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The Franchise Memorandum

Posts from January 2015 - Issue 189.

As has been widely reported in the media, the National Labor Relations Board last month filed complaints in 13 regional NLRB offices charging multiple McDonald’s franchisees with unfair labor practices relating to union organizing activities at McDonald’s franchised restaurants across the country. The NLRB also alleged that McDonald’s USA, LLC is liable for the alleged labor violations as a “joint employer” with its franchisees. The claims against the McDonald’s franchisees allege a variety of unfair labor practices, including reducing working hours ...

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The United States District Court for the District of Massachusetts granted a franchisor’s motion for a preliminary injunction seeking to prevent a group of holdover franchisees from using its trademarks, but permitted the franchisees to continue operating their business as an unaffiliated convenience store until a full adjudication on the merits. 7-Eleven, Inc. v. Grewal, 2014 U.S. Dist. LEXIS 163712 (D. Mass. Nov. 20, 2014). 7-Eleven terminated the parties’ franchise relationship after an investigation revealed that Grewal had falsified its sales data by incorrectly ...

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A New York court recently denied a franchisor’s motion to dismiss claims brought by its franchisee. Schwartzco Enters., LLC v. TMH Management, LLC, 2014 U.S. Dist. LEXIS 160856 (E.D.N.Y. Nov. 17, 2014). Schwartzco brought multiple causes of action alleging that the franchisor and related individuals participated in a fraudulent scheme in the sale of franchise and area developer rights for The Meat House system, violating numerous state laws and regulations. According to Schwartzco, the franchisor made material misrepresentations, including providing false financial ...

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Posted in Choice of Law

A federal court in the Southern District of Illinois recently struck a franchise agreement’s choice of law provision after concluding that the state in which the franchise was located had a materially greater interest in the dispute than the state whose law was chosen by contract. Show-Me’s Franchises, Inc. v. Sullivan, 2014 U.S. Dist. LEXIS 171507 (S.D. Ill. Dec. 11, 2014). In a case started by Show-Me, Sullivan brought counterclaims alleging violations of the Indiana Deceptive Franchise Practice Act, the Illinois Franchise Disclosure Act, and Indiana common law. He argued ...

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In a case defended by Gray Plant Mooty, a Minnesota federal court recently denied an injunction motion brought by a party claiming to be a putative franchisee under the Minnesota Franchise Act (MFA). Wave Form Sys., Inc. v. AMS Sales Corp., 2014 U.S. Dist. LEXIS 175927 (D. Minn. Dec. 22, 2014). Wave Form was an Oregon corporation that supplied health care providers with laser equipment and services, including medical procedures that use “GreenLight” lasers marketed by AMS Sales Corp. In 2012, Wave Form signed a two-year agreement with AMS that provided nonexclusive use of AMS’s ...

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The United States District Court for the Central District of California declined to extend the test for imposing employer liability established by the California Supreme Court in Patterson v. Domino’s Pizza, LLC, S204546 (Cal. Aug. 28, 2014) (reported on in Issue 184 of The GPMemorandum) beyond the franchise context. Ambrose v. Avis Rent a Car Sys., Inc., 2014 U.S. Dist. LEXIS 170406 (S.D. Cal. Dec. 8, 2014). Ambrose had entered into an “independent operator” agreement to operate a Budget Rent a Car business. The court found that the agreement was indistinguishable from a ...

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Posted in Damages

The Georgia Court of Appeals held that a franchisor could claim lost future royalties based on the franchisee’s breach of the franchise agreement, but denied the recovery because the franchisor had not established its lost future royalties with sufficient specificity. Legacy Academy, Inc. v. JLK, Inc., 2014 Ga. App. LEXIS 833 (Ga. Ct. App. Nov. 20, 2014). JLK, a franchisee for a Legacy Academy childcare center, informed its franchisor that it intended to terminate the parties’ relationship, and then it continued operations under a different name. Legacy Academy sued for ...

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The court in Chicago Male Medical Clinic v. Ultimate Management, Inc., determined that a “consulting agreement” was a franchise under the Illinois Franchise Disclosure Act (IFDA), and awarded the plaintiff rescission of the agreement. 2014 U.S. Dist. LEXIS 174478 (C.D. Cal. Dec 16, 2014). Chicago Male operated a medical clinic under a “Continuing Compensation and Consulting Agreement” with Ultimate Management. Approximately nine months after executing the agreement, Chicago Male sued for rescission. Chicago Male claimed it was a “franchisee” under the IFDA ...

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The United States District Court for the Northern District of California recently denied a franchisor’s motion to dismiss claims of fraud and misrepresentation, and allowed the franchisee to proceed with claims that the franchisor misrepresented the feasibility of the independent contractor business model. The parties in Andersen v. Griswold Int’l, LLC, Case No. 3:14-cv-02560 (N.D. Cal. Dec. 16, 2014), entered into a franchise agreement under which Andersen operated a nonmedical home care business. He claimed that before the sale of the franchise, Griswold made ...

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Posted in Advertising

A federal court in Wisconsin granted a franchisor’s motion for a preliminary injunction prohibiting a former franchisee from broadcasting a misleading radio advertisement about the franchisor’s business. Paul Davis Restoration, Inc. v. Everett, 2014 U.S. Dist. LEXIS 172227 (E.D. Wis. Dec. 12, 2014). Following a series of lawsuits, the franchisor, Paul Davis, sought to enforce an arbitration award against former franchisee Everett. Everett responded by running an ad, which purported to be a “business advisory,” construing the franchisor’s attempt to enforce the ...

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A federal district court in Wisconsin has granted a franchisor’s motion for a preliminary injunction against a former franchisee who continued to use a variation of the franchisor’s trademark after entering into a Franchise Termination Agreement. Dent Doctor, Inc. v. Dent Clinic, Inc., 2014 WL 7139831 (E.D. Wis. Dec. 12, 2014). Dent Clinic operated a Dent Doctor franchise from 1993 to 2012 until the parties entered into the termination agreement. The agreement required Dent Clinic to cease using the trademark DENT DOCTOR. In response, it replaced the mark DENT DOCTOR with DENT ...

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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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