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The Franchise Memorandum

Posts from May 2018 - Issue 229.
Posted in Employment

A series of unusual developments has brought the NLRB’s joint-employer standard back in front of the D.C. Circuit, where the federal court will finally weigh in on the 2015 decision in Browning-Ferris Industries, 362 NLRB No. 186 (2015). For many years prior to 2015, when determining when two or more entities would be considered a “jointemployer” under the National Labor Relations Act, the NLRB looked at whether an entity possessed and exercised direct control over employees’ terms and conditions of employment. In Browning-Ferris, however, the board announced that even ...

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Posted in Arbitration

The federal court in Connecticut denied a former Subway franchisee’s motion to vacate an arbitration award, finding that the franchisee failed to show that the arbitrator was guilty of misconduct in refusing to continue a hearing and reserving judgment on two of the franchisee’s motions. The court also declined to find that the arbitrator exceeded his powers by issuing an ex parte award to the franchisor, and confirmed the arbitrator’s award. Vyas v. Doctor’s Assocs., Inc., 2018 WL 1440179 (D. Conn. Mar. 21, 2018). Doctor’s Associates (DAI), the franchisor of Subway, had ...

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The United States District Court for the Southern District of New York recently partially granted and partially denied a franchisor’s motion for summary judgment against its former franchisee. Wyndham Hotel Grp. Int’l, Inc., v. Silver Entm’t LLC, 2018 WL 1585945 (S.D.N.Y. Mar. 28, 2018). Wyndham and its franchisee were parties to a franchise agreement for the operation of a hotel in Panama. After several years of operations, the hotel fell into financial difficulties and the franchisee became delinquent on contractually required fees, installments on a promissory note ...

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Posted in Terminations

The United States District Court for the Central District of California recently granted summary judgment in favor of H&R Block Tax Services (“Block”) in two consolidated cases in which franchisees had claimed that Block’s terminations of their franchises had breached their franchise agreements and violated the California Franchise Relations Act. Devore v. H&R Block Tax Servs. LLC, No. 16-cv-946 (C.D. Cal. Mar. 29, 2018). Gray Plant Mooty represents Block in both cases. Block terminated the agreements of the two related franchisees after discovering that they were ...

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A federal court in Michigan recently determined that Pennsylvania’s “gist of the action” doctrine, which is similar to the economic loss rule, did not bar franchisees’ fraud claims. Nutrimost Doctors, LLC v. Sterling, 2018 WL 1570624 (E.D. Mich. Mar. 30, 2018). Franchisor Nutrimost Doctors sued its three franchisee chiropractors claiming that they had purposely submitted contaminated samples of Nutrimost’s supplements to a laboratory in an attempt to void the franchise agreements. Nutrimost had the supplements tested by a different facility that detected no ...

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Posted in Terminations

A federal district court in Florida recently held that a franchisee’s refusal to install a new point-of-sale (POS) system was valid grounds for termination. Peterbrooke Franchising of Am., LLC v. Miami Chocolates, LLC, 2018 WL 1083552 (S.D. Fla. Feb. 28, 2018). Peterbrooke Franchising of America (PFA) terminated its agreement with former franchisee Miami Chocolates after it refused to install a new point-of-sale system, as required under the franchise agreement. When Miami Chocolates continued to operate in the same location, PFA sued to enforce the noncompete provision ...

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A federal court in Indiana recently granted a franchisee’s motion for summary judgment on the franchisor’s underreporting claim. Noble Roman’s, Inc. v. Hattenhauer Distrib. Co., 2018 WL 1566812 (S.D. Ind. Mar. 30, 2018). At issue in the case were two gas stations and convenience stores owned by Hattenhauer that contained Noble Roman’s pizza franchises. Each location was required to pay a royalty fee on its gross sales. Noble Roman’s alleged that Hattenhauer breached its franchise agreement by underreporting those sales by more than 20% and failing to pay the ...

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New rules from the Food and Drug Administration take effect on May 7, 2018, requiring certain businesses selling food to disclose calorie counts on their menus. The FDA’s menu labeling rules were previously scheduled to take effect in May 2017, but a strong lobbying effort from the restaurant industry led to a delay in implementation. The new rules apply to restaurants and similar businesses with 20 or more locations operating under a common name and offering substantially similar menu items. If enacted, a recent bill, the Common Sense Nutrition Disclosure Act, could loosen some of ...

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Posted in Arbitration

A federal court in Tennessee has confirmed an arbitrator’s award of damages and rescission against a franchisor, Medex, and in favor of a franchisee. Altruist, LLC v. Medex Patient Transp., LLC, 2018 WL 1704111 (M.D. Tenn. Apr. 9, 2018). The franchisee had asserted various claims, including breach of contract, misrepresentation, and breach of the covenant of good faith and fair dealing against Medex, arising out of a failure to disclose a bankruptcy in the FDD and unfulfilled promises of “back door” services including a call center, dispatch, and route management. In seeking ...

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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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