Co., LLC v. S.A. Smith Enterp., LLC, 2011 U.S. Dist. LEXIS 2595 (E.D. Pa. Jan. 11, 2011), a Pennsylvania federal court recently granted the franchisor’s motion for preliminary injunction against a former franchisee, finding the post-termination covenant not to compete to be reasonable, and that success on the merits was likely. The franchisee operated a Rita’s Water Ice franchise before starting its own competing dessert business at the same location. The Rita’s franchise agreement contained a covenant restricting the former franchisee ...

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Posted in Noncompetes

In American Dairy Queen Corp. v. Fortune Street Research and Writing, Inc., 2010 U.S. LEXIS 119782 (W.D. Ky. Nov. 10, 2010), franchisor ADQ, represented by Gray Plant Mooty, moved for summary judgment that it was entitled to liquidated damages under its franchise operating agreements with the franchisee, which had been operating three Dairy Queen restaurants. When ADQ learned that the franchisee was operating a chain of competing Rally’s restaurants in Kentucky, it issued notices of default and gave the franchisee an option to cure by selling either the Dairy Queen or the ...

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The Illinois Franchise Disclosure Act (IFDA) imposes a one-year statute of limitations that begins to run when the franchisee becomes aware of facts or circumstances reasonably indicating a claim under the statute. In RWJ Mgmt. Co. v. BP Prods. N. Am., Inc., 2011 U.S. Dist. LEXIS 2928 (E.D. Ill. Jan. 12, 2011), franchisor BP filed a motion for summary judgment, asserting that the franchisees’ claims that BP had violated the IFDA registration requirements and committed fraud were barred because of the IFDA statute of limitations. BP argued that the limitations period began to run on ...

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Posted in Choice of Law

In Hockey Enter., Inc., v. Total Hockey Worldwide, LLC, 2011 U.S. Dist. LEXIS 2201 (D. Minn. Jan. 10, 2011), a Minnesota federal court dismissed a Florida franchisee’s claim against franchisor Total Hockey Worldwide, LLC, its parent, and a number of its officers for breach of the Minnesota Franchise Act. A Florida-based franchisee of two hockey-training businesses had filed suit against the Total Hockey defendants alleging, among other things, that they violated the Minnesota Franchise Act by failing to register the franchisor in Minnesota and making several false ...

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Posted in International

Last week, New Brunswick became the fourth province in Canada to enact a franchise disclosure law. Because the law became effective before many franchisors have updated their disclosure documents, franchisors either will have to update now to comply with the New Brunswick Franchises Act or postpone sales of franchises in New Brunswick until they update their disclosure documents.

What does this mean for franchisors offering and selling franchises in New Brunswick? All franchisors offering and selling franchises in New Brunswick must provide a disclosure document to a ...

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Posted in Antitrust

Last week the United States District Court for the Western District of Washington dismissed two of the four counts—including an antitrust claim—brought by a disgruntled franchisee in Danforth & Associates, Inc. v. Coldwell Banker Real Estate, LLC, 2011 U.S. Dist. LEXIS 10882 (W.D. Wash. Feb. 3, 2011). In addition to dismissing a claim for breach of contract, the court made a brief and specific ruling that a claim under Section 1 of the Sherman Antitrust Act cannot be based on an alleged conspiracy between a franchisor and a franchisee. For this reason, the court ruled that the ...

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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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