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The Franchise Memorandum

Posts from March 2014 - Issue 178.

In H&R Block Tax Services LLC v. Acevedo-López, 2014 U.S. App. LEXIS 2602 (8th Cir. Feb. 12, 2014), the United States Court of Appeals for the Eighth Circuit vacated the order of a district court in Missouri, which had denied a motion by H&R Block for a preliminary injunction prohibiting breach by a former franchisee of his covenants against competition. Shortly thereafter, the district court granted summary judgment to H&R Block on all of the claims and counterclaims in the case, awarding H&R Block approximately $1.5 million in damages, entering a final injunction enforcing the ...

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In responding to a motion to dismiss, the United States District Court for the Western District of Virginia recently permitted a “negligence per se” claim based on a franchisor’s FTC disclosure violation to proceed under Georgia law. Bans Pasta, LLC v. Mirko Franchising, LLC, 2014 U.S. Dist. LEXIS 19953 (W.D. Va. Feb. 12, 2014). Mirko, an Italian restaurant franchisee, alleged that the franchisor, Bans Pasta, violated the FTC Rule’s disclosure requirements by providing financial performance representations outside the context of Item 19 of the FDD. Bans Pasta filed a ...

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Posted in Contracts

In a case in which Gray Plant Mooty represented the defendant hotel management company, the federal court in North Dakota recently granted it summary judgment with respect to claims asserted by the owner of a franchised hotel. Ivesdal v. Three Rivers Hospitality, LLC, No. 1:12-cv-00073-DLH-CSM (D.N.D. Feb. 7, 2014). Hotel owner Ivesdal engaged Three Rivers to manage operations of his franchised AmericInn hotel in Dickinson, North Dakota. The parties entered into a Management Agreement governed by Minnesota law. After declining to renew the Management Agreement following ...

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Posted in Arbitration

In Doctor’s Associates Inc. v. White, 2014 U.S. Dist. LEXIS 11433 (D.N.J. Jan. 30, 2014), the federal court in New Jersey granted partial reconsideration of an order refusing to confirm an arbitration award. Doctor’s Associates, Inc. (“DAI”) had initiated arbitration against franchisee White for breach of his Subway franchise agreement. After DAI won the arbitration, it filed a lawsuit in federal court to confirm the award against both White and Coach Investments & Developers. Although Coach was not party to the arbitration, DAI argued that Coach was the alter ego of the ...

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Posted in Contracts

A federal district court in Pennsylvania recently held that a franchisor was entitled to summary judgment on a franchisee’s equitable rescission claim because the franchisee did not act promptly in bringing suit after discovering the franchisor’s alleged misrepresentations. In Al-Barqawi v. 7-Eleven, Inc., 2014 U.S. Dist. LEXIS 19601 (E.D. Pa. Feb. 18, 2014), the franchisee, Al-Barqawi, alleged that 7-Eleven representatives falsely represented to him before he signed his franchise agreement that the particular store he was purchasing did not have problems with crime ...

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In Ocean City Express Co., Inc. v. Atlas Van Lines, Inc., 2014 U.S. Dist. LEXIS 20885 (D.N.J. Feb. 19, 2014), the United States District Court for the District of New Jersey denied the plaintiff’s motion to amend its complaint and dismissed without prejudice its claim under the New Jersey Franchise Practices Act. Ocean City Express, which was a party to an agency agreement with Atlas Van Lines, failed to plead that that it had a qualifying place of business in New Jersey. It merely pled that it had a principal place of business within the state of New Jersey.

To qualify for protection under ...

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Posted in Trademarks

The United States District Court for the Northern District of Texas held that the failure of a terminated franchisee and its successor to fully deidentify a hotel and remove all signage related to its former franchise system, even signage that is difficult to access and costly to remove, constituted trademark infringement. Choice Hotels Int’l, Inc. v. Goldmark Hospitality, LLC, 2014 U.S. Dist. LEXIS 20666 (N.D. Tex. Feb. 19, 2014). The franchisee, Goldmark, acquired a former Choice Hotels franchisee’s property through bankruptcy and foreclosure and converted it from ...

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In Solanki v. 7-Eleven, Inc., 2014 U.S. Dist. LEXIS 11183 (S.D.N.Y. Jan. 29, 2014), a franchisee’s claims under the New York Franchise Sales Act have survived a franchisor’s motion for summary judgment. Solanski alleged that 7-Eleven’s presale revenue estimates should have been included in the FDD, and that its earnings estimates were false. At or shortly after the parties’ initial meeting to discuss the store, 7-Eleven provided Solanski with an FDD and a business plan outline to complete. At a subsequent meeting, Solanski presented his completed business plan, which was ...

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Posted in Bankruptcy

In In re A&F Enterprises, Inc. v. IHOP Franchising LLC, 2014 U.S. App. LEXIS 2408 (7th Cir. Feb. 7, 2014), the Seventh Circuit reversed the district court and the bankruptcy court and stayed the enforcement of the bankruptcy court orders that were on appeal. The dispute in the bankruptcy case involved when a debtor-franchisee must assume or reject a real property lease for a leased franchise location. Under bankruptcy law, a debtor must assume or reject a commercial real property lease within 120 days after the bankruptcy case is filed or the lease is deemed rejected. In contrast, a ...

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The Texas Court of Appeals recently affirmed a trial court’s ruling that a franchise agreement’s forum-selection clause was enforceable against a guarantor who had not signed the agreement. Pritchett v. Gold’s Gym Franchising, LLC, 2014 Tex. App. LEXIS 1281 (Tex. Ct. App. Feb. 4, 2014). The forum-selection clause at issue designated Texas as the exclusive venue for disputes. Pritchett, a guarantor to the franchise agreement who owned a 50% interest in the corporate franchisee, argued that the Texas court lacked personal jurisdiction over him because he did not conduct ...

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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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