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The Franchise Memorandum

The Franchise Memorandum

Posts in Good Faith and Fair Dealing.

The U.S. Court of Appeals for the Sixth Circuit recently affirmed summary judgment for a medical device manufacturer, Wright Medical Technology, on claims brought by a distributor, Beijing Fito Medical, alleging that Wright breached the distribution agreement between the parties. Beijing Fito Med. Co. v. Wright Med. Tech., Inc., 2019 WL 480410 (6th Cir. Feb. 7, 2019). Wright and Fito entered into an agreement that gave Fito the right to serve as Wright’s exclusive distributor of hip, knee, foot, ankle, and biologics products in China. The agreement permitted Wright to remove ...

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A Massachusetts federal court granted in part and denied in part a motion to dismiss claims for breach of the implied covenant of good faith and fair dealing in a distribution contract. Bruno Int'l Ltd. v. Vicor Corp., 2015 U.S. Dist. LEXIS 123556 (D. Mass. Sept. 16, 2015). For nearly 25 years, Bruno had been the exclusive Israeli distributor for Vicor, a Massachusetts supplier of modular power components and power systems. Then, Vicor notified Bruno that it would not renew its exclusive distribution contract. Approximately one month later, the parties signed an agreement providing ...

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In Passport Health, Inc. v. Travel Med, Inc., et. al., 2010 U.S. Dist. LEXIS 46210 (E.D. Cal., May 11, 2010), a California federal court granted a franchisor’s motion to dismiss the franchisee’s claims for breach of the franchise agreement, but refused to dismiss its claims for the franchisor’s breach of the covenant of good faith and fair dealing. The franchisee claimed that the franchisor breached the franchise agreement, in part, by failing to provide “training, marketing, management methods, procedures, and materials,” by providing “flawed and defective ...

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In Coriatt-Gaubil et al. v. Roche Bobois Int’l, S.A. et al., 2010 U.S. Dist. LEXIS 48880 (D. Mass. May 18, 2010), a Massachusetts federal court denied a motion of the plaintiff, who was a 50 percent shareholder of several corporate franchisees, for a preliminary injunction to enjoin the franchisor, who was the other shareholder via an affiliate, from terminating the parties’ franchise agreements. The court found that the plaintiff and corporate franchisees had not established a likelihood of success on the merits on their claim for breach of the implied covenant of good faith and ...

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In Sunshine Restaurant Partners, L.P. v. Shivshakti One, Inc., 2008 WL 2809096 (S.D. Fla. Nov. 5, 2008), the United States District Court for the Southern District of Florida granted an International House of Pancakes subfranchisor’s motion to dismiss a franchisee’s claim for breach of the covenant of good faith and fair dealing regarding the construction of a new location in a site the franchisee wanted, finding the construction fell in line with the contract between the parties. However, the court denied the subfranchisor’s motion to dismiss the contract claim, finding ...

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In Cottman Transmission Systems, LLC v. Kershner, 2008 WL 583894 (E.D. Pa. March 3, 2008), several former franchisees sued their franchisor alleging that it failed to make a good faith effort to establish a chain of successful franchise stores and, instead, engaged in a nefarious scheme to “churn” franchises and profit at the franchisees’ expense. Based upon the franchisor’s alleged conduct, the franchisees filed a lawsuit claiming, among things, that the franchisor violated the covenant of good faith and fair dealing.

In response to the lawsuit, the franchisor moved to ...

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The United States District Court for the District of Colorado recently denied The Quizno’s Franchise Company LLC’s motion to dismiss claims brought by a class of Quizno’s franchisees under Colorado statutory and common law. Bonanno v. The Quizno’s Franchise Co. LLC, 2008 WL 638367 (D. Colo. March 5, 2008). Plaintiffs allege that Quizno’s, its affiliated entities, and individuals who control and operate the Quizno’s franchise system fraudulently induced plaintiffs to “purchase franchises for between $20,000 - $25,000 per franchise when they knew that the ...

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The United States Bankruptcy Court for the Southern District of Texas recently found the franchisor of Diedrich coffeehouses in breach of the implied covenant of good faith and fair dealing for failing to exercise an option in its master lease that would have allowed plaintiff Magna Cum Latte, a Diedrich franchisee, to continue to sublease from Diedrich the premises of one of Magna’s franchised coffeehouses. Magna Cum Latte, Inc. v. Diedrich Coffee, Inc., et al., 2007 WL 4412143 (Bankr. S.D. Tex Dec. 13, 2007).

Diedrich sold three existing coffeehouses in Houston, Texas to Magna ...

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About this Publication

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

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