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The Franchise Memorandum

Posts from February 2017 - Issue 214.

A district court in California has granted Domino’s motion to dismiss claims asserted against it by Prostar Wireless Group, a prospective supplier to Domino’s franchisees. Prostar Wireless Grp., LLC v. Domino’s Pizza, Inc., 2017 WL 67075 (N.D. Cal. Jan. 6, 2017). Prostar alleged that it had worked with Domino’s and its franchisees over the course of ten years to develop technology to assist franchisees in driver tracking and navigation. Domino’s ultimately elected to develop technology of its own, which Prostar alleged was functionally identical to Prostar’s ...

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Posted in Arbitration

In Rahmany v. T-Mobile USA, Inc., No. C16-1416-JCC (W.D. Wash. Jan. 5, 2017), a federal court in Washington granted defendant Subway’s motion to compel arbitration based on the plaintiffs’ cellular telephone contracts with T-Mobile, which mandated arbitration. Shortly after entering into those agreements, T-Mobile sent the plaintiffs a text message promoting free Subway sandwiches for T-Mobile customers. The plaintiffs filed a putative class action against T-Mobile and Subway, alleging violations of the Telephone Consumer Protection Act. The plaintiffs then ...

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Posted in Transfers

Meanwhile, a federal court in Kentucky held that a franchisee sufficiently pled a claim against a franchisor for intentional interference with a prospective economic advantage. Raheel Foods, LLC v. Yum! Brands, Inc., 2017 WL 217751 (W.D. Ky. Jan. 18, 2017). Raheel was party to several franchise agreements with Yum! Brands and eventually decided to sell its franchised stores. Under the franchise agreements, prior to selling the stores, Raheel was required to obtain Yum! Brands’ approval of the proposed purchaser. Raheel alleged that it presented proposed purchasers to Yum ...

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Posted in Choice of Law

The United States District Court for the Northern District of New York recently rejected a franchisee’s counterclaims that her franchisor wrongfully refused to renew her franchise agreement and breached its implied covenant of good faith and fair dealing when (as previously reported in Issue 190 of The GPMemorandum) it thereafter obtained enforcement of the franchisee’s post-termination covenant against competition. H&R Block Tax Servs. LLC v. Strauss, 2017 WL 395119 (N.D.N.Y. Jan. 27, 2017). Gray Plant Mooty represents H&R Block in this case. 

The franchise agreement ...

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Last month, an Oklahoma district court dismissed a bad faith counterclaim against a franchisor in Sonic Industries LLC v. Halleran, 2017 WL 239388 (W.D. Okla. Jan. 19, 2017). Oklahoma law recognizes an implied covenant of good faith and fair dealing in every contract but only allows recovery for breach of that covenant as an independent claim if there is a “special relationship” between the parties and evidence of adhesion. The court dismissed the bad faith claim after finding no evidence of adhesion in the contracts at issue.

The court further held that, under Florida law, a ...

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The United States Court of Appeals for the Sixth Circuit has affirmed a judgment granting rescission of a purported franchise agreement and holding the franchisor and its salesperson jointly and severally liable for damages. Lofgren v. AirTrona Canada, 2017 WL 384876 (6th Cir. Jan. 27, 2017). The lower court’s judgment was summarized in Issue 202 of The GPMemorandum. AirTrona Green Technologies had previously sold an “ozone process” automobile deodorizer business plan and related equipment to the plaintiff, Lofgren. In 2011, AirTrona Canada (the apparent ...

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Posted in Employment

A Wisconsin federal court recently granted a motion for summary judgment filed by franchisor Fish Window Cleaning Services, Inc., finding that it was neither an employer of its franchisee’s employees under the Fair Labor Standards Act (“FLSA”) nor under Wisconsin state wage and hour laws. Pope v. Espeseth, Inc., 2017 WL 108081 (W.D. Wis. Jan. 11, 2017).

The court held that the test for joint-employer liability was substantially similar under both the FLSA and Wisconsin state law and looked to the following four factors: (1) whether Fish had the power to hire and fire the ...

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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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