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The Franchise Memorandum

Posts from January 2016 - Issue 201.

As we reported in Issue No. 198 of The GPMemorandum, AB 525, which amends the California Franchise Relations Act ("CFRA"), applies to all franchise agreements entered into or renewed after January 1, 2016. Under the amendments, franchisors that prevent a terminated or nonrenewed franchisee from "retaining control of the principal place of the franchise business" will be required to purchase the franchisee's assets. One issue raised by this new provision is whether language in franchise agreements, conditional lease assignments, or leases that gives a franchisor certain ...

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Posted in Arbitration

Meanwhile, a federal court in California has granted a franchisor's motion to compel arbitration in a putative class action lawsuit filed by one of its franchisees. Jacobson v. Snap-on Tools Co., 2015 WL 8293164 (N.D. Cal. Dec. 9, 2015). Jacobson argued that his work was so closely regulated by Snap-on Tools, a franchisor of automotive and shop equipment, that he should be treated as an employee under California law, rather than as an independent franchisee, and that Snap-on Tools failed to properly pay him for employment-related expenses, overtime, and meal and rest breaks. Snap-on ...

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The United States District Court for the Southern District of Indiana dismissed a franchisor's claims under the Minnesota Franchise Act ("MFA") in a case recently transferred from a Minnesota federal court. Rogovsky Enterprise, Inc. v. Masterbrand Cabinets, Inc., 2015 WL 7721223 (S.D. Ind. Nov. 30, 2015). Rogovsky, the franchisor of Kitchen & Home Interiors remodeling franchises, brought suit against Masterbrand, a manufacturer and distributor of cabinets, following Masterbrand's termination of the exclusive distribution agreement between the parties. Under the ...

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A federal court in Texas recently decided that a franchisor may recover on a guaranty agreement despite the guarantor's claim that the guaranty was unenforceable because he did not receive the value that he was allegedly promised in exchange for executing it. Burger King Europe GMBH v. Groenke, 2015 WL 6751121 (N.D. Tex. Nov. 5, 2015). Groenke had an ownership interest in multiple entities that owned and operated a number of Burger King franchises in and around Berlin, Germany. After the opening of insolvency proceedings for Groenke's entities, Burger King brought claims against ...

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A magistrate judge for the United States District Court for the Eastern District of Michigan has denied, without prejudice, a motion to strike an untimely demand for a jury trial made by a group of franchisees. L.A. Insurance Agency Franchising, LLC v. Montes, 2015 WL 9314738 (E.D. Mich. Dec. 23, 2015). The franchisees waited until five months after filing their answer to the complaint to assert their demand for a jury. L.A. Insurance, the franchisor, then sought to strike the jury demand, arguing that the franchisees had waived their right to a jury because each franchise agreement ...

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The United States District Court for the Eastern District of North Carolina has granted a hotel franchisor's motion to transfer venue based on the forum selection clause in the parties' franchise agreement. Generation Companies, LLC v. Holiday Hospitality Franchising, LLC, 2015 WL 7306448 (E.D.N.C. Nov. 19, 2015). Generation, a franchisee of the Staybridge Suites brand, brought suit alleging that Holiday Hospitality (the franchisor of the Staybridge Suites system) was liable for tortious interference with contract, slander, and unfair trade practices as a result of its ...

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After the United States Court of Appeals for the Third Circuit recently affirmed the denial of Wyndham Hotel's motion to dismiss claims that it allegedly violated Section 5 of the FTC Act (as reported in Issue No. 197 of The GPMemorandum), a federal court in New Jersey entered a stipulated order for an injunction resolving the case. FTC v. Wyndham Worldwide Corp., No. 2:13-cv-01887 (D.N.J. Dec. 11, 2015). The complaint filed by the FTC alleged that Wyndham engaged in unfair practices by failing to maintain reasonable and appropriate data security for consumers' sensitive personal ...

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The United States District Court for the Southern District of New York dismissed a claim brought by blind patrons of the Moe's restaurant chain that the restaurants' "freestyle" touch screen Coca-Cola machines were discriminatory under the Americans with Disabilities Act (ADA). West v. Moe's Franchisor, LLC, 2015 WL 8484567 (S.D.N.Y. Dec. 9, 2015). Because the machines did not incorporate "adaptive features" like the tactile buttons found on ATMs, the plaintiffs claimed that they were unable to use the machines independently. They further contended that Moe's employees failed ...

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Posted in Arbitration

The United States Supreme Court recently reaffirmed the strong federal policy favoring arbitration under the Federal Arbitration Act. In DIRECTV, Inc. v. Imburgia, 136 S. Ct. 463 (U.S. Dec. 14, 2015), the court overturned a decision by a California Court of Appeals, which had invalidated an arbitration provision that included a class action waiver. In doing so, the court held that the arbitration agreement had to be enforced.

After DIRECTV customers commenced a putative class action seeking damages for violation of various California consumer protection laws, DIRECTV moved to ...

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As reported in Issue No. 199 of The GPMemorandum, the North American Securities Administrators Association ("NASAA")—the state franchise examiners—issued a "Proposed Franchise Commentary on Financial Performance Representations" on October 1, 2015. NASAA is seeking to create new interpretations and guidelines for financial performance representations ("FPRs"), including (a) when franchisors can and cannot use data from company-owned or affiliate-owned outlets; (b) when franchisors can and cannot use a subset of the entire pool of franchised or company-owned ...

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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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