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The Franchise Memorandum

Posts from February 2019 - Issue 238.
Posted in Employment

A federal court in California granted a franchisor’s motion for summary judgment on all but one claim brought by a franchisee’s employees, holding that there was a fact question on the reasonableness of the employees’ belief that the franchisee was operating as an agent of the franchisor. Cruz v. MM 879, Inc., 2019 WL 266458 (E.D. Cal. Jan. 18, 2019). The plaintiffs are a class, which the court certified in a separate order on the same day, of approximately 181 current and former employees of MM 879, a California-based Merry Maids franchisee. They alleged that several of MM 879’s ...

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The U.S. District Court for the Northern District of California granted a dealer’s motion for a preliminary injunction to halt the termination of its franchise in S.A. Mission Corp. v. BP West Coast Products LLC, 2019 WL 99042 (N.D. Cal. Jan. 3, 2019). S.A. Mission owned and operated a gas station as part of its franchise agreements with BP. The franchise agreements contained an “image standards” provision, under which S.A. Mission would need to conform to certain standards and its station would be subject to periodic inspections. S.A. Mission failed six consecutive ...

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Posted in Employment

Meanwhile, the federal court in Connecticut has granted a motion for class certification, allowing the lead plaintiffs to pursue employee misclassification claims on behalf of all Connecticut franchisees of the Jani-King system. Mujo v. Jani-King Int’l, Inc., 2019 WL 145524 (D. Conn. Jan. 9, 2019). The plaintiffs alleged that franchisees had been misclassified as independent contractors under their franchise agreements with Jani-King and were actually employees of the franchisor, citing operational standards and their dependence on Jani-King for work assignments. They ...

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Posted in Arbitration

A New York federal district court upheld an arbitral award that denied attorneys’ fees to Benihana in a dispute with its licensee, Benihana of Tokyo (“BOT”). Benihana Inc. v. Benihana of Tokyo, LLC, 2019 WL 251729 (S.D.N.Y. Jan. 17, 2019). BOT had initiated an arbitration against Benihana for breach of the parties’ license agreement, and Benihana counterclaimed for breach of the agreement and requested that the arbitrator uphold its earlier termination of the agreement. In conjunction with its counterclaim, Benihana sought to recover attorneys’ fees pursuant to the ...

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Posted in Antitrust

The U.S. Department of Justice recently announced its intent to file a statement of interest in three pending class action lawsuits, which each challenge no-poaching agreements, filed against franchisors in federal court in Washington. In its notice, the DOJ stated that “[a] no-poaching agreement between a franchisor and a franchisee, within the same franchise system, . . . merits rule of reason analysis at the proper procedural stage.” In so writing, the DOJ made clear its disagreement with the plaintiffs’ arguments in these cases that the less rigorous per se or quicklook ...

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An Illinois federal court ruled in favor of franchisor BrightStar Franchising, LLC, holding former franchisee Northern Nevada Care and its owners Stephen and Teresa Neff in contempt for failing to comply with the terms of a preliminary injunction. BrightStar Franchising, LLC v. N. Nevada Care, Inc., 2019 WL 194369 (N.D. Ill. Jan. 15, 2019). The Neffs previously operated a franchised BrightStar agency offering at-home personal care and medical services in Carson City, Nevada. BrightStar filed an action alleging a violation of the parties’ franchise agreement and sought ...

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Posted in Settlement

The Appellate Division of the New Jersey Superior Court recently held that a former Gulf Oil franchisee must comply with the terms of a settlement agreement and affirmed the denial of the franchisee’s motion to vacate the agreement. S&M Gulf Inc. v. Gulf Oil, LP, 2019 WL 333055 (N.J. Super. Ct. App. Div. Jan. 28, 2019). The dispute initially arose after the franchisee, Gulf Express, sued to enforce its right to purchase the franchise premises pursuant to a right of first refusal clause in its franchise agreement with Gulf Oil. The parties then entered into a settlement agreement ...

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Posted in Employment

The National Labor Relations Board has overruled its 2014 decision in FedEx Home Delivery, 361 NLRB No. 610 (2014), finding that FedEx improperly limited the significance of a worker’s “entrepreneurial opportunity for gain or loss” when evaluating whether a party is an independent contractor or an employee. SuperShuttle DFW, Inc., 367 NLRB No. 75 (Jan. 25, 2019). In SuperShuttle, the NLRB considered whether SuperShuttle franchisees, who operate shared-ride vans to and from the airport, were employees for purposes of the National Labor Relations Act, or whether the ...

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Posted in Employment

A federal court in Ohio recently approved a class action settlement of a wage and hour lawsuit brought on behalf of a class of pizza delivery drivers against a Domino’s franchisee and various Domino’s corporate entities, including the franchisor of the Domino’s system. Mullins v. S. Ohio Pizza, Inc., 2019 WL 275711 (S.D. Ohio Jan. 18, 2019). The plaintiff, a pizza delivery driver for Southern Ohio Pizza, a 19-unit Domino’s franchisee, alleged that the franchisee and Domino’s were his joint employers, and that as such they under-reimbursed him and similarly situated ...

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The U.S. District Court for the Southern District of Ohio had no trouble preliminarily enjoining a franchisee and its principals (“Pivotal”) from violating a one-year covenant against competition, when Pivotal’s principals formed a competing company, hired Pivotal’s employees for the same roles in the new business, sent notices to industry contacts that Pivotal was “rebranding,” and declared the franchise agreement terminated. Relo Franchise Servs., Inc. v. Gilman, 2019 WL 324215 (S.D. Ohio Jan. 25, 2019). Pivotal attempted to avoid the injunction by arguing ...

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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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