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The Franchise Memorandum

Posts from June 2011 - Issue 143.
Posted in Damages

A federal court in North Carolina has awarded franchisor Choice Hotels International, Inc. liquidated damages after granting its motion for reconsideration. Choice Hotels Int’l, Inc. v. Smith Hotel Props., LLC, 2011 U.S. Dist. LEXIS 48928 (E.D.N.C. May 6, 2011). In an earlier opinion, the court found in favor of the franchisor on its motion for summary judgment with regard to its claims for trademark infringement, unfair competition, and unfair and deceptive trade practices against a franchisee that was terminated for nonpayment. The court also found in favor of Choice Hotels ...

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Posted in Arbitration

In Wild v. H&R Block, Inc., 2011 U.S. Dist. LEXIS 55140 (D. Colo. May 12, 2011), a franchisee unsuccessfully sought a temporary restraining order to enjoin a pending arbitration between it and franchisor H&R Block. The franchise agreement between the parties provided that if a final award in arbitration was not rendered within 180 days of the notice of arbitration, either party could terminate the arbitration and pursue the matter in court, and the decision deadline in this case became March 9, 2011. The arbitration hearing was set for March 1-3, 2011, but because the hearing was set ...

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In Vysovsky v. Glazman, 2011 U.S. Dist. LEXIS 51909 (S.D.N.Y. May 11, 2011), eight franchisees sued franchisor U.S. Pack Courier Services and various individuals for violations of the New York Franchise Act. The franchisees claimed that they paid franchise fees for unregistered franchises, a violation of the statute, and that they were entitled to damages, including the reimbursement of their franchise fees. After a jury found for the franchisees, the franchisor moved for judgment as a matter of law on the grounds that (among other things) the claims were barred by the three year ...

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Posted in Class Actions

In Vallabhapurapu v. Burger King Corp., 2011 U.S. Dist. LEXIS 48804 (N.D. Cal. May 6, 2011), a California federal district court denied a motion to dismiss brought based on standing and the failure to join necessary parties. The case is part of a series of attempted class action lawsuits against Burger King as a franchisor of 96 restaurants leased to franchisees in the state of California. The complaint alleges that the restaurants are inaccessible to customers in wheelchairs, in violation of the Americans with Disabilities Act, the California Civil Rights Act, and the California ...

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Posted in Contracts

A federal district court in Georgia recently rejected a franchisor’s attempt to introduce expert testimony regarding the proper grammatical interpretation of the sentence in its franchise agreement defining “Net Sales.” In Coyote Portable Storage, LLC v. PODS Enterprises, Inc., 2011 U.S. Dist. LEXIS 51899 (N.D. Ga. May 16, 2011), several franchisees sued for breach of contract, claiming that their franchisor had improperly calculated royalties, and had thus overcharged them. The franchise agreements at issue calculated royalties as a percentage of “Net Sales,” ...

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In @Wireless Enterprises, Inc. v. AI Consulting, LLC, 2011 U.S. Dist. LEXIS 51973 (W.D.N.Y. May 16, 2011), a New York federal district court granted summary judgment in favor of the franchisor and its corporate officer dismissing the former franchisee’s counterclaims for breach of contract, breach of the covenant of good faith and fair dealing, actual fraud, constructive fraud, and tortious interference, among others. The franchisor had terminated the franchise agreement for a retail cell phone store and sued the franchisee for monies owed. The franchisee countersued based ...

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Posted in Bankruptcy

In In re Quattrin, 2011 Bankr. LEXIS 1941 (Bankr. N.D. Cal. May 26, 2011), the debtor was a franchisee in the Total Car Franchising Corporation (“Total Car”) system at the time he filed for bankruptcy. During the bankruptcy case, the franchise agreement was terminated. The debtor subsequently received his bankruptcy discharge, which gave rise to the discharge injunction against the collection of discharged debts. Total Car thereafter sought to enforce its post-termination remedies under the franchise agreement, including enforcement of the two year non-competition ...

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In Wakeman v. Aqua2 Acquisition, Inc., 2011 U.S. Dist. LEXIS 47498 (D. Minn. May 3, 2011), in which Gray Plant Mooty represented the franchisor of the AutoQual system, a Minnesota federal court last month denied the franchisee plaintiff’s request to stay the court’s judgment and injunction pending appeal. As reported in Issue 140 of The GPMemorandum, the court in February had confirmed an arbitrator’s award despite a clarification to which Wakeman, a former AutoQual franchisee, objected. Specifically, the court enjoined Wakeman and a defined group of people working in ...

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A federal court in Illinois has let stand a franchisee’s complaint about the new menu and pricing policy of its franchisor. Stuller, Inc. v. Steak N Shake Enterprises, Inc., 2011 U.S. Dist. LEXIS 57704 (C.D. Ill. May 31, 2011). Rejecting parts of a federal magistrate judge’s recommendation, the district court denied the franchisor’s motion to dismiss two counts of the complaint. In those two counts, the franchisee is challenging the Steak N Shake franchisor’s new policy that requires franchisees to follow set menu and pricing on some items, and to participate in system ...

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Posted in Arbitration

Plaintiffs hoping to avoid having to comply with contractual arbitration clauses were given a glimmer of hope in Brooks v. Fetch! Pet Care, Inc., 2011 N.J. Super. LEXIS 1236 (N.J. Super. Ct. App. Div. May 13, 2011). In this case, the New Jersey Superior Court reversed the trial court’s dismissal of the plaintiffs’ complaint and remanded the case for further discovery. The trial court held that the constitutional Supremacy Clause and Federal Arbitration Act (“FAA”) required enforcement of the mandatory arbitration provision in the parties’ franchise agreement, which ...

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Posted in Trademarks

In Eva’s Bridal Ltd v. Halanick Enterprises, Inc., 2011 U.S. App. LEXIS 9539 (7th Cir. May 10, 2011), the United States Court of Appeals for the Seventh Circuit affirmed a district court’s decision that the plaintiffs abandoned their trademark because they had granted a naked license under which the plaintiffs had no “reasonable control over the nature and quality of the goods, services, or business on which the [mark] is used” by the defendants. The plaintiffs had granted various family members licenses to use their trademark Eva’s Bridal to operate bridal salons in 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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