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The Franchise Memorandum

Posts from May 2020 - Issue 253.
Posted in Arbitration

A federal court in Connecticut has ruled that Subway customers can pursue class action claims against the company for unwanted text messages in violation of the Telephone Consumer Protection Act (TCPA). Soliman v. Subway Franchisee Advertising Fund Trust Ltd., 2020 WL 161328 (D. Conn. Mar. 5, 2020). Named-plaintiff Marina Soliman, along with other Subway customers, alleges that, upon entering a Subway restaurant, a Subway employee informed her of a promotion whereby customers could sign up for text messages to receive discounts and other promotional information from Subway ...

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Lathrop GPM continues to provide clients with alerts, articles, and other resources to help clients navigate important legal information regarding the COVID-19 pandemic. Some of the following may be of particular interest to franchisors and distribution-based businesses:

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A federal court in North Carolina has granted a quick-service restaurant franchisor’s motion to dismiss allegations that it violated the Americans with Disabilities Act (ADA). Chapman v. CKE Rests. Holdings, Inc., 2020 WL 1230130 (E.D.N.C. March 12, 2020). Chapman, a quadriplegic, alleged that CKE violated the ADA by denying her full and equal access to one of its restaurants where “she experienced unnecessary difficulty and risk due to excessive slopes in a purportedly accessible parking area.” Chapman alleged that she desires to return to that restaurant in the future ...

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A federal court in Washington has granted a preliminary injunction against a terminated tax preparation services franchisee, preventing it from operating a competing business and soliciting the franchisor’s customers. JTH Tax LLC (d/b/a Liberty Tax Service) v. McHugh, 2020 WL 1689731 (W.D. Wash. Apr. 7, 2020). Plaintiffs Liberty Tax Service and SiempreTax+ operate thousands of tax preparation service centers nationally. Defendant Lorraine McHugh entered into a Liberty Tax Franchise Agreement in 2015, and ultimately operated the franchise through her business KVC. By ...

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Posted in Arbitration

In another putative class action in Connecticut, a federal court declined to dismiss an employee misclassification lawsuit against Coverall North America, Inc., a janitorial services franchisor, but agreed to stay the action and compel arbitration. Bille v. Coverall N. Am., Inc., 2020 WL 1185251 (D. Conn. Mar. 11, 2020). Plaintiffs Caribe Billie and Quincy Reeves, both Coverall franchisees, alleged that Coverall had misclassified them as independent contractors and withheld portions of their wages in violation of Connecticut law. Coverall sought to dismiss the case, in part ...

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The Fourth Circuit Court of Appeals has vacated a judgment dismissing claims that Mid-Atlantic Restaurant Corporation (owner of the Smithfield’s Chicken ‘N Bar-B-Q franchise system) interfered with the business relationship between owners of certain of its franchisees. Musselwhite. v. Mid-Atlantic Restaurant Corp., 2020 WL 1873330 (4th Cir. Apr. 15, 2020). In the underlying action, Musselwhite, a part-owner of several Smithfield’s Chicken ‘N Bar-B-Q franchisees, alleged that Mid-Atlantic wrongfully interfered with the business relationship between ...

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A federal court in Maryland recently granted a franchisor default judgment and awarded it a permanent injunction and attorneys’ fees under the Lanham Act, against a holdover franchisee that failed to respond to a lawsuit. ICENY USA, LLC v. M&M’s LLC, 2020 WL 1890511 (D. Md. Apr. 16, 2020). ICENY is the franchisor of Thai ice cream roll shops, and M&M was an ICENY franchisee in Yuma, Arizona. ICENY terminated the franchise agreement after M&M failed to pay various required fees. Following termination, M&M did not comply with its post-termination obligations, and ICENY filed suit in ...

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A federal court in Michigan recently dismissed a complaint filed by a distributor against its former manufacturer, rejecting the application of Michigan franchise laws and enforcing the choice of a Minnesota forum in the agreements between the parties. Lakeside Surfaces, Inc. v. Cambria Co., 2020 WL 1227047 (W.D. Mich. Mar. 13, 2020). Lakeside is a Michigan countertop distributor; Cambria is a Minnesota manufacturer of countertops. Cambria unilaterally terminated the relationship between the two over a disagreement concerning Lakeside’s offering of non-Cambria ...

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A federal court in Missouri has held that a franchisee’s fraud claim cannot be based upon the franchisor’s alleged prediction of future success at a franchise expo, but allowed other fraud claims to be re-pled while questioning the likelihood that the franchisee will successfully demonstrate reasonable reliance. Fabius v. Medinexo USA, LLC, 2020 WL 1666468 (E.D. Mo. April 3, 2020). Fabius, a franchisee of the Medinexo franchise system, alleged that Medinexo made several oral and written financial performance representations outside of the FDD, both at a franchise expo and ...

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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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