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The Franchise Memorandum

Posts from July 2015 - Issue 195.

The United States District Court for the Southern District of New York has held that a provision in a franchise agreement disclaiming a franchisee's reliance on statements made outside of the franchise disclosure document was sufficient to defeat a claim for common law fraud. The court, however, also found the same disclaimer provision did not bar a cause of action for statutory fraud under the New York Franchise Sales Act ("NYFSA"). Coraud LLC v. Kidville Franchise Co., 2015 U.S. Dist. LEXIS 77028 (S.D.N.Y. June 12, 2015). Prior to the sale of the franchise, the franchisor, Kidville ...

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Posted in Contracts

A federal district court in Colorado recently granted a franchisor's motion for summary judgment on claims of breach of contract, trademark infringement, unfair competition, and injunctive relief against two terminated franchisees, while rejecting the franchisees' counterclaims for breach of contract and fraud. Steak 'n Shake Enters., Inc. v. Globex Co., 2015 WL 3883590 (D. Colo. June 23, 2015). The franchisor, Steak 'n Shake, alleged that franchisees Globex and Springfield Downs, LLC, had breached the franchise agreement by charging more than allowed for certain food and ...

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A federal court recently denied defendant Harley-Davidson's motion to dismiss a claim under the Hawaii Franchise Investment Law ("HFIL"). Cycle City Ltd., v. Harley-Davidson Motor Co., 2015 WL 3407825 (D. Haw. May 26, 2015). Cycle City alleged that HarleyDavidson failed to renew a license agreement between the parties in violation of the HFIL. In response, Harley-Davidson argued that Cycle City failed to state a claim under the HFIL because the relationship between the parties is not a franchise governed by the law. Under the parties' license agreement, Cycle City was granted the ...

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The United States Court of Appeals for the Third Circuit recently affirmed an order holding a franchisor liable for damages awarded against its predecessor in an arbitration proceeding brought by one of the predecessor's franchisees. Regis Corp. v. S. El Dorado Corp. (In re Trade Secret Inc.), 2015 U.S. App. LEXIS 9912 (3d Cir. June 10, 2015). Houston BW, Inc., the franchisee, had filed an arbitration action seeking to terminate its franchise agreements with the original franchisor, Trade Secret, Inc. Trade Secret then filed for bankruptcy, and its assets and liabilities were ...

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Posted in Insurance

In connection with a lawsuit by a franchisor against former franchisees for injunctive relief, a federal court in Wisconsin granted a motion by the former franchisees' insurer seeking a declaration that the former franchisees were not entitled to coverage because their policy only covered suits for damages. Paul Davis Restoration, Inc. v. Everett, 2014 U.S. Dist. LEXIS 172227 (E.D. Wis. Dec. 12, 2014). The franchisor, Paul Davis Restoration, initiated the suit against former franchise owners, the Everetts, and their businesses, to enjoin them from disseminating misleading ...

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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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