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The Franchise Memorandum

Posts from July 2013 - Issue 169.
Posted in Class Actions

Seven putative class action cases against Subway Sandwich Shops, Inc. for engaging in a false or misleading advertising campaign will be centralized in the Eastern District of Wisconsin, according to a transfer order by the Judicial Panel on Multidistrict Litigation. In re: Subway Footlong Sandwich Mktg. & Sales Practices Litig., 2013 U.S. Dist. LEXIS 81639 (E.D. Wis. June 10, 2013). The plaintiffs allege that Subway’s advertising misled them regarding the size of the Subway footlong sandwich. Specifically, they complained that Subway’s uniform standards and practices ...

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Posted in Terminations

The United States District Court for the District of Maryland has denied a franchisee’s motion for preliminary injunctive relief to prohibit the termination of its franchise agreement. Noya v. Frontier Adjusters, Inc., 2013 U.S. Dist. LEXIS 80672 (N.D. Md. June 7, 2013). Frontier Adjusters, Inc., and Noya were parties to several franchise agreements under which the franchisees operated insurance adjustment businesses, including one agreement that expired on June 9, 2013. Franchisee Noya had expressed its desire to enter into a new franchise agreement for the locations with ...

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In Palermo Gelato, LLC v. Pino Gelato, Inc., 2013 U.S. Dist. LEXIS 85925 (W.D. Pa. June 19, 2013), a federal court in Pennsylvania revisited its decision to dismiss the case for lack of subject matter jurisdiction. As reported in Issue 164 of The GPMemorandum, Palermo, a licensee of Pino, brought suit after discovering that Pino allegedly had misrepresented the origins of the gelato product it supplied. Palermo claimed that it was led to believe it was purchasing Pino’s own exclusive recipe gelato when in fact the gelato was manufactured in bulk by a wholesaler. Palermo further ...

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The United States District Court for the Eastern District of Pennsylvania has denied a motion to transfer filed by California franchisee defendants, finding the forum selection clause in their franchise agreement valid and enforceable and concluding that the defendants failed to demonstrate that the action should be moved to the Northern District of California. Maaco Franchising, Inc. v. Tainter, 2012 U.S. Dist. LEXIS 80790 (E.D. Pa. June 6, 2013). Franchisor Maaco filed the action asserting breaches of the franchise agreement. The agreement contained a choice-of-law ...

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A federal district court in Utah last week denied summary judgment for the defendant franchisor in a case involving a Legionnaires’ disease outbreak at a franchised hotel. Licari v. Best Western International, Inc., et al., 2013 U.S. Dist. LEXIS 97725 (D. Utah July 12, 2013). The court found that the plaintiff, who became ill after staying at the hotel, could proceed against the franchisor on two agency-based liability theories. First, the court found enough evidence to suggest that the franchisee was an “actual agent” of the franchisor. The most significant evidence in that ...

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In KFC Corp. v. Wagstaff, 2013 U.S. Dist. LEXIS 86758 (W.D. Ky. June 19, 2013), a district court in Kentucky held that neither the forum selection clauses in agreements underlying a personal guarantee nor Kentucky’s long-arm statute conferred personal jurisdiction over the defendant guarantors. The defendants owned or operated KFC franchises. After KFC terminated the franchises for failing to pay fees due, the parties executed, among other things, a prenegotiation agreement under which KFC would forgo suit, promissory notes under which the franchisee corporations agreed to ...

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In Depianti v. Jan-Pro Franchising International, Inc., 2013 Mass. Lexis 472 (Mass. June 17, 2013), the Supreme Judicial Court of Massachusetts ruled that in analyzing vicarious liability claims against a franchisor, a modified right of control test should be applied. In addition, the court held that a franchisor can be sued by a franchisee for alleged worker misclassification even if there is no written contract between the franchisor and the franchisee. Jan-Pro operates a multi-tier janitorial services franchise system, in which it enters into agreements with master ...

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Posted in Damages

The United States Court of Appeals for the Ninth Circuit has amended a recent opinion and voted to deny rehearing en banc in Alaska Rent-A-Car, Inc. v. Avis Budget Group, Inc., 2013 U.S. App. LEXIS 12709 (9th Cir. June 19, 2013). We previously reported on the case in Issue 165 of The GPMemorandum. In its most recent opinion, the court of appeals upheld the plaintiff licensee’s $16 million jury verdict for lost profits and lost future profits stemming from Avis’s purchase of Budget Rent-A-Car out of bankruptcy. Alaska Rent-A-Car successfully argued that Avis’s ownership and ...

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Applying Connecticut law, the United States Court of Appeals for the Second Circuit held last month that an insurance agent is not protected by the state’s franchise relationship law. Garbinski v. Nationwide Mut. Ins. Co., 2013 U.S. App LEXIS 12856 (2d Cir. June 24, 2013). In this decision, the Second Circuit reviewed and affirmed the district court’s dismissal order that we reported in Issue 159 of The GPMemorandum. Readers may recall that Nationwide, the insurance company, terminated its contract with Garbinski, who sold Nationwide insurance policies, after local media ...

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Posted in Contracts

A federal district court in New Jersey granted summary judgment to Ramada Worldwide on several counts of a breach of contract claim against a franchisee, despite the franchisee’s equitable challenge to enforcement of the parties’ franchise agreement. Ramada Worldwide Inc. v. Southport, LLC, 2013 U.S. Dist. LEXIS 91719 (D.N.J. June 27, 2013). Ramada brought a claim against Southport and other individuals for breach of a license agreement, development incentive note, and guaranty, because Southport had failed to make periodic payments required by the agreements. Ramada ...

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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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