The Franchise Memorandum

A California appellate court reversed the trial court’s ruling that an arbitration agreement related to a former Papa John’s employee was unconscionable in Spaulding v. PJCA-2 LP, 2019 WL 517667 (Cal. Ct. App. Feb. 11, 2019). Plaintiff Jason Spaulding began working in a restaurant operated by defendant Papa John’s in 2009, and Papa John’s later sold the business to a franchisee, PJCA-2. PJCA-2 offered to continue to employ Spaulding at the restaurant but required him to review and sign a 40-page new hire package, which included a four-page arbitration agreement. Spaulding ...

The United States District Court for the Northern District of Texas has granted in part and denied in part a motion for summary judgment filed by franchisor Pizza Inn in a dispute with one of its area developers. Pizza Inn, Inc. v. Clairday, 2019 WL 499105 (N.D. Tex. Feb. 8, 2019). Pizza Inn entered into two area developer agreements with Clairday that permitted Clairday to promote and develop Pizza Inn franchises in Arkansas. The agreements contained a primary term of 20 years and provided Clairday the option to renew for two additional five-year periods. The parties renewed the ...

A franchise agreement’s arbitration clause was not rendered entirely void under Ohio’s business opportunity laws the Northern District of Ohio recently held, granting the franchisor’s motion to stay the federal court proceedings pending arbitration. Party Princess Toledo, LLC v. Party Princess USA LLC, 2019 WL 524186 (N.D. Ohio Feb. 11, 2019). After an Ohio franchisee sued Party Princess for a variety of claims arising under the parties’ franchise agreement, Party Princess moved to stay the proceedings pursuant to the agreement’s arbitration clause, which ...

The United States District Court for the District of New Jersey recently held that Zevin Curtis Ward, an employee of a franchised automotive repair business, sufficiently alleged that franchisor Cottman Transmission Systems acted as his joint employer. Ward v. Cottman Transmission, 2019 WL 643605 (D.N.J. Feb. 14, 2019). Ward brought claims of workplace discrimination, retaliation, and creation of a hostile work environment under Title VII of the Civil Rights Act of 1964 and the New Jersey Law Against Discrimination, together with allegations of unpaid overtime under the Fair ...

Ruling on a motion to dismiss in a consolidated action, a federal district court in North Carolina held that several Charlie Graingers area representatives alleged sufficient facts to permit fraud and tort-based claims and other similar claims to proceed against franchisor Charlie Graingers and its individual officers. Trident Atlanta, LLC v. Charlie Grangers Franchising, LLC, 2019 WL 441187 (E.D. N.C. Feb. 4, 2019). The area representatives claimed that prior to signing their franchise agreements, Charlie Graingers’ officers made multiple representations outside of the ...

The North Carolina Court of Appeals affirmed a lower court’s dismissal of claims against Family Fare, LLC for violations of the North Carolina Unfair and Deceptive Trade Practices Act and for rescission, fraud, misrepresentation, and breach of the duty of good faith and fair dealing on the grounds that the one-year contractual limitations period contained in the franchise agreements at issue expired prior to the franchisees’ filing suit. Sanghrajka v. Family Fare, LLC, 822 S.E.2d 789 (N.C. Ct. App. 2019). Sanghrajka operated a convenience store under the ownership and ...