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The Franchise Memorandum

Posts from December 2011 - Issue 150.
Posted in Contracts

In Green Desert Oil Group, et al. v. BP West Coast Products, et al., 2011 U.S. Dist. LEXIS 131140 (N.D. Ca. Nov. 14, 2011), the U.S. District Court for the Northern District of California granted a supplier’s motion to dismiss, finding that the plaintiffs failed to state a claim upon which relief could be granted regarding their claims of breach of contract, negligence, and violation of unfair competition laws.

The plaintiffs, who are gas station franchisees, brought a class action lawsuit against BP West Coast Products LLC and BP Products North America, Inc. (BP), the franchisor of ...

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Posted in Discrimination

In Hardee’s Food Systems, Inc. v. Hallbeck, 2011 U.S. Dist. LEXIS 127169 (E.D. Mo. Nov. 3, 2011), the court granted Hardee’s motion to dismiss allegations by a group of its franchisees of breach of the implied covenant of good faith and fair dealing. (Gray Plant Mooty represented the franchisor in this case.) The franchisees alleged that Hardee’s had treated them differently from other Hardee’s franchisees by (a) failing to allow a reduction in license fees, (b) failing to provide advertising support, and (c) not allowing the complaining franchisees to close their ...

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Posted in Arbitration

A federal district court dismissed a complaint brought by international franchisees against a franchisor, a senior federal judge, and an arbitrator challenging the handling of arbitrations brought in the United States. Bletas v. Deluca, 2011 U.S. Dist. LEXIS 133132 (S.D.N.Y. Nov. 15, 2011), arose out of a longstanding dispute between Subway and its franchisees in Greece for nonpayment and standards violations. Subway terminated the franchise agreements and then initiated arbitration proceedings against the franchisees in the United States to enforce the terminations and ...

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In Izzy Poco v. Town of Springfield, et al., 2011 U.S. Dist. LEXIS 125080 (D. Utah Oct. 28, 2011), the court held that Springfield town officials were entitled to qualified immunity for enforcing an ordinance that banned franchises from opening in town. In 2006, Springfield, Utah passed an ordinance banning “formula restaurants” that were “required by contractual or other arrangement to provide any of the following: substantially identical named menu items, packaging, food preparation methods, employee uniforms, interior décor, signage, exterior design, or name as any ...

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Posted in Trademarks

In Super 8 Worldwide, Inc. v. Riro, Inc., 2011 U.S. Dist. LEXIS 134163 (D. Neb. Nov. 18, 2011), the United States District Court for the District of Nebraska denied a motion to strike filed by the defendant, a terminated Super 8 franchisee. The franchisor brought suit against the terminated franchisee for trademark infringement and trademark dilution based on the former franchisee’s use of confusingly similar marks after termination. The former franchisee moved to strike, as scandalous, immaterial, and impertinent, portions of the complaint averring that the franchisor’s ...

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A federal district court in Minnesota recently clarified that the reach of the Minnesota Franchise Act does not extend to protect entities operating outside Minnesota. In Johnson Brothers Liquor Co. v. Bacardi U.S.A., Inc., 2011 U.S. Dist. LEXIS 132768 (D. Minn. Nov. 17, 2011), plaintiff Johnson Brothers was a Minnesota entity whose out of state subsidiaries entered contracts with Bacardi and Brown-Forman Corporation to distribute their products in states other than Minnesota. Bacardi and Brown-Forman terminated their distributorship agreements with Johnson Brothers’ ...

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Posted in Bankruptcy

In In re Wagstaff Minnesota, Inc., 2011 U.S. Dist. LEXIS 124889 (D. Minn. Oct. 26, 2011), the United States District Court in Minnesota denied an appellee’s request to authorize an appeal of a Bankruptcy Court’s decision directly to the Eighth Circuit Court of Appeals. The normal appeal process for decisions from a bankruptcy court is to appeal first to either a bankruptcy appellate panel for the particular circuit or to the U.S. District Court for the particular district, then to the applicable circuit court of appeals, and then to the U.S. Supreme Court. Under certain ...

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A federal court in New York has granted a franchisor’s motion to dismiss a count of unjust enrichment by a construction company hired by a franchisee. Vertex Construction Corp. v. T.F.J. Fitness, L.L.C., 2011 U.S. Dist. LEXIS 135453 (E.D.N.Y. Nov. 23, 2011). The defendant, Retrofitness, is the franchisor of fitness facilities. The co-defendant franchisee entered a construction contract with the plaintiff for a “build-out” of its facility. Retrofitness was not a party to the construction contract. The construction company alleged that it was underpaid for its services by ...

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Posted in Employment

In Doctors’ Associates, Inc. v. Uninsured Employee’s Fund, 2011 Ky. LEXIS 166 (Ken. Nov. 23, 2011), the Kentucky Supreme Court held that Subway franchisor DAI was not responsible for paying workers’ compensation claims on behalf of a franchisee who failed to maintain workers’ compensation insurance. The injured worker was employed by a Subway franchisee at the time of injury, and the state Uninsured Employers’ Fund paid benefits to the worker. The Fund then brought a claim against DAI seeking repayment of the benefits. At issue was a Kentucky statute that imposes ...

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Posted in Damages

The United States District Court in New York City last week rejected a franchisee’s attempt to avoid judgment against it for damages and interest, as the court held that counterclaims the franchisee belatedly sought to assert were not timely and could not support an offset in any event. Gallagher’s NYC Steakhouse Franchising, Inc. v. NY Steakhouse of Tampa, Inc., 2011 U.S. Dist. LEXIS 139175 (S.D.N.Y. Dec. 5, 2011). This unusual case saw the franchisee-defendant not deny breach of the franchise agreement’s royalty obligations, not contest the amount it owed in past-due ...

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Posted in Retrospective

The first issue of The GPMemorandum was dated December 19, 1997. Today we publish Issue 150. To mark this milestone edition, we preview here a series of articles we will bring to you next year during our fifteenth year of publication. The series of articles will provide a bit of perspective on what has happened with the most important topics in franchise law since we celebrated the tenth anniversary of The GPMemorandum four years ago.

In Issue 101, published in December of 2007, we set forth a list of what we viewed as the ten most important of the 700 cases we had summarized for our franchisor ...

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A franchisee’s attempt to assert a claim against its franchisor arising out of the sale of franchise development rights failed recently in an Illinois federal court. The court’s ruling was based on the economic loss rule. Ace Hardware Corp. v. Landen Hardware, LLC, 2011 U.S. Dist. LEXIS 136247 (N.D. Ill. Nov. 28, 2011). Under Illinois law, economic losses allegedly resulting from the tort of negligent misrepresentation cannot
be asserted unless the supplier of the incorrect information is in the business of supplying information for the guidance of others in their business ...

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In Travelodge Hotels, Inc. v. Perry Developers, Inc., 2011 U.S. Dist. LEXIS 134478 (D.N.J. Nov. 22, 2011), Travelodge filed suit in New Jersey federal district court pursuant to a non-exclusive forum selection clause contained in the license agreement with its terminated licensee. In response to the lawsuit, the licensee moved to transfer the case to the Eastern District of Missouri, where its hotel was located. In opposing the transfer, Travelodge argued that the licensee waived its right to seek a transfer based upon convenience by agreeing to the forum selection clause in the ...

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In contrast to the Minnesota district court ruling discussed in the previous summary, the United States Court of Appeals for the Ninth Circuit last week ruled that the Washington Franchise Investment Protection Act (FIPA) does apply to protect a non-Washington franchisee. Red Lion Hotels Franchising, Inc. v. MAK, LLC, et al., 2011 U. S. App. LEXIS 24152 (9th Cir. Dec. 7, 2011). Reversing in part a Washington federal court’s grant of summary judgment, the Ninth Circuit remanded the case to the district court to determine the merits of the FIPA counterclaims brought by a ...

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In Western Sizzler Corp. v. Pinnacle Business Partners, LLC, 2011 U.S. Dist. LEXIS 135353 (M.D. Fla. Nov. 23, 2011), the court awarded a partial summary judgment in favor of the defendant, Pinnacle, which operates a “Sizzlin Grill” in a former franchise location of the Western Sizzlin® franchise system. The location displayed the mark Western Sizzlin from 1995 to 2004, during which time it operated as a licensed franchise location. In 2005, when Pinnacle took over the location, the restaurant was operated under the mark Sizzlin Grill. The franchisor, Western Sizzler, and ...

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Posted in Contracts

The District of New Jersey recently dismissed a franchisee’s claim for breach of the implied covenant of good faith and fair dealing against BP, a large oil producer and gas station franchisor. Alboyacian v. BP Products North America, Inc., et. al., 2011 U.S. Dist. LEXIS 134453 (D.N.J. Nov. 22, 2011). BP was a party to several commission agreements for the sale of gasoline by BP through third-party gas station operators. Those agreements had previously been found subject to the relationship protections of the New Jersey Franchise Practices Act (NJFPA). Upon expiration of the ...

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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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