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The Franchise Memorandum

Posts from January 2020 - Issue 249.
Posted in Antitrust

A federal court in New Jersey has become the latest to deny a franchisor’s motion to dismiss a putative class action complaint based upon a no-poach provision in a franchise agreement. Robinson v. Jackson Hewitt, Inc., 2019 WL 5617512 (D.N.J. Oct. 31, 2019). Jackson Hewitt operates a tax preparation business with franchised and company-owned locations throughout the United States. Its largest franchisee, which owns approximately 20% of all Jackson Hewitt locations, is a co-defendant in the suit. The plaintiffs worked as seasonal tax preparers for franchised and company-owned ...

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Posted in Bankruptcy

A federal bankruptcy court in Alabama granted limited relief from the automatic stay to a franchisor that wanted to pursue injunctive relief pursuant to the franchise agreement. In re Mainous, 2019 WL 6245752 (Bankr. S.D. Ala. Nov. 21, 2019). U.S. Lawns, Inc., the franchisor of businesses offering commercial landscape services, and the Mainouses were parties to a franchise agreement that included noncompete provisions. The relationship between the parties deteriorated and the Mainouses assigned their rights and interests in the franchise to a third party. The Mainouses then ...

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In another significant development in the area of joint employer law, the Department of Labor (DOL) has released its final joint employer rule to revise and update its regulation interpreting joint employer status under the FLSA. The new rule provides a four-part test asking: whether or not the company can hire or fire the employee; whether it supervises the employee’s work schedule; whether it sets their pay; and if it maintains their employment records. This four-part test returns the standard to its traditional definition. The effective date of the rule is March 16, 2020, and ...

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A federal court in New Jersey held that the release contained in an assignment agreement did not violate the New Jersey Franchise Practices Act (NJFPA). Scism v. Golden Corral Corp., 2019 WL 6522738 (D.N.J. Dec. 4, 2019). The NJFPA prohibits a franchisor from requiring that a franchisee assent to a release that would relieve any person of liability imposed by the Act at the time the franchisee enters into a franchise arrangement. The Scisms entered into a franchise agreement dated May 24, 2007. The franchise agreement was later assigned to GC of Vineland, LLC, in which the Scisms are ...

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A federal court in Ohio denied G6 Hospitality and Wyndham’s motions to dismiss claims that they are vicariously liable for federal sex trafficking claims brought against their franchisees. H.H. v. G6 Hospitality, LLC, 2019 WL 6682152 (S.D. Ohio Dec. 6, 2019). H.H., the sex trafficking victim, alleged that she was trafficked for a period of five months at various Columbus area hotels within G6 and Wyndham’s franchise systems. H.H. claimed that the hotels were or should have been aware of the sex trafficking after seeing various items or witnessing certain events, and the hotels ...

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Posted in Employment

A federal court in Connecticut concluded that material disputes of fact precluded deciding whether a franchisor had misclassified its franchisees as independent contractors, but nevertheless dismissed the plaintiffs claim for unjust enrichment based on a Connecticut anti-kickback statute. Mujo v. Jani-King Int’l, Inc., 2019 WL 7037794 (D. Conn. Dec. 12, 2019). Mujo, on behalf of a class of over 100 Jani-King franchisees, alleged that Jani-King was unjustly enriched in violation of a Connecticut statute that prohibits employers from demanding any sum of money from any ...

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Posted in Employment

A federal court in New York granted 7-Eleven’s motion to dismiss a franchisee’s employee’s complaint, which alleged that 7-Eleven was his joint employer, for lack of sufficient factual allegations to support the claim. Acharya v. 7-Eleven, Inc., 2019 WL 6830203 (S.D.N.Y. Dec. 13, 2019). Acharya’s complaint alleged that he was unpaid for, among other things, over 2,000 hours of overtime work and that, as a result, 7-Eleven and the franchisee, as his joint employers, had violated the Fair Labor Standards Act (FLSA) and the New York Labor Law.

In granting 7-Eleven’s motion ...

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A federal court in Tennessee granted a franchisor’s request for a temporary restraining order, preventing its former franchisee from operating a competing business at its formerly franchised locations and from infringing the franchisor’s trade dress, trademarks, and intellectual property. I Love Juice Bar Franchising, LLC v. ILJB Charlotte Juice, LLC, 2019 WL 6050283 (M.D. Tenn. Nov. 15, 2019). ILJB was a franchisee of Juice Bar with two locations in Charlotte, North Carolina. Upon ILJB’s request for early termination, Juice Bar submitted a termination offer to ILJB ...

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Posted in Choice of Law

An urgent care franchisor can pursue claims against a franchisee who refused to use new trademarks after a federal court in Alabama voided a one-year period of limitations in the parties’ agreement. AFC Franchising, LLC v. Fabbro, 2019 WL 6683781 (N.D. Ala. Dec. 06, 2019). Laura Fabbro entered into a Doctor’s Express franchise agreement in 2009 to operate an urgent care center under the franchisor’s marks, but the contract obligated Fabbro to comply with the franchisor’s directions to modify or discontinue the use of certain trademarks. When AFC Franchising later acquired ...

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Posted in Employment

The National Labor Relations Board (NLRB) has vacated a decision by an administrative law judge (ALJ) denying the settlement agreements that had been proposed to resolve complaints against McDonald’s USA LLC, McDonald’s Restaurants of Illinois, Inc., and 29 McDonald’s franchisees alleging various unfair labor practices violations. McDonald’s USA LLC, 368 NLRB No. 134 (2019). The NLRB’s decision upheld the parties’ settlement agreements even though they do not impose joint employer liability on the franchisor as had been sought in the complaints.

The highly ...

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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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