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Posts in Class Actions.
Posted in Class Actions

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.

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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).

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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).

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In a closely watched case, the United States Court of Appeals for the Ninth Circuit has affirmed a ruling that McDonald’s is not a joint-employer of its California franchisee’s employees. Salazar v. McDonald’s Corp., 2019 WL 4782760 (9th Cir. Oct. 1, 2019). Guadalupe Salazar and other employees of a McDonald’s franchisee in California filed a class action suit against both the franchisee and McDonald’s alleging that defendants, as joint employers, violated various wage-and-hour statutes. After Salazar entered into a settlement agreement with the franchisee ...

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

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A federal district court in California dismissed a class action suit initiated against Fitness Evolution Franchising LLC (“FEF”), the franchisor and successor to the Fitness 19 system, by members of the former Fitness 19 gyms in Abrantes v. Fitness 19 LLC, 2013 WL 4075576 (E.D. Cal. Sept. 14, 2017). The members’ accounts were transferred from franchised Fitness 19 gyms to various franchised Fitness Evolution gyms in 2015 and 2016. Automatic debits of monthly membership fees were subsequently made from the members’ bank accounts in accordance with the terms of the ...

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The United States Court of Appeals for the Seventh Circuit has reversed a district court’s decision to certify a class and approve a settlement related to Subway’s “Footlong” sandwiches. In re Subway Footlong Sandwich Mktg. & Sales Practices Litig., 2017 WL 3666635 (7th Cir. Aug. 25, 2017). In 2013, a teenager’s photo revealing his 11-inch Subway Footlong sandwich alongside a tape measure went viral. Plaintiffs’ lawyers across the nation sued Subway under state consumer protection laws, and the cases were consolidated. Initial discovery indicated that the majority ...

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A California federal court has denied class certification to two proposed classes of small wholesalers alleging that Living Essentials, LLC, the maker of 5-hour Energy, engaged in price discrimination. ABC Distrib., Inc. v. Living Essentials LLC, 2017 WL 2603311 (N.D. Cal. Apr. 7, 2017). The plaintiffs, who were three small wholesale distribution companies in California, alleged that Living Essentials sold 5-Hour Energy to wholesalers at different prices, discriminating against small wholesalers in violation of the Robinson-Patman Act and California law. The court found ...

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The United States District Court for the Northern District of California recently denied class certification to a group of plaintiffs alleging that they were misclassified as franchisees rather than employees. Soares v. Flowers Foods, Inc., 2017 WL 2793807 (N.D. Cal. June 28, 2017). The plaintiffs were all distributors who delivered, or hired their own subcontractors to deliver, baked goods for Flowers Foods and its network of subsidiaries. Flowers had classified the plaintiffs as franchisees rather than employees, as expressed in each plaintiff’s distributor agreement ...

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The United States Court of Appeals for the Second Circuit affirmed the Southern District of New York’s dismissal of a putative class action against Dunkin’ Donuts and several of its New York franchisees for allegedly improperly charging sales tax on pre-packaged coffee. Estler v. Dunkin’ Brands, Inc., 2017 WL 2258614 (2d Cir. May 23, 2017). In New York, as in many other states, pre-packaged coffee is considered a grocery item and is not subject to the sales tax charged on ready-to-eat restaurant items.

Dunkin’ contended that its franchisees determined and charged sales tax ...

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The United States Court of Appeals for the Third Circuit recently held that a trial court did not abuse its discretion when it allowed an employmentclassification dispute between a group of franchisees and a franchisor to proceed on a class-wide basis. In Williams v. Jani-King of Philadelphia Inc., 2016 WL 5111920 (3d Cir. Sept. 21, 2016), two franchisees sued Jani-King, the world’s largest commercial cleaning franchisor, on behalf of a class of JaniKing franchisees in the Philadelphia area. The franchisees claimed that they were misclassified by Jani-King as independent ...

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A federal court in New York held that it lacked subject matter jurisdiction to hear claims that Dunkin’ Donuts franchises assessed an unlawful surcharge, under the guise of a sales tax, in Estler v. Dunkin’ Brands, Inc., 2016 WL 5720814 (S.D.N.Y. Oct. 3, 2016). Gray Plant Mooty represented the franchisor in this case. The plaintiffs alleged that various franchisees in New York City had improperly assessed sales tax on prepackaged coffee, which is exempt from sales tax under New York law. The plaintiffs brought claims against the franchisor, Dunkin’ Brands, and several ...

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A federal judge in California last week certified for class action treatment a case brought by a group of workers at five franchised McDonald’s restaurants. Ochoa v. McDonald’s Corp., No. 3:14-cv-02098 (N.D. Cal. July 7, 2016). Because the franchisee in this closely-followed case has settled with the plaintiffs, the class was certified to pursue claims against only McDonald’s Corp. and McDonald’s USA, LLC, which remain in the case on the theory of “ostensible agency.” As reported in Issue 198 of The GPMemorandum, summary judgment already has been denied on ostensible ...

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A New Jersey state court granted a franchisor’s motion to dismiss a class-action complaint because the court found that, based on the language of the franchise agreements, only the franchisees could be at fault. Frate v. Dunkin’ Brands, Inc., 2016 WL 3542402 (N.J. Super. Ct. Law Div. June 28, 2016). Gray Plant Mooty represented the franchisor in this case. The plaintiffs alleged that various New Jersey franchisees had improperly assessed sales tax on bottled water and prepackaged coffee, which are goods that may qualify as grocery items and thus be exempt from New Jersey sales ...

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The United States District Court for the Eastern District of Wisconsin recently approved the settlement of a consolidated consumer class action brought against Doctor's Associates, Inc., the franchisor of Subway restaurants. In re: Subway Footlong Sandwich Mktg. Sr Sales Practices Litig., 2016 WL 755640 (E.D. Wisc. Feb. 25, 2016). The plaintiffs alleged that Doctor's Associates had engaged in deceptive marketing and sales practices by advertising Subway sandwiches as "Footlongs" and "6-inch" sandwiches when, the case alleged, some sandwiches were slightly shorter than ...

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A United States District Court in the Eastern District of Missouri recently granted class certification to certain former general managers of company-owned Panera restaurants in connection their employment dispute with the company. Boswell v. Panera Bread Co., 2015 WL 6445396 (E.D. Mo. Oct. 23, 2015). The class of former general managers alleged that Panera breached a buy-out provision in their employment agreements and also committed fraud because it never intended to comply with the provision. Panera contested the allegations, contending, among other things, that the ...

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A Pennsylvania federal court has granted class certification to a group of Jani-King® franchisees, allowing their lawsuit alleging contractor misclassification and wage claims under Pennsylvania's Wage Payment and Collection Law ("WPCL") to proceed. Myers v. Jani-King of Phila., 2015 U.S. Dist. LEXIS 29566 (E.D. Pa. Mar. 10, 2015). The action considered whether Texas-based franchisor Jani-King, a franchisor of commercial cleaning businesses, exercised so much control that its franchisees were employees, rather than independent business owners, and whether the ...

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A California state appellate court affirmed the denial of a motion for class certification for a group of independent Apple dealers (known as Specialists) in Siechert & Synn v. Apple, Inc., 2015 WL 513645 (Cal. Ct. App. Feb. 6, 2015). The plaintiffs failed to show that common questions predominated over individual issues or that a class action would be superior to individual suits. The court also found that facts related to the statute of limitations, causation, and alleged misrepresentation should all be determined on an individual basis.

All of the plaintiffs were in the business of ...

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A federal district court in California determined that a franchisor could be held liable for violation of the California Unfair Competition Law (UCL) based upon the content of form membership agreements it had originated and distributed to its franchisees for sale to the public. In Hahn v. Massage Envy Franchising, LLC, 2014 U.S. Dist. LEXIS 147899 (S.D. Cal. Sept. 25, 2014), the plaintiffs represented a class of customers who had signed membership agreements at one of Massage Envy's franchised clinics. They argued that a provision in the agreements that required customers to ...

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The United States Court of Appeals for the Ninth Circuit has affirmed a ruling from a federal California court, approving a proposed class action settlement agreement that included nearly a million dollars in fees to the plaintiffs' attorneys. Laguna v. Coverall N. Am., Inc., 2014 U.S. App. LEXIS 10259 (9th Cir. June 3, 2014). In 2009, the plaintiffs brought a class action suit against Coverall, a janitorial franchising company, alleging that Coverall misclassified California franchisees as independent contractors allowing them to avoid certain protections afforded to ...

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A federal court in California denied class certification to a customer who received an unwanted text message from a promotional campaign by a franchisee. Ryan v. Jersey Mike’s Franchise Sys., 2014 U.S. Dist. LEXIS 42677 (S.D. Cal. Mar. 28, 2014). The plaintiff, Ryan, was one of 7,659 of the franchisee’s customers who received a promotional text message relating to a loyalty card each obtained from the store. Ryan claimed that he had not given consent for such a text message, and he brought suit against both the franchisor and franchisee under the Telephone Consumer Protection Act ...

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A class action settlement has been approved in Swift v. DirectBuy, Inc., 2013 U.S. Dist. LEXIS 152618 (N.D. Ind. Oct. 24, 2013), in which current and former member-customers of buying club franchisor DirectBuy sued the company alleging that they did not enjoy savings commensurate with their membership fee. The plaintiffs alleged that DirectBuy failed to disclose material information regarding the true prices for its products and the fact that DirectBuy received payments from vendors, manufacturers, and suppliers but did not pass along these savings to members. After the court ...

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Seven putative class action cases against Subway Sandwich Shops, Inc. for engaging in a false or misleading advertising campaign will be centralized in the Eastern District of Wisconsin, according to a transfer order by the Judicial Panel on Multidistrict Litigation. In re: Subway Footlong Sandwich Mktg. & Sales Practices Litig., 2013 U.S. Dist. LEXIS 81639 (E.D. Wis. June 10, 2013). The plaintiffs allege that Subway’s advertising misled them regarding the size of the Subway footlong sandwich. Specifically, they complained that Subway’s uniform standards and practices ...

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In Martin v. JTH Tax, Inc. d/b/a Liberty Tax Service, 2013 U.S. Dist. LEXIS 15512 (D.S.C. Feb. 5, 2013), the United States District Court for the District of South Carolina refused to certify customers of Liberty Tax franchises as a class under Federal Rule of Civil Procedure 23. The plaintiffs alleged that Liberty Tax franchisees pressured them into paying additional fees to file unnecessary forms, and that they incurred additional tax liability as a result of the fraudulently filed forms. The court gave two reasons for refusing to certify the plaintiffs as a class. First, it found ...

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In Simpson v. Best Western International, Inc., 2012 U.S. Dist. LEXIS 162181 (N.D. Cal. Nov. 13, 2012) and Simpson v. Vantage Hospitality Group, Inc., 2012 U.S. Dist. LEXIS 172157 (N.D. Cal. Dec. 4, 2012), two separate federal judges ruled against two separate hotel franchisors on their respective motions to dismiss the plaintiffs’ consumer class action complaints. In each case the plaintiffs asserted that the franchisors violated a California penal statute when their reservation centers recorded Plaintiffs’ cellphone calls, and the franchisors moved to dismiss on the ...

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A federal court in California recently approved the settlement of a disability-access class action lawsuit in Vallabhapurapu v. Burger King Corp., 2012 U.S. Dist. LEXIS 154867 (N.D. Cal. Oct. 26, 2012). The settlement involved the second part of a class action originally asserted by ten plaintiffs against Burger King in Castaneda v. Burger King Corp., 2010 U.S. Dist. LEXIS 78299 (N.D. Cal. July 12, 2012), the settlement of which was reported in Issue 134 of The GPMemorandum. The approximately 86 plaintiffs in Vallabhapurapu contended that restaurants leased by Burger King to its ...

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In 2008, a group of over 300 current and former franchisees of SuperShuttle International, Inc., a shared-ride airport taxi shuttle service, commenced an action against the franchisor. The franchisees claimed that they were employees of the franchisor and were improperly denied a minimum wage and overtime compensation under the New York Labor Law and the Fair Labor Standards Act. In Reid v. SuperShuttle Int’l, Inc., 2012 U.S. Dist. LEXIS 113117 (E.D.N.Y. Aug. 10, 2012), the United States District Court for the Eastern District of New York granted the plaintiffs’ motion to ...

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A federal district court in the Southern District of California recently decertified a class of former 7-Eleven franchisees seeking to recover federal excise tax refunds issued to 7-Eleven. Grayson v. 7-Eleven, Inc., 2011 U.S. Dist. LEXIS 62211 (S.D. Cal. June 10, 2011). The parties had stipulated to the certification of a class of former 7-Eleven franchisees who sold prepaid long distance telephone cards that were subject to a three percent federal excise tax, who terminated their franchise agreements, and to whom 7-Eleven refused to pay any portion of its excise tax refund. After ...

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In Vallabhapurapu v. Burger King Corp., 2011 U.S. Dist. LEXIS 48804 (N.D. Cal. May 6, 2011), a California federal district court denied a motion to dismiss brought based on standing and the failure to join necessary parties. The case is part of a series of attempted class action lawsuits against Burger King as a franchisor of 96 restaurants leased to franchisees in the state of California. The complaint alleges that the restaurants are inaccessible to customers in wheelchairs, in violation of the Americans with Disabilities Act, the California Civil Rights Act, and the California ...

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A California federal court recently dismissed a putative franchisee class action against IHOP for violation of California’s Unfair Competition Law in Hameed v. IHOP Franchising, LLC et al., No. 2:10-cv-02276 (E.D. Cal. Feb. 10, 2011). Hameed, an IHOP franchisee in Sacramento, sued IHOP on behalf of a class of IHOP franchisees, alleging that IHOP violated California’s Unfair Competition Law by, among other things, denying him monetary aid pursuant to IHOP’s Development Impact Assistance Program (DIAP). The DIAP provides money to an existing franchisee who is impacted ...

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A federal district court judge in National Franchisee Association v. Burger King Corp., 2010 U.S. Dist. LEXIS 123065 (S.D. Fla. Nov. 19, 2010), has dismissed for failure to state a claim a class action suit brought by Burger King franchisees challenging the franchisor’s ability to set maximum prices on products. The franchisees claimed that Burger King’s decision to set a $1.00 maximum price for certain items to be included on the $1.00 Value Menu breached its express and implied duties of good faith and fair dealing, was not permitted under the franchise agreements, and violated ...

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On October 27, the United States District Court for the Southern District of New York  rejected class action certification in the obesity case filed against McDonald’s Corporation in 2002. Pelman v. McDonald’s Corp., 2010 U.S. Dist. LEXIS 114247 (S.D.N.Y. Oct. 27, 2010). This is the case in which the plaintiff claimed that “deceptive marketing schemes” had caused consumer obesity. In a lengthy opinion, the court ruled that “extensive individualized inquiries” in the case preclude class action treatment. Those individual questions include causation and injury. As ...

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A California appeals court recently upheld a trial court’s decision to strike all class allegations contained in a complaint brought by members of a walnut producing cooperative marketing association against a walnut processor. The court relied upon a class action waiver contained in the arbitration agreements between the parties, rejecting the argument that the waiver was unconscionable. The case is Walnut Producers of California et al. v. Diamond Foods, Inc., No. C060346, 2010 Ca. App. LEXIS 1419 (Ca. Ct. App. 3d Div. Aug. 16, 2010). This nonfranchise decision is notable for ...

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In Castaneda v. Burger King Corp., 2010 U.S. Dist. LEXIS 78299 (N.D. Cal. July 12, 2010), a California federal court approved a settlement of a disability class action lawsuit. The plaintiffs had contended that Burger King’s restaurants were not accessible to customers who use wheelchairs and scooters in violation of the Americans with Disabilities Act and California’s Unruh Act. Under the terms of settlement, Burger King agreed, among other things, to an injunction to eliminate accessibility barriers at certain of its restaurants and to pay $5 million in damages (an average ...

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In Moua v. Jani-King of Minnesota, Inc, 08-4942 (D. Minn. Mar. 12, 2010), a Minnesota federal court denied a motion for class certification filed by franchisees who alleged that Jani-King falsely promised them a certain amount of monthly business while knowing that the promised amount was unattainable. The franchisees further alleged that the business accounts Jani-King offered to them were unprofitable and that Jani-King took accounts away from them.  The court found that the claims required individualized determinations of Jani-King's conduct vis-a-vis each franchisee.

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A Minnesota federal court has denied a motion to remand a class action lawsuit to state court, holding that the federal court had jurisdiction over the action under the Class Action Fairness Act (CAFA). In Green et al. v. SuperShuttle Int’l, Inc. et al., 2010 U.S. Dist. LEXIS 7456 (D. Minn. Jan. 29, 2010), a putative class of current and former franchisees sued various SuperShuttle entities that provide shared-ride airport shuttle services, claiming the entities had mischaracterized them as franchisees rather than as employees. The plaintiff-franchisees originally sued in ...

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A federal court in California has dismissed the claims of the remaining franchisee classmembers in Samica Enterprises, LLC, et al. v. Mail Boxes Etc. USA, Inc., et al., 2010 U.S. Dist. LEXIS 21343 (C.D. Cal. Feb. 26, 2010). In granting summary judgment against these more than 200 putative plaintiffs, the court rejected their attempts to circumvent the prior decisions dismissing claims of two representative subclasses. The claims all arose out of the efforts of the defendants to convert Mail Boxes Etc. franchisees to UPS Store franchisees, which the plaintiffs claimed to be a fraud ...

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A California federal court recently denied a motion to dismiss a class action complaint alleging alter ego liability of a franchisor’s parent corporation.  Laguna v. Coverall North America, inc., 2009 WL 5125606 (S.D. Cal., Dec. 18, 2009). In Laguna, the complaint alleged that Coverall improperly sold janitorial franchises knowing that the franchisees lacked sufficient business to satisfy their obligations under the franchise agreements and that it misrepresented the guaranteed amount of monthly income from the franchises. Another key allegation was that the class members ...

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In De Giovanni v. Jani-King Int’l., Inc., 2009 WL 2993798 (D. Mass. Sept. 21, 2009), the court considered plaintiffs’ motion to certify a class composed of Jani-King franchisees operating in Massachusetts. Plaintiffs brought two claims against Jani-King.  First, the plaintiffs claimed that Jani-King had engaged in various unfair business practices, including breach of contract, misrepresentation, unjust enrichment, and violation of Massachusetts’ unfair and deceptive trade practices law. Second, the plaintiffs claimed that Jani-King had violated ...

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In an important decision upholding a contractual prohibition of collective actions, a Colorado federal court last month refused to certify a class of franchisees in Bonanno v. Quiznos Franchise Co., 2009 WL 1068744 (D. Colo. Apr. 20, 2009). This ruling was based on language in the franchise agreement that a franchisee’s claim “may not be consolidated with another proceeding between Franchisor and any other entity or person.” The court found this clause an effective bar to the proposed class action fraud challenge to the franchisor’s practices for selling Quiznos ...

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In Ganezer, et al. v. DirectBuy, Inc, et al., 2009 WL 363908 (C.D. Cal. Feb. 11, 2009), a California federal court granted the plaintiffs’ motion to remand the case back to state court. The plaintiffs had filed a class action suit in California state court against DirectBuy, a franchisor of outlets marketing a direct-buying service to the public through club membership programs. DirectBuy removed the action to federal court under the provisions of the Class Action Fairness Act (CAFA). The plaintiffs moved to remand to state court claiming that the CAFA amount in controversy and ...

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A plaintiff alleging access violations at approximately 90 Burger King restaurants in California will be allowed to proceed with the case under a decision issued last week.  Castaneda v. Burger King Corp., 2009 WL 398489 (N.D. Cal. Feb. 18, 2009). The plaintiff’s legal standing and specificity of allegations survived the defendant’s motion to dismiss on the pleadings, according to the decision of the United States District Court for the Northern District of California. This is the first reported major case against a franchisor under the Americans with Disabilities Act ...

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In Moua et al. v. Jani-King of Minnesota, Inc., 2009 WL 212425 (D. Minn. Jan. 27, 2009), the United States District Court for the District of Minnesota denied a group of class action plaintiffs’ motion to remand the case to state court, finding that federal jurisdiction was proper under the Class Action Fairness Act (CAFA). The plaintiffs, a group of franchisees of the Jani-King cleaning and janitorial system, initially brought suit in Minnesota state court against their franchisor, claiming Jani-King did not have enough cleaning and janitorial accounts to provide the minimum ...

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The United States Court of Appeals for the Third Circuit has reversed a New Jersey district court’s certification of a class of approximately 4,000 dealers in an action against Ford Motor Company alleging violations of the Robinson-Patman Act, the federal Automobile Dealer’s Day in Court Act, and numerous state franchise laws, as well as breach of contract and the covenant of good faith and fair dealing. Danvers Motor Co., Inc. v. Ford Motor Company, No. 07-2287, WL 418728 (3rd Cir. Sept. 12, 2008).

Ford had instituted a voluntary dealer certification program called The Blue Oval ...

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In Issue 103 of The GPMemorandum, we reported that a federal court had granted a motion for class certification in Quadrel v. GNC Franchising, L.L.C., 2007 WL 4241839 (W.D. Pa. Nov. 29, 2007). On February 20, 2008, however, that court granted the defendant’s motion for reconsideration and dismissed the purported class action. Quadrel v. GNC Franchising, L.L.C., 2008 WL 474260 (W.D. Pa. Feb. 20, 2008). GNC’s motion for reconsideration of the class certification order argued that, after the court had certified the class, the single named class representative had settled his ...

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In Good, et al. v. Ameriprise Financial, Inc., 2008 WL 185714 (D. Minn. Jan. 18, 2008), the United States District Court for the District of Minnesota denied class certification to the plaintiffs, two Ameriprise financial advisors who brought an action on behalf of a putative class of over 10,000 advisors – a class that would include franchisees. The plaintiffs alleged that Ameriprise failed to pay its financial advisors the full amount of the commissions to which they were entitled under their contracts.  

Ameriprise argued that the case did not present a question of law or fact ...

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In Quadrel v. GNC Franchising, LLC., 2007 WL 4241839 (W.D. Pa. Nov. 29, 2007), the court considered a motion by current and former GNC franchisees to certify a class action against their franchisor. The plaintiffs alleged that GNC had violated the provisions of a settlement agreement to resolve a previous class action brought in 2001. Under the prior settlement, the franchisor had agreed to take reasonable measures to avoid setting the ultimate discounted retail price on certain sale items below the franchisees’ then-current wholesale price, to not accept royalty on such items ...

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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