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The Franchise Memorandum

Posts from May 2011 - Issue 142.
Posted in Bankruptcy

In In re Stone Resources, Inc., 2011 Bankr. LEXIS 1166 (E.D. Pa. Mar. 28, 2011), the franchisor, MarbleLife, moved for relief from the automatic stay against the debtor, its former franchisee, seeking to enforce an earlier preliminary injunction order granted in its favor by the U.S. District Court for the Eastern District of Pennsylvania. The preliminary injunction order prohibited the debtor from continued operation in violation of a covenant not to compete contained in the expired franchise agreement between the parties. MarbleLife’s primary argument to establish ...

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A federal court in New York held that it lacked federal diversity jurisdiction over an action to confirm a $60,000 arbitration award. In re Doctor’s Associates, Inc. v. Navindra Gharbaran, 2011 U.S. Dist. LEXIS 33693 (S.D.N.Y. Mar. 30, 2011). The franchisor, Doctor’s Associates, Inc., had obtained an award against a former franchisee that included damages of $60,000 and an injunction prohibiting the former franchisee from continuing to operate her restaurant as a Subway franchise. The federal court denied the petition to confirm the award because the amount in controversy ...

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In Bricker v. R & A Pizza, Inc., 2011 U.S. Dist. LEXIS 39017 (S.D. Ohio Apr. 8, 2011), an Ohio federal district court granted a motion by franchisor Domino’s Pizza to dismiss the claims of its franchisee’s former employee. The court held that the former employee’s complaint failed to state plausible claims against the franchisor under Title VII and  for sexual harassment, retaliation, and negligence under state law. Each of those claims requires that there be an employer/employee or agency relationship between the worker and the franchisor, and the court found no allegations to ...

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Posted in Damages

A federal court in Illinois has granted summary judgment to franchisor Hardee’s on its claim for money damages against a franchisee, rejecting the defense that the franchisee’s failure to pay should be excused by bad economic conditions. Hardee's Food Systems, Inc. v. Shree Krishna Foods, L.L.C., 2011 U.S. Dist. LEXIS 40542 (C.D. Ill. Apr. 14, 2011). The case arose after the franchisee defaulted under its franchise agreements by failing to pay amounts due, and Hardee’s terminated the agreements. The parties subsequently entered into a temporary license agreement under ...

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Posted in Settlement

In Prosperity Systems, Inc. v. Ali, 2011 U.S. Dist. LEXIS 43884 (D. Md. Apr. 22, 2011), a Maryland federal court granted a franchisor’s motion to dismiss a franchisee’s counterclaim alleging that the franchisor breached a settlement agreement entered between the franchisor, franchisee, and other unrelated entities. That agreement granted Ali a PIZZA BOLI’S franchise and required franchisor PSI to insert language in the franchise agreement stating that it would treat Ali the same as all other franchisees. The agreement also required its signatories  to use their best ...

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Posted in Damages

In Meineke Car Care Ctrs., Inc. v. RLB Holdings, LLC, 2011 U.S. App. LEXIS 7809 (4th Cir. Apr. 14, 2011), the U.S. Court of Appeals for the Fourth Circuit reversed the judgment of the federal district court in the Western District of North Carolina, which had held that future damages could not be recovered by the franchisor. Meineke, a franchisor of automotive car care centers, terminated RLB Holdings’ franchise agreements based upon its abandonment of its shops. Meineke brought suit against RLB in North Carolina state court, alleging that RLB breached the franchise agreements and ...

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Posted in Arbitration

The Seventh Circuit Court of Appeals recently upheld the dismissal of a franchise-related lawsuit in light of the existence of a binding arbitration provision. In Faulkenberg v. CB Tax Franchise Systems, LP, 2011 U.S. App. LEXIS 6391 (7th Cir. Mar. 29, 2011), a disgruntled franchisee brought suit against its tax preparation franchisor after closing its five franchised outlets. The franchisee-plaintiff alleged, among other things, that the franchisor violated the Illinois Franchise Disclosure Act by failing to register its offering circular in the state prior to the sale. The ...

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Posted in Antitrust

The United States District Court for the Western District of Kentucky recently granted in part but denied in part a motion brought by tire retreading franchisor, Bridgestone Bandag, LLC, to dismiss a four-count complaint brought by Shamrock Marketing, Inc., alleging that Bandag implemented an unlawful tying arrangement in violation of Sections 1 and 2 of the Sherman Act. Shamrock Marketing, Inc. v. Bridgestone Bandag, LLC, 2011 U.S. Dist. LEXIS 25109 (W.D. Ky. Mar. 11, 2011). Shamrock is a family-owned Kentucky corporation that supplies “curing envelopes” and other ...

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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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