The Franchise Memorandum

A federal district court in Nevada transferred a franchisee’s lawsuit against a franchisor to another district court in which the franchisor had filed suit against the franchisee just hours earlier. Khutob v. L.A. Ins. Agency Franchising, LLC, 2018 WL 4286171 (D. Nev. Sept. 8, 2018). When a dispute arose between the parties and settlement negotiations broke down, the franchisor, L.A. Insurance Agency (LAIA), filed suit against the franchisee, Khutob, in the U.S. District Court for the Eastern District of Michigan. Later that same day, Khutob filed a parallel lawsuit against ...

A Massachusetts federal court recently granted summary judgment to the defendants in a trademark dispute that stemmed from their development of restaurants under the plaintiff’s trademarks. Xiao Wei Yang Catering Linkage In Inner Mongolia Co. v. Inner Mongolia Xiao Wei Yang USA, Inc., 2018 WL 4516682 (D. Mass. Sept. 20, 2018). Linkage entered into a five-year cooperation agreement with the defendants to support the defendants’ promotion and development of a franchise market under trademarks owned by Linkage, including the federally registered trademark LITTLE LAMB. The ...

A federal court in Washington granted a franchisor’s motion for summary judgment enforcing the liquidated damages provision in the parties’ franchise agreement. Red Lion Hotels Franchising, Inc. v. First Capital Real Estate Invs., LLC, 2018 WL 4259241 (E.D. Wash. Sept. 6, 2018). Red Lion brought a breach of contract action against three former franchisees who defaulted under their agreements, seeking liquidated damages and past due fees. The franchisees conceded that the license agreements were enforceable contracts and that Red Lion lawfully terminated the agreements ...

A federal court in California has denied a franchisor’s motion to dismiss a claim that it violated California’s disclosure law because it failed to redisclose a prospective franchisee with, among other things, the franchisor’s then-effective amended FDD. Schulenburg v. Handel’s Enters., Inc., 2018 WL 4282637 (S.D. Cal. Sept. 7, 2018). Handel’s provided its FDD to the prospective franchisee, Schulenburg, in October 2015. In December 2015, Schulenburg sent a small deposit of the initial franchise fee to Handel’s, without signing the franchise agreement. On ...

An Illinois federal court recently granted a franchisor’s motion for a preliminary injunction and two motions to compel arbitration against its former franchisee. BrightStar Franchising, LLC v. Northern Nevada Care, Inc., 2018 WL 4224454 (N.D. Ill. Sept. 4, 2018). BrightStar, a franchisor of home-based health services, entered into a franchise agreement with Northern Nevada Care (NNC) pursuant to which NNC had the right to provide in-home medical care in the Carson City, Nevada area. After BrightStar learned that NNC was providing services to a customer living in another ...

After finding a group of terminated franchisees in contempt of court for violating a preliminary injunction enforcing their covenant against solicitation, the U.S. District Court for the Western District of North Carolina awarded a franchisor nearly $100,000 in attorneys’ fees and costs and extended the nonsolicitation covenant for an additional year. Atl. Pinstriping LLC v. Atl. Pinstriping Triad, LLC, 2018 WL 4265564 (W.D.N.C. Sept. 6, 2018). Atlantic terminated the parties’ franchise agreements and then filed a motion for a temporary restraining order seeking to ...

Following a franchisor’s motion to dismiss and motion for summary judgment, the United States District Court for the Southern District of New York has dismissed a franchisee’s fraud claims based on actions that occurred after it entered the parties’ franchise agreement. Safe Step Walk In Tub Co. v. CKH Indus., Inc., 2018 WL 4539656 (S.D.N.Y. Sept. 20, 2018). Under the franchise agreement, Safe Step permitted CKH to use Safe Step’s trademarks when marketing, selling, and installing its walk-in bathtubs in the Mid-Atlantic and New England areas. Safe Step brought suit ...