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The Franchise Memorandum

Posts from June 2018 - Issue 230.
Posted in Contracts

A Kansas appellate court concluded that a franchisor was entitled to enforce one clause of its franchise agreement despite its alleged breach of an unrelated clause in Hendrix v. Sheridan, 2018 WL 2272588 (Kan. Ct. App. May 18, 2018). Franchisee Ronald Hendrix and franchisor Sheridan’s Franchise Systems (SFS) were parties to a franchise agreement that granted Hendrix the right to operate a Sheridan’s Frozen Custard franchise. The franchise agreement allowed SFS to purchase the restaurant upon termination or expiration of the agreement. The dispute between the parties began ...

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A Florida appellate court recently affirmed the denial of Domino’s Pizza’s request for a directed verdict on its vicarious liability for the actions of its franchisee’s employee, but remanded the case for a new trial as a result of the opposing counsel’s improper closing argument. Domino’s Pizza, LLC v. Wiederhold, 2018 WL 2165224 (Fla. Dist. Ct. App. May 11, 2018). The plaintiff sued Domino’s on a vicarious liability theory after a franchisee’s delivery driver cut off the plaintiff’s husband in traffic, which resulted in a serious accident, and contributed to the ...

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The U.S. District Court for the Western District of Tennessee granted a motion for a preliminary injunction in favor of franchisor Amerispec, enforcing a one-year post-termination covenant against competition and rejecting the ex-franchisee’s argument that the covenant expired prior to the date on which he ceased operating his franchise. Amerispec, L.L.C. v. Omni Enters., Inc., 2018 WL 2248459 (W.D. Tenn. May 16, 2018). Gray Plant Mooty represented the franchisor in this case. When the parties’ franchise agreement expired in March of 2017, the franchisee failed to execute ...

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A federal court in Texas has denied a franchisor’s motion for a preliminary injunction, finding that the franchisor failed to show a likelihood of success on the merits. BL Rest. Franchises LLC v. 510 Park Inc., 2018 WL 2363606 (N.D. Tex. May 24, 2018). Restaurant franchisor Bar Louie filed suit against a group of franchisees and sought an injunction to require them to comply with the early termination procedures set forth in the parties’ franchise agreement before closing one of their restaurants.

As an initial matter, the court held that the motion was still ripe for review, even ...

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A district court in Missouri recently held that a forum selection clause did not survive the mutual termination of a franchise agreement. Serv. Team of Prof’ls, Inc. v. Folks, 2018 WL 2051516 (W.D. Mo. May 2, 2018). The parties had previously entered into a franchise agreement with a forum selection clause dictating that all actions be brought in Kansas City, Missouri. Following a dispute between the parties, they agreed to terminate the franchise agreement and enter into a settlement agreement. The settlement agreement provided that except for certain post-termination ...

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Posted in Terminations

In the case of Holiday Hospitality Franchising LLC v. CPTS Hotel Lessee LLC, No. 653096/2016 (N.Y. Sup. Ct. May 7, 2018), the Supreme Court of New York granted Holiday Hospitality’s motion to dismiss CPTS’s claim that the license agreement between the parties was a personal services contract and, therefore, could be terminated without cause. CPTS had attempted to terminate the license agreement due to Holiday’s alleged failure to properly invest in the growth and promotion of the Crowne Plaza brand. CPTS alleged, among other things, that Holiday breached the license ...

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The U.S. District Court for the Eastern District of Michigan recently denied a franchisor’s motion to enjoin a franchisee from proceeding with its counterclaim in a related matter pending in Texas state court. Live Cryo, LLC v. CryoUSA Import & Sales, LLC, 2018 WL 2355662 (E.D. Mich. May 24, 2018). The Texas action was initiated by defendant-franchisor CryoUSA. A few days later, plaintiff-franchisee Live Cryo filed the related federal suit in the Eastern District of Michigan. After the Michigan court granted in part and denied in part a motion to dismiss filed by CryoUSA, CryoUSA ...

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Posted in Damages

A federal court in New Jersey found that 7-Eleven could seek damages following the court’s grant of a declaratory judgment determining that 7-Eleven had properly terminated the parties’ franchise agreements. 7-Eleven, Inc. v. Sodhi, 2018 WL 2289876 (D.N.J. May 18, 2018). Sodhi appealed the district court’s order granting the declaratory judgment, but his motion to stay execution of the judgment was denied. 7-Eleven then filed an emergency motion for supplemental relief pursuant to 28 U.S.C. § 2202, alleging that Sodhi had stolen some $180,000 in proceeds before ...

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Posted in RICO

The U.S. District Court for the Northern District of Georgia has dismissed claims that a franchisor and its franchisees violated the Racketeer Influenced and Corrupt Organizations Act (RICO) through an alleged companywide policy of buying sick puppies, certifying their health for sale, and then covering up the source of their illness after they grew sick. Cisneros v. Petland, Inc., Bus. Franchise Guide (CCH) ¶ 16,177 (N.D. Ga. Apr. 17, 2018). The plaintiff bought a Shih Tzu puppy from a Petland franchisee that was certified as healthy but died of parvovirus soon after she brought him ...

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Posted in International

A Superior Court of Justice in Canada last week awarded a franchisor over $1.7 million in costs against the sole shareholder and guarantor of a franchisee that had been the named plaintiff in an unsuccessful class action against the franchisor. Pet Valu Canada Inc. v. Rodger, 2018 O.N.S.C. 3353 (Ontario Super. Ct. May 29, 2018). The class action had been commenced in 2009, seeking some $100 million, but was dismissed on summary judgment, with the franchisor receiving cost awards totaling $1,736,675 against the named plaintiff franchisee, a corporation. When the corporation failed ...

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Posted in Arbitration

In a landmark non-franchise decision, the United States Supreme Court held, 5-4, that employers can require employees to individually arbitrate employment law claims without violating federal labor laws. Epic Sys. Corp. v. Lewis, 2018 WL 2292444 (U.S. May 21, 2018). Employees of Epic Systems Corporation entered into an arbitration agreement that required them to resolve employment disputes through individual arbitration and waive their right to participate in class actions. A former Epic employee brought an action in federal court against the company, on behalf of himself and ...

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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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