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The Franchise Memorandum

Posts from October 2011 - Issue 148.
Posted in Damages

The United States District Court for the Eastern District of Missouri recently issued an important decision for franchisors seeking to recover damages caused by a franchisee’s abandonment of the franchise. In Hardee’s Food Systems, Inc. v. Hallbeck, 2011 U.S. Dist. LEXIS 107038 (E.D. Mo. Sept. 21, 2011), Hardee’s sued the Hallbecks when they abandoned their franchised restaurant before the expiration of their franchise agreement. (Gray Plant Mooty represents the franchisor in this case.) Hardee’s sought to recover damages caused by that abandonment, including the ...

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Posted in Contracts

In AAMCO Transmissions, Inc. v. Trovato, 2011 U.S. Dist. LEXIS 111943 (S.D. Cal. Sept. 28, 2011), a California federal court denied a motion to dismiss AAMCO’s claim for breach of contract based on a franchisee’s failure to accurately report sales and failure to allow AAMCO to inspect its books and records. The dispute arose when AAMCO learned that the franchisee had completed a $2,400 transaction for a customer, which it did not report to AAMCO. During a resulting audit, AAMCO’s inspectors found two books with receipts for transactions that were not reported. When the ...

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In Cousin Subs Systems Inc. v. Better Subs Development Inc. et al., 2011 U.S. Dist. LEXIS 112903 (E.D. Wis. Sept. 30, 2011), Cousins Subs brought multiple claims against a former franchisee/area developer for breach of contract and failure to pay a promissory note after its two restaurants failed and area development stalled. The franchisee, in turn, brought counterclaims for alleged representations made by a sales consultant (though the court noted the consultant’s relationship with Cousins Subs was not entirely clear). The franchisee based its damages claim on what it likely ...

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In Moua, et al. v. Jani-King of Minnesota, Inc., 2011 U.S. Dist. LEXIS 104026 (D. Minn. Sep. 12, 2011), the United States District Court for the District of Minnesota granted summary judgment in favor of a cleaning service franchisor on a franchisee’s claim of fraud. The case was originally brought as a class action (see Issue 130 of The GPMemorandum) and the bulk of the plaintiffs’ claims, including a claim for violation of the Minnesota Franchise Act, later were dismissed (see Issue 147).

In the most recent decision, the court addressed a single remaining plaintiff’s claim that ...

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The New Jersey Franchise Practices Act (NJFPA) makes it unlawful for a franchisor to terminate or fail to renew a franchise agreement without good cause. In BP Prod. N. Am., Inc. v. Hillside Service, Inc., 2011 U.S. Dist. LEXIS 10473 (D.N.J. Sept. 14, 2011), a federal district court in New Jersey noted that the NJFPA was not limited to “those situations in which the franchisor seeks to arbitrarily and capriciously terminate the franchise agreement. . . .” It held that the NJFPA also requires the franchisor to renew franchise agreements with New Jersey franchisees regardless of ...

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Posted in Contracts

In JMF, Inc., et al. v. Medicine Shoppe International, Inc., 2011 U.S. Dist. LEXIS 106100 (D.N.D. Sept. 19, 2011), the federal district court for North Dakota denied, in part, a franchisor’s motion for summary judgment, finding that issues of fact existed regarding whether the franchisor had offered new franchises in North Dakota sufficient to trigger a “most favored nations” (MFN) clause contained in the plaintiffs’ franchise agreements. Defendant Medicine Shoppe International, Inc. (MSI), the franchisor of nationwide prescription pharmacies, in 2009 announced an ...

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A Connecticut federal court has declined to dismiss a complaint filed by a franchisee association against Edible Arrangements alleging breach of contract, breach of a duty of good faith and fair dealing, and violation of the Connecticut Unfair Trade Practices Act after the franchisor filed a motion for reconsideration. EA Independent Franchisee Association v. Edible Arrangements, International, Inc., Case 3:10-cv-01489-WWE (D. Conn. Sept. 21, 2011). The original ruling was the topic of a special edition of The GPMemorandum in August 2011 (Issue 145). Edible Arrangements ...

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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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