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The Franchise Memorandum

Posts from July 2011 - Issue 144.

In Sylvan Learning, Inc. v. Learning Solutions, Inc., 2011 U.S. Dist. LEXIS 64492 (S.D. Ala. June 17, 2011), a federal court in Alabama granted in part and denied in part a preliminary injunction against a licensee for continuing to operate business locations following the licensor’s termination of the license agreements. The defendant operated three Sylvan Learning centers under separate license agreements, two in Mississippi and one in Alabama. Richard Blow, a signatory to all the license agreements and partial owner of the defendant entity, was convicted of felony bank ...

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Posted in Employment

A Georgia appellate court recently ruled that there was no employer-employee relationship between a Massachusetts unit franchisee and a commercial cleaning franchisor—reversing the trial court’s grant of summary judgment to the unit franchisee. In Jan-Pro Franchising Int’l, Inc. v. Depianti, 2011 Ga. App. LEXIS 543 (Ga. Ct. App. June 23, 2011), the franchisor, Jan-Pro, brought a declaratory judgment action seeking to clarify the employment status of a Massachusetts franchisee. The trial court granted the franchisee’s motion for summary judgment, determining that ...

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In A Love of Food I, LLC v. Maoz Vegetarian USA, Inc., 2011 U.S. Dist. LEXIS 73539 (D. Md. July 7, 2011), the federal district court in Maryland this month declined to dismiss several claims brought by a Maryland-based franchisee under the New York Franchise Sales Act (NYFSA) and the Maryland Franchise Registration and Disclosure Law (MFDL). The franchisee alleged that Maoz, a New York-based franchisor of quick-service vegetarian restaurants, had made misrepresentations in its UFOC that induced the franchisee to enter into the franchise agreement. Specifically, the franchisee ...

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In Hayes v. Jani-King of Jackson, 2011 U.S. Dist. LEXIS 66736 (S.D. Miss. June 22, 2011), a Mississippi federal district court denied a franchisor’s motion for summary judgment on a vicarious liability claim, concluding that under Mississippi law there was a question of fact regarding whether a janitorial cleaning service franchisor exercised sufficient control over its franchisee to be held liable for the franchisee’s negligent acts. The case arose out of an injury to the plaintiff who, after entering a restroom recently cleaned by the franchisee, slipped on the wet ...

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Posted in Arbitration

A Michigan federal court recently decided that an arbitration provision contained in a franchise agreement governed claims arising out of a subsequent, related agreement. The parties in Braverman Props., LLC v. Boston Pizza Rests, 2011 U.S. Dist. LEXIS 68536 (W.D. Mich. June 27, 2011), had a franchise agreement that included an arbitration provision requiring arbitration of “any and all controversies, claims and disputes between [the parties] arising out of or related to this Agreement.” The franchise agreement also gave the franchisor, Boston Pizza Restaurants, a right ...

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A federal district court in Illinois granted a franchisee’s motion for a preliminary injunction preventing a quick service restaurant franchisor from requiring the franchisee to comply with pricing and promotional policies. Stuller, Inc. v. Steak N Shake Enterprises, Inc., 2011 U.S. Dist. LEXIS 66455 (C.D. Ill. June 22, 2011). As reported in the June 10, 2011, edition of The GPMemorandum, the franchisee is challenging Steak N Shake’s new policy that requires franchisees to follow set menu and pricing on some items, and to participate in system promotions. The franchisee ...

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Posted in Class Actions

A federal district court in the Southern District of California recently decertified a class of former 7-Eleven franchisees seeking to recover federal excise tax refunds issued to 7-Eleven. Grayson v. 7-Eleven, Inc., 2011 U.S. Dist. LEXIS 62211 (S.D. Cal. June 10, 2011). The parties had stipulated to the certification of a class of former 7-Eleven franchisees who sold prepaid long distance telephone cards that were subject to a three percent federal excise tax, who terminated their franchise agreements, and to whom 7-Eleven refused to pay any portion of its excise tax refund. After ...

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Posted in Arbitration

Does an arbitration clause have to use the word “binding” to be binding?  That was the question raised in Akaoma v. Supershuttle Int’l Corp., 2011 U.S. App. LEXIS 12763 (4th Cir. June 22, 2011). The parties arbitrated a dispute under a franchise agreement, and the defendant franchisor succeeded on all but one claim. The federal district court granted the franchisor’s motion to confirm the arbitration award. On appeal to the Fourth Circuit, the franchisee challenged the district court's holding that the arbitration was binding, on the grounds that the ...

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In Free Green Can, LLC v. Green Recycling Enterprises, LLC, 2011  U.S. Dist. LEXIS 65132 (N.D. Ill. June 20, 2011), the federal district court for the Northern District of Illinois dismissed claims against an individual investor in the franchisor, refusing to pierce the corporate veil and find an individual personally liable as an alter ego. In 2009, Free Green Can (FGC), an Illinois-based franchisor of a recycling concept, entered into a franchise agreement with Green Recycling Enterprises (GRE), a Nebraska-based limited liability company. The parties’ relationship was ...

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Posted in Employment

In Awuah v. Coverall North America, Inc., 2011 U.S. Dist. LEXIS 63381 (D. Mass. June 15, 2011), a case followed closely by the franchise industry, two franchisees who prevailed on their claims in arbitration that they had been misclassified as independent contractors under Massachusetts law were awarded reasonable attorneys’ fees and costs. Following the conclusion of the arbitration hearing, the two franchisees sought an award of all attorneys’ fees and costs from the court related to summary judgment in the underlying litigation on the misclassification issue, their ...

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In Victory Lane Quick Oil Change, Inc. v. Darwich, 2011 U.S. Dist. LEXIS 70062 (E.D. Mich. June 29, 2011), a federal court in Michigan granted a franchisor’s motion for a preliminary injunction against its former franchisee for breaching the noncompete provision in the parties’ franchise agreement and violating the Lanham Act. Although the franchisee’s principal argued that he sold his oil change business to his brother, who was now operating it as Saline Quick Lube, the court noted that the franchisee remained the tenant of record on the lease for the premises. As a result, the ...

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The federal district court for the Northern District of Illinois recently rejected a franchisee’s counterclaims, relating to the franchisor’s omission of same store sales information for the franchised unit purchased by the franchisee. In 7-Eleven, Inc. v. Spear, 2011 U.S. Dist. LEXIS 67415 (N.D. Ill. June 23, 2011), a convenience store franchisee was terminated for consistent failure to maintain a minimum net worth for the franchised store, as required by the franchise agreement. The franchisor obtained summary judgment on its action to enforce termination, leaving only ...

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Posted in Arbitration

In Wild v. H&R Block Tax Services LLC, AAA Case No. 77 114 266 10 (June 15, 2011), a panel of arbitrators upheld the termination of an H&R Block franchisee who had refused to convert to H&R Block’s proprietary tax return preparation software when Block made that software mandatory for all system offices. (Gray Plant Mooty represented the franchisor in this case.) Although the franchisee had been allowed to use other tax return preparation software for many years, the panel held that Block should not be penalized for its patience as it sought to convince its franchisees to voluntarily ...

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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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