The Franchise Memorandum

In a recent case a federal court in New Jersey granted a franchisee's motion to dismiss trademark infringement claims brought by the franchisor, but granted the franchisor leave to amend its claim. 7 Eleven, Inc. v. Maia Inv. Co., 2015 U.S. Dist. LEXIS 50753 (D.N.J. Apr. 17, 2015). 7-Eleven brought suit against its franchisee, Maia, after discovering that it had sold 7-Eleven branded products at a competing convenience store. Specifically, 7-Eleven alleged that Maia had sold various 7-Eleven proprietary products, such as Cheeseburger Bites and BIG BITE hot dogs, at its own store ...

In Patel v. 7-Eleven, Inc., Bus. Franchise Guide (CCH) 9115,492 (C.D. Cal. Apr. 14, 2015), a former franchisee alleged that 7-Eleven unlawfully terminated its franchise. While preparing to file the case, Patel's counsel was contacted by a disgruntled employee in 7- Eleven's Asset Protection Department, Kurt McCord, who offered his services as a "Loss Prevention Consultant." Patel hired McCord. He drafted a document specifying how 7- Eleven's Asset Protection Department operated, a summary of proper interview techniques, and an analysis of 7-Eleven's loss prevention ...

A federal district court in Michigan recently denied a franchisee's motion to dismiss its franchisor's counterclaims for breach of contract and a declaratory judgment. AKB Wireless, Inc. v. Wireless Toyz Franchise LLC, 2015 U.S. Dist. LEXIS 48005 (E.D. Mich. Apr. 13, 2015). The franchisor, Wireless Toyz, alleged that AKB had breached its franchise agreement by, among other things, violating the agreement's covenant not to compete and confidentiality provisions. AKB argued that the franchise agreement's noncompetition and confidentiality provisions only applied upon ...

In a case involving claims for rescission of the franchise agreement and damages related to a franchisee's purchase of a day care franchise, the Georgia Supreme Court recently reversed the franchisee's favorable jury verdict and remanded the case for a new trial. Legacy Acad., Inc., v. Mamilove, LLC, 2015 Ga. LEXIS 233 (Ga. Apr. 20, 2015). Mamilove and its owners alleged that the franchisor, Legacy Academy, made improper earnings claims, and that they were fraudulently induced to sign the franchise agreement with false information from historical earnings of existing ...

Following a two-week jury trial in federal court in Philadelphia on a real estate developer's tortious interference claim, a jury recently returned a complete defense verdict in favor of Dunkin' Donuts. Selzer v. Dunkin' Donuts Inc., No. 2:09-cv-05484-GP (E.D. Pa.). Gray Plant Mooty represented the franchisor in this case, which involved a Pennsylvania real estate developer who had entered into an agreement with a Dunkin' Donuts franchisee to develop his stores in York, Pennsylvania. The franchisee had entered into a store development agreement with Dunkin', giving him the ...

In Unlimited Opportunity, Inc. v. Waadah, 2015 Neb. LEXIS 71 (Neb. Apr. 10, 2015), the Supreme Court of Nebraska affirmed a district court's ruling that the post-term noncompete covenant contained within the parties' franchise agreement was unreasonable, and therefore unenforceable. Unlimited Opportunity, d/b/a Jani-King of Omaha, ("JaniKing") is a subfranchisor of professional cleaning and maintenance services. In 2008, Jani-King granted Waadah a franchise in the Omaha, Nebraska area, which franchise later was terminated. The parties' franchise agreement contained a ...

A Pennsylvania federal court has granted class certification to a group of Jani-King® franchisees, allowing their lawsuit alleging contractor misclassification and wage claims under Pennsylvania's Wage Payment and Collection Law ("WPCL") to proceed. Myers v. Jani-King of Phila., 2015 U.S. Dist. LEXIS 29566 (E.D. Pa. Mar. 10, 2015). The action considered whether Texas-based franchisor Jani-King, a franchisor of commercial cleaning businesses, exercised so much control that its franchisees were employees, rather than independent business owners, and whether the ...

The Second Circuit affirmed a grant of summary judgment in favor of hotel franchisor HLT Existing Franchise Holding LLC, dismissing a former franchisee's claim that HLT improperly terminated the franchise agreement and permitting HLT to recover liquidated damages. HLT Existing Franchise Holding LLC v. Worcester Hospitality Grp., LLC, 2015 U.S. App. LEXIS (2d Cir. Apr. 9, 2015). The terminated Hampton Inn franchisee, Worcester Hospitality Group, LLC (WHG), argued that the district court erred in three respects, contending that: (1) HLT had violated the covenant of good faith ...

The U.S. Supreme Court recently held that, under certain circumstances, rulings by the Trademark Trial and Appeal Board (TTAB) of the United States Patent and Trademark Office on the core issue of "likelihood of confusion" in contested trademark registration (opposition or cancellation) proceedings can be binding on a court considering the same issue in infringement litigation. B&B Hardware, Inc. v. Hargis Indus., Inc., 135 S. Ct. 1293 (March 24, 2015). The TTAB had held, in an opposition proceeding, that there was a likelihood of confusion between B&B's senior registered mark ...

The Texas Court of Appeals recently overturned a jury verdict that had found the Domino's franchisor vicariously liable for a death and serious injuries resulting from an accident caused by the defective vehicle of a delivery driver. Domino's Pizza, LLC v. Reddy, 2015 Tex. App. LEXIS 2578 (Tex. Ct. App. Mar. 19, 2015). The court observed that whether a franchisor may be held vicariously liable for the acts of its franchisees depends on whether the franchisor had the right to the control the injury causing conduct. Reddy, a representative of the victims, argued that Domino's controls ...

The Third Circuit recently affirmed a federal district court's dismissal of a lawsuit against the franchisor of the Doctors Express franchise system. In Fabbro v. DRX Urgent Care, LLC, 2015 WL 1453537 (3d Cir. Apr. 1, 2015), the franchisee alleged that Doctors Express breached its contract, breached the duty of good faith, and fraudulently misrepresented the actual startup costs the franchisee would expend after entering into the franchise agreement. It claimed that its actual costs exceeded the estimates by a substantial margin, and it argued that overly restrictive ...