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The Franchise Memorandum

Posts from March 2015 - Issue 191.

A federal court in California granted a franchisor's motion to preliminarily enjoin a former franchisee from continuing to use its trademarks following the franchisee's termination for failure to pay royalties and advertising fees. IHOP Franchising, LLC v. Hameed, 2015 U.S. Dist. LEXIS 12021 (E.D. Cal. Feb. 2, 2015). After IHOP and its affiliates terminated the franchise agreement, Hameed continued to operate his restaurant using IHOP's trademarks. IHOP then filed suit for breach of contract, trademark infringement, and unfair competition, and moved to enforce Hameed's ...

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In Ramada Worldwide, Inc. v. SB Hotel Management Inc., 2015 U.S. Dist. LEXIS 20955 (D.N.J. Feb. 23, 2015), a federal court in New Jersey denied a franchisee's attempt to dismiss the complaint for improper venue or, alternatively, transfer the case to Minnesota. Ramada brought an action against the franchisee, SB, in New Jersey federal court for breach of a license agreement for the operation of a Ramada Inn located in Wisconsin. In the license agreement, SB consented to the nonexclusive jurisdiction of the New Jersey courts for any dispute between the parties. In response to the ...

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Posted in Arbitration

A federal court in Pennsylvania recently ruled that a cleaning service franchisee must arbitrate his claims against a franchisor on an individual basis, upholding the franchise agreement's arbitration clause and class action waiver. Torres v. CleanNet USA, Inc., 2015 WL 500163 (E.D. Pa. Feb. 5, 2015). Torres claimed CleanNet and its two subfranchisors engaged in a scheme to misclassify franchisees as independent contractors to avoid their obligations under state labor laws. Citing the United States Supreme Court's decision in AT&T Mobility LLC v. Concepcion, the court ...

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Posted in Arbitration

In an unusual twist, an Idaho federal court granted a former franchisee's motion to dismiss, or alternatively, a motion to stay the action pending arbitration, because the franchisor's claims were subject to the franchise agreement's arbitration clause. Arctic Circle Rests. v. Bell, 2015 U.S. Dist. LEXIS 24342 (D. Idaho Feb. 26, 2015). Arctic Circle, a franchisor, filed an action to enforce certain provisions of the franchise agreement, as well as claims under trademark and unfair competition law, after Bell continued to use trademarks owned by Arctic Circle and refused to ...

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Posted in Employment

The trend of troublesome "joint employer" lawsuits against franchisors continues. In Benitez v. Demco, 2015 US Dist. Lexis 20325 (S.D.N.Y. Feb. 19, 2015), for example, a federal court in New York declined to consider a franchisor's motion to dismiss federal and New York state-law claims asserted by franchisees' employees, on the grounds that imposing joint-employer liability is a fact specific question that cannot be resolved on a motion to dismiss. Two managers of Planet Wings franchises claimed the franchisor was liable as their employer for various wage and hour violations. To ...

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A federal court in the Northern District of Georgia recently ruled in favor of the franchisor of the Moe's Southwest Grill, and related parties, in a case brought by several Moe's franchisees, alleging that Moe's made written and oral misrepresentations related to the profits that Moe's derived from franchisees' purchase of food supplies. Massey, Inc. v. Moe's Southwest Grill, LLC, 2015 U.S. Dist. LEXIS 12281 (N.D. Ga. Feb. 3, 2015). The franchisees alleged that Moe's offering circular falsely represented that neither Moe's nor its affiliates would derive income from ...

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Posted in Employment

A state appellate court has reinstated a decision of the Board of Industrial Insurance Appeals that Jan-Pro cleaning franchisees without employees or subordinates were considered covered workers under the Washington Industrial Insurance Act. Dept. of Labor and Indus. v. Lyons Enters., Inc., 2015 WL 459409 (Wash. Ct. App. Feb. 3, 2015). The Act requires employers to report and pay workers compensation premiums for covered workers. Lyons Enterprises, the master franchisee of Jan-Pro cleaning franchises, argued that franchisees should not be considered workers under the Act ...

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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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