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The Franchise Memorandum

Posts from May 2013 - Issue 167.

In Dunkin’ Donuts Franchising, LLC, v. SAI Food and Hospitality, LLC, 2013 U.S. Dist. LEXIS 359472 (E.D. Mo. Mar. 15, 2013), the United States District Court for the Eastern District of Missouri granted Dunkin’s motion to strike the franchisees’ jury demand, and their request for punitive damages and lost profits. Gray Plant Mooty represents the franchisor in this case. The court enforced the mutual jury trial waiver contained in the parties’ contracts on the basis that it was unambiguous and conspicuous. In addition, the court noted that the franchisees were experienced ...

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Posted in Arbitration

The Fourth Circuit overturned a district court’s decision not to enforce a franchise agreement’s arbitration clause in Muriithi v. Shuttle Express, Inc., 712 F.3d 173 (4th Cir. Apr. 1, 2013). The lower court had denied Shuttle Express’s motion to compel arbitration after concluding that the arbitration clause was unconscionable because of (1) a class action waiver; (2) a requirement that the parties split arbitration fees; and (3) a one-year limitation on claims arising under the agreement. The Fourth Circuit concluded that the district court’s first rationale was not ...

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Posted in Damages

A federal court in Texas awarded a hotel franchisor statutory damages consisting of profits, additional damages and costs, plus actual damages measured by lost royalties. Choice Hotels Int’l, Inc. v. Bhakta, 2013 U.S. Dist. LEXIS 49863 (S.D. Tex. Apr. 5, 2013). The lawsuit arose after Choice Hotels terminated a franchisee for its failure to comply with remodel requirements and to timely pay fees. Although the franchisee received a notice of termination in which Choice Hotels specifically demanded that the franchisee cease using its trademarks, the franchisee continued ...

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Posted in Insurance

A federal court in Michigan granted summary judgment to an insurance carrier following its denial of liability coverage and refusal to defend a franchisor based on the policy’s contractual liability exclusion. In Certified Restoration Drycleaning Network, LLC v. Federal Ins. Co., 2013 U.S. Dist. LEXIS 54457 (E.D. Mich. Apr. 16, 2013), the franchisor (CRDN) sought defense coverage under its general liability insurance policy for an underlying lawsuit by a franchisee. The lawsuit arose after CRDN sold a franchise to a company named East Coast Garment Restoration and then ...

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Posted in Contracts

In an action stemming from a franchisee’s alleged continued operation of a franchised restaurant after the termination of the franchise agreement, a federal district court in Georgia dismissed the franchisor’s claims for unjust enrichment, negligence, and punitive damages. Huddle House, Inc. v. Two Views, Inc., 2013 U.S. Dist. LEXIS 48754 (N.D. Ga. Apr. 4, 2013). The court stated that Georgia law precludes an unjust enrichment claim arising from a contract when the validity of the contract is undisputed. The court noted that although a party may plead an unjust enrichment ...

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Posted in Damages

In Novus Franchising, Inc. v. AZ Glassworks, LLC et al., 2013 U.S. Dist. LEXIS 36830 (D. Minn. Mar. 18, 2013), a federal district court denied Novus Franchising’s claim for lost future royalties stemming from the franchisees’ abandonment of two windshield replacement franchises. Novus calculated its lost future royalties based on the minimum monthly royalty and maintenance fees that the franchisee would have had to pay during the last six years of the franchise agreements. The court recognized that Minnesota law allows a franchisor to recover lost future royalties as long as ...

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Posted in Contracts

The United States District Court for the District of New Jersey recently granted a hotel franchisor summary judgment on its Lanham Act and breach of contract claims, and dismissed the franchisee’s claims that the franchise agreement was unconscionable and the product of negligent misrepresentation. Wyndham Hotels and Resorts, LLC v. Northstar Mt. Olive, LLC, et al., 2013 U.S. Dist. LEXIS 44468 (D.N.J. Mar. 28, 2013). Wyndham, after terminating its franchise agreement with Northstar for Northstar’s failure to pay royalties, sued Northstar to enforce the post-termination ...

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Posted in Damages

In 7-Eleven, Inc. v. Spear, 2013 U.S. Dist. LEXIS 59392 (N.D. Ill. Apr. 25, 2013), the convenience store franchisor had previously prevailed in an action against a franchisee to enforce the termination of the franchise agreement. Because it had prevailed in the underlying matter, 7-Eleven was entitled to an award of its reasonable attorneys’ fees incurred in enforcing the franchise agreement. Having previously parted ways with her attorney, the franchisee’s primary owner and personal guarantor of the franchise agreement defended against 7-Eleven’s motion for fees on a ...

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Posted in Internet

As Gray Plant Mooty reported in Issue 157 of The GPMemorandum, the international corporation that controls internet domain names, ICANN, will soon allow companies to operate hundreds of new Generic Top-Level Domains (gTLDs)—URL extensions to the right of the “dot.” Examples include product and service groups such as .coffee, .food, and .restaurant, and geographic locations such as .boston and .nyc. A few hundred of the gTLDs that are expected to be approved are “open,” as opposed to being restricted to certain companies (e.g., .google) or other groups. The first group ...

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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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