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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).

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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).

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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).

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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).

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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).

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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.

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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.

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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.

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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 ...

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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 ...

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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 ...

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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 ...

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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 ...

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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 ...

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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 ...

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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.

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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 ...

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The United States Court of Appeals for the Eleventh Circuit has held that a franchisee is required to indemnify a franchisor for its litigation defense costs, vacating a district court’s orders of summary judgment in favor of the franchisee. Aaron’s Inc. v. MKW Invs., Inc., 2019 WL 4200260 (11th Cir. Sept. 5, 2019). Aaron’s Inc., a home furnishings retailer and franchisor, entered into a franchise agreement with MKW Investments under which MKW agreed to indemnify Aaron’s for certain expenses incurred as a result of certain conduct by MKW. After a former MKW employee sued both ...

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A federal court in South Carolina has granted summary judgment to a franchisor after finding no material question of fact regarding whether a contract ever existed between the parties. Theo’s Pizza, LLC v. Integrity Brands, LLC, 2019 WL 1282325 (D.S.C. Mar. 20, 2019). Ted and Marcia Contos began communicating with Integrity Brands, LLC (“IBL”) with the hope of developing an Uncle Maddio’s Pizza Joint franchised restaurant. The Contoses created two limited liability companies: (i) Thea and Theo, LLC to develop the premises for the restaurant, and (ii) Theo’s Pizza, LLC ...

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The United States District Court for the Northern District of Texas has granted in part and denied in part a motion for summary judgment filed by franchisor Pizza Inn in a dispute with one of its area developers. Pizza Inn, Inc. v. Clairday, 2019 WL 499105 (N.D. Tex. Feb. 8, 2019). Pizza Inn entered into two area developer agreements with Clairday that permitted Clairday to promote and develop Pizza Inn franchises in Arkansas. The agreements contained a primary term of 20 years and provided Clairday the option to renew for two additional five-year periods. The parties renewed the ...

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Meanwhile, a federal court in Colorado has denied in part a franchisor’s motion to dismiss counterclaims brought by a franchisee, including a claim for breach of contract based on the implied covenant of good faith and fair dealing. E&I Holdings, Inc. v. Coral Springs Eggs & I, LLC, 2018 WL 4680339 (D. Colo. Sept. 28, 2018). The dispute arose when E&I Holdings, a franchisor of various restaurants including the Egg & I, terminated two franchise agreements with Coral Springs after it failed to comply with the agreed upon store development schedule. E&I sued for damages and injunctive ...

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A federal district court in New Jersey granted a franchisor’s motion to dismiss a franchisee’s complaint because it failed to sufficiently plead facts in support of each claim it alleged. Khorchid v. 7-Eleven, Inc., 2018 WL 5149643 (D.N.J. Oct. 22, 2018). The parties entered into a franchise agreement in 2009, and then executed a revised franchise agreement in 2016. Khorchid filed a lawsuit against 7-Eleven that included claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and violations of the New Jersey Franchise Practices Act (NJFPA ...

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The Wyoming Supreme Court affirmed a lower‐court decision approving the termination of two executives following their pursuit of a franchise opportunity with another system. James v. Taco John’s Int’l, Inc., 2018 WL 4011633 (Wyo. Aug. 22, 2018). In 2013, Taco John’s International (TJI) hired a new Chief Development Officer and a Vice President of Operations at the behest of its recently hired President and CEO. The pair’s employment agreements required them to “devote all of [their] time, attention, knowledge, and skills solely to the business and interest of ...

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The Supreme Court of Nebraska affirmed the decision of a state district court that a contract permitted a fuel retailer to rebrand several of its gas stations and sell competitor-branded fuel. Ray Anderson, Inc. v. Buck’s, Inc., 300 Neb. 434 (July 6, 2018). Ray Anderson, Inc., the operator of retail gas stations in Omaha, Nebraska, and Buck’s, Inc., a distributor and “jobber” of BPbranded fuel, entered into a fuel supply contract, through which Anderson sold BP-branded fuel at its stations. A rider entitled the Electronic Dealer Delivery Plan (EDDP) was incorporated into ...

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A Kansas appellate court concluded that a franchisor was entitled to enforce one clause of its franchise agreement despite its alleged breach of an unrelated clause in Hendrix v. Sheridan, 2018 WL 2272588 (Kan. Ct. App. May 18, 2018). Franchisee Ronald Hendrix and franchisor Sheridan’s Franchise Systems (SFS) were parties to a franchise agreement that granted Hendrix the right to operate a Sheridan’s Frozen Custard franchise. The franchise agreement allowed SFS to purchase the restaurant upon termination or expiration of the agreement. The dispute between the parties began ...

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Baskin-Robbins charges its designated supplier a fee for the right to manufacture and sell Baskin’s proprietary ice cream products to Baskin’s franchisees. The supplier includes an amount equal to the fee in the price that it charges Baskin’s franchisees for those products. In Association of Independent BR Franchise Owners v. Baskin-Robbins Franchising, LLC, 2017 WL 4314607 (D. Mass. Sept. 27, 2017), an association of Baskin-Robbins franchisees sought a declaration that the price component paid by its members that was attributable to the fee paid by the supplier to Baskin ...

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An appellate court in California recently reversed a grant of summary judgment to a franchisor, finding that the franchisor did not provide sufficient evidence to establish that a landlord was not assigned the rights to one of its restaurant franchises. Cha La Mirada, LLC, v. Red Robin Int’l, Inc., 2017 WL 2691576 (Cal. Ct. App. June 22, 2017). The dispute involved a franchise agreement between Red Robin and La Mirada Restaurant Group (“LMRG”) for the rights to operate a Red Robin restaurant in a hotel. Red Robin, LMRG, and the landlord for the property also signed a consent ...

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A Wisconsin federal court recently denied a distributor's motion to dismiss a breach of contract action brought by one of its dealers. Traffic and Parking Control Co. v. Global Traffic Techs., LLC, 2017 WL 1067774 (E.D. Wis. Mar. 21, 2017). TAPCO claimed, among other things, that GTT breached the dealership agreement between the parties by sending its termination notice in the form of an email. While the notice clause of the agreement did not explicitly identify email as a permissible form of written notice, both parties' email addresses were listed in the contact information section ...

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The New Jersey Superior Court recently affirmed summary judgment in favor of a retail lessor, holding that an exclusivity provision in a lease agreement with Starbucks did not prohibit the shopping center from also leasing space to a McDonald's franchisee. Delco LLC v. Starbucks Corp., 2015 WL 6159534 (N.J. Super. Ct. App. Div. Oct. 21, 2015). The lease agreement contained an exclusivity provision that prohibited the lessor from leasing space within the shopping center to any tenant (other than Starbucks) for the operation of a business selling coffee, espresso, and tea drinks. The ...

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In LightStyles, Ltd. v. Marvin Lumber & Cedar Co., 2015 U.S. Dist. LEXIS 86954 (M.D. Pa. July 6, 2015), a federal court granted summary judgment in favor of manufacturer Marvin against a distributor, LightStyles, after Marvin terminated the parties' oral distribution agreement of sixteen years. LightStyles brought claims for (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) breach of a franchise agreement; (4) breach of fiduciary duty, (5) unjust enrichment, (6) promissory estoppel, and (7) intentional interference with business and ...

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A federal district court in Colorado recently granted a franchisor's motion for summary judgment on claims of breach of contract, trademark infringement, unfair competition, and injunctive relief against two terminated franchisees, while rejecting the franchisees' counterclaims for breach of contract and fraud. Steak 'n Shake Enters., Inc. v. Globex Co., 2015 WL 3883590 (D. Colo. June 23, 2015). The franchisor, Steak 'n Shake, alleged that franchisees Globex and Springfield Downs, LLC, had breached the franchise agreement by charging more than allowed for certain food and ...

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A federal court in Florida recently denied a franchisor's motion for summary judgment, finding that issues of fact remained as to whether the franchisor or the franchisee was responsible for alleged breaches of the franchise agreement. Creative Am. Educ., LLC v. The Learning Experience Sys., LLC, 2015 U.S. Dist. LEXIS 60138 (S.D. Fla. May 7, 2015). Pursuant to a management agreement between the parties, the franchisor ("TLE") assumed initial management responsibilities for the two franchises at issue, then transitioned responsibility to the franchisee ("CAE"). At some point ...

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The United States Court of Appeals for the Seventh Circuit recently reversed a lower court's judgment that a sales agreement was of indefinite duration and therefore terminable at will. Burford v. Accounting Practice Sales, Inc.,2015 U.S. App. LEXIS 7894 (7th Cir. May 13, 2015). The parties had entered into an agreement whereby Burford facilitated the purchase and sale of accounting practices in a designated territory on behalf of Accounting Practice Sales ("APS"). The agreement had an initial term of twelve months and provided that it would renew automatically for another ...

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A federal district court in Michigan recently denied a franchisee's motion to dismiss its franchisor's counterclaims for breach of contract and a declaratory judgment. AKB Wireless, Inc. v. Wireless Toyz Franchise LLC, 2015 U.S. Dist. LEXIS 48005 (E.D. Mich. Apr. 13, 2015). The franchisor, Wireless Toyz, alleged that AKB had breached its franchise agreement by, among other things, violating the agreement's covenant not to compete and confidentiality provisions. AKB argued that the franchise agreement's noncompetition and confidentiality provisions only applied upon ...

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In Unlimited Opportunity, Inc. v. Waadah, 2015 Neb. LEXIS 71 (Neb. Apr. 10, 2015), the Supreme Court of Nebraska affirmed a district court's ruling that the post-term noncompete covenant contained within the parties' franchise agreement was unreasonable, and therefore unenforceable. Unlimited Opportunity, d/b/a Jani-King of Omaha, ("JaniKing") is a subfranchisor of professional cleaning and maintenance services. In 2008, Jani-King granted Waadah a franchise in the Omaha, Nebraska area, which franchise later was terminated. The parties' franchise agreement contained a ...

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A federal court in Washington denied a product supplier's motion for partial summary judgment on numerous claims related to an oral contract. Mastaba v. Lamb Weston Sales, 2014 U.S. Dist. LEXIS 72865 (E.D. Wash. May 27, 2014). Mastaba, a seller of frozen potato products in the Philippines, brought an action against Lamb Weston, its sole supplier of potatoes, for breach of contract, promissory estoppel, quantum meruit, unjust enrichment, negligent representation, and fraud, all based on the supplier's alleged oral representations that it would enter into a written, five-year ...

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The United States District Court for the District of New Jersey recently granted a franchisor's motion to dismiss a franchisee's counterclaims for, among other things, fraud and a breach of the New Jersey Consumer Fraud Act ("NJCFA"). Yogo Factory Franchising, Inc. v. Ying, 2014 U.S. Dist. LEXIS 61968 (D.N.J. May 5, 2014). Ying's counterclaims were premised on allegations that he was induced into purchasing franchises by pre-contract misrepresentations of earnings potential, investment costs, and services to be provided by Yogo Factory.

In dismissing the fraud claim, the court ...

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In a decision from the Western District of New York, a magistrate judge relied on the plain language of a distribution agreement to determine its scope. Precimed Inc. v. ECA Medical Instruments, 2014 U.S. Dist. LEXIS 10349 (W.D.N.Y. Jan. 28, 2014). ECA, a manufacturer of both standard and custom surgical instruments, entered into a distribution agreement for Precimed to market and sell ECA's "Products." After a disagreement as to the scope of the term "Products," the parties filed opposing claims regarding whether the distribution agreement gave Precimed exclusive rights to ...

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In a case in which Gray Plant Mooty represented the defendant hotel management company, the federal court in North Dakota recently granted it summary judgment with respect to claims asserted by the owner of a franchised hotel. Ivesdal v. Three Rivers Hospitality, LLC, No. 1:12-cv-00073-DLH-CSM (D.N.D. Feb. 7, 2014). Hotel owner Ivesdal engaged Three Rivers to manage operations of his franchised AmericInn hotel in Dickinson, North Dakota. The parties entered into a Management Agreement governed by Minnesota law. After declining to renew the Management Agreement following ...

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A federal district court in Pennsylvania recently held that a franchisor was entitled to summary judgment on a franchisee’s equitable rescission claim because the franchisee did not act promptly in bringing suit after discovering the franchisor’s alleged misrepresentations. In Al-Barqawi v. 7-Eleven, Inc., 2014 U.S. Dist. LEXIS 19601 (E.D. Pa. Feb. 18, 2014), the franchisee, Al-Barqawi, alleged that 7-Eleven representatives falsely represented to him before he signed his franchise agreement that the particular store he was purchasing did not have problems with crime ...

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A Pennsylvania federal court has granted a manufacturer’s motion to dismiss a complaint for breach of distribution agreement. In Assalone v. S-L Distribution Co., Inc., 2013 U.S. Dist. LEXIS 149625 (M.D. Pa. Oct. 17, 2013), Assalone sued S-L, the manufacturer of Snyder’s snack foods, claiming that it breached the exclusivity provisions of the parties’ distributorship agreements by distributing another line of snack foods in Assalone’s territories. In 1999, Assalone entered into separate agreements with a food manufacturer and distributor of Snyder’s products ...

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The United States District Court for the Eastern District of Wisconsin has determined that a manufacturer was contractually required to pay a commission to one of its distributors in connection with the sale of its industrial hoist equipment. Marine Travelift, Inc. v. Marine Lift Sys., Inc., 2013 U.S. Dist. LEXIS 144435 (E.D. Wis. Sept. 30, 2013). The parties had entered into a distributorship agreement that granted the distributor, Marine Lift Systems, a nonexclusive right to purchase equipment from the manufacturer, Marine Travelift, and then resell it to customers at ...

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The United States District Court for the Western District of Pennsylvania dismissed with prejudice a beer distributor’s amended complaint alleging violations of a distributorship agreement between the parties. Frank B. Fuhrer Wholesale Co. v. MillerCoors LLC, 2013 U.S. Dist. LEXIS 155253 (W.D. Pa. Oct. 30, 2013). Under the agreement, Frank B. Fuhrer Wholesale Co. was granted exclusive distribution rights for certain Coors products in a nine-county area including metropolitan Pittsburgh. The agreement allowed MillerCoors to add products to the list of those for which the ...

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In Lenexa Hotel, LP v. Holiday Hospitality Franchising, Inc., 2013 U.S. Dist. LEXIS 125240 (D. Kan. Sept. 3, 2013), a federal district court in Kansas denied a hotel franchisor’s motion to dismiss a franchisee’s claims for breach of contract and breach of the implied duty of good faith and fair dealing, and for a declaratory judgment regarding the parties’ obligations under their license agreement. The plaintiff’s allegation was that Holiday Hospitality Franchising, the franchisor of the Holiday Inn, Crowne Plaza, and InterContinental brands, repeatedly represented ...

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The United Stated District Court for the District of Minnesota recently dismissed several claims by a Party City franchisee premised on the franchisor’s operation of an online store. Newpaper, LLC v. Party City Corp., 2013 U.S. Dist. LEXIS 137396 (D. Minn. Sept. 25, 2013). Gray Plant Mooty represents Party City in this matter. The franchisee’s complaint alleged that the operation of an online store by the franchisor breached the franchisee’s contractual right to an exclusive territory. It also alleged that certain aspects of Party City’s online store, including its ...

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A Wisconsin federal district court dismissed a terminated franchisee’s tort based claims premised on a pre-agreement misrepresentation by the franchisor, but refused to dismiss—for the time being—the franchisee’s unjust enrichment claim. ERA Franchise Sys., LLC v. Hoppens Realty, Inc., 2013 U.S. Dist. LEXIS 107078 (W.D. Wis. July 31, 2013). Prior to the execution of a franchise agreement, a representative from ERA allegedly told the franchisee that it would receive support and training from ERA during the franchise relationship. The franchisee claimed that ERA made ...

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In Joseph McSweeney Enterprises, LLC v. Mr. Softee Sales and Manufacturing, LLC, 2013 U.S. Dist. LEXIS 122279 (D.N.J. Aug. 17, 2013), the United States District Court for the District of New Jersey granted Mr. Softee and its affiliates’ motion to dismiss a franchisee’s claims for fraud, breach of the New Jersey Consumer Fraud Act (CFA), breach of warranty, and breach of contract based on an integration clause in the franchise agreements. The franchisee claimed that the ice cream trucks it purchased from Mr. Softee’s affiliate pursuant to its franchise agreements did not ...

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The United States District Court for the Southern District of Indiana recently ruled that an integration clause barred certain claims by a dealer that were premised on an alleged preagreement misrepresentation by the supplier/distributor. Volvo Trucks N. Am. v. Andy Mohr Truck Ctr., 2013 U.S. Dist. LEXIS 83881 (S.D. Ind. June 14, 2013). Mohr Truck alleged that it entered into a dealer agreement with Volvo in reliance on a preagreement oral representation by Volvo that Volvo would also grant Mohr Truck a separate Mack Truck dealership, which Volvo never awarded. Citing the alleged ...

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The United States Court of Appeals for the Eighth Circuit affirmed a district court award of summary judgment in favor of a Minnesota supplier, finding that the supplier did not breach its contract with the appellant distributor. Watkins Inc. v. Chilkoot Distrib., Inc., 2013 U.S. App. LEXIS 13716 (8th Cir. July 8, 2013). The parties had entered into a series of two agreements through which Chilkoot became a Watkins sales associate in Canada. Chilkoot then recruited a new sales associate, the Lambert Group, which became a profitable part of Chilkoot’s downline sales network ...

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A federal district court in New Jersey granted summary judgment to Ramada Worldwide on several counts of a breach of contract claim against a franchisee, despite the franchisee’s equitable challenge to enforcement of the parties’ franchise agreement. Ramada Worldwide Inc. v. Southport, LLC, 2013 U.S. Dist. LEXIS 91719 (D.N.J. June 27, 2013). Ramada brought a claim against Southport and other individuals for breach of a license agreement, development incentive note, and guaranty, because Southport had failed to make periodic payments required by the agreements. Ramada ...

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In Damabeh v. 7-Eleven, Inc., 2013 U.S. Dist. LEXIS 66565 (N.D. Cal. May 8, 2013), a federal court in California dismissed a franchisee’s claims that 7-Eleven breached the express terms of the franchise agreement, breached the implied covenant of good faith and fair dealing, and tortiously interfered with the franchisee’s prospective business advantage when 7-Eleven terminated the franchise agreement instead of repairing damage to the franchisee’s store. The parties’ claims and defenses relied on a franchise agreement provision providing that the agreement could be ...

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In an action stemming from a franchisee’s alleged continued operation of a franchised restaurant after the termination of the franchise agreement, a federal district court in Georgia dismissed the franchisor’s claims for unjust enrichment, negligence, and punitive damages. Huddle House, Inc. v. Two Views, Inc., 2013 U.S. Dist. LEXIS 48754 (N.D. Ga. Apr. 4, 2013). The court stated that Georgia law precludes an unjust enrichment claim arising from a contract when the validity of the contract is undisputed. The court noted that although a party may plead an unjust enrichment ...

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The United States District Court for the District of New Jersey recently granted a hotel franchisor summary judgment on its Lanham Act and breach of contract claims, and dismissed the franchisee’s claims that the franchise agreement was unconscionable and the product of negligent misrepresentation. Wyndham Hotels and Resorts, LLC v. Northstar Mt. Olive, LLC, et al., 2013 U.S. Dist. LEXIS 44468 (D.N.J. Mar. 28, 2013). Wyndham, after terminating its franchise agreement with Northstar for Northstar’s failure to pay royalties, sued Northstar to enforce the post-termination ...

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Jiffy Lube was recently sued by a real property company under which Jiffy Lube served as both the landlord and tenant of property located in Anne Arundel County, Maryland. Bird Realty Ltd. P’ship v. Jiffy Lube Int’l, Inc., 2012 U.S. Dist. LEXIS 177207 (D. Md. Dec. 14, 2012). Jiffy Lube entered into a prime lease for the property in 1989 and immediately thereafter entered into a sublease with the plaintiff. The plaintiff, in turn, subleased the property to a subsidiary of Jiffy Lube.  Through a series of mergers, Jiffy Lube assumed the obligations of the property as both landlord and ...

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In Andy Mohr Truck Center, Inc. v. Volvo Trucks North America, 2012 U.S. Dist. LEXIS 145057 (S.D. Ind. Oct. 9, 2012), the United States District Court for the Southern District of Indiana denied Volvo’s motion to dismiss a dealer’s breach of contract claims. According to plaintiff Mohr, Volvo represented that it would grant him a Mack Trucks franchise in a separate transaction if he first entered into an agreement to operate a Volvo Trucks dealership. Mohr accepted his appointment as a Volvo Trucks dealer based on the understanding that he could later combine that franchise with a ...

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A New York appellate court has rejected a statute of frauds defense to a claim for breach of oral exclusive distribution agreements. Last Time Beverage Corp. v. F & V Distribution Co., LLC, 2012 N.Y. App. Div. LEXIS 6092 (N.Y. App. Div. Sept. 12, 2012). This case began when two separate groups of soft drink distributors sued their common supplier for several breaches of the distribution agreement between one group of distributors (Last Time Beverage) and the original franchisor. The distributors alleged that the supplier had changed their distribution rights without additional ...

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A Florida federal district court judge has enforced a forum selection clause set forth in a form franchise agreement attached to a Uniform Franchise Offering Circular even though neither party to the contract could produce a fully executed copy. Alloy Wheels, Inc. v. Wheel Repair Solutions Int’l, Inc., 2012 U.S. Dist. LEXIS 118600 (S.D. Fla. Aug. 21, 2012). The plaintiff franchisee alleged that it negotiated with the defendant franchisor, headquartered in Georgia, for a wheel repair franchise that included a specific, exclusive territory in South Florida. After the franchisee ...

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The United States District Court for the Eastern District of California recently granted summary judgment to a franchisor on a franchisee’s claim that it had breached the franchise agreement, thus relieving the franchisee of the obligation to pay fees. In Century 21 Real Estate LLC v. All Professional Realty, Inc., 2012 U.S. Dist. LEXIS 111744 (E.D. Ca. August 7, 2012), All Professional Realty, Inc. owned and operated several Century 21 franchises in California and Hawaii. After several years of operation, All Professional closed one of its California locations and stopped ...

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Last month, the United States District Court for the Central District of Illinois granted summary judgment to a franchisee of five Steak N Shake restaurants in a contract dispute over the franchisor’s policy requiring all franchisees to “follow set menu and pricing (with the exception of breakfast items), and to offer all company promotions published.” Stuller, Inc. v. Steak N Shake Enterprises, Inc., 2012 U.S. Dist. LEXIS 97414 (C.D. Ill. July 12, 2012). According to the plaintiff, the policy was “contrary to longstanding custom, practice, policy, agreement, and ...

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McLane Foodservice, Inc., a regional distributor of raw produce to Taco Bell restaurants, was named as a defendant in several customer lawsuits arising out of a 2006 E. coli outbreak that was allegedly traced to lettuce served at the restaurants. McLane subsequently filed suit against Ready Pac Produce, Inc., who processed produce for Taco Bell, and Tanimura & Antle, Inc., the entity that procured the raw produce processed by Ready Pac. McLane sought to recover inventories, profits, and goodwill that it lost as a result of the outbreak. McLane also asserted claims for ...

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In Jaguar Land Rover North America, LLC v. Manhattan Imported Cars, Inc., 2012 U.S. App. LEXIS 8260 (4th. Cir. Apr. 23, 2012), the United States Court of Appeals for the Fourth Circuit affirmed a district court’s summary judgment ruling in favor of an automobile supplier, holding that the supplier was not required to make certain incentive payments to the dealership. The appeals court declined to enforce a contract integration clause that purported to cancel and supersede any agreements previously executed between the parties.

In connection with their agreement to add a Land ...

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In Window World of Chicagoland, LLC v. Window World, Inc., 2012 U.S. Dist. LEXIS 71615 (N.D. III. May 23, 2012), the franchisee entered into multiple licensing agreements with Window World that granted him exclusive trade areas in certain Illinois counties. The franchisee alleged that representatives of Window World assured him that his exclusive territories would be protected by the use of buffer areas around them and that if a territory adjacent to any of his exclusive territories was to be sold, he would have the "right of first refusal" to purchase the territory. When the ...

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In DNB Fitness, LLC v. Anytime Fitness, LLC , 2012 U.S. Dist. LEXIS 74287 (N.D. III. May 30, 2012), a federal district court only partly granted a franchisor's motion to dismiss, as the court refused to enforce a clause that required mediation before the filing of a lawsuit. The case was a challenge to Anytime Fitness' practice of charging franchisees when they enrolled their health club members in a website called "Anytime Health." Several franchisees sued Anytime for breach of contract and alleged a failure of appropriate disclosure. The plaintiffs also alleged that Anytime used its ...

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In Smoothie King Franchises, Inc. v. Southside Smoothie & Nutrition Center, Inc., 2012 U.S. Dist. LEXIS 24436 (E.D. La. Feb. 27, 2012), the franchisor of the Smoothie King system brought an action to enforce post-termination noncompetition clauses. The defendant-former franchisees filed various counterclaims based on allegations that they were required to engage in false and deceptive advertising by selling their products as “real whole fruit” smoothies, when the product allegedly contained other ingredients. After the court granted Smoothie King’s request to ...

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In DaimlerChrysler Motors Company, LLC v. Manuel, et al., 2012 Tex. App. LEXIS 1489 (Tex. Ct. App. Feb. 24, 2012), a Texas appellate court affirmed the trial court’s finding that DaimlerChrysler (Chrysler) breached the best efforts provision of its contract with its dealer. In this case, Chrysler entered into an agreement with the dealer for a new Chrysler-Jeep dealership in South Arlington, Texas. The agreement stated that Chrysler granted the dealership subject to the possibility that it could be protested by another dealer, which would delay its establishment. The contract ...

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In Green Desert Oil Group, et al. v. BP West Coast Products, et al., 2011 U.S. Dist. LEXIS 131140 (N.D. Ca. Nov. 14, 2011), the U.S. District Court for the Northern District of California granted a supplier’s motion to dismiss, finding that the plaintiffs failed to state a claim upon which relief could be granted regarding their claims of breach of contract, negligence, and violation of unfair competition laws.

The plaintiffs, who are gas station franchisees, brought a class action lawsuit against BP West Coast Products LLC and BP Products North America, Inc. (BP), the franchisor of ...

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The District of New Jersey recently dismissed a franchisee’s claim for breach of the implied covenant of good faith and fair dealing against BP, a large oil producer and gas station franchisor. Alboyacian v. BP Products North America, Inc., et. al., 2011 U.S. Dist. LEXIS 134453 (D.N.J. Nov. 22, 2011). BP was a party to several commission agreements for the sale of gasoline by BP through third-party gas station operators. Those agreements had previously been found subject to the relationship protections of the New Jersey Franchise Practices Act (NJFPA). Upon expiration of the ...

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In AAMCO Transmissions, Inc. v. Trovato, 2011 U.S. Dist. LEXIS 111943 (S.D. Cal. Sept. 28, 2011), a California federal court denied a motion to dismiss AAMCO’s claim for breach of contract based on a franchisee’s failure to accurately report sales and failure to allow AAMCO to inspect its books and records. The dispute arose when AAMCO learned that the franchisee had completed a $2,400 transaction for a customer, which it did not report to AAMCO. During a resulting audit, AAMCO’s inspectors found two books with receipts for transactions that were not reported. When the ...

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In JMF, Inc., et al. v. Medicine Shoppe International, Inc., 2011 U.S. Dist. LEXIS 106100 (D.N.D. Sept. 19, 2011), the federal district court for North Dakota denied, in part, a franchisor’s motion for summary judgment, finding that issues of fact existed regarding whether the franchisor had offered new franchises in North Dakota sufficient to trigger a “most favored nations” (MFN) clause contained in the plaintiffs’ franchise agreements. Defendant Medicine Shoppe International, Inc. (MSI), the franchisor of nationwide prescription pharmacies, in 2009 announced an ...

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In Good Feet Worldwide, LLC v. Larry Schneider, 2011 U.S. Dist. LEXIS 83865 (S.D. Cal. August 1, 2011), the court held that the statute of frauds was satisfied even though the franchisee did not sign a franchise agreement. A dispute arose between the franchisor and franchisee that eventually required a determination of whether the forum selection clause was enforceable because the entire franchise agreement itself was not signed by the franchisee. The franchisor argued that the statute of frauds was satisfied because the specific franchisee in question had “signed documents ...

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A federal district court in Georgia recently rejected a franchisor’s attempt to introduce expert testimony regarding the proper grammatical interpretation of the sentence in its franchise agreement defining “Net Sales.” In Coyote Portable Storage, LLC v. PODS Enterprises, Inc., 2011 U.S. Dist. LEXIS 51899 (N.D. Ga. May 16, 2011), several franchisees sued for breach of contract, claiming that their franchisor had improperly calculated royalties, and had thus overcharged them. The franchise agreements at issue calculated royalties as a percentage of “Net Sales,” ...

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A Colorado federal district court recently held that the Colorado Uniform Commercial Code governed a dealership agreement in Precision Fitness Equip., Inc. v. Nautilus, Inc., 2011 U.S. Dist. LEXIS 13576 (D. Colo. Feb. 2, 2011). This case required the court to consider the admissibility of extrinsic evidence to interpret a contract provision, an issue that may be decided differently depending on whether the UCC or the common law applies. To make this determination, Colorado courts look to whether the primary purpose of the contract is the sale of goods or services. Since the Colorado ...

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In Boon Rawd Trading International Co., Ltd. v. Paleewong Trading Co., 2011 U.S. Dist. LEXIS 24963 (N.D. Cal. Mar. 8, 2011), a California federal district court recently granted a supplier’s motion for summary judgment on all claims in a contract dispute with a long-time United States importer and distributor of its Singha Beer products. Although it was undisputed that the parties never had a written contract or even an oral agreement, the distributor claimed that an implied contract under California Civil Code § 1621 had manifested over the course of the parties’ 30-year ...

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In Landreth, Inc. v. Mazda Motors of Am., Inc., 2010 U.S. Dist. LEXIS 108080 (S.D. Ind. Oct. 7, 2010), the plaintiff Mazda dealer sued Mazda Motors of America alleging that the manufacturer had broken its promise to award plaintiff an additional dealership. The plaintiff admitted that Mazda had not entered into a written agreement to grant it  an additional dealership, but contended that Mazda’s representatives had told the plaintiff that it would receive a new dealership when the opportunity arose. Mazda moved for summary judgment on that claim, arguing that no contract could ...

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Must a pizza franchisor force its franchisees to stay within their delivery territories? “No”, said the United States District Court for the Eastern District of Michigan last month. Cottage Inn Carryout & Delivery, Inc. v. True Freedom Investments LLC, 2010 U.S. Dist. LEXIS 113170 (E.D. Mich. Oct. 20, 2010). The question was raised by a franchisee who claimed the franchisor was allowing others to infringe on its “protected” trading area. The franchisor argued that the parties’ agreement did not require it to police its franchisees to make sure that they were staying ...

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A franchisee since the 1970s who had owned 21 Hardee’s stores lost on its attempt to evade the jury trial waiver in its franchise renewal agreement. Hardee’s Food Sys., Inc. v. Hallbeck, 2010 U.S. Dist. LEXIS 114192 (E.D. Mo. Oct. 27, 2010). Jury trial waivers “are valid under federal law,” the court held. In this recent decision, the court also found significant that the jury waiver appeared twice in the agreement, including once in bold type.  Under these facts, the court found the waiver was made knowingly and voluntarily. The case will go forward sans jury.

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In Mercedes-Benz USA v. Concours Motors, 2010 WL 55473 (E.D. Wis. Jan 4, 2010), a Wisconsin federal court denied Mercedes-Benz’s motion for partial summary judgment on its breach of contract claim against its dealer, Concours. At issue concerned the parties’ oral agreement to allow the dealer to construct a new facility.  Because of low sales at the dealership, MB and Concours agreed to relocate the dealership to another location. When Concours started constructing a few facility but then stopped, MB sued claiming promissory estoppel and breach of contract.  The court refused to ...

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In Luther v. Kia Motors Am., Inc., 2009 WL 4906878 (W.D. Pa. Dec. 18, 2009), the court granted summary judgment to Kia on a rejected applicant’s claim that he had been promised a dealership.  The applicant claimed that a Kia representative told him he had been approved at the regional level, and that in the past, those approved at that level were approved by the ultimate national-level decision makers.  That constituted an oral contract, according to the applicant.  The court disagreed, holding that the conversation did not amount to an oral contract, that the representative did not have ...

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A Florida federal court recently enjoined franchisor Panda Express from opening a restaurant adjoining a Chick-Fil-A restaurant location in Mount Dora, Florida. Chick-Fil-A, Inc. v. CFT Development, LLC, 2009 WL 2870617 (M.D. Fla. Sept. 3, 2009). When Panda Express acquired its property in 2007, it was aware that Chick-Fil-A enjoyed the benefit of a restrictive covenant prohibiting the property from being used as the site of “a quick service restaurant deriving twenty-five percent (25%) or more of its gross sales from the sale of chicken.” Panda Express resisted the ...

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In Cottman Transmission Systems, LLC v. FVLR Enterprises, LLC, 2009 WL 2488505 (Tex. Ct. App. Aug. 17, 2009), a Texas appellate court affirmed a jury’s finding that Cottman was liable for the lease obligations of its terminated franchisee even though Cottman was not a signatory to the lease. The franchisee and landlord had entered into a 10-year lease that included a lease rider giving Cottman the option to assume the lease upon its termination or expiration. Cottman did not sign either the lease or the rider.  

After Cottman terminated the franchisee for abandonment, the landlord ...

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In Honey Dew Assoc. v. Creighton Muscato Enter., Inc., 73 Mass. App. Ct. 846 (Mass. App. Ct. Mar. 23, 2009), the Massachusetts Court of Appeals vacated a judgment against a franchisee for failing to pay advertising fees. The Court found that by signing a newer franchise agreement with an ad fee clause in it, the corporate franchisee had not agreed to pay ad fees for all of its owner’s earlier established locations in the name of other commonly-owned entities.

Specifically, franchisor Honey Dew added a provision in its franchise agreement that the franchisee agreed to contribute to an ...

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Real estate franchisor Cendant Corporation has prevailed against a variety of claims arising out of a prospective subfranchise arrangement in Greece.  Katsiavrias v. Cendant Corp., 2009 WL 872172 (D.N.J. Mar. 30, 2009). A prospective franchisee sued Cendant after not receiving exclusive subfranchise rights to Greece. Earlier, after sending a letter of intent to the potential subfranchisee, Cendant had heard nothing. It then went so far as to inform the party of a competing offer for the subfranchising rights before signing with another company. In evaluating Cendant’s ...

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A recent decision illustrates the importance of carefully describing the bounds of a protected territory in a franchise agreement. In Ingraham v. Planet Beach Franchising Corp., 2009 WL 909567 (E.D. La. Apr. 1, 2009), the franchisee opened a Planet Beach tanning salon in a suburb of Philadelphia. The franchise agreement prohibited Planet Beach from establishing another franchise within the protected territory, defined as “Philadelphia, PA 30,000 in Population.”  When Planet Beach established another franchise within five miles of the plaintiffs’ location, the ...

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This month the United States District Court for the Western District of Michigan refused to grant a hotel franchisee’s request for a preliminary injunction ordering its franchisor to take reservations for hotel stays occurring after June 30, 2009, the date that the parties agreed the franchise agreement between them would expire. Lake Country Corp. v. Sheraton LLC, 2008 WL 4534419 (W.D. Mich. Oct. 6, 2008).

Relations between the franchisee and Sheraton had begun to deteriorate after the franchisee refused to make required improvements to the hotel property. The franchisee ...

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The United States Court of Appeals for the Fifth Circuit recently concluded that a prospective purchaser of a vehicle dealership is not a third-party beneficiary of the seller’s dealership agreement. In K.P.’s Auto Sales, Inc. v. General Motors Corp., 2008 WL 4580087 (5th Cir. Oct. 15, 2008), K.P. offered to buy an existing Cadillac dealership, which submitted the proposed sale to GM for approval.  K.P.’s lawsuit alleged that GM then improperly shared confidential information about K.P. and its principal with another dealer, who used that information to outbid K.P. In its ...

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A three-judge panel of the Eighth Circuit Court of Appeals has ruled that Domino’s Pizza may specify a particular new computer system developed by Domino’s for system-wide use under the terms of its franchise agreement. Bores, et al. v. Domino’s Pizza, LLC, 2008 WL 2467983 (8th Cir. June 20, 2008). By reversing and instructing the district court to enter judgment in favor of Domino’s, the appellate court decided the last remaining claim in the case. A Domino’s motion for summary judgment dismissing all of the franchisees’ other claims had been granted in May of 2007.

The ...

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In De Walsche v. Togo’s Franchised Eateries LLC, No. CV-07-2901 (C.D. Cal. July 21, 2008), a federal court in California granted a defense motion for summary judgment on the franchisee’s claims that Togo’s had breached the franchise agreement and the implied covenant of good faith and fair dealing in requiring an English Language Proficiency Assessment (“ELPA”) as a condition for the transfer of his shop to two buyers. The franchisee also claimed that Togo’s ELPA discriminated against the buyers in violation of California’s Civil Rights Act. (Gray Plant Mooty ...

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In AAA Abachman Enterprises, Inc. v. Stanley Steemer Intern., Inc., 2008 WL 624040 (11th Cir. March 10, 2008), the plaintiff’s franchise agreement granted exclusive rights to use the Stanley Steemer trademarks in the carpet and upholstery cleaning business, within a specified territory. The franchisor later granted exclusive rights in the same territory to other companies to operate a “Stanley Steemer Duct Cleaning Business.” The plaintiff alleged that this grant of rights in connection with duct cleaning violated the exclusivity provision of plaintiff’s franchise ...

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A Pennsylvania federal court in Khan v. GNC Franchising LLC, 2008 WL 612749 (W.D. Pa. March 3, 2008), granted a partial victory to franchisor GNC Franchising seeking to terminate franchisees based on non-payment. The court, however, denied the franchisor’s summary judgment motion requesting breach of contract damages because they were not proved with certainty. The franchisees presented evidence showing that they paid some of the outstanding amount owed, although it was not clear how much they had paid. The decision is a reminder that damages even in non-payment cases must be ...

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In R & F, LLC v. Brooke Corporation, 2008 WL 294517 (D. Kan. Jan. 31, 2008), the federal district court in Kansas granted a franchisor defendant’s motion in part and issued a stay to provide an opportunity for the parties to mediate the dispute, as required by their franchise agreement. Plaintiff R & F, LLC brought suit alleging that franchisor Brooke Corporation breached the franchise agreement by failing to provide contacts with insurance companies in the markets where R & F conducts its business, in order for R & F to offer insurance products to its customers and potential customers ...

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The United States District Court for the District of Arizona recently denied a post-trial motion filed by Best Western International Inc. for a new trial and for judgment as a matter of law following a set of unfavorable jury verdicts in Best Western International, Inc. v. Patel, et al., 2008 WL 205286 (D. Ariz. Jan. 23, 2008). The hotel at issue had been operated for over 30 years under the Best Western trademarks but was terminated approximately a year after the current franchisees had purchased it. Best Western thereafter brought suit against the franchisees for failing to pay for ...

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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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