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The Franchise Memorandum

Posts from September 2012 - Issue 159.

In Ford v. Palmden Restaurants, LLC, Bus. Franchise Guide ¶ 14,877 (Cal. Ct. App. July 31, 2012), a California Court of Appeal held that the plaintiff had raised a triable issue of fact as to whether Denny’s and several of its affiliated corporate entities could be held jointly liable for the injuries he sustained at a franchised restaurant. The plaintiff brought a negligence action against the franchisee and the Denny’s entities after being attacked by members of a street gang who were known to frequent the premises. The lower court granted summary judgment in favor of Denny’s ...

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The United States District Court for the District of Connecticut recently held that a terminated insurance agent could not claim the protection of the Connecticut Franchise Act (CFA). In Garbinski v. Nationwide Mut. Ins. Co., Bus. Franchise Guide (CCH) ¶ 14,872 (D. Conn. July 24, 2012), Garbinski entered into an Independent Contractor Agent’s Agreement with Nationwide. Under that agreement, Garbinski had the right to sell Nationwide insurance products to his customers, but also the right to sell products offered by other insurers. After Garbinski was charged in connection ...

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In a case litigated by Gray Plant Mooty, the United States Court of Appeals for the Sixth Circuit recently reversed a federal trial court’s judgment in favor of a franchisee in a dispute over a development contract on the grounds that its claims were barred by the agreement’s two-year limitations provision. The franchisee in Progressive Foods, LLC v. Dunkin’ Donuts, Inc., 2012 WL 3241696 (6th Cir., Aug. 9, 2012), had opened three stores under a six-store development contract before Dunkin’ terminated the deal for nonpayment of fees associated with the agreement. The ...

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Posted in Class Actions

In 2008, a group of over 300 current and former franchisees of SuperShuttle International, Inc., a shared-ride airport taxi shuttle service, commenced an action against the franchisor. The franchisees claimed that they were employees of the franchisor and were improperly denied a minimum wage and overtime compensation under the New York Labor Law and the Fair Labor Standards Act. In Reid v. SuperShuttle Int’l, Inc., 2012 U.S. Dist. LEXIS 113117 (E.D.N.Y. Aug. 10, 2012), the United States District Court for the Eastern District of New York granted the plaintiffs’ motion to ...

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Posted in Trademarks

Wine & Canvas, an Indiana franchisor whose franchisees organize parties where guests can enjoy cocktails during painting classes, sued YN Canvas, which operated a Wine & Canvas location in San Francisco. Wine & Canvas Development, LLC v. YN Canvas CA, LLC, et al., 2012 U.S. Dist. LEXIS 111273 (S.D. Ind. Aug. 7, 2012). The nature of the parties’ relationship was in dispute, including whether the arrangement was a license or a franchise. The suit alleged trademark infringement, unfair competition, breach of contract, and a number of other claims. The complaint named several ...

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In Hamden v. Total Car Franchising Corp., 2012 U.S. Dist. LEXIS 111432 (W.D. Va. Aug. 7, 2012), a Virginia federal district court held that where a franchise agreement expired at the end of its term, the post-termination non-compete clause was unenforceable because the clause only applied in situations where the agreement was terminated prior to expiration. The parties’ franchise agreement expired in May 2011, but the franchisee continued operating as a franchisee because he did not realize the term had ended. After receiving a reminder from the franchisor of his right to renew ...

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Posted in Renewals

In a case in which Gray Plant Mooty represented H&R Block, the United States Court of Appeals for the Eighth Circuit reversed a district court holding that Block was required to continue performing its obligations under certain franchise agreements in perpetuity. H&R Block Tax Services LLC v. Franklin, 2012 WL 3870574 (8th Cir. Sept. 7, 2012). The franchise agreements at issue provided that they would “automatically renew” for successive five-year terms, but that the franchisee could elect not to renew if it gave 120 days’ notice. After the agreements had remained in force for ...

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In Allegra Network LLC v. Cormack, 2012 U.S. Dist. LEXIS 117014 (E.D. Mich. Aug. 20, 2012), the court granted a preliminary injunction enforcing a post-termination covenant against competition. The franchisor terminated the franchise rights of an Insty-Prints Center based on its failure to pay royalty and advertising fees, report royalty figures, and use only the franchisor’s marks. When the franchisees began operating a competing business in the same location as their terminated franchise, the franchisor sought a preliminary injunction to enforce the noncompetition ...

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An Indiana district court recently allowed a terminated distributor to allege that a manufacturer had violated a state deceptive franchise practices act by terminating its distributor agreement without good cause, even though the distributor’s challenge to the agreement’s unilateral termination provision was time-barred under the terms of the agreement itself. Irvin Kahn & Son, Inc. v. Mannington Mills, Inc., 2012 U.S. Dist. LEXIS 116308 (S.D. Ind. Aug. 17, 2012). The plaintiff, a wholesale distributor of floor coverings, entered into a 1999 distributor agreement ...

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Posted in Contracts

The United States District Court for the Eastern District of California recently granted summary judgment to a franchisor on a franchisee’s claim that it had breached the franchise agreement, thus relieving the franchisee of the obligation to pay fees. In Century 21 Real Estate LLC v. All Professional Realty, Inc., 2012 U.S. Dist. LEXIS 111744 (E.D. Ca. August 7, 2012), All Professional Realty, Inc. owned and operated several Century 21 franchises in California and Hawaii. After several years of operation, All Professional closed one of its California locations and stopped ...

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An Illinois court recently dismissed a case brought by a celebrity sports journalist against a hotel franchisor arising out of alleged privacy violations. Erin Andrews v. Marriot International, Inc., No. 10-L-8186 (Cook County Circuit Court, state of Illinois, August 10, 2012). In a case defended by Gray Plant Mooty, Erin Andrews filed a lawsuit in Illinois against Radisson Hotels International, Inc. (and other hotel companies) alleging that she was illegally viewed in the nude by an individual who stalked her and altered the peephole in her guest room door at various hotels in ...

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Posted in Damages

The United States District Court for the District of New Jersey recently granted summary judgment in favor of the franchisor of the Wingate Hotels system on its claim for damages (including liquidated damages) arising from the early termination of a franchise agreement by a franchisee. In Wingate Inns International, Inc. v. P.G.S, LLC, 2012 U.S. Dist. LEXIS 115745 (D.N.J. Aug. 16, 2012), the franchisee entered into a franchise agreement for a ten-year term. The agreement stated that the franchisee would pay liquidated damages capped at $250,000 if it terminated the franchise ...

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Posted in Terminations

Affirming a preliminary injunction reported in Issue 144 of The GPMemorandum, the United States Court of Appeals for the Seventh Circuit has found that a five-unit Steak N Shake franchisee would suffer “irreparable harm” if terminated for failing to comply with new policies governing pricing. Stuller, Inc. v. Steak N Shake Enterprises, Inc., 2012 U.S. App. LEXIS 17921 (7th Cir. August 24, 2012). The court based its ruling on evidence submitted by the franchisee that the pricing policy “would be a significant change to its business model and it would negatively affect its ...

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The United States District Court for the Western District of Wisconsin recently upheld the jury waiver provision in a franchise agreement under the Wisconsin Fair Dealership Law (WFDL). In Novus Franchising, Inc. v. Superior Entrance Systems, Inc., et al., 2012 U.S. Dist. LEXIS 115640 (W.D. Wis. August 15, 2012), Novus Franchising and defendants Superior Entrance Systems, Inc. (SES) and Knute Pedersen were parties to a franchise agreement for the operation of a Novus business. Although SES’s affiliate, defendant Superior Glass, Inc. (SGI), did not sign the franchise ...

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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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