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The Franchise Memorandum

Posts from February 2013 - Issue 164.

A Minnesota federal court has held that a franchisor’s lawsuit was properly filed in its headquarters state because a substantial part of the events giving rise to the claims occurred there. Great Clips, Inc. v. Ross, 2013 U.S. Dist. LEXIS 12530 (D. Minn. Jan. 30, 2013). Great Clips filed the case in Minnesota seeking a declaratory judgment that it did not breach the confidentiality/non-slander clause of a settlement agreement it had signed with a franchisee. In response to the lawsuit, the franchisee moved to dismiss and transfer on the ground that venue was not proper in Minnesota ...

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Chicago Male Medical Clinic (CMMC) brought suit against Ultimate Management, Inc. (UMI), a company that licenses and oversees a national affiliation of medical clinics, alleging, among many counts, that UMI had fraudulently induced CMMC’s investment and had violated the Illinois Franchise Disclosure Act, the Illinois Consumer Fraud & Deceptive Business Practices Act, as well as common law fraud and breach of contract. In Chicago Male Medical Clinic, LLC v. Ultimate Management, Inc., 2012 U.S. Dist. LEXIS 183257 (N.D. Ill. Dec. 28, 2012), the court addressed several motions ...

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Posted in Arbitration

The United States District Court for the Central District of California recently upheld an arbitrator’s finding that a franchisor had constructively terminated a franchise agreement in violation of the Wisconsin Fair Dealership Law (WFDL), when, among other things, the franchisor cut off the franchisee’s access to the franchise system’s record-keeping and management web portal and its external website. In Budget Blinds Inc. v. LeClair, 2013 U.S. Dist. LEXIS 7463 (C.D. Cal. Jan. 16, 2013), two neighboring Budget Blinds franchisees became embroiled in a dispute ...

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In Palermo Gelato, LLC v. Pino Gelato, Inc., 2013 U.S. Dist. LEXIS 9931 (W.D. Pa. Jan. 24, 2013), the United States District Court for the Western District of Pennsylvania dismissed a licensee’s action based on the FTC Rule for lack of subject matter jurisdiction. The parties had entered into a development and supply agreement that gave Palermo exclusive rights to sell Pino’s gelato product in certain designated counties. The dispute arose when Palermo allegedly discovered that Pino had misrepresented its manufacturing method. Palermo filed suit seeking a declaratory ...

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The United States District Court for the Middle District of Tennessee last month ruled that dispute resolution procedures in the parties’ franchise agreements survived termination of the agreements and must be followed prior to the initiation of litigation. Shoney’s N. Am., LLC v. Vidrine Rests., Inc. (M.D. Tenn. Jan. 22, 2013). Shoney’s commenced the action seeking liquidated damages arising from its termination of a number of franchise agreements with Vidrine. More than six months after Shoney’s initiated the suit, Vidrine filed a motion to stay the action pursuant to ...

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A California state appellate court upheld a finding that a franchisor was vicariously liable for its franchisees’ illegal advertising, determining that the franchisor had extensive controls over the advertising beyond that necessary to protect the franchisor’s trademarks and goodwill. In The People v. JTH Tax, Inc., 2013 Cal. App. LEXIS 37 (Cal. Ct. App. Jan. 17, 2013), the California Attorney General filed a complaint against Liberty Tax Service for several violations of consumer protection laws, including false advertising in relation to its refund-anticipation loans ...

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Posted in Announcement

Mark Kirsch and Jan Gilbert joined Gray Plant Mooty’s 32-member Franchise & Distribution Practice Group on February 1, 2013. Both will practice in the firm’s Washington, D.C. office. These two high-profile attorneys bring more than 50 years of combined experience in the franchise industry, and both have strong backgrounds in domestic and international franchising.

Kirsch focuses his practice on domestic and international franchising and distribution matters, with an emphasis on transactional and regulatory work, mergers and acquisitions, and international ...

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Posted in Arbitration

A United States District Court in Iowa has granted a franchisor’s motion to dismiss the complaint filed by its franchisee and enforced the applicable arbitration provisions. Cahill v. Alternative Wines, Inc., 2013 LEXIS 14588 (N.D. Iowa Feb. 4, 2013). The franchisee sued the franchisor and its CEO for breach of a purchase agreement and services agreement between the franchisee and the franchisor, violation of Iowa business opportunity laws, and fraud. The defendants moved to stay or dismiss, seeking to enforce the services agreement’s provision requiring arbitration in ...

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Posted in Trademarks

A Michigan federal court recently denied a franchisor’s motion for summary judgment on its trade dress infringement and unfair competition claims. Happy’s Pizza Franchise, LLC v. Papa’s Pizza, Inc., 2013 U.S. Dist. LEXIS 10130 (E.D. Mich. Jan. 25, 2013), involved a lawsuit brought by Happy’s Pizza Franchise, LLC, against Papa’s Pizza, Inc. and Phil Almaki, who once was a passive investor in one Happy’s Pizza location. Almaki later sold his interest in the Happy’s Pizza store and opened several pizza restaurants under the mark Papa’s Pizza. Happy’s claimed that ...

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A recent case from the Eastern District of Pennsylvania shows the lengths to which courts will go to enforce franchise agreements against personal guarantors and related parties. Tantopia Franchising Co. v. West Coast Tans of PA, LLC, 2013 U.S. Dist. LEXIS 8266 (E.D. Pa. Jan. 22, 2013). The relevant history began in 2002, when Tantopia Franchising Company entered into a franchise agreement with West Coast Tans (WCT) to operate a tanning salon in Philadelphia. Donald and Richard Weiss personally guaranteed WCT’s obligations under that agreement. In 2009, WCT ceased operations. A ...

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Posted in Trademarks

The Supreme Court’s decision in Already, LLC v. Nike, Inc., 568 U.S. ___, 184 L. Ed. 2d 553 (U.S. Jan. 9, 2013), is important for franchisors who may be considering bringing a trademark infringement action against a competitor (including a former franchisee) using a similar mark, as well as for recipients of such infringement claims. The unanimous court affirmed the lower courts’ rulings that, once a trademark plaintiff has voluntarily dismissed its infringement suit and issued a covenant not to sue, the district court loses federal jurisdiction under Article III of the U.S ...

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Posted in Arbitration

The Supreme Court of Washington recently upheld a trial court’s order compelling arbitration in Washington, despite clauses in a franchise agreement providing disputes would be arbitrated in Connecticut, under Connecticut law (except for Connecticut franchise law). In Saleemi v. Doctor’s Associates, Inc., 292 P.3d 108 (Wash. Jan. 17, 2013), the plaintiffs sought to compel arbitration over DAI’s termination of their Subway franchises in Washington. The trial court ruled that the forum selection and choice of law provisions of the franchise agreement were ...

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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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