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The Franchise Memorandum

Posts from September 2011 - Issue 147.
Posted in Arbitration

A federal court in Pennsylvania recently granted a franchisee’s motion to compel arbitration, while simultaneously granting the franchisor’s motion for a preliminary injunction. AAMCO Transmissions, Inc. v . Dunlap, 2011 U.S. Dist. LEXIS 91130 (E.D. Pa. Aug. 16, 2011), involved a lengthy dispute over the franchisor’s termination of the franchise agreement. In 2007, AAMCO sued to enforce termination, which resulted in a settlement agreement allowing Dunlap to operate the franchises for their remaining terms for the limited purpose of giving him an opportunity to sell ...

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A Minnesota federal court recently granted a franchisor’s motion for summary judgment on certain claims pertaining to the franchisor’s alleged violations of the Minnesota Franchise Act. In Ellering v. Sellstate Realty Sys. Network, Inc., 2011 U.S. Dist. LEXIS 75852 (D. Minn. July 13, 2011), the issue presented was whether the franchisor was registered to sell franchises in Minnesota and whether the franchisor had misrepresented the potential earnings of the area franchise agreement. The plaintiff-franchisees claimed that the franchisor was not registered when it sold ...

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Posted in Trademarks

The United States District Court for the Western District of Missouri recently granted a preliminary injunction against a franchisee and ordered the franchisee to cease using the franchisor’s trademarks due to the poor condition of the franchisee’s store.  The case is American Dairy Queen Corp. v. McMurray, No. 11-00859-CV-W-GAF (W.D. Mo. Sept. 2, 2011). Gray Plant Mooty represented American Dairy Queen (ADQ) in the action. 

ADQ brought the action after store inspections revealed health and food safety violations at the store. The decades-old contract between the parties did ...

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Posted in Employment

In Howell v. Papa John’s Int’l., 2011 U.S. Dist. LEXIS 90972 (N.D. Ohio Aug. 16, 2011), the plaintiff alleged that his employment with a Papa John’s franchisee was terminated improperly in violation of the Americans with Disabilities Act. The plaintiff sued Papa John’s, claiming it was responsible for its franchisee’s employment decision. Papa John’s moved for summary judgment on the grounds that it had never employed the plaintiff and was not responsible for its franchisee’s conduct. The court agreed, finding that the plaintiff had failed to present any evidence ...

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Posted in Defamation

In reinstating franchisees’ claims for defamation, the Florida Court of Appeals recently held that statements made by a franchisor on its website are not protected by the “litigation privilege.” Ball v. D’Lites Enterprises, Inc., 65 So. 3d 637 (Fla. Ct. App. July 27, 2011). When the franchisees sued their franchisor regarding representations as to the nutritional content of its products, the franchisor placed a statement on its website stating that the products sold by the franchisees under the franchisor’s trademarks were unauthorized and constituted a “hoax” ...

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Posted in Terminations

In a case we have been tracking in The GPMemorandum, income tax preparation franchisor Liberty Tax Service achieved a victory in a dispute concerning whether it properly terminated a former franchisee under Connecticut law on non-payment grounds. The court in Sherman St. Assocs., LLC v. JTH Tax, Inc., 2011 U.S. Dist. LEXIS 97073 (D. Conn. Aug. 30, 2011), found in Liberty’s favor on its counterclaims against franchisee Sherman Street Associates for breach of the parties’ franchise agreements, a promissory note, and a personal guaranty. The court held that Sherman Street’s ...

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Posted in Arbitration

The United States Supreme Court’s arbitration-friendly decision in AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (U.S. 2011), was extended this month to a group of “franchisees” who sought to claim they were really employees. Green v. SuperShuttle International, Inc., 2011 U.S. App. LEXIS 18483 (8th Cir. Sept. 6, 2011). The franchisees in this case are current and former shuttle drivers who alleged (on a class basis) violations of the Minnesota Fair Labor Standards Act. As reported in Issue 135 of The GPMemorandum, the federal district court compelled arbitration on an ...

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Posted in Employment

Last year, we reported on a ruling that shocked the franchise community when a Massachusetts district judge compared a franchise to a modified Ponzi scheme and held, in a putative class action case, that a commercial janitorial services franchisor had misclassified its franchisees as independent contractors when they were employees. Awuah v. Coverall North America, Inc., 707 F. Supp. 2d 80 (D. Mass. 2010). We subsequently reported on a later damages ruling in which the district court appeared to favor Coverall’s arguments, but ultimately certified various damages questions to ...

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In Ammirato v. Duraclean Int’l., Inc., 2011 U.S. Dist. LEXIS 75305 (E.D.N.Y. July 13, 2011), the United States District Court for the Eastern District of New York held that a franchisor was not vicariously liable for a franchisee’s default on loans. A Duraclean franchisee (not a party to this case) obtained a series of loans from plaintiffs to finance cleaning projects by the Duraclean “National Team,” a marketing program whereby the franchisee would obtain large national accounts. When the franchisee failed to repay the loans, plaintiffs sued Duraclean International ...

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In Solis v. McDonald’s Corp., 2011 N.Y. Misc. LEXIS 3366 (N.Y. Sup. Ct. July 11, 2011), a New York state court denied McDonald’s summary judgment on a vicarious liability claim, concluding that there was a question of fact regarding whether the franchisor exercised sufficient control over its franchisee’s day-to-day operations to be held liable for the franchisee’s negligent acts. The case arose out of injuries suffered by the plaintiff when he fell on a staircase inside a McDonald’s restaurant entrance. The plaintiff sued the franchisee and McDonald’s, seeking ...

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Posted in Contracts

In Good Feet Worldwide, LLC v. Larry Schneider, 2011 U.S. Dist. LEXIS 83865 (S.D. Cal. August 1, 2011), the court held that the statute of frauds was satisfied even though the franchisee did not sign a franchise agreement. A dispute arose between the franchisor and franchisee that eventually required a determination of whether the forum selection clause was enforceable because the entire franchise agreement itself was not signed by the franchisee. The franchisor argued that the statute of frauds was satisfied because the specific franchisee in question had “signed documents ...

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A Minnesota federal district court has dismissed nearly all claims in Moua v. Jani-King of Minnesota, Inc., 2011 U.S. Dist. LEXIS 98455 (D. Minn. Aug. 30, 2011). This case originally was brought as a class action by a group of individuals who provide cleaning services or janitorial work at client accounts. After class certification was denied (see Issue 130 of The GPMemorandum), the parties apparently agreed that the defendant franchisor would move for summary judgment as to three of the individual plaintiffs before further summary judgment motions were filed. The plaintiffs ...

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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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