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The Franchise Memorandum

Posts from January 2014 - Issue 176.

A California Court of Appeal recently affirmed a trial court’s ruling that subsequent evidence of franchisee misconduct warranted the dissolution of a preliminary injunction. Husain v. McDonald’s Corp., 2013 Cal. App. Unpub. LEXIS 9072 (Cal. Ct. App. Dec. 17, 2013). Early in the litigation, in which the franchisees were seeking to prevent the termination of three of their franchises, both parties moved for preliminary injunctions. The trial court granted the franchisees’ motion, concluding that there was a reasonable likelihood that the franchisees would prevail on the ...

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Posted in Arbitration

As part of the continuing saga of Awuah v. Coverall N. Am., Inc., 2013 U.S. Dist. LEXIS 171870 (D. Mass. Dec. 5, 2013), a Massachusetts federal district court recently reexamined the arbitrability of some of the plaintiffs’ state wage claims. At prior phases of the Awuah litigation, a class of plaintiffs was certified and later obtained a final judgment in their favor. This certified class excluded certain Coverall franchisees who had signed a franchise agreement with Coverall containing an arbitration provision. Following the Massachusetts Supreme Judicial Court’s 2012 ...

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In Doctor’s Associates, Inc. v. Windham, 2013 U.S. Dist. LEXIS 546 (Conn. App. Nov. 26, 2013), the Connecticut Court of Appeals found that alleged violations of the Connecticut Rules of Professional Conduct by the franchisor’s lawyers, even if they actually occurred, did not constitute sufficient grounds to overturn an arbitration award. Doctor’s Associates had initiated arbitration in this case, seeking to terminate a Subway franchise agreement based on Windham’s failure to complete required store upgrades. Windham failed to make an appearance in the arbitration ...

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Posted in Terminations

The Fourth Circuit affirmed in part the decision of the Western District of Virginia that certain post-term restrictive covenants did not apply to a former franchisee, finding that the expiration of the franchise agreement did not constitute a termination. Hamden v. Total Car Franchising Corp., 2013 U.S. App. LEXIS 23514 (4th Cir. Nov. 22, 2013). Former franchisee Hamden operated a paintless dent repair business for the entire fifteen year term of his franchise agreement. Electing to not renew the Franchise Agreement, Hamden informed Total Car Franchising (“TCF”) that he ...

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Posted in Advertising

A federal court in Indiana declined to dismiss a breach of contract claim concerning the collection of advertising and marketing funds by the franchisor of a members-only buying club franchise. In Arcangelo, Inc. v. DirectBuy, Inc., 2013 U.S. Dist. LEXIS 164941 (N.D. Ind. Nov. 20, 2013), the district court concluded that the language of the franchise agreement was not sufficiently unambiguous to resolve the fee dispute as a matter of law. Arcangelo had filed suit claiming that DirectBuy charged excessive fees for advertising and marketing under the franchise agreement, which ...

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Posted in Terminations

The United States District Court for the Eastern District of Missouri recently upheld a franchisor’s decision to terminate a group of franchisees that fraudulently concealed the true ownership of their operating company when entering into their franchise agreement. Dunkin’ Donuts Franchising LLC v. Sai Food & Hospitality, LLC, 2013 U.S. Dist. LEXIS 181752 (E.D. Mo. Dec. 31, 2013). Gray Plant Mooty represents the franchisor in this case. Dunkin’ terminated the parties’ franchise agreements and their related development agreement and sublease after an investigation ...

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A federal district court in New Mexico held that a franchisor may be liable for its franchisee’s failure to provide a safe working environment after an armed robbery resulted in the death of the franchisee’s employee. In Estate of Anderson v. Barreras, Bus. Franchise Guide (CCH) ¶ 15,181 (D.N.M. Nov. 13, 2013), the plaintiff brought a wrongful death action against the franchisee and the franchisor, Denny’s, Inc., alleging that they were liable for the employee’s death by failing to properly train personnel on emergency procedures, failing to implement adequate security ...

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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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