The Franchise Memorandum
A federal court in Virginia denied a franchisor’s motion for preliminary injunction against a former franchisee violating the franchise agreement’s post-termination noncompete. JTH Tax, LLC v. Younan, 2023 WL 6304865 (E.D. Va. Sept. 27, 2023).
The Eighth Circuit Court of Appeals has affirmed the denial of a motion to stay pending arbitration because the claims of the franchisor, Breadeaux’s Pisa, did not fall within the mandatory stay provision of the Federal Arbitration Act (FAA). Breadeaux’s Pisa, LLC v. Beckman Bros. Ltd., 2023 WL 6801149 (8th Cir. Oct. 16, 2023).
A federal court in Florida rejected a franchisee’s motion to vacate an arbitration award entered against it despite its arguments it did not have notice of the arbitration hearing. Your CBD Stores Franchising, LLC v. Buckwalter, 2023 WL 6676671 (M.D. Fla. Oct. 12, 2023).
A federal court in Tennessee recently granted a franchisor’s motion to compel arbitration, including as to questions of arbitrability, in response to a 15 count complaint brought by 54 separate franchisees. Anthony v. Van Over, 2023 WL 6317685 (E.D. Tenn. Sept. 27, 2023).
A federal court in New Jersey recently declined to issue an order invalidating the class action waiver and arbitration provision used by franchisor The UPS Store, Inc. and certain TUPSS franchisees’ (collectively, TUPSS) and it would not bar TUPSS from soliciting such waivers from their customers going forward. Tripicchio v. UPS Store, Inc., 2023 WL 6307528 (D.N.J. Sept. 28, 2023).
As franchisors implement and expand their DEI initiatives, each brand may undertake slightly different paths, or may focus resources in different ways to increase diversity throughout their systems. Franchise Times recently published an article describing some of these approaches, as well as challenges facing franchisors.
The Fifth Circuit Court of Appeals recently affirmed the enforcement of a jury trial waiver against a franchisee. Pizza Hut L.L.C. v. Pandya, 79 F.4th 535 (5th Cir. Aug. 22, 2023).
The First Circuit Court of Appeals recently certified to the Massachusetts Supreme Court the question of whether franchisee plaintiffs in an ongoing case pass the threshold inquiry under the state’s three-prong employee classification test, which requires a finding that the putative employee is “performing any service.” Patel v. 7-Eleven, Inc., 2023 WL 5542778 (1st Cir. Aug. 29, 2023).
Refusing to rubber-stamp a proposed $5 million anti-poaching class action settlement, a federal court in Kentucky has directed the plaintiff to provide additional information to allow proper consideration of the factors specified in Fed. R. Civ. P. 23. In re Papa John’s Employee and Franchisee Employment Antitrust Litig., 2023 WL 5227294 (D. Ky. Sep. 15, 2023).
A federal court in Pennsylvania granted in part and denied in part a former franchisee’s motion to dismiss a franchisor’s allegation that she misappropriated trade secrets and breached the franchise agreement. JTH Tax, LLC v. Foster, 2023 WL 5938983 (W.D. Pa. Sept. 12, 2023).
In Munoz, v. Earthgrains Distribution, LLC, 2023 WL 5986129 (S.D. Cal. Sept. 13, 2023),
A federal court in Massachusetts has dismissed franchise claims brought against a manufacturer, concluding that the distributor had failed to identify a franchise fee that would qualify it for protection from non-renewal under state law. Cognex Corp. v. Air Hydro Power, LLC, 2023 WL 5833112 (D. Mass. Sept. 8, 2023).
Dallas Startup Week (DSW) takes place in September every year; this year’s event was hosted by University of North Texas on September 10-14.
In an important case of first impression that drew amicus participation from the Department of Justice, the Federal Trade Commission, and the International Franchise Association, the Seventh Circuit reversed a judgment in favor of McDonald’s and revived a potential employee class action which alleges that the anti-poaching provision formerly found in McDonald’s franchise agreements violates the Sherman Act.
The Tenth Circuit has ruled in favor of KFC in a dispute with a franchisee alleging a breach of the implied covenant of good faith and fair dealing. Kazi v. KFC US, LLC, 2023 WL 4983119 (10th Cir. Aug. 4, 2023).
An appellate court in Illinois upheld a trial court’s dismissal of claims that franchisor was vicariously liable for the alleged actions of its franchisees. Shavers v. The UPS Store, Inc., 2023 IL App (1st) 221407-U (Ill. App. Ct. Aug. 7, 2023).
A federal court in North Carolina recently dismissed a complaint brought by Bigelow Corporation against its franchisor Hound Town USA because the claims were time barred. Bigelow Corporation v. Hounds Town USA, LLC, 2023 WL 4939386 (W.D.N.C. Aug. 2, 2023).
A federal court in Michigan granted Little Caesar Pizza Enterprises, Inc.’s motion for summary judgment seeking to enforce its termination of the franchise agreements between it and franchisee S&S Pizza Enterprises, Inc. Little Caesar Enters., Inc. v. S&S Pizza Enters., Inc., 2023 WL 5489021 (E.D. Mich. Aug. 24, 2023).
A federal court in Utah denied a requested injunction in a dispute between competitors in the gourmet cookie market. Crumbl LLC v. Dirty Dough LLC, (D. Utah Aug. 11, 2023).
In this month’s Increasing Diversity in Franchising article, Iris Rosario, Senior Counsel of Franchise for Choice Hotels International, stands as an admirable example of one who never forgets her roots.
A Louisiana Federal court recently dismissed a complaint brought by Tesla against the Louisiana Automobile Dealers Association (LADA) and other associated dealerships and commissioners for various competition and constitutional claims stemming from Louisiana’s ban on direct sales of automobiles. Tesla, Inc. v. Louisiana Automobile Dealers Assoc., 2023 WL 4053438 (E.D. La. June 16, 2023).
A federal court in Tennessee determined that a binding contract existed between a sales representative and CWS Powder Coatings Company governing the percentage of commissions to be paid to the representative for sales to Premier, a CWS customer. The court also concluded, however, that there was no binding agreement requiring payment of commissions on sales to Carrier, a prospective customer at the time the alleged agreement was formed, who began purchasing from CWS nine years later. Reaves v. CWS Powder Coatings Co., No. 3:22-cv-0158 (M.D. Tenn. May 24, 2023).
The Fifth Circuit Court of Appeals affirmed a Texas federal court’s (i) dismissal of a distributor’s fraud claims against an automobile-product manufacturer and (ii) grant of summary judgment in favor of the manufacturer on the distributor’s breach of contract claim. Wesdem, LLC v. Illinois Tool Works, Inc., 70 F.4th 285 (5th Cir. 2023).
The Fifth Circuit Court of Appeals recently affirmed a federal district court’s ruling in a breach of contract action brought by Shenzen Synergy Digital, a China based manufacturer and exporter, against Mingtel, a Texas based importer. Shenzen Synergy Digital Co., Ltd. v. Mingtel, Inc., 2023 WL 4573552 (5th Cir. July 18, 2023).
The California Court of Appeals for the Second District, creating a split of authority among California’s appellate courts, held that Ford Motor Co. did not have the right to enforce an arbitration provision in a sales contract between its dealership and a downstream purchaser. Montemayor v. Ford Motor Co., 92 Cal. App. 5th 958 (2023).
As part of Lathrop GPM’s Increasing Diversity in Franchising initiative, we have explored and conducted webinars on various facets of increasing diversity in franchising, including access to capital, educational initiatives that focus on business in general and franchising specifically, franchise issues for prospective franchisees, outreach through diverse professional organizations, and franchisor DEI goals and programs. We now want to drill down and focus on individual franchisors and their brand-specific DEI initiatives. First up: Ben & Jerry’s.
A federal court in Kansas recently granted Defendant Sandvik Mining and Construction’s motion to quash a deposition subpoena of its in-house counsel. Roadbuilders Machinery and Supply Co., Inc. v. Sandvik Mining and Construction USA, LLC, 2023 WL 3790691 (D. Kan. June 2, 2023).
A federal court in Maine granted a franchisor’s motion to dismiss claims asserting that a franchisor was liable for its franchisee’s alleged age discrimination in employment. Goodwill v. Anywhere Real Est., 2023 WL 4034372 (D. Me. June 15, 2023).
A federal court in Tennessee recently compelled arbitration for parties in a franchise disclosure dispute. B&P Glass Mirror, LLC v. Clozetivity Franchising, LLC, 2023 WL 3484205 (M.D. Tenn. May 16, 2023).
Diverse perspectives enrich business environments through varied ideas and understanding of different clientele. Franchising is no exception. By engaging with diverse franchisees and franchisors, investing in franchises in diverse communities, and deploying organizational strategies to enhance diversity, equity, and inclusion, the franchising industry becomes more accessible, collaborative, and innovative.
A federal court in Tennessee granted franchisor Frost Shades’ motion to compel arbitration of franchisee Lunt’s fraudulent inducement of contract claims, but the court also granted in part franchisee Lunt’s request for a preliminary injunction preventing Frost Shades’ enforcement of noncompete restrictions under the franchise agreement while that arbitration was pending. Lunt v. Frost Shades Franchising, LLC, 2023 WL 3484202 (M.D. Tenn. May 16, 2023).
A federal court in Michigan recently denied a franchisor’s motion to dismiss claims alleging that it was liable as a joint employer for claims under Title VII of the Elliott-Larsen Civil Rights Act, Michigan’s state counterpart to Title VII. Acuff v. Dy N Fly, LLC, 2023 WL 3293278 (E.D. Mich. May 5, 2023).
A Minnesota bankruptcy court granted Fantastic Sams summary judgment and enjoined a former franchisee from violating the post-termination noncompete in its franchise agreements after the franchisee rejected the agreements in bankruptcy. EllDan Corp. v. Fantastic Sams Franchise Corp., 2023 WL 3394917 (Bankr. Minn. May 11, 2023).
A federal court in Florida recently dismissed a franchisee’s lawsuit sua sponte pursuant to the forum-selection clause in the parties’ franchise agreements, finding the clause valid, mandatory, and enforceable. Kava Culture Franchise Grp. Corp. v. Dar-Jkta Enters. LLC, 2023 WL 3568598 (M.D. Fla. May 18, 2023).
A federal court in Michigan granted a motion to dismiss claims that franchisor Bateel International, LLC had violated the Michigan Franchise Investment Law and the Texas Business Opportunity Act. Luxury Concepts, Inc. v. Bateel Int’l LLC, 2023 WL 3606649 (E.D. Mich. May 23, 2023).
A federal court in Ohio recently denied in part a franchisor’s motion for summary judgment related to a dispute over the renewal of two area representative agreements. KAM Dev., LLC v. Marco’s Franchising, LLC, 2023 WL 3251216 (N.D. Ohio May 4, 2023).
Reflecting a shifting national landscape on restrictive covenants, the Minnesota Legislature recently adopted legislation that prohibits franchisors from placing certain nonsolicitation and no-poach restrictions in franchise agreements.
Lathrop GPM’s Increasing Diversity in Franchising initiative was launched in October 2021 to help increase ownership and participation in franchising within underrepresented racial and ethnic groups.
Join Lathrop GPM attorneys Rachel L. O’Connor and Carlos L. White at 11:30 CT on Wednesday, June 21, for a discussion on the benefits, challenges, and strategies for developing and implementing ESG Standards into a franchise system.
A federal court in Tennessee recently granted a franchisor’s motion to dismiss claims alleging that a franchisor was liable for a workplace mass shooting by a franchisee. Fernald v. JFE Franchising, Inc., 2023 WL 2938312 (W.D. Tenn. April 13, 2023).
A federal bankruptcy court in Delaware has dismissed time-barred claims that a Chapter 7 Trustee alleged on behalf of a bankrupt franchisor, AVF Franchising, LLC, against several of its franchisees. In re Start Man Furniture, LLC., 2023 WL 2717662 (Bankr. D. Del. Mar. 30, 2023).
A federal court in Oklahoma granted franchisor Pizza Inn, Inc.’s motion for preliminary injunction preventing two former Pizza Inn franchisees – Odetallah and Allen’s Dynamic Food – from operating competing pizza restaurants in the same location as each of their former Pizza Inn franchises. Pizza Inn, Inc. v. Allen's Dynamic Food, Inc., 2023 WL 3015297 (W.D. Okla. Apr. 19, 2023).
A federal court in California denied a subfranchisor’s motion to transfer venue, holding that its Operator Agreement constituted a franchise agreement, thus making its forum-selection clause void under the California Franchise Relations Act (CFRA). Singh v. Wireless Vision, LLC, 2023 WL 2752584 (E.D. Cal. Mar. 31, 2023).
A federal court in New Jersey recently granted salon franchisor Fantastic Sams summary judgment against former franchisees that failed to make payments required under a previous settlement agreement. Fantastic Sams Franchise Corp. v. Weekes, 2023 WL 2696595 (D.N.J. Mar. 29, 2023).
On May 11, 2023, the United States Small Business Administration will eliminate the SBA Franchise Directory, a move that may impact evaluation of franchise loans by some lenders. The change comes from the SBA’s revision of “affiliation” and “control” standards in its lending rules for small business loans, including those administered under the 7(a) and 504 Loan Programs often utilized by franchisees. With these changes in the SBA rules, there is no longer any need for the SBA Franchise Directory.
In 2021, Lathrop GPM launched a speaker series and initiative designed to increase franchise ownership by underrepresented racial and ethnic groups – as both franchisees and franchisors. In this month’s content, we shine the spotlight on Carlos White, one of the leaders of our Diversity in Franchising efforts.
A federal court in New Jersey granted summary judgment to a car manufacturer, holding that a retailer coalition cannot state a claim on behalf of its members under the New Jersey Franchise Practices Act (NJFPA). N.J. Coal. of Auto. Retailers v. Mazda Motor of Am., 2023 WL 2263741 (D.N.J. Feb. 28, 2023).
A federal court in Tennessee denied a manufacturer’s motion to dismiss claims that it acted in bad faith and constructively terminated a dealership when it denied the dealer’s proposed relocation sites. Hyundai Subaru of Nashville v. Hyundai Motor Am., 2023 WL 2201015 (M.D. Tenn. Feb. 24, 2023).
A federal court in Tennessee denied a dealer’s motion to dismiss a supplier’s declaratory judgment action because it was unclear whether a CEO’s departure was a “substantial” change in ownership that would establish good cause for nonrenewal. Wirtgen Am. v. Hayden-Murphy Equip., 2023 WL 123499 (M.D. Tenn. Jan. 6, 2023).
A federal court in New York recently upheld an arbitration award, rejecting an argument that the arbitrator had improperly applied Puerto Rico law. Conmed Corp. v. First Choice Prosthetic & Orthopedic Serv., 2023 WL 157957 (N.D.N.Y. Jan. 11, 2023).
A federal court in Ohio denied a distributor’s motion for a preliminary injunction, holding that it failed to demonstrate a likelihood of success on the merits of its claims against a beer importer who chose a different distributor following the bankruptcy of a previous importer. Cavalier Distrib. Co. v. Lime Ventures, 2023 WL 2384440 (S.D. Ohio Mar. 7, 2023).
In 2021, Lathrop GPM launched a speaker series and initiative designed to increase franchise ownership by underrepresented racial and ethnic groups – as both franchisees and franchisors. Our professionals are passionate about the industry and believe encouraging and educating franchisors and potential franchisees from diverse communities will help them capitalize on business opportunities they may not otherwise explore.
A federal court in Arizona recently denied preliminary relief enforcing franchisees’ noncompete provisions against nonsignatories to the franchise agreement because the franchisor failed to present sufficient evidence that the franchisees were acting in concert with the nonsignatory companies. JTH Tax v. Anderson, 2023 WL 2072496 (D. Ariz. Feb. 17, 2023).
A federal court in Virginia recently enforced an alleged “scrivener’s error” that extended the term of a development agreement for one developer, while enforcing notice requirements to uphold a nonrenewal for another developer. Road King Dev. v. JTH Tax, 2023 WL 2090280 (E.D. Va. Feb. 17, 2023).
A federal court in Ohio recently declined to dismiss a franchisee’s claims of breach of contract, rejecting the franchisor’s argument that the claims were barred by general releases included in the parties’ agreement. SC Am. v. Marco’s Franchising, 2023 WL 2229654 (N.D. Ohio Feb. 23, 2023).
A state appellate court in New York recently held a franchisor was not entitled to unpaid royalty fees because of its own breach of a franchise agreement reinstated by preliminary injunction. Integrity Real Estate Consultants v. Re/Max of New York, 2023 WL 2000464 (N.Y. App. Div. Feb. 15, 2023).
In a case involving an unorthodox procedural posture, a federal court in Oregon determined that nonsignatory franchisee owners are not subject to a franchise agreement arbitration provision. Goergen v. Black Rock Coffee B., 2023 WL 1777980 (D. Or. Feb. 6, 2023).
A federal court in Maryland granted a foreign hotel franchisee’s motion to dismiss for lack of personal jurisdiction but denied a forum non conveniens motion in a personal injury case naming both franchisor and franchisee as defendants. Sant v. Marriott Int’l, 2023 WL 2213926 (D. Md. Feb. 24, 2023).
In 2021, Lathrop GPM launched a speaker series and initiative designed to increase ownership in franchising by underrepresented racial and ethnic groups – as both franchisees and franchisors.
A federal court in Nevada recently transferred a franchisor’s trademark infringement lawsuit to Illinois, the location of the franchise, declining to rule on the franchisor’s motion for preliminary injunction. Hofbräuhaus of Am., LLC v. Oak Tree Mgmt. Servs., 2023 WL 24179 (D. Nev. Jan. 3, 2023).
A federal court in New York has denied a franchisor’s motion for preliminary injunction aimed at preventing a former franchisee from operating a competing business in the same location as its former franchised business because the franchisor did not establish that it would suffer irreparable harm absent an injunction. Doctor's Assocs. LLC v. Khononov, 2023 WL 184389 (E.D.N.Y. Jan. 13, 2023).
A federal court in New Jersey has denied a motion to compel arbitration in a dispute over alleged breach of a franchise agreement. Passion for Restaurants, Inc. v. Villa Pizza, LLC, 2022 WL 18024209 (D.N.J. Dec. 30, 2022).
A federal court in Minnesota has dismissed a claim under the Minnesota Franchise Act (MFA), holding that a franchisor’s consent to the assignment of a franchise does not constitute a sale or an offer to sell under the Act. LG2, LLC, v. Am. Dairy Queen Corp., 2023 WL 171792 (D. Minn. Jan. 12, 2023).
A federal court in New Jersey has denied a franchisor’s motion for summary judgment on its claim for breach of contract by its franchisee, finding that the franchisee raised issues of material fact regarding whether it had been fraudulently induced to sign its franchise agreement based on an oral promise. Travelodge Hotels, Inc. v. Durga, LLC, 2023 WL 314313 (D.N.J. Jan. 19, 2023).
A federal court in Massachusetts has denied a franchisor’s summary judgment motion which sought attorneys’ fees related its defense of previously dismissed claims. Patel v. 7-Eleven, 2023 WL 35357 (D. Mass Jan. 4, 2023).
The Ninth Circuit Court of Appeals recently affirmed a decision that a group of franchisees are not employees of their franchisor, even though the trial court failed to apply the correct test. Haitayan v. 7-Eleven, Inc., 2022 WL17547805 (9th Cir. Dec. 9, 2022).
An appellate court in Louisiana recently affirmed summary judgment in favor of a franchisor, dismissing negligence and premises liability claims asserted by a customer was injured on unauthorized exercise equipment. Flynn v. Anytime Fitness, 2022 WL 17982922 (La. App. Dec. 29, 2022).
A federal court in Connecticut denied a franchisee’s motion for a temporary restraining order permitting it to operate until the court could hear a preliminary injunction motion. A.B. Corp. v. Dunkin' Donuts Franchising, LLC, 2022 WL 17337756 (D. Conn. Nov. 30, 2022).
A federal court in Missouri recently ruled that antitrust claims against four real estate broker franchisors and a trade association may proceed to trial based on evidence that the association’s code of ethics may inflate broker commissions. Burnett v. Nat’l Ass’n Of Realtors, 2022 WL 17741708 (W.D. Mo. Dec. 16, 2022).
A federal court in Florida recently granted a franchisor’s motion to dismiss a franchisee’s claim for breach of the implied covenant of good faith and fair dealing, but allowed a claim for breach of contract to proceed. Pinnacle Foods of Cal. v. Popeyes La. Kitchen, 2022 WL 17736190 (S.D. Fla. Dec. 16, 2022).
Towards the end of December, without conducting any outreach to industry groups or consumer organizations, the Federal Trade Commission issued a new guidance document, Health Products Compliance Guidance.
This year new and amended privacy laws are going into effect in several states, including California, Virginia, Connecticut, Colorado, and Utah. Read more about the laws in Lathrop GPM’s client alert.
A federal court in Illinois granted a manufacturer’s motion to dismiss in a dispute over the nonrenewal of a distribution agreement. Fluid Power Engr. Co. v. Cognex Corp., 2022 WL 16856395 (N.D. Ill. Nov. 10, 2022).
A Delaware trial court recently affirmed an administrative decision denying Tesla a dealer license because the Motor Vehicle Franchising Practices Act prohibits manufacturers from serving as dealers. Tesla v. Del. Div. of Motor Vehicles, 2022 WL 4483222 (Del. Super. Ct. Sept. 23, 2022).
A federal court in Illinois recently enforced a provision designating Illinois law for the interpretation of a distributor agreement between an Illinois manufacturer and a distributor in the Dominican Republic. Wahl Clipper Corp. v. Plaza Lama, 2022 WL 16744282 (N.D. Ill. Nov. 7, 2022).
A federal court in Michigan granted partial summary judgment to a steel supplier defending claims for breach of an oral contract and violation of Michigan’s Sales Representatives Commission Act. L.V. Nagle & Assocs. v. Tubular Steel, 2022 WL 3568574 (E.D. Mich. Aug. 18, 2022).
A federal court in New Jersey denied a motion for preliminary injunction because of the franchisor’s delay in seeking relief. H-1 Auto Care, LLC v. Lasher, 2022 WL 13003468 (D.N.J. Oct. 21, 2022).
A federal court in Massachusetts granted a franchisor’s motion for summary judgment, determining that the franchisor did not employ its franchisees because they did not perform services for the franchisor. Patel v. 7-Eleven, 2022 WL 4540981 (D. Mass. Sept. 28, 2022).
A federal court in New Jersey refused a motion for default judgment where a franchisor plaintiff and the franchisee defendant were both Canadian citizens. Wyndham Hotel Group Canada, v. Ostrander, 2022 WL 16552817 (D.N.J. Oct. 31, 2022).
A federal court in Missouri recently granted a franchisor’s motion to dismiss and enforced the franchise agreement’s forum selection provision. Fogle Enters. v. CiCi Enters., 2022 WL 5246446 (W.D. Mo. Oct. 6, 2022).
A federal court in New York recently denied a franchisor’s motion for summary judgment on claims related to its termination of a lease and dealer agreement. BP Prods. N. Am. Inv. v. Blue Hills Fuels, 2022 WL 16540804 (S.D.N.Y. Oct. 28, 2022).
Last week, the Governor of California signed AB 676, which includes several significant amendments to the California Franchise Relations Act and Franchise Investment Law.
Back in January 2022, the Franchise Memorandum reported on the North American Securities Administrators Association’s proposal to eliminate the use of acknowledgments and questionnaires that franchisors usually incorporate into their franchise sales closing process.
A federal court in Virginia held void a franchise agreement’s forum selection provision and granted a franchisee’s motion to transfer the case to California. JTH Tax, LLC v. Leggat, 2022 WL 3970197 (E.D. Va. Aug. 31, 2022).
A federal court in Ohio recently enjoyed a former franchisee from violating the post-term obligations of its franchise agreement, including the post-term covenant not to compete. H.H Fran. Sys., Inc. v. CareSmart Sols., Inc., 2022 WL 4274278 (S.D. Ohio Sept. 15, 2022).
A federal court in Nevada recently denied a franchisee’s motion for preliminary relief in a dispute over renewal of a franchise. Terrier, LLC v. HCAFranchise Corp., 2022 WL 4280251 (D. Nev. Sept. 15, 2022).
A federal court in Texas awarded a defendants’ profits, the franchisor’s lost royalty fees, treble damages, and attorneys’ fees and costs following summary judgment. Choice Hotels Int’l, Inc. v. Gosla Fam. Tr., 2022 WL 4295362 (W.D. Tex. Sept. 16, 2022).
A federal court in Ohio has awarded a franchisor the attorneys’ fees incurred in dismissing its former franchisees’ fraud-based claims, even though breach of contract claims remained to be litigated. CajunLand Pizza, LLC v. Marco’s Franchising, LLC, 2022 WL 3960574 (N.D. Ohio Aug. 31, 2022).
The Eleventh Circuit Court of Appeals reversed a decision dismissing an anti-poaching class action against Burger King, holding that the franchisor and its franchisees are independent actors capable of concerted action in violation of Section 1 of the Sherman Act. Arrington v. Burger King Worldwide, Inc., --- F.4th ----, 2022 WL 3931471 (11th Cir. Aug. 31, 2022).
The Eleventh Circuit Court of Appeals recently reversed a lower court’s dismissal for lack of jurisdiction, upholding a floating forum selection clause in a franchise agreement. AFC Franchising, LLC v. Purugganan, 43 F.4th 1285 (11th Cir. 2022).
A federal court in Illinois granted a motion to dismiss a Biometric Information Privacy Act (BIPA) claim against a franchisor brought by a franchisee employee. Stauffer v. Innovative Heights Fairview Heights, LLC, 2022 WL 3139507 (S.D. Ill. Aug. 5, 2022).
A federal court in Wisconsin recently held that a franchisor’s contractual right to approve or deny the transfer of a franchise includes the right to condition approval on the transferee’s signing the current form of franchise agreement. Am. Dairy Queen v. Wineinger, 2022 WL 3027004 (W.D. Wis. Aug. 1, 2022).
A federal bankruptcy court in Texas held that a former franchisor can seek continued enforcement of its nondisclosure and nondisparagement agreements with a debtor and former franchisee, even following the franchisee’s bankruptcy. In re Lager, 2022 WL 3330421 (Bankr. N.D. Tex. Aug. 11, 2022).
A federal court in Florida overruled a former franchisee’s objections to a magistrate judge’s report and recommendation, granting in full a franchisor’s request for preliminary relief enforcing the covenant not to compete contained in the franchise agreements. JTH Tax, LLC v. Gilbert, 2022 WL 3098407 (M.D. Fla. Aug. 4, 2022).
A federal court in Oklahoma preliminarily enjoined a former franchisee from using the franchisor’s marks and from violating its post-term noncompete following termination. Sonic Indus. LLC v. Olympia Cascade Drive Ins LLC, 2022 WL 3654748 (W.D. Okla. Aug. 24, 2022).
A federal court in Pennsylvania recently granted summary judgment to McDonald’s on a joint employer claim brought by a former franchisee employee. Bosley v. Rawden Joint Ventures Corp., 2022 WL 3701171 (E.D. Pa. Aug. 26, 2022).
The Texas Supreme Court, answering a certified question from the Fifth Circuit Court of Appeals, held that the application of a state dealer law to an agreement entered into before the law’s passage did not violate the Texas Constitution. Fire Protection Serv., Inc. v. Survitec Survival Prods., Inc., 2022 WL 1815046 (Tex. June 3, 2022).
The Seventh Circuit Court of Appeals recently affirmed the dismissal of a retailer’s complaint that a manufacturer violated the Wisconsin Fair Dealership Law by terminating it as an authorized retailer without cause or sufficient notice. Watch Co., Inc. v. Citizen Watch Co. of Am., Inc., 2022 WL 1535262 (7th Cir. May 16, 2022).
A federal court in Illinois denied a motion to dismiss a beverage distributor’s claims for alleged violations of the Illinois Franchise Disclosure Act. Rhine Enters. LLC v. Refresco Beverage US, Inc., 2022 WL 2439966 (S.D. Ill. July 5, 2022).
Subject to court approval, franchisors Jiffy Lube and Papa John’s have agreed to settle separate putative civil class actions alleging that anti-poaching provisions previously included in their franchise agreements violated antitrust law. In re: Papa John’s Employee and Franchisee Employee Antitrust Litig., No 3:18-cv-00825-BB-RSE (W.D. Ken. July 27, 2022); Fuentes v. Jiffy Lube Int’l, Inc., No. 2:18-cv-05174-AB (E.D. Pa. July 22, 2022).
The Eleventh Circuit Court of Appeals recently affirmed an award of fees incurred in seeking confirmation of an arbitral preliminary injunction. Vital Pharm. v. Pepsico, Inc., 2022 WL 2066406 (11th Cir. Jun. 8, 2022).
A federal court in Maryland recently entered an order requiring a former franchisee to comply with the post-term covenant against competition and awarding liquidated damages to the franchisor following the termination of the franchise agreement. The Cleaning Authority v. Hunsberger Enters., 2022 WL 2344169 (D. Md. June 29, 2022).
A federal court in New Jersey recently granted a preliminary injunction against a former franchisee, as well as associates that were nonsignatories to the franchise agreement. HouseMaster SPV LLC v. Burke, 2022 WL 2373874 (D.N.J. June 30, 2022).
A federal court in New York recently granted a motion to exclude one expert report as untimely filed, but denied a motion to exclude another equally untimely report. Rekor Sys., Inc. v. Loughlin, 2022 WL 2063857 (S.D.N.Y. June 8, 2022).
In an unpublished opinion, a Utah appellate court affirmed the enforcement of a settlement agreement related to a dispute over a terminated franchise agreement. Park Prop. Mgmt. LLC v. G6 Hosp. Franchising LLC, 2022 WL 2165335 (Utah Ct. App. June 16, 2022).
A federal court in New York denied in part a motion to dismiss a franchisee’s fraud and negligent representation claims. Gould v. ILKB, LLC, 2022 WL 2079652 (E.D.N.Y. June 9, 2022).
The Tenth Circuit Court of Appeals recently upheld a preliminary injunction awarded to fitness chain franchisor Core Progression, enforcing a post-termination noncompete against a former franchisee in North Carolina. Core Progression Franchise LLC v. O’Hare, 2022 WL 1741836 (10th Cir. May 31, 2022).
A federal court in New York denied a franchisor’s preliminary injunction motion where it did not establish a likelihood of success on the merits or irreparable harm. JTH Tax LLC v. Agnant, 2022 WL 1556656 (E.D.N.Y. May 17, 2022).
A federal court in New Jersey recently held that a contractual disclaimer of reliance did not bar the franchisee’s claim for fraudulent inducement. TSMA Franchise Sys., Ind., v. TS of Kings Highway Inc., 2022 WL 1602137 (D.N.J. May 20, 2022).
A federal court in Oklahoma denied a motion to dismiss a franchisee’s fraud counterclaims. Pizza Inn, Inc. v. Odetallah, 2022 WL 1671122 (W.D. Okla. May 25, 2022).
A federal court in New Jersey recently entered a $357,917.22 default judgment in favor of a franchisor. Americinn Int'l, LLC v. Mataj12 Corp., 2022 WL 1773779 (D.N.J. June 1, 2022).
Over the last three months, McDonald’s, Burger King, and Cava Grill have been subject to a wave of consumer-product class actions involving a group of chemicals known as per- and polyfluoroalkyl substances or “PFAS.” Plaintiffs in the lawsuits Hussain v. Burger King (N.D. Cal. Apr. 11, 2022); McDowell v. McDonald’s (N.D. Ill. Mar. 31, 2022); Clark v. McDonald’s (S.D. Ill. Mar. 28, 2022); and Hamman v. Cava Group (S.D. Cal. Apr. 27, 2022), bring similar causes of action and seek similar remedies.
After denying a motion to dismiss, a federal court in New Jersey has now refused to grant summary judgment to a franchisor on racial discrimination and other employment-related claims asserted by its franchisee’s employee. Ward v. Cottman Transmission Sys., LLC, 2022 WL 909637 (D.N.J. Mar. 29, 2022).
A federal court in Illinois recently dismissed a franchisee employee’s Title VII hostile work environment and related Illinois state-law claims against the franchisor. Budzyn v. KFC Corp., 2022 WL 952746 (N.D. Ill., Mar. 30, 2022).
A federal court in Illinois denied Subway’s motion to dismiss a claim that it violated the Illinois Biometric Information Privacy Act (BIPA) by failing to obtain a franchisee’s employee’s consent for the collection and possession of the employee’s fingerprints. Ronquillo v. Doctor’s Assocs., LLC, 2022 WL 1016600 (N.D. Ill. Apr. 4, 2022).
A state court in Connecticut recently granted summary judgment to Days Inns Worldwide, Inc. in a slip and fall case. Lacertosa v. Days Inns Worldwide, Inc., 2022 WL 1051147 (Sup. Ct. Conn. Mar. 30, 2022).
A federal court in New York recently granted Yum! Brands’ motion to dismiss ADA and New York State Human Rights Law claims brought against it by a customer of a Kentucky Fried Chicken franchise. Zuchengno v. FQSR, LLC, 2022 WL 1214406 (W.D.N.Y. Apr. 25, 2022).
A federal court in Florida looked to the explicit terms of the agreements when a franchisee alleged that a franchisor’s failure to provide ongoing support and assistance was in breach of contract. Show Me Hospitality, LLC v. Tim Hortons USA, Inc., 2022 WL 1182896 (S.D. Fla. Apr. 21, 2022).
A Federal Court in Tennessee recently denied a franchisor’s motion for preliminary injunction and dissolved a temporary restraining order that had previously been put in place, because the franchisor could not demonstrate a likelihood of success on the merits of its claims, did not establish irreparable harm, and the customers of the defendant would be substantially harmed if the preliminary injunction were ordered. Freedom Franchise Sys., LLC v. CHOTO Boat Club LLC, 2022 WL 1206569 (E.D. Tenn. Apr. 21, 2022).
The Federal Circuit Court of Appeals recently reversed a district court’s ruling that dealership agreements were sufficient to establish jurisdiction over car manufacturers in a patent dispute. In re Volkswagen Grp. of Am., Inc., --- F.4th ---, 2022 WL 697526 (Fed. Cir. Mar. 9, 2022).
A federal court in Minnesota recently granted summary judgment to a manufacturer on all claims brought against it by its distributor, holding that optional equipment purchases cannot constitute a franchise fee under the Minnesota Franchise Act. Louis DeGidio, Inc. v. Indus. Combustion, Inc., 2021 WL 6127865 (D. Minn. Dec. 28, 2021).
A federal court in Missouri recently denied a medical device manufacturer’s motion for summary judgment on its distributor’s counterclaims for breach of contract and declaratory relief, finding factual disputes remained as to nearly every significant issue. MWG Enters., LLC v. ETS Wound Care, LLC, 2022 WL 503727 (E.D. Mo. Feb. 18, 2022).
A federal court in Georgia denied a manufacturer’s motion for summary judgment related to its withholding of consent to a proposed transfer of a car dealer location. Savannah Motorcars, LLC v. Volkswagen Grp. Of Am., Inc., 2022 WL 866342 (S.D. Ga. Mar. 22, 2022).
A federal court in Mississippi recently denied motions to dismiss filed by various wholesalers of Pepsi and Dr. Pepper products, challenging tortious interference and unfair competition claims brought against them by Brown Bottling Group, a bottler, seller, and distributor of Pepsi and Dr. Pepper products. Brown Bottling Group, Inc. v. Imperial Trading Co., LLC, 2022 WL 667780 (S.D. Miss. March 4, 2022).
A federal court in Missouri recently granted summary judgment to the franchisor of the Hardee’s restaurant system, its parent company, and an affiliate on claims that they were vicariously liable for the fatal electrocution of a child on the playground of a franchised restaurant in Amman, Jordan. Hersh v. CKE Rest. Holding’s Inc., 2022 WL 407124 (E.D. Mo. Feb. 10, 2022).
A federal court in New York recently denied judgment on the pleadings for two franchisors in a wage and hour putative class action involving franchisee employees. McArdle-Bracelin v. Congress Hotel, LLC, 2022 WL 486805 (N.D.N.Y. Feb. 17, 2022).
A federal district court in New York granted franchisor Just Salad’s motion for summary judgment on all claims against it and against various franchisees who never employed the plaintiffs. Tecocoatzi-Ortiz, v. Just Salad, LLC, 2022 WL 596831 (S.D.N.Y. Feb. 25, 2022).
A Pennsylvania appellate court affirmed a grant of summary judgment in favor of franchisor DrPhoneFix USA, LLC due to the franchisee’s breach of a franchise agreement and sublease. DrPhoneFix USA, LLC v. Mitchell Enterpriser, LLC, 2022 WL 278840 (Pa. Super Ct. Jan 31, 2022).
A federal court in New Jersey recently denied a hotel franchisor’s motion for summary judgment that sought damages due to a franchisee’s unapproved transfer of the hotel. Travelodge Hotels, Inc. v. Huber Hotels, 2022 WL 44634 (D.N.J. Jan. 5, 2022).
An appellate court in Texas recently affirmed an award of damages to a franchisor on its claims to recover unpaid amounts under a franchise agreement and sublease. Beach Street Foods, Inc. v. Grandy’s, LLC, 2022 WL 187988 (Tex. Ct. App. Jan. 20, 2022).
A federal court in New Jersey refused to dismiss a counterclaim filed in violation of a contractual forum selection provision because, even though the provision was mandatory and enforceable, the plaintiff’s filing of the initial complaint waived the right to enforce it. The Indian Express Private Ltd. v. Hali, 2022 WL 154354 (D.N.J. Jan. 18, 2022).
A federal court in Tennessee denied a motion to dismiss a franchisee’s allegations of fraud in Item 19 of an FDD. Sugarlips Bakery, LLC v. A&G Franchising, LLC, 2022 WL 210135 (M.D. Tenn. Jan. 24, 2022).
A federal court in California recently denied a motion for a temporary restraining order against a franchisee of a pizza restaurant, concluding that there was not evidence that the franchisor would be irreparably harmed by a franchisee’s refusal to transfer its store back to the franchisor. Mountain Mike’s Pizza, LLC v. SV Adventures, Inc., 2021 WL 6136178 (E.D. Cal. Dec. 29, 2021).
An appellate court in Tennessee affirmed denial of a “Motion to Correct Misnomer,” which resulted in dismissal of a premises liability action for injuries allegedly sustained in a fall at a Long John Silver’s restaurant. Bodine v. Long John Silver’s LLC, 2022 WL 128473 (Tenn. Ct. App. Jan. 14, 2022).
A federal court in Ohio recently transferred to Georgia a class action alleging that a franchisor violated federal antitrust laws and breached license agreements by requiring its franchisees to use certain vendors and suppliers. Synergy Hotels, LLC v. Holiday Hosp. Franchising, LLC, 2021 WL 5979297 (S.D. Ohio Dec. 17, 2021).
A federal court in California enjoined the brother of a former franchisee from continuing to use marks similar to the franchisor’s—even though the franchisor’s application to register the mark was denied, and even though the restaurant was in Miami while the franchisor’s system otherwise consists of a single forthcoming restaurant in California. Shawarma Stackz LLC v. Jawad, 2021 WL 5827066 (S.D. Cal. Dec. 8, 2021).
A federal court in South Carolina granted franchisor Petland, Inc.’s motion to dismiss based on the court’s lack of personal jurisdiction. Madden v. Petland Summerville, 2021 WL 5770294 (D.S.C. Dec. 6, 2021).
A federal court in Colorado recently denied franchisor KFC’s motions to set aside a jury award for damages resulting from KFC’s breach of its duty of good faith and fair dealing. Kazi v. KFC US, LLC, 2021 WL 6081832 (D. Colo. Dec. 22, 2021).
A federal court in Georgia refused to dismiss a franchisee’s counterclaim alleging a breach of a franchise termination agreement between the parties. JTH Tax LLC v. Robertson, 2021 WL 5449215 (N.D. Ga. Nov. 22, 2021).
A federal district court in Maine recently relied on the express terms of the franchise agreement between the parties and awarded the franchisor the attorneys’ fees and costs it incurred enforcing and collecting on an arbitration award and defending the franchisee’s appeal of the judgment. Toddle Inn Franchising, LLC v. KPJ Assocs. LLC, 2021 WL 5828029 (D. Me. Dec. 8, 2021).
Without previous notice that it was even under consideration, on December 6, 2021, the NASAA Franchise Project Group requested comments by January 5, 2022, on a comprehensive proposal to eliminate the use of the acknowledgments and questionnaires (“A&Qs”) franchisors usually incorporate into their franchise sales closing processes.
In a dispute between Audi and two dealers, the Third Circuit Court of Appeals affirmed the district court’s conclusion that one dealer’s obligation in a consent decree to “forever quit” its interest in purchasing an Audi dealership survived termination of the litigation and the dissolution of a preliminary injunction and was enforceable. Audi of Am., Inc. v. Bronsberg & Hughes Pontiac, Inc., No. 20-2940, 2021 WL 5320848 (3d Cir. Nov. 16, 2021) (designated as non-precedential).
The Sixth Circuit Court of Appeals recently affirmed judgment on the pleadings in a contract dispute between Whirlpool Corporation and its former licensing agent. Whirlpool Corp. v. Equity Management, Inc., No. 20-2062, 2021 WL 5133177 (6th Cir. Nov. 4, 2021).
A federal court in Illinois recently dismissed a distributor’s claim that a competitor committed tortious interference by encroaching on the distributor’s exclusive distribution territory because the distributor failed to demonstrate—through draft agreements and other communications with the manufacturer—valid exclusive distribution rights. Midland Distrib., Inc. v. Zest US Wholesale, Inc., 2021 WL 4745265 (N.D. Ill. Oct. 12, 2021).
A federal court in New York granted a franchisor summary judgment, invalidating its purported supply agreement with a food manufacturer and wholesaler. Bonchon v. LKRG Provisions & Holdings, LLC d/b/a Frontier Food Group, 2021 WL 5042858 (S.D.N.Y. Oct. 29, 2021).
A federal court in Michigan stuck to the explicit contractual requirements in deciding whether purchase order agreements were formed between a boat manufacturer and its dealer. S2 Yachts, Inc. v. ERH Marine Corp., No. 1:18-CV-389 (W.D. Mich. Nov. 16, 2021).
A federal court in California recently granted summary judgment against a distributor that alleged that her agreement with Ralph Lauren permitted her to resell Ralph Lauren furniture in perpetuity. Card v. Ralph Lauren Corp., 2021 WL 4427433 (N.D. Cal. Sept. 27, 2021).
The Ninth Circuit Court of Appeals has reversed the approval of a $10 million voucher settlement and a $2.6 million attorneys’ fee award in a class action over increased membership fees charged by Massage Envy franchises. McKinney-Drobnis v. Oreshack, --- F.4th ---, 2021 WL 4890277 (9th Cir. Oct. 20, 2021).
The Sixth Circuit Court of Appeals ruled that a forum selection clause in a franchise agreement was unenforceable. Lakeside Surfaces, Inc. v. Cambria Co., LLC, --- F.4th ---, 2021 WL 4807182 (6th Cir. Apr. 20, 2021).
A federal court in Massachusetts dismissed a franchisee’s declaratory judgment, consumer protection, and fraud claims against a franchisor, two of its employees, and its outside counsel and enforced the arbitration clause in the parties’ franchise agreement. Restuccia v. H&R Block Tax Services LLC, et al. 2021 WL 4658734 (D. Mass. Oct. 7, 2021), Restuccia converted his accounting firm into an H&R Block franchise through a series of agreements he entered into in 2015.
A federal court in New Jersey denied a franchisee defendant’s motion for judgment on the pleadings on franchisor Golden Corral’s breach of contract claims for lost future royalties and marketing fees of $1,168,368. Golden Corral Franchising Systems, Inc. v. Scism, 2021 WL 4490233 (D.N.J. October 1, 2021).
A federal court in California denied a gasoline station and convenience store franchisee’s motion for summary judgment on its claim that there was an unlawful material modification to its franchise agreement under the California Franchise Investment Law (CFIL). BP Prods. N. Am., Inc. v. Grand Petroleum, Inc., 2021 WL 4804275 (N.D. Ca. Oct. 14, 2021).
A federal court in Illinois granted summary judgment to McDonald’s on an ADA claim, finding the franchisor did not “operate” the franchised restaurants. Magee v. McDonald’s USA, LLC, 2021 WL 4552411 (N.D. Ill. Oct. 5, 2021).
A federal Court in Nebraska has recently denied a licensor’s request to enjoin a terminated licensee, concluding that there was no likelihood of irreparable harm where the licensor delayed in seeking injunctive relief. Stone Strong, LLC v. Stone Strong of Texas, LLC, 2021 WL 4710449 (D. Neb. Oct. 28, 2021).
The Global Franchise Regulation Update (GFRU) is a well-known Lathrop GPM Franchise & Distribution publication that is updated and re-published around 3 times annually, most recently on September 30, 2021.
A federal court in California has recently ruled that a group of former 7-Eleven franchisees were not employees of 7-Eleven. Haitayan v. 7-Eleven, Inc., 2021 WL 4078727 (C.D. Cal. Sept. 8, 2021).
A federal court in Georgia denied a franchisee’s motion to dismiss a franchisor’s claim for liquidated damages. Holiday Hosp. Franchising, LLC v. N. Riverfront Marina & Hotel, LLLP, 2021 WL 3798561 (N.D. Ga. Aug. 26, 2021).
A federal court in Illinois denied a franchise developer’s motion for partial summary judgment seeking to dismiss a franchisor’s allegations that he misappropriated trade secrets. JTH Tax LLC v. Grabowski, 2021 WL 3857794 (N.D. Ill. Aug. 30, 2021).
On October 28, 2021, Lathrop GPM will launch its Increasing Diversity in Franchising virtual educational speaker series with a presentation by Dr. Marcia Chatelain, Professor, History and African American Studies, Georgetown, and Pulitzer Prize-winning author of Franchise: The Golden Arches in Black America. Dr. Chatelain will discuss “Diversity in Franchising – Where Are We & How Can We Improve?” Click here to learn more and to register for this important discussion.
A federal court in Indiana recently granted a motion by Steak N Shake to temporarily restrain a former franchisee from operating a competing business.
After a two-day bench trial, a federal court in New Jersey found franchisees breached real estate franchise agreements and awarded the franchisor over $7 million in damages. Coldwell Banker Real Estate, LLC. v. Bellmarc Group LLC, 2021 WL 4129492 (D.N.J. September 9, 2021).
A divided panel of the Second Circuit Court of Appeals has concluded that claims of improper wage deductions and unjust enrichment against a franchisor were properly dismissed because the plaintiffs agreed to deductions in exchange for valuable franchise rights.
A California appellate court affirmed a trial court’s ruling that a third party’s offer to purchase a franchise was not a valid, bona fide offer under the terms of a franchise agreement because the purchase price was contingent on the franchise’s future revenues.
In response to the uncertainty caused by the European Court of Justice questioning whether Standard Contractual Clauses (last amended in 2004) provide sufficient data protections in the “Schrems II” opinion, the European Commission recently adopted new SCCs.
The First Circuit Court of Appeals has affirmed a district court’s confirmation of an arbitration award, concluding that franchisor Toddle Inn Franchising had not waived its contractual right to arbitrate by initially seeking injunctive relief in court.
A federal court in Illinois declined to dismiss franchisor 360 Painting’s claims against franchisee R. Sterling Enterprises for underreporting of gross sales but dismissed its claims for fraudulent misrepresentation.
A federal court in Pennsylvania granted a former franchisee’s motion for reconsideration of its order staying proceedings holding the franchisor’s arbitration agreement invalid. Takiedine v. 7-Eleven, Inc., 2021 WL 3223070 (E.D. Pa. July 29, 2021). In 2017, Azmi Takiedine, a 7-Eleven franchisee for over 40 years, brought suit in district court alleging that 7-Eleven failed its duties regarding vendor negotiating practices as required by the parties’ franchise agreement. The contract included an arbitration agreement requiring disputes arising under the ...
A federal court in Oregon held that plaintiff franchisee employees were bound by the arbitration provision of relevant franchise agreements and could be compelled to arbitrate by affiliates of the franchisor, even though none of them were parties to the franchise agreements.
Two federal courts in Illinois have rejected motions to certify classes of employees who worked in franchised McDonald’s and Jimmy John’s restaurants.
The Eleventh Circuit Court of Appeals recently affirmed a ruling that forklift manufacturer Taylor Group could not be compelled to arbitrate a dispute pursuant to an arbitration provision in an agreement to which it was not a party.
In a terse, per curiam decision, the Eleventh Circuit Court of Appeals upheld a district court’s determination that the preferential treatment given by a distributor to another manufacturer’s products was grounds for termination of the distributor agreements.
A federal court in Minnesota granted a distributor’s motion for a preliminary injunction to prevent a former licensee from continuing to use its trademarks after the distributor terminated the parties’ license agreement.
A federal court in New Jersey applied the New Jersey Franchise Protection Act (NJFPA) and entered judgment in favor of a car manufacturer on a franchisee’s unlawful chargebacks claim.
The Sixth Circuit Court of Appeals affirmed a Michigan federal court’s finding that Michigan was a proper forum and Michigan law applied to dealer agreements between a Michigan manufacturer and a dealer in the Dominican Republic.
A federal court in Wisconsin has recently granted defendant Garmin International’s motion to dismiss a claim under Wisconsin’s dealer law, which it concluded did not apply to the parties’ relationship.
A federal court in Wisconsin has dismissed a dealer’s claim that a supplier fraudulently induced the dealer to enter into a distributor agreement.
A federal court in Missouri recently denied a motion by McDonald’s to dismiss an employment discrimination claim brought against it by a franchisee’s former employee.
A federal court in Arizona recently granted a temporary restraining order for franchisor ReBath against one of its franchisees even though ReBath gave no opportunity to cure the defaults and had previously sent a notice of default with opportunity to cure for a similar issue.
A federal court in New York has dismissed contract, fraud, and negligent misrepresentation claims brought by a former iLoveKickboxing franchisee.
A federal court in Colorado found a former franchisee of Core Progression Franchise in contempt and awarded sanctions for violations of the terms of a preliminary injunction.
A federal court in Louisiana granted a preliminary injunction against a former franchisee for breaching post-termination covenants, and the court extended the covenants for 20 months following the date of the injunction.
The Louisiana Court of Appeals affirmed a trial court’s finding that there was a signed franchise agreement between the parties even though the franchisor could not produce the signed original.
A federal court in California granted a franchisor’s motion for a preliminary injunction against a former franchisee alleged to have misappropriated trade secrets and breached a noncompetition provision related to the continued operation of a formerly franchised restaurant.
A federal court in New Jersey granted the franchisor Jackson Hewitt a preliminary injunction enjoining a franchisee from violating the franchise agreement’s post-termination covenants.
A federal court in Virginia denied a franchisor’s motion to disqualify its former in-house counsel from representing two area developers in a lawsuit that was not “substantially related” to the work the lawyer had performed for the franchisor.
A franchisee association’s claims against a franchisor, brought on behalf of the association’s franchisee members, were summarily dismissed because the court decided that the association “simply [was] not in as good a position” as the individual franchisees to present the subtleties of the claims.
A federal court in New Hampshire recently denied franchisor Planet Fitness’s motion for judgment on the pleadings that it did not tortiously interfere with the prospective contracts of one of its franchisees.
The Eighth Circuit Court of Appeals reversed a district court’s dismissal of a lawsuit against a franchisor based on the doctrine of forum non conveniens. Estate of I.E.H. v. CKE Rests. Holdings, Inc., 2021 WL 1653036 (8th Cir. Apr. 28, 2021).
A federal court in Illinois denied reconsideration of its decision to exclude plaintiff’s expert testimony in connection with a motion seeking class certification.
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A federal court in Minnesota dismissed all claims against a franchise broker because the plaintiff failed to demonstrate that the broker made false statements about past or present facts or circumstances.
A federal court in Michigan has denied a franchisor’s motion to compel arbitration because the court determined that the dispute arose from a service contract that was outside the scope of the arbitration provision in the separate franchise agreements.
A federal court in Illinois dismissed certain putative class action claims related to pandemic closures of Planet Fitness franchises, compelling arbitration against one named plaintiff while dismissing claims of another for failure to name the franchisee.
Similarly, a federal court in Pennsylvania has dismissed a lawsuit brought by 90 hotel franchisees, enforcing the arbitration provisions in their franchise agreements and ordering all 90 franchisees to arbitrate their claims individually.
A federal court in New York recently dismissed a franchisee’s employee’s discrimination claim against a franchisor because the franchisor was not her joint employer.
A federal court in Texas recently denied franchisor Kiddie Academy Domestic Franchising’s motion for summary judgment, rejecting the argument that Kiddie Academy bore no liability under its franchise agreement for the negligence of one of its franchisees.
In another vicarious liability case, a federal court in Tennessee granted summary judgment in favor of Country Inn & Suites By Radisson, dismissing claims that it was liable for the alleged actions of its franchisee’s employee.
A federal court in Illinois denied a motion to temporarily restrain franchisor Seva Beauty from terminating franchise agreements based on the franchisee’s failure to pay weekly royalty payments while a dispute with the franchisor was pending.
The First Circuit Court of Appeals recently affirmed a district court’s denial of John Deere’s post-trial motions for a new trial or for judgment as a matter of law in its favor.
A federal court in New Jersey granted summary judgment to a manufacturer who terminated its distributor for widespread fraud. Mall Chevrolet, Inc. v. General Motors, LLC, 2021 WL 426193 (D.N.J. Feb. 8, 2021).
A state court of appeals in Maryland recently held that the sale of Pabst Brewing’s parent company and a change in Pabst’s corporate structure made neither the new parent nor Pabst a “successor beer manufacturer” such that Pabst could terminate a distributorship agreement without cause under the Maryland Beer Franchise Fair Dealing Act (BFFDA).
The First Circuit Court of Appeals has upheld a finding that an implied contract was formed between a manufacturer and a distributor, and an award of damages to the distributor based on that contract.
A federal court in Michigan recently dismissed a distributor’s four-count complaint alleging that a brewer’s drastic reduction of beer sales was in breach of a requirements contract.
A federal court in California rejected City Beverages’ request to disqualify JAMS from arbitrating its contractual dispute with Monster Energy. Monster Energy Co. v. City Beverages, LLC, 2021 WL 650275 (C.D. Cal. Feb. 17, 2021).
A federal court in Ohio recently held that a distributor adequately alleged the existence of a fiduciary relationship with a manufacturer.
A Texas federal court has granted an injunction to a Bundt cake franchisor seeking to prevent a competitor from using its trademarked frosting pattern on her cake products. Denbra IP Holdings, LLC v. Thornton, 2021 WL 674238 (E.D. Tex. Feb. 22, 2021). Plaintiff Denbra IP Holdings, LLC d/b/a Nothing Bundt Cakes has over 300 franchises around the United States and Canada selling Bundt cakes topped with its trademarked frosting pattern. The frosting pattern consists of long strips of tubular ring-shaped frosting that expands outward from the center of the cake. Twenty-one of its ...
A federal court in Illinois granted Jimmy John’s motion to exclude expert testimony of a putative class seeking certification, while denying the class’s motion to exclude Jimmy John’s expert testimony. Conrad v. Jimmy John's Franchise, LLC, 2021 WL 718320 (S.D. Ill. Feb. 24, 2021). The case against Jimmy John’s is the most procedurally advanced of the class actions filed against various franchisors alleging that employee anti-poaching provisions formerly contained in many franchise agreements constitute an unlawful conspiracy in restraint of trade in violation of ...
A federal court in Illinois has recently concluded that an insurer may have a duty to cover a franchisor’s costs of defending a COVID-19-related injunction. In McDonald’s Corp. v. Austin Mutual Insurance Co., (N.D. Ill. Feb. 22, 2021), McDonald’s claimed that Austin Mutual had a duty to defend McDonald’s in an ancillary case brought by employees of a McDonald’s franchisee alleging McDonald’s was liable for public nuisance and negligence as the result of its decision to allow its franchisee to remain open during the COVID-19 pandemic without enhanced health and safety ...
The Court of Appeals of Kentucky affirmed the dismissal of a Jani-King franchisee owner’s wage and hour, breach of contract, and fraud claims on the basis that the franchisee’s individual owner lacked standing to sue. Mouanda v. Jani-King, 2021 WL 406317 (Ky. Ct. App. Feb. 5, 2021). The plaintiff, Constance Mouanda, was the sole owner of an entity, The Matsoumou’s, LLC. That entity entered into a franchise agreement with Cardinal Franchising, Inc., a master franchisee for the Jani-King janitorial franchise system. In the instant suit, Mouanda alleged a variety of claims ...
A federal court in Michigan granted 7-Eleven’s motion for summary judgment and enforced the franchisor’s right to terminate a franchisee following repeated defaults. 7-Eleven, Inc. v. CJ-Grand, LLC, 2021 WL 429332 (E.D. Mich. Feb. 8, 2021). The franchise agreement at issue permitted immediate termination if 7-Eleven issued four notices of default to its franchisee within a two-year period, regardless of whether any of the defaults were cured. 7-Eleven sought a declaratory judgment from the court vindicating 7-Eleven’s right to terminate its franchise agreement with ...
A federal court in Nevada remanded a class action back to state court after Red Robbin was unable to show that the putative damages exceeded the amount in controversy requirement under the Class Action Fairness Act (CAFA).
A federal court in Connecticut enforced the choice of law provision in a master franchise agreement entered into with the franchisor’s predecessor.
A federal court in California granted in part a franchisor’s motion to dismiss a franchisee’s California Unfair Competition Law (UCL) and business interference claims, while denying the motion as to other aspects of the unfair competition claims and the covenant of good faith and fair dealing claim. Ronald Cohn, Inc. v. Sprouts Farmers Market, Inc., 2021 WL 120896 (S.D. Cal. Jan. 13, 2021). Ronald Cohn entered into a Trademark License Agreement (TLA) with Boney’s Services, Inc. in 1990 and then a second TLA in 1995. Boney’s was subsequently purchased by Sprouts Farmers ...
In another vicarious liability case, a Delaware Superior Court denied franchisor Hand and Stone’s motion to dismiss, allowing vicarious liability claims based on the alleged sexual misconduct of its franchisee’s former employee to go forward. Jane Doe v. Massage Envy Franchising, LLC, 2021 WL 62643 (Del. Super. Ct. Jan. 7, 2021). The plaintiff alleged she was sexually assaulted while receiving a massage by Massage Envy employee, Christopher Dorman. She further alleged that Dorman was previously employed by a franchisee of Hand and Stone, that Dorman had engaged in ...
A federal court in New Jersey has denied a franchisee’s motion for an emergency temporary restraining order. Sat Agiyar, LLC v. 7-Eleven, Inc., 2021 WL 147110 (Jan. 15, 2021). In September 2015, Agiyar signed a franchise agreement to operate a 7-Eleven store 24-hours per day in Princeton, New Jersey. At that time, Princeton prohibited the operation of retail food establishments from 2 a.m. to 5 a.m. The prohibition was set to expire in 2017 unless the city council extended it. To account for the local ordinance, Agiyar and 7-Eleven agreed to permit Agiyar to operate the location for ...
A federal court in New Jersey has dismissed certain state-law claims against the franchisors of Circle K gas stations based upon choice-of-law provisions in the parties’ franchise agreements, but ruled that related lease agreements had narrower choice-of-law language that did not apply to tort claims. Universal Prop. Servs. Inc. v. Lehigh Gas Wholesale Servs., Inc., 2021 WL 118940 (D.N.J. Jan. 13, 2021). Plaintiffs acquired the rights to operate 17 Florida-located gas stations from Defendants Circle K Stores, Inc. and TMC Franchise Corp. Plaintiffs alleged that during ...
A federal court in New Jersey granted the motion for summary judgment filed by Doubletree hotel franchisor, Hilton Franchise Holdings, LLC, and its affiliate (collectively “Hilton”), finding that Hilton was not liable for the tragic accidental drowning of a child in a franchised Doubletree hotel’s pool. Burnet v. Hilton, 2021 WL 118924 (D.N.J. Jan. 13, 2021). The victim’s family claimed that Hilton, the third-party hotel management company, and the Hilton franchisee were all negligent in causing the child’s death. At summary judgment, the family argued that Hilton ...
Laws that just became effective in Belgium and Netherlands may have a major impact on how franchisors conduct business there.
In his first few days in office, President Biden has set out to reverse a number of Trump-era labor policies. One such reversal involves the DOL final rule on independent contractor classification (the “Final Rule”), which was published on January 7, 2021, and would have set new standards for determining when a worker is an employee or an independent contractor under the Fair Labor Standards Act. Notably, the Final Rule implemented a more employer-friendly “economic realities” test, which focused on (1) the nature and degree of the worker’s control over the work, and (2 ...
A federal court in Texas granted in part and denied in part a franchisor’s motion to dismiss a franchisee’s counterclaims under California state law. Jack in the Box Inc. v. San-Tex Rests., Inc., 2021 WL 148058 (W.D. Tex. Jan. 14, 2021). Jack in the Box entered into franchise agreements for 49 Texas restaurant locations with Atour Eyvazian and Anil Yadav, who, on the same day, assigned the franchise agreements to San-Tex Restaurants. The franchise agreements contained a choice of law provision contemplating the application of California law to claims “regarding the making ...
The California Supreme Court has held that its Dynamex decision applies retroactively, answering a question certified to it by the Ninth Circuit in Vazquez v. Jan-Pro Franchising Int’l, Inc., --- P.3d ---, 2021 WL 127201 (Cal. 2021).
The Fifth Circuit Court of Appeals has reversed a Texas court’s ruling excusing an area representative’s untimely renewal notice and rendered judgment for the franchisor. Pizza Inn, Inc. v. Clairday, 979 F.3d 1064 (5th Cir. 2020). Clairday and Pizza Inn were parties to two area development agreements under which Clairday held two five-year options to renew. Clairday failed to timely notify Pizza Inn of his intent to exercise the second renewal option. Pizza Inn did not honor the tardy notice of renewal and did not renew. A jury awarded damages after finding that Pizza Inn had ...
A federal court in Colorado has denied a motion to dismiss a franchisee’s claim that the franchisor breached the implied duty of good faith and fair dealing. Kazi v. KFC US, LLC, 2020 WL 6680361 (D. Colo. Nov. 12, 2020). The franchise agreement in question stated that KFC would not operate, or permit a third party to operate, another KFC within a one-and-a-half mile radius of Kazi’s restaurant. In March 2019, after execution of the franchise agreement, KFC issued a policy allowing franchisees to request an impact study if KFC intended to permit the development of a new location within ...
As a part of its decennial review of the Franchise Rule, which is required by a series of executive orders, the FTC invited interested parties to participate in a Virtual Public Workshop on November 10, 2020 to discuss potential changes to the Rule. Lathrop GPM was one of nine law firms and independent lawyers asked to comment on proposed changes, in particular, changes to the FDD format. While acknowledging that current FDD requirements do result in long documents, and applauding efforts by the FTC and NASAA to make the document easier to navigate and understand, Lathrop GPM cited ...
In another case involving joint employer allegations, a federal court in Massachusetts denied a motion to dismiss brought by Enterprise Holdings, Inc. (Enterprise), finding that the plaintiff Mamadou Bah plausibly alleged Enterprise was his joint employer. Bah v. Enter. Rent-A-Car Co. of Bos., LLC, 2020 WL 6701324 (D. Mass. Nov. 13, 2020). Plaintiff was an assistant manager employed by Enterprise-Boston, an independent regional subsidiary of Enterprise, and alleged that Enterprise-Boston and Enterprise violated the Fair Labor Standards Act and the Massachusetts Overtime ...
A federal court in Michigan has relied upon contractual disclaimers to reject most of the fraud-related claims asserted by a failed massage franchisee, but did award damages amounting to the initial franchisee fee based upon the franchisor’s misrepresentations in its FDD regarding the number of closed units. MTR Capital, LLC v. LaVida Massage Franchise Dev., Inc., 2020 WL 6536954 (E.D. Mich. Nov. 6, 2020). MTR Capital brought common law and statutory claims against LaVida based upon allegedly false financial performance representations. Although no Item 19 disclosures were ...
The Missouri Court of Appeals reversed an award of attorneys’ fees to a franchisor made by the trial court, finding that the franchisor’s recovery was barred by a settlement agreement, and even if not barred, would have been limited to success on only breach of contract claims under the franchise agreement. AEFC, Inc. v. Vietti, 2020 WL 7381536 (Mo. Ct. App. Dec. 16, 2020). Plaintiff AEFC licenses the “Adam & Eve” brand to franchisees who use it to sell lingerie and adult-themed novelty products. Following the deterioration of AEFC’s relationship with franchisee Vietti ...
A federal court in Missouri partially granted franchisees’ motion to dismiss a franchisor’s Lanham Act claims and stayed the proceedings on the surviving claims pending the resolution of parallel proceedings in North Carolina state court. Window World Int’l, LLC v. O’Toole, 2020 WL 7041814 (E.D. Mo. Nov. 30, 2020). Window World, a franchisor of home remodeling products, was sued by dozens of its franchisees in North Carolina state court for various claims, some of which related to the franchisees’ rights to use Window World’s trademarks. Window World later sued three ...
Meanwhile, a federal court in North Carolina granted motions for summary judgment filed by a franchisor and its owners on claims for fraud, misrepresentation, breach of the duty of good faith and fair dealing, breach of fiduciary duty, and a violation of North Carolina's Unfair and Deceptive Trade Practices Act. Trident Atlanta, LLC v. Charlie Graingers Franchising, LLC, 2020 WL 6889208 (E.D.N.C. Nov. 23, 2020). The lawsuit was filed by former franchisees and area representatives of the Charlie Graingers restaurant system based on allegedly misleading statements that the ...
A federal court in Pennsylvania dismissed all claims against a franchisor because the plaintiff failed to plausibly allege that the franchisor and its franchisee were joint employers. Doe v. McDonald’s USA, LLC, 2020 WL 7133517 (E.D. Pa. Dec. 3, 2020). Sixteen-year-old Jane Doe brought claims for discrimination, hostile work environment, and intentional infliction of emotional distress against McDonald’s and its franchisee, alleging McDonald’s and the franchisee were joint employers and thus jointly liable for the franchisee’s manager’s misconduct ...
The Sixth Circuit Court of Appeals recently affirmed a Michigan federal court’s grant of summary judgment enforcing Little Caesar’s termination of franchise agreements for related multi-unit franchisees based on nonpayment and repeat defaults. Little Caesar Enters., Inc. v. Little Caesars ASF Corp., 2021 WL 37544 (6th Cir. Jan. 5, 2021). Lathrop GPM represented Little Caesar in the case. Little Caesar terminated the franchise agreements after the franchisees accrued more than $200,000 in debt for, among other things, unpaid royalties, and failed to cure their defaults ...
A federal court in California recently partially granted China-based medical device distributor Belter’s motion to dismiss a complaint by U.S.-based device distributor Meditex Capital, and related parties, for breach of contract and fraud, among other claims. Naghavi v. Belter Health Measurement & Analysis Tech. Co., 2020 WL 6150431 (S.D. Cal. Oct. 20, 2020). In May 2017, Belter and Meditex entered into a distribution agreement that granted Belter certain rights to sell Meditex’s medical devices in China and contained minimum sales requirements. The parties amended the ...
As the year draws to a close, join The Franchise Memo by Lathrop GPM editors Maisa Frank and Richard Landon as they recap some of the most significant decisions and lessons learned in franchise law during the past year.
A federal court in Maryland denied a manufacturer’s motion to dismiss claims for breach of contract and tortious interference brought by a former distributor. KVC Waffles Ltd. v. New Carbon Co., 2020 WL 6204303 (D. Md. Oct. 22, 2020). KVC was the exclusive distributor of New Carbon products in parts of Europe. During the initial term, the parties allegedly executed a revised distribution agreement. During a renewal term of the agreement, New Carbon informed KVC that it could not locate an executed copy of the agreement. New Carbon demanded that KVC agree to certain modifications to ...
A federal court in Michigan has recently granted Whirlpool Corporation’s motion for judgment on the pleadings in a contract dispute with its former licensing agent. Whirlpool Corp. v. Equity Mgmt., Inc., Case No. 1:19-cv-00259 (W.D. Mich. Sept. 30, 2020). Lathrop GPM represented Whirlpool in this dispute. When Whirlpool Corporation acquired the Maytag® brand in 2006, it inherited a third party licensing arrangement with the company Equity Management, Inc. (EMI) in which EMI administered third party licensing agreements with manufacturers using the Maytag® trademark ...
A federal court in Puerto Rico partially granted a manufacturer’s motion for summary judgment, finding a Puerto Rican law that protects local distributors from contract terminations without just cause does not apply to the distributor’s operations outside of Puerto Rico, and that the manufacturer had just cause to terminate the distributorship. M30 Brands, LLC v. Riceland Foods, Inc., 2020 WL 6084138 (D.P.R. Oct. 15, 2020). Riceland, an Arkansas rice manufacturer and exporter, terminated its distribution relationship with M30, a Puerto Rican company that distributed ...
The Second Circuit Court of Appeals recently affirmed a lower court’s dismissal of a distributor’s breach of contract claims because the contract was terminable at will and the manufacturer had no duty to protect the distributor from competition. Compania Embotelladora Del Pacifico, S.A. v. Pepsi Cola Company, 976 F.3d 239 (2d Cir. Sept. 29, 2020). In 1952, PepsiCo and Compania Embotelladora Del Pacifico, S.A. (CEPSA) entered into an exclusive bottler agreement (EBA) granting CEPSA the exclusive right to bottle and distribute Pepsi Cola in a protected territory in parts of ...
A federal court in Wisconsin granted summary judgment to a manufacturer on claims brought against it by its former dealer, holding the claims to be barred by the release language in an assignment agreement the dealer executed when it sold the dealership. Seattle Powersports, LLC v. Harley-Davidson Motor Co., 2020 WL 5531565 (E.D. Wis. Sept. 15, 2020). Plaintiff Seattle Powersports, a former Harley-Davidson dealer, sued Harley for breach of contract and good faith and fair dealing based upon its dissatisfaction with the amount of inventory it was allocated. In response to the ...
A federal court in Wisconsin recently granted a distributor’s motion for a temporary restraining order and a preliminary injunction to enjoin a manufacturer from terminating a longstanding but unwritten exclusive dealership agreement. Keen Edge Co., Inc. v. Wright Mfg., Inc., 2020 WL 4926664 (E.D. Wis. Aug. 21, 2020). For over 20 years, Keen Edge enjoyed exclusive rights to sell Wright’s products in much of the Midwest. Wright’s products accounted for almost 95% of Keen Edge’s sales. After a change in Wright’s leadership, however, Wright required Keen Edge to ...
A federal court in California found that a restaurant does not violate the Americans with Disabilities Act or the California Unruh Civil Rights Act when it provides late-night service exclusively through its “drive-thru.” Szwanek v. Jack in the Box, Inc., 2020 WL 5816752 (N.D. Cal. Sept. 30, 2020). Plaintiffs Judy Szwanek and James Lopez II are California residents and patrons of Jack in the Box fast food restaurants within walking distance of their homes. Visual impairments prevent each from driving. They brought a putative class action against the franchisees who operate the ...
A federal court in Colorado held that entities controlled by former franchisees were bound by the forum selection clauses in the franchisees’ terminated franchise agreements. Fitness Together Franchise, LLC v. EM Fitness, LLC, 2020 WL 6119470 (D. Colo. Oct. 16, 2020). EM Fitness and related franchiseedefendants operated several Fitness Together franchises in Ohio under franchise agreements that contained post-termination noncompetition and Colorado forum selection clauses. The franchiseedefendants negotiated the early termination of their franchise agreements ...
A federal court in Illinois has dismissed three of four counterclaims asserted against Liberty Tax by one of its former area developers and franchisees, David Rocci. JTH Tax LLC v. Grabowski, 2020 WL 6203355 (N.D. Ill. Oct. 22, 2020). Liberty first sued Rocci for allegedly continuing to operate competing businesses using Liberty’s trademarks and other property following the expiration of his area development agreement and the termination of his franchise. Rocci counterclaimed, arguing that Liberty breached the area development agreement because it failed to offer him a ...
A federal court in Missouri granted, in part, a franchisor’s motion for a temporary restraining order against a former licensee. Imo’s Franchising, Inc. v. Kanzoua, Inc., 2020 WL 5534425 (E.D. Mo. Sept. 14, 2020). Imo’s Pizza entered into a licensing agreement with Kanzoua, which allowed Kanzoua to operate an Imo’s Pizza restaurant at its gas station/convenience store location. In July 2020, Imo’s Pizza terminated the agreement. Imo’s Pizza alleged that after termination, Kanzoua continued to sell pizza, hold itself out as an Imo’s-affiliated restaurant, and ...
Wyndham Hotel Group International’s claim for monetary damages against a guarantor of an $850,000 note related to a franchise agreement has survived a motion to dismiss. Wyndham Hotel Grp. Int’l v. Silver Entm’t LLC, 2020 WL 5517519 (S.D.N.Y. Sept. 14, 2020). Wyndham sued its franchisees Silver Entertainment and Veneto Hotel & Casino and was awarded monetary damages for their breach of the franchise agreement. Wyndham then sought to recover against Silverman, the personal guarantor of a note related to the franchise agreement. Silverman moved to dismiss the claims on the ...
A federal court in Ohio denied an area representative’s request to enjoin the nonrenewal or termination of two of its area representative agreements. KAM Development, LLC v. Marco’s Franchising, LLC, 2020 WL 6146482 (N.D. Ohio Oct. 10, 2020). In 2010, Marco’s granted KAM two area representative agreements in which KAM agreed to solicit potential franchisees and service existing franchisees in Charlotte, North Carolina, and Columbia, South Carolina, for ten years. Each agreement provided up to four renewal periods of five years each, so long as KAM satisfied certain ...
In a blow to the franchisor community, a federal court in New York invalidated the joint employer regulation recently issued by the U.S. Department of Labor (DOL).
Based on evidence of numerous customer complaints regarding the franchisee’s business practices, a federal court in Tennessee recently granted a franchisor summary judgment, rejecting the franchisee’s improper termination claims.
A federal court in Tennessee has held a franchisee in contempt for its failure to deidentify its restaurant after entry of a temporary restraining order and consent permanent injunction.
A federal court in Arizona granted in part and denied in part cross-motions for summary judgment, finding that an unsigned agreement with various omitted terms and handwritten notations was not enforceable under Arizona’s statute of frauds.
A federal court in Tennessee has granted a franchisor’s motion to compel arbitration of all of a franchisee’s claims.
A federal court in California has granted a franchisor’s motion to stay the case pending arbitration.
Since the beginning of 2020, new, comprehensive franchising regulatory schemes have become effective in Belgium, Netherlands, Saudi Arabia, South Korea, and Thailand; Cambodia has adopted a filing requirement; and Brazil, Malaysia, Ontario, Canada, and South Korea have all amended their existing franchise laws.
Lathrop GPM continues to provide clients with alerts, articles, and other resources to help clients navigate important legal information regarding the COVID-19 pandemic.
Lathrop GPM continues to provide clients with alerts, articles, and other resources to help clients navigate important legal information regarding the COVID-19 pandemic. The following may be of particular interest to franchisors and distribution-based businesses:
- Insurance Recovery Alert: Missouri Federal Court Opens Door to COVID-19 Business Interruption Claims by Alexander Brown
This update and resources from Lathrop GPM’s cross-disciplinary team are available at the Lathrop GPM COVID-19 Client Resource website.
A state court in Delaware denied a franchisor’s motion for a preliminary injunction based upon claims that a prospective franchisee misappropriated confidential information and started a competing business despite having signed a non-disclosure agreement. Smash Franchise Partners, LLC v. Kanda Holdings, Inc., 2020 WL 4692287 (Del. Ch. Aug. 13, 2020). Todd Perri was initially interested in potentially becoming a Smash Franchisee. Perri researched information that Smash published online about the company, spoke with franchise brokers about Smash, and participated in a ...
A federal court in Maryland has recently granted franchisor Kiddie Academy’s motion for summary judgment, dismissing franchisee Wonder World Learning’s counterclaim for negligent misrepresentations. Kiddie Academy Domestic Franchising, LLC v. Wonder World Learning, LLC, 2020 WL 4338891 (D. Md. July 27, 2020). Wonder World alleged that Kiddie Academy made various misrepresentations regarding the value of the benefit of the Kiddie Academy curriculum, site selection and construction assistance, and financial performance pro formas, arguing that these ...
A federal court in North Carolina granted in part and denied in part a franchisor’s motion for summary judgment because the franchisee’s owner and her employee-spouse could not demonstrate that they were jointly employed by their franchisor. Elsayed v. Family Fare LLC, 2020 WL 4586788 (M.D.N.C. Aug. 10, 2020). We previously reported on the court’s denial of the franchisor’s motion to dismiss in Issue 251 of The Franchise Memorandum. Family Fare entered into a franchise agreement for a gas station convenience store with Almy, LLC, a company owned by plaintiff Lola Salamah ...
A federal court in Oregon compelled arbitration over the objections of franchisees who claimed they were fraudulently induced to enter franchise agreements because of false representations made by the franchisor’s counsel. Black Rock Coffee Bar, LLC v. BR Coffee, LLC, 2020 WL 4728877 (D. Or. Aug. 14, 2020). Black Rock, a coffee shop franchisor, became embroiled in a dispute over initial franchise fees with a company that had opened three franchised Black Rock coffee shops. In response, Black Rock exercised its option under the territory and franchise agreements to purportedly ...
A federal court in Tennessee recently enjoined from violating a post-termination noncompete a former franchisee, as well as his son and his son’s competing business — neither of which were party to the franchise agreements. AmeriSpec, LLC v. Sutko Real Estate Servs., Inc., 2020 WL 3913584 (W.D. Tenn. July 10, 2020). Lathrop GPM represented AmeriSpec in this case. In May 2020, Sutko Real Estate Services, Inc. (SRESI) and its principal Thomas Sutko agreed with franchisor AmeriSpec to the termination of the franchise agreements for SRESI’s property inspection franchises. As ...
A federal court in Texas reached a different conclusion with regard to enforcement of a noncompete covenant, granting in part and denying in part a franchisor’s motion for preliminary injunction to enforce post-termination obligations against a former franchisee. JTH Tax LLC v. White, 2020 WL 3843691 (W.D. Tex. July 8, 2020). White entered into three franchise agreements with JTH to operate three Liberty Tax franchised businesses, and into another franchise agreement to operate one SiempreTax+ franchised business within a Liberty Tax location. Eventually, White closed the ...
A federal court in New York recently held that a supplier did not have a duty to disclose its business plans to its distribution partners before it changed its distribution system. Aaronson v. Kellogg Co., 2020 WL 2489087 (E.D.N.Y. May 14, 2020). Since 2000, Kellogg, a manufacturer of snack foods, had distributed its products through a Direct Store Delivery Distributor (DSDD) system, which relied on master distributors and sub-distributors for delivery and distribution of its products. In 2017, as part of a costsavings initiative, Kellogg changed its distribution model and ...
A federal court granted a motion to transfer venue of a distributor’s claims from the Eastern District of Michigan to the Central District of California. Complete Med. Sales, Inc. v. Genoray Am., Inc., 2020 WL 4013306 (E.D. Mich. July 16, 2020). Complete Medical Services had entered into a distribution agreement with Genoray America to sell Genoray America’s manufactured medical diagnostic equipment. The parties also entered into a dealer policy which, among other things, specified that “any case of dispute or legal cases will follow the law of the state of California ...
A federal court in New Jersey recently denied antitrust claims brought by a prospective baker and distributor of Dunkin’ Donuts products against an existing distributor. Central Jersey, CML v. Patel, 2020 WL 2840125 (D.N.J. May 31, 2020). Central Jersey, CML sought to open a baking and distribution facility for nearby Dunkin’ Donuts stores. In pursuit of its efforts, it obtained conditional approval for $18.9 million in New Jersey State tax credits. Also in pursuit of its efforts, it sought the financial backing of the defendants — members of another New Jersey-based ...
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:
- IP Alert: USPTO Implements COVID-19 Prioritized Examination Program for Trademarks and Service Marks by Tucker Griffith
- Franchise Alert: Four Key Takeaways from the NASAA & Washington Commentaries on COVID-19 Disclosures by Hannah Holloran Fotsch and Mark Kirsch
These updates and resources from Lathrop ...
The Seventh Circuit Court of Appeals affirmed an Indiana federal court’s decision strictly interpreting a distribution contract according to its terms and limiting the application of the duty of good faith and fair dealing implied into such contracts by the Indiana Commercial Code. Acheron Med. Supply, LLC v. Cook Med. Inc., 958 F.3d 637 (7th Cir. 2020). Cook, a manufacturer of medical devices and products, contracted with Acheron, a distributor experienced in selling to the Veterans Administration and Department of Defense, to serve as Cook’s distributor to those entities ...
In another case from the Third Circuit, the appellate court affirmed a lower court’s decision to grant a franchisor’s motion for summary judgment. Audi of Am. v. Bronsberg & Hughes Pontiac, Inc., 2020 WL 2988888 (3d Cir. June 4, 2020). Audi of America and Wyoming Valley Motors (WVM) were parties to a 1997 franchise agreement that permitted WVM to operate a location-specific Audi dealership. In 2011, Audi unveiled a plan to convert all franchised locations to exclusive dealerships, with a six-year transition period. To comply with these new requirements, WVM purchased real ...
The Third Circuit Court of Appeals reversed a judgment dismissing claims brought by the New Jersey Coalition of Automotive Retailers against Mazda Motor of America under the New Jersey Franchise Practices Act. N.J. Coal. of Auto. Retailers, Inc. v. Mazda Motor of Am., Inc., 957 F.3d 390 (3d Cir. 2020). In the underlying action, the Coalition (a trade association whose members consist of franchised new car dealerships in New Jersey, including 16 Mazda dealers) alleged Mazda’s incentive program for its franchised dealers violates the New Jersey Franchise Practices Act in that it ...
As previously reported in Issue 252 of The Franchise Memorandum, the DOJ’s Antitrust Division and the FTC’s Bureau of Competition recently issued a joint statement regarding review of business collaborations in the fight against COVID-19, announcing a plan to expedite the Business Review Process for potential antitrust risk. A review of the recent opinions issued under this new process, and lessons that can be learned from the enforcement approach in those reviews, can be found here.
A federal court in Washington held that a distributor failed to demonstrate that Wisconsin law, particularly the Wisconsin Fair Dealership Law (WFDL), should apply to a distribution agreement that specified that the agreement is to be governed by the laws of the State of Washington. ACD Distrib., LLC v. Wizards of the Coast, LLC, 2020 WL 3266196 (W.D. Wash. June 17, 2020). ACD, located in Wisconsin, and Wizards of the Coast (WOTC), located in Washington, entered into a distribution agreement that granted ACD the right to distribute WOTC’s gaming products in Wisconsin. At the end of ...
A recent change related to the Coronavirus Aid, Relief, and Economic Security (CARES) Act may increase the number of small business bankruptcy filings in coming months. The Small Business Reorganization Act (SBRA) went into effect on February 19, 2020, aiming to streamline small business reorganizations by modifying or eliminating certain traditional Chapter 11 requirements and creating an easier path for small business debtors to confirm plans of reorganization. Under the SBRA, a small business debtor, whether an individual or legal entity, is the only party permitted to file ...
A federal court in Florida granted a franchisor preliminary injunctive relief for trademark infringement claims, but denied the franchisor’s request to enforce a noncompete against defendants who had not signed a franchise agreement. Interim Healthcare, Inc. v. Interim Healthcare of Se. La., Inc., 2020 WL 3078531 (S.D. Fla. June 10, 2020). Interim is the franchisor of a system that provides nursing, therapy and non-medical home care, hospice, and healthcare staffing. Defendants operated Interim franchises in and around New Orleans and Livingston Parish, Louisiana. The ...
In another case analyzing the amount of control exerted by 7-Eleven over its franchisees, a federal court in Illinois dismissed a franchisee’s putative class action seeking relief under Illinois’ Wage Payment and Collection Act (IWPCA). Patel v. 7-Eleven, Inc., 2020 WL 3303003 (N.D. Ill. June 18, 2020). In his complaint, plaintiff Niral Patel contended that 7-Eleven’s franchise agreements, including the franchise agreement between 7-Eleven and Shanti 11, Inc. (a corporation wholly owned by Patel), constituted agreements to pay wages governed by the IWPCA. Under the ...
A federal court in Michigan has denied a restaurant chain’s motion for preliminary injunction because it failed to demonstrate likelihood of success on its claim that a competing franchisor was infringing trademarks and trade dress. Eastpointe DWC, LLC v. Wing Snob Inc., 2020 WL 3412266 (E.D. Mich. June 22, 2020). Detroit Wing Company has been operating restaurants primarily selling chicken wings since 2015. Wing Snob Inc. subsequently opened its first restaurant and rapidly expanded, opening locations in near proximity to other Detroit Wing Company locations. Detroit Wing ...
A federal Court in New Jersey granted summary judgment after finding that the franchisor did not owe a duty of care to the plaintiff, who was shot in an armed robbery at a 7-Eleven store operated by a franchisee. Boutahli v. 7-Eleven, Inc., 2020 WL 3287127 (D.N.J. June 18, 2020). On January 10, 2014, Boutahli was the only employee working at a 7-Eleven store in Pennsauken, New Jersey. Just after midnight, two men walked into the store, demanded the contents of the cash register, and pistol-whipped and shot Boutahli four times before fleeing the scene. While Boutahli survived the attack, he ...
On June 5, 2020, the President signed the Paycheck Protection Program Flexibility Act of 2020 (Flexibility Act) (Pub. L. 116–142), which changes key provisions of the Paycheck Protection Program (PPP), including provisions relating to the maturity of PPP loans, the deferral of PPP loan payments, and the forgiveness of PPP loans. Section 3(d) of the Flexibility Act provides that the amendments relating to PPP loan forgiveness and extension of the deferral period for PPP loans shall be effective as if included in the CARES Act, which means that they are retroactive to March 27, 2020.
A federal court in Pennsylvania recently transferred a franchise dispute to Delaware pursuant to the franchise agreement’s forum selection clause, even though some defendants were not party to the agreement. Sweet Charlie’s Franchising, LLC v. Sweet Moo’s Rolled Ice Cream, LLC, 2020 WL 3405769 (E.D. Pa. June 19, 2020). Franchisor Sweet Charlie’s brought an action against a franchisee, Peter Aguib, and other third-parties (collectively, “Aguib”), alleging misappropriation of confidential information that Aguib gained while attending a training program for ...
The Sixth Circuit Court of Appeals recently upheld the district court’s grant of Little Caesar’s motion for a preliminary injunction preventing a holdover franchisee from continuing to operate its restaurants. Little Caesar Enters., Inc. v. Miramar Quick Serv. Rest. Corp., Case. No. 19-1860 (6th Cir. June 25, 2020). Lathrop GPM represented Little Caesar in this case. As we previously reported in Issues 244 and 246 of The GPMemorandum, this case involves a franchisee of four Little Caesars franchises in Connecticut and Massachusetts that was terminated for its failure to ...
In another recent decision from the Sixth Circuit Court of Appeals, the court affirmed a ruling that incorporation of the AAA Rules into an arbitration agreement provides the “clear and unmistakable” evidence required under Supreme Court precedent that the parties agreed to arbitrate the question of arbitrability. Blanton v. Domino's Pizza Franchising LLC, 2020 WL 3263002 (6th Cir. June 17, 2020). The AAA Rules provide, in part, that “[t]he arbitrator shall have the power to rule on his or her own jurisdiction, including any objections with respect to the existence, scope or ...
A federal court in Connecticut has ruled that a franchisor’s successor-in-interest cannot invoke a choice of venue provision in an agreement that refers to its predecessor’s principal place of business. Purugganan v. AFC Franchising, LLC, 2020 WL 2494718 (D. Conn. May 13, 2020). Purugganan entered into the Master Development Agreement with AFC’s predecessor-in-interest, Doctors Express Franchising LLC, to obtain exclusive rights to develop franchises in two New York counties and one county in Connecticut. Purugganan alleged AFC was not honoring the Master ...
In another recent damages case, a federal court in Minnesota has granted in part a franchisee’s motion to add a claim for punitive damages, holding that the Federal Rules of Civil Procedure supersede state rules with respect to a franchisee amending its complaint to assert a claim for punitive damages. JTKB, LLC v. FranChoice, Inc., 2020 WL 2192337 (D. Minn. May 6, 2020). JTKB became a franchisee of ILKB kickboxing studios after engaging the services of franchise broker FranChoice. JTKB filed suit against FranChoice, alleging claims of fraud and misrepresentations regarding the ...
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:
- Restaurant Alert: Guidance for Reopening Restaurants by Thomas Pacheco and Samuel Butler
- Privacy Alert: CCPA Enforcement Remains on Track Despite COVID-19 Pandemic by Tedrick Housh, Michael Cohen, Amanda McAllister and Reid Day | The Franchise Memorandum by Lathrop GPM
- M&A Update: "CorePower Yoga ...
As part of its periodic adjustment for inflation, the Federal Trade Commission has announced in a press release the new monetary thresholds for certain exemptions from disclosure under the FTC’s Franchise Rule. Although the Franchise Rule generally requires a franchisor to disclose key information to a prospective buyer before selling a franchise, 16 C.F.R. § 436.8 contains various exemptions, including three based on monetary thresholds for the sale. As of July 1, 2020, disclosure to a prospective buyer is not required under the Franchise Rule if:
- The buyer pays less than $615 ...
A federal court in Michigan recently entered a default judgement against a former Little Caesars franchisee and its principals, which included contractual liquidated damages in the amount of $474,144.14, as well as all attorneys’ fees and costs requested. Little Caesar Enterprises, Inc., v. Reyes 1, Inc., 2020 WL 2395206 (E.D. Mich. May 11, 2020). After Reyes repeatedly failed to operate its restaurants in accordance with Little Caesar’s standards, Little Caesar terminated its franchise agreements and filed a lawsuit, which quickly resulted in a settlement agreement ...
A federal court in New York has dismissed a claim that Doctor’s Associates LLC, the franchisor of Subway restaurants, violated the Americans with Disabilities Act (ADA) because the plaintiff failed to allege that Doctor’s Associates operated the Subway restaurant at which the discrimination took place. Sullivan v. Doctor’s Assocs. LLC, 2020 WL 2319295 (S.D.N.Y. May 8, 2020). Sullivan, a “profoundly deaf individual,” attempted to order a steak sandwich from a Subway restaurant. He alleged that, while trying to order, a Subway employee became angry with him, using ...
A federal court in Ohio granted in part, and denied in part, a motion for summary judgment filed by hotel franchisor Red Roof Franchising, LLC on certain breach of contract and other claims that Red Roof filed against a former franchisee. Red Roof Franchising, LLC v. Riverside Macon Group, LLC, 2020 WL 2494462 (S.D. Ohio May 14, 2020). Red Roof terminated its franchise agreement with Riverside because the franchisee had failed to pay certain fees when due and failed to make required improvements to the premises of the franchised hotel. Riverside continued to operate the franchised ...
A federal court in Ohio held that an arbitration provision in a franchise agreement was enforceable despite arguments that the agreement was rescinded or that it was contrary to Ohio law. Scarso Enters., Inc. v. Honor Yoga Mgmt., LLC, 2020 WL 2496941 (N.D. Ohio May 14, 2020). Plaintiff Scarso is a former franchisee that operated a yoga studio under the trade name of franchisor Honor Yoga. Scarso entered a development agreement with Honor Yoga to develop three studios and a franchise agreement for the first studio. When that studio underperformed, Scarso sought to renegotiate the ...
The Third Circuit Court of Appeals has held that Coverall franchisees must submit their employee misclassification claims against a subfranchisor to arbitration, but remanded the question of whether the franchisor can invoke the same arbitration provision even though it is not a party to the plaintiffs’ franchise agreements. Richardson v. Coverall N. Am., Inc., 2020 WL 2028523 (3rd Cir. Apr. 28, 2020). Plaintiffs Richardson and Silva signed subfranchise agreements with Sojul, LLC in 2016 and 2005, respectively, to operate Coverall commercial cleaning franchised ...
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 ...
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:
- Employment Alert: Opening for Business? Issues for Employers by Brian Woolley and Megan Anderson
- CARES ACT Update: More Money More Problems? The Sequel: Should My Company Return The Money It Received from the CARES Act? by Susan Gaertner, Jackson Hobbs and Daryn McBeth
- Litigation Alert: COVID-19 Leads to New ...
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 ...