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The Franchise Memorandum

Posts from April 2012 - Issue 154.
Posted in International

In a far-reaching decision with important implications for franchisors operating in Canada, the Ontario Superior Court of Justice last month dismissed a $2 billion action brought against franchisor Tim Hortons by a putative class of Canadian franchisees. Fairview Donut Inc. v. The TDL Group Corp., 2012 ONSC 1252 (Can LII). The decision addresses the pricing of products within a franchise system and the competitive impacts of vertical pricing and distribution under Canadian law. The court also provided the first guidance on a number of recent amendments to Canada’s Competition ...

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In a case handled by Gray Plant Mooty, Outdoor Lighting Perspectives Franchising, Inc. (“OLP”) filed suit against a former franchisee and its owners arising out of the operation of a competing business and the evasion of post-expiration obligations contained in the defendants’ franchise agreement. Outdoor Lighting Perspectives Franchising, Inc. v. OLP-Pittsburgh, Inc., Amy Perlmutter and Outdoor Living Pittsburgh, LLC, 2012 US Disc. LEXIS 25861 (W.D.N.C. Jan. 26, 2012). OLP sought a preliminary and permanent injunction against the defendants and all others in active ...

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In Hardee’s Food Systems, Inc. v. Hallbeck, No. 4:09CV00664 AGF (E.D. Mo. Feb. 28, 2012), the United States District Court for the Eastern District of Missouri granted summary judgment to Hardee’s on a claim that its decision to produce purportedly “lewd” television advertisements constituted an abuse of its discretion in overseeing the Hardee’s National Advertising Fund. (Gray Plant Mooty represented the franchisor in this case.) Although the franchise agreement gave Hardee’s “sole discretion” over the advertising and marketing activities financed by the ...

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Posted in Contracts

In Smoothie King Franchises, Inc. v. Southside Smoothie & Nutrition Center, Inc., 2012 U.S. Dist. LEXIS 24436 (E.D. La. Feb. 27, 2012), the franchisor of the Smoothie King system brought an action to enforce post-termination noncompetition clauses. The defendant-former franchisees filed various counterclaims based on allegations that they were required to engage in false and deceptive advertising by selling their products as “real whole fruit” smoothies, when the product allegedly contained other ingredients. After the court granted Smoothie King’s request to ...

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Posted in Terminations

In Ohio Learning Centers, LLC v. Sylvan Learning, Inc., 2012 U.S. Dist. LEXIS 41718 (D. Md. Mar. 27, 2012), the United States District Court for the District of Maryland upheld the franchisor’s termination of franchisees who ceased making payments under their license agreement while continuing to use the franchisor’s trademarks. The plaintiffs had entered into contracts with Sylvan to purchase and operate a former company-owned learning center as a franchise and executed two promissory notes to complete the transaction. When the plaintiffs ceased making the required ...

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Posted in Renewals

A federal court in South Dakota was asked to interpret the renewal language of three franchise agreements as amended after a class action lawsuit involving Little Caesar and its franchisee. Sioux Falls Pizza Co., Inc. v. Little Caesar Enterp., Inc., 2012 U.S. Dist. LEXIS 34687 (D.S.D. Mar. 14, 2012). At issue last month was whether Little Caesar could refuse to renew the franchises based on the franchisee’s prior litigation against the franchisor over the Hot-N-Ready concept. The franchisee claimed in the first litigation that it created the Hot-N-Ready concept and sued Little ...

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In Tankersley, et al. v. Lynch, et al., 2012 U.S. Dist. LEXIS 27762 (E.D. Mich. Mar. 2, 2012), a federal court in Michigan denied a motion for summary judgment brought by two former franchisees claiming that the franchisor’s officers were liable for an arbitration award obtained against the franchisor for violations of the Michigan Franchise Investment Law (“MFIL”). The plaintiffs owned and operated a Collision of Wheels (“CoW”) mobile auto body repair franchise. The franchise relationship soured, and the plaintiffs brought an arbitration demand claiming that CoW ...

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In McDonald’s Restaurants of Florida, Inc. v. Doe, 2012 Fla. App. LEXIS 3807 (Mar. 9, 2012), a Florida court of appeals overturned a trial court ruling that had required McDonald’s to produce its training and operations manuals in discovery relating to a vicarious liability claim. The plaintiff had argued that the manuals were necessary to show that McDonald’s had control over the franchised restaurant where an assault had taken place. The trial court, while recognizing that the manuals contained trade secrets, ordered their production pursuant to a confidentiality ...

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Posted in International

China’s Ministry of Commerce (MOFCOM) has adopted new Administrative Measures that clarify issues in question since MOFCOM published its original Administrative Measures in 2007. The new Measures became effective April 1, 2012. Our colleague Chen Biaochong, of the Jun He law firm in Beijing, has provided a summary of the new Measures, which have yet to be published in English. The principal changes are:

  • Article 5.4 of the 2007 Administrative Measures requires franchisors to disclose information about an affiliate of the franchisor if the affiliate supplies products or ...
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Posted in International

Regulations interpreting the disclosure requirements for franchisors which offer and sell franchises in Manitoba were proclaimed April 7 and will become effective October 1, 2012. Even franchisors that are offering master franchises for territories which may include Manitoba should consider amending their Canadian FDDs to reflect the Manitoba requirements. The law applies “if the franchised business is operated, or is to be operated, partly or wholly in Manitoba.” The new legislation is substantively very similar to other franchise disclosure regulations in Canada.

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Posted in Retrospective

Continuing our yearlong series of retrospective articles looking back at the ten cases we identified as the most significant franchise decisions summarized in the first 100 issues of The GPMemorandum, this article will examine the impact of the Eleventh Circuit Court of Appeals’ decision in McDonald’s v. Robertson (1998). That decision was significant not for its result—the court upheld the trial court’s entry of post-termination injunctive relief for the franchisor—but for the type of proof the franchisor was required to present in order to obtain the relief. The ...

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In Dos Beaches, LLC vs. Mail Boxes Etc., Inc., 2012 U.S. Dist. LEXIS 18619 (S.D. Cal. Feb. 15, 2012), a California federal court considered a second attempt by Mail Boxes Etc. (“MBE”) for dismissal of a former franchisee’s complaint alleging a litany of grievances and various claims that MBE violated certain state franchise laws. The first complaint was dismissed without prejudice with leave to amend. After amendment, the court again dismissed most of the former franchisee’s complaint (without prejudice), noting that the claims are “simply inadequate,” give ...

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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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