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The Franchise Memorandum

Posts from June 2019 - Issue 242.

In the last issue of The GPMemorandum, we covered the “Protect Alabama Small Businesses Act,” the first major state franchise relationship bill to be considered this year. The Alabama State Senate version of the bill (SB129) passed the Alabama Senate on March 16, 2019. The identical House companion bill (HB352) was voted out of committee with a favorable recommendation on April 4, 2019. While a final vote on the bill was expected by many to occur this month, the Alabama Legislature did not take the bill up for final vote before adjourning the 2019 regular session on May 31, 2019.

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A federal district court in Massachusetts has denied a motion to dismiss for lack of personal jurisdiction jointly filed by Marriott International, Inc. and franchisee Reluxicorp in a premises liability action brought against them, finding that a franchise agreement between Marriott’s affiliate and Reluxicorp created sufficient contacts with the forum to satisfy specific jurisdiction requirements. Nandjou v. Marriott Int’l, Inc., 2019 WL 1903382 (D. Mass. Apr. 29, 2019). The plaintiff, Chimene Mbague Nandjou, filed wrongful death, vicarious liability, and negligent ...

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Posted in Arbitration

A federal court in Washington denied a franchisor’s motion to dismiss or compel arbitration of a franchisee’s claims after finding that material questions of fact remained as to whether a valid and enforceable franchise contract existed between the parties. Garrett v. Rothschild, 2019 WL 1957929 (W.D. Wash. May 2, 2019). Morgan Rothschild, the owner of the Party Princess International franchise system, sold a franchise to Sean and Stephanie Taylor that they planned to operate in Washington. Party Princess had filed paperwork to register in Washington as a franchisor but the ...

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Posted in Antitrust

As reported in the last issue of The GPMemorandum, the Department of Justice Antitrust Division filed statements of interest in three franchise anti-poaching class actions pending in federal court in Washington. The statements urged application of the rule of reason to the Sherman Act claims asserted by the putative class members and explained why per se and quick-look analyses were improper. The cases in which the DOJ filed its statements of interest were settled and dismissed shortly thereafter, but similar class actions remain pending against many other franchisors.

In a ...

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Posted in Antitrust

A court in the Eastern District of Michigan recently denied a franchisor’s motion to dismiss a franchisee employee’s anti-poaching complaint, finding that the employee had pled sufficient facts to show that the anti-poaching provision of the franchise agreement could be an unlawful restraint of trade. Blanton v. Domino’s Pizza Franchising LLC, 2019 WL 2247731 (E.D. Mich. May 24, 2019). The plaintiff, Harley Blanton, was a former employee of a Florida Domino’s franchisee who alleged that he quit his job after his hours were cut. He filed suit against franchisor Domino’s ...

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A federal court in Minnesota recently denied a Wisconsin franchisee’s motion for a temporary restraining order to prevent the termination of its license agreement. Izabella HMC-MF, LLC v. Radisson Hotels Int’l, Inc., 2019 WL 2067141 (D. Minn. May 10, 2019). After learning that Izabella was conducting unapproved renovations at its franchised hotel, Radisson issued a default notice giving Izabella an opportunity to cure. In the default notice, Radisson warned Izabella that if it did not cure the renovation default within 60 days, the license agreement would automatically ...

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Meanwhile, the U.S. District Court for the Western District of Kentucky has partially granted a tax preparation franchisor’s motion for a preliminary injunction against a former franchisee operating a competing tax return preparation business. JTH Tax, Inc. v. Freedom Tax, Inc., 2019 WL 2062519 (W.D. Ky. May 9, 2019). JTH Tax, the franchisor of the Liberty Tax Service system, sued the franchisee for, among other things, trademark infringement under the Lanham Act and violation of the Defend Trade Secrets Act. JTH alleged that the former franchisee was using logos and slogans ...

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Posted in Employment

The U.S. Court of Appeals for the Ninth Circuit announced an onerous standard that could potentially make all franchisors liable to California franchisees for wage-and-hour claims in Vazquez v. Jan-Pro Franchising Int'l, Inc., 923 F.3d 575 (9th Cir. 2019). The case arose over a decade ago when unit franchisees claimed that Jan-Pro was their employer and had failed to comply with state wage-and-hour laws. Originally filed as a putative class action in Massachusetts federal court, the claims by California unit-franchisees were severed and transferred to California, while the ...

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Posted in Class Actions

After ten years of litigation, the U.S. District Court for the Eastern District of Pennsylvania granted a motion for preliminary class action settlement approval in a case against the franchisor of the Jani-King janitorial system alleging violations of Pennsylvania’s Wage Payment and Collection Law. Myers v. Jani-King of Philadelphia, Inc., 2019 WL 2077719 (E.D. Pa. May 10, 2019). Two franchisees had initiated the lawsuit on behalf of themselves and others similarly situated claiming that Jani-King misclassified them as independent contractors and improperly deducted ...

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Posted in Trademarks

The U.S. Supreme Court has resolved a circuit court split by holding that a bankrupt licensor’s rejection of a trademark license under section 365 of the Bankruptcy Code does not deprive the licensee of its rights to the licensed trademarks. Mission Prod. Holdings, Inc. v. Tempnology, LLC, 587 U.S. ___, 2019 WL 2166392 (May 20, 2019). The decision holds that the licensor’s rejection of the trademark license under bankruptcy law constitutes a breach of the license by the licensor and that the legal effects of that breach on the licensee’s rights to the trademarks are determined ...

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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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