IFA's 45th Annual LEGAL - International Franchise Association

IFA’s 45 th Annual
LEGAL
SYMPOSIUM

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Fraud
• Coca-Cola N. Am. v. Crawley Juice, Inc., Bus.
Franchise Guide (CCH) 14,621 (E.D.N.Y. May
17, 2011)
– Agreement contained merger clause
– Franchisee’s allegations contrary to agreement
– Fraud claims dismissed

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Fraud
Heightened Pleading Requirements
• Meade v. Kiddie Academy Domestic
Franchising, 2012 U.S. Dist. LEXIS 42711 (D.
N.J. March 28, 2012)
• BP West Coast Products, LLC v. Shalabi, 2012
U.S. Dist. 17027 (W.D. Wa. Feb. 10, 2012),

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Earnings Claim
• 7-Eleven, Inc. v. Spear, Bus. Franchise Guide
(CCH) 14644 (N.D. Ill. June 23, 2011)
– 7-Eleven disclose not providing info on stores
open less than 12 months
– Franchisee purchase store open less than 12mos
– Claim knew critical information but failed to
disclose

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Estimated Start Up Costs
• A Love of Food I, LLC v. Maaz Vegetarian USA,
Inc., 795 F. Supp 2d 365 (D. Md. 2011)
– Actual investment 85% more than estimated initial
investment in disclosure document
– Extent of discrepancy can be considered when
determining fraud claim

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Fraud
• Teng Moua v. Jani-King of Minnesota, Inc., 810
F.Supp. 2d 882 (D. Minn. Aug. 30, 2011)
– Earn as much as medical doctor
– If you buy more, you’ll get more
– The business could continue for long time
– Miscalculated amount of accounts

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Registration
• Ellering v. Sellstate Realty Systems Network, Inc.,
801 F. Supp. 2d 834 (D. Minn. July 13, 2011)
-Selling a franchise in Minnesota before franchise
was registered
-False and misleading future projections
-Reasonably should have known that the
franchisor was not registered.

• Teng Moua
IFA’s 45
LEGAL SYMPOSIUM
th Annual
Fraud
– Representation after purchased
– UFOC disclaimed earnings claims
– UFOC explained calculation for accounts
– True
– Puffery

Keeps Franchisors Up at Night
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Awuah v. Coverall North America, Inc., 952 N.E.2d 890 (Mass.
2011).
• Previously found that franchisees were employees and
certified questions to Mass Supreme Court
• Mass supreme Court found franchisor
– cannot use an accounts receivable financing method to
pay,
– cannot agree with the franchisee (now employee) that the
employee pays cost of workers comp insurance and
– franchisor cannot deduct franchise fees from employee's
wages.
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Jason Robert’s, Inc. v. Administrator, 15 A.3d 1145 (Conn. App.
Ct. 2011).
• Parties had franchise agreement whereby
"franchisee" was licensee for concrete business
• Court held franchise agreement is not exception to
Connecticut's Unemployment Compensation act so
must evaluate traditional factors, including control
– Franchise Agreement provided that F'zor scheduled jobs,
Licensee had to check-in every day, wear required uniform,
notify licensor if late or absent from work, etc.
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Juarez v. Jani-King of California, Inc., 273 F.R.D. 571 (N.D. Cal. 2011)
Juarez v. Jani-King of California, Inc., 2012 WL 177564 (N.D. Cal. Jan. 23, 2012)
Juarez v. Jani-King of California, Inc., 2012 WL 525511 (N.D. Cal. Feb. 16, 2012).
• Court denies motion for class action status
• Court grants Franchisor Summary judgment finding on record that
franchisees not employees
– Where franchise agreement between the parties, the normal
rebuttable presumption does not apply
– "control" by franchisor to protect trademark is insufficient
– Method of payment irrelevant if insufficient control
• But certified for interlocutory appeal
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Jan-Pro Franchising International Inc. v. Depianti, 712 S.E.2d 648,
2011 WL 2535280, Bus. Franchise Guide (CCH) 14,643 (Ga. Ct.
App. 2011).
• Franchisor not employer of Unit franchisees under
Mass Independent Contractor statute
• A master franchisee entered into franchise
agreements; thus another layer between defendant
franchisor and the unit franchisees
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Implied Covenant of
Good Faith & Fair Dealing
• Hardee’s Food Systems, Inc. v. Hallbeck, 776 F.
Supp. 2d 949 (E.D. Mo. 2011)
-Franchisee alleged breach of implied
covenant based on lewd TV advertisement
-Agreement gave franchisor sole discretion
over ad fund

Implied Covenant of Good Faith and Fair Dealing
• Young Living Essential Oils, LC v. Carlos Marin,
Bus. Franchise Guide (CCH) 14,713 (Utah
Oct. 21, 2011)
• Agreement silent on marketing assistance
• Covenant cannot create obligation
inconsistent with express terms
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Non-Compete
• Fantastic Sams Salons Corp. v. Maxie Enterprises,
Inc., 2012 WL 210889 (M.D. Ga. Jan. 24, 2012)
-Alleged violation of the post-termination
noncompetition clause
-in any capacity
-similar to Fantastic Sams business”
-Specify with particularity

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Non-compete
• Singas Famous Pizza Brands Core v. New York
Advertising LLC, 2012 WL 899231 (2d Cir. Mar.
19, 2012)
• Franchisee claimed 10 mile radius
unreasonable
• Franchise Agreement treated as evidence
restriction “fair and reasonable”
• Close proximity to other restaurants

“Then current” Franchise Agreement
• G.I. McDougal, Inc. v. Mail Boxes Etc., Inc.,
2012 WL 90083 (Cal. Ct. App. 2012)
-Franchisor did not have to renew the
franchise agreement “intact and without
change so as to preserve the status, and
economic benefits conferred by the Franchise
Agreement.”
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Good Cause
• Continental Cars, Inc. v. Mazda Motor of
America, Inc., Bus. Franchise Guide (CCH)
14,688 (W.D. Wash. Sept. 9, 2011)
-Statute- may terminate upon felony
-Statute is baseline
-Agreement req’d “significant adverse effect”

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Economic Loss Rule
• Cousins Subs Systems Inc. v. Better Subs Development Inc.,
2011 WL 4585541 (E.D. Wis. Sept. 30, 2011)
-Economic loss doctrine precludes recovery for many tort
claims which result in purely economic damages
-Applies to goods and not services
-Franchise agreement involved services
-Economic loss doctrine was inapplicable
-Wisconsin Deceptive Trade Practices Act

IFA’s 45
LEGAL SYMPOSIUM
th Annual

Chin v. Advances Fresh Concepts Franchise Corp., 123 Cal. Rptr.
3d 547, 2011 App. LEXIS 464, Bus. Franchise Guide (CCH)
14602 (Cal. Ct. App. 2011)
• Appellate Court reverses finding of unconscionability
and enforces arbitration clause:
• Not unconscionable:
– Provision requiring the arbitrator to apply the law
rather than "principles of justice and equity"
– Provision limiting recovery to compensatory
damages
– Provision that costs were prohibitive
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Gadson v. Supershuttle Int'l, 2011 U.S. Dist. LEXIS 112812, 2011
WL 1231311, Bus. Franchise Guide (CCH) 14,597 (D. Md. Mar.
30, 2011)
• Court refuses to enforce arbitration clause on
unconscionability grounds.
• Unconscionable:
– Fee splitting provision
– Prohibition on class action in arbitration
– Truncated limitations
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Laguna v. Coverall N. Am., Inc., 2011 WL 3176469, Bus. Franchise
Guide (CCH) 14,656 (S.D. Cal. July 26, 2011).
• Who decides arbitrability?
• Generally, if incorporate AAA rules, parties deemed
to have agreed to have arbitrator decide
• But here, agreement might be ambiguous because
franchise agreement also contained a severability
clause providing that, "if any term…is held by a court
of competent jurisdiction to be invalid…":
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Relationship – Analysis of Good Cause
• Kaeser Compressors, Inc. v. Compressor &
Pump Repair Services, Inc., 781
F. Supp. 2d 819 (E.D. Wis. Feb. 14, 2011)
-An objectively ascertainable need for change
-Proportionate response to that need
-Nondiscriminatory action
-Constructive termination
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Good Cause
• Girl Scouts of Manitou Council, Inc. v. Girl
Scouts of the United States, Inc., 646 F.3d 983,
(7th Cir. 2011)
• National realignment
• No evidence Council failed to meet goals

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Franchisor not vicariously liable
• McKee Foods Corp. v. Lawrence, 2011 Ga. App. LEXIS 444 (Ga. Ct. App.
June 3, 2011).
• Stephens v. General Nutrition Companies, Inc., 2011 WL 833340 (N.D. Ill.
Mar. 3, 2011).
• McFarland v. Breads of the World, LLC, 2011 WL 801815 (S.D. Ohio Feb. 1,
2011).
• Capriglione v. Radisson Hotels International, Inc., 2011 U.S. Dist. LEXIS
115145, 2011 WL 4736310 (D. N.J. Oct. 5, 2011).
• Ketterling v. Burger King Corp., dba Burger King, HB Boys, 2012 Ida. LEXIS
62 (Idaho 2012).
• Howell v. Papa Johns Int’l., 2011 WL 3625142 (N.D. Ohio Aug. 16, 2011).

Franchisor Not vicariously Liable
• Conrad v. Waffle House, Inc., 351 S.W.3d 813 (Mo. Ct. App.
2011).
• "Economics Reality Test":
– Power to hire and fire
– Supervision and control over schedule and conditions
– Determination of rate and method of pay
– Maintain work records
– Who owns premises and equipment
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Franchisor May be Vicariously Liable
• Cooley v. Valero Energy Corp., 2012 U.S. Dist. LEXIS 40291
(Mar. 20, 2012).
• Customer ADA claim
• Franchise agreement provided some control to Valero
– Station must be operated in conformity with
standards
– Valero had right to communicate directly with
subfranchisee
– Could require renovations to location
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Damages trebled for infringement and/or
counterfeiting under Lanham Act
• Super 8 Worldwide, Inc. v. Urmita, Inc., 2011 WL 2909316
(D.N.J. July 18, 2011)
• Luxottica Retail North America Inc. v. CAS-MAN, Inc., 2011 WL
672063 (S.D. Ohio Jan. 14, 2011) (magistrate judge
recommendation); and 2011 WL 672051 (S.D. Ohio Feb. 16,
2011) (order adopting recommendation)
• Passport Health, Inc. v. Travel Med, Inc., 2011 WL 3915840
(E.D. Cal. Sept. 6, 2011).
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Damages/Attorney’s Fees
• Doctor’s Associates, Inc. v. Vennie’s
Smokehouse/Meat Speciality, LLC, 2011 U.S.
Dist. LEXIS 75375 (E. D. La. July 13, 2011)

Lost Future Royalties too speculative
Days Inns Worldwide, Inc. v. Investment
Properties of Brooklyn Center, LLC, 2011 WL
4538076 (D. Minn. Aug. 26, 2011).
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Franchisor entitled to lost future royalties
• Meineke Car Care Centers, Inc. v. RLB Holdings, LLC, 423 Fed.
Appx. 274 (4th Cir. 2011).
• Franchise Agreement did not specify that Franchisor entitled
to lost future royalties
– But may be entitled to lost future profits as measure of
damages under common law
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Meineke Car Care Centers, Inc. v. RLB Holdings, LLC, 423 Fed.
Appx. 274 (4th Cir. 2011).
• Franchisor presented sufficient evidence to get to trial under
common law
– Franchisee breached by closing and that was proximate
cause of lost future profits
– Reasonable certainty as to amounts—even if franchisee
was loosing money because royalties based on gross not
net sales
– Calculation presented to court was based on actual
historical sales performance
– Mitigation is affirmative defense and Meinke presented
some evidence of efforts to mitigate, creating a fact issue
for trial
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Hardee’s Food Sys., Inc. v. Hallbeck, 2011 WL 4407435
(E.D. Mo. Sept. 21, 2011).
Same and relying on Meineke, finds franchisor
Meet burden and is entitled to lost future
royalties
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Craig & Landreth, Inc. v. Mazda Motor of
America, Inc., 2011 WL 308386 (S.D. Ind. Jan. 27,
2011).
• Franchisee's damages must be limited to net
profits--granted franchisor's motion in limine
to exclude evidence of owner's lost
compensation
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
250 per hour

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Recovered Rates: burden of proof
• Passport Health, Inc. v. Travel Med, Inc., 2011 WL 3915840 (E.D. Cal. Sept. 6, 2011).
• Partner rate $250 per hour
• Firehouse Restaurant Grp., Inc. v. Scurmont, Bus. Franchise Guide 14,738 (D.S.C. ) Oct 17, 2011)
• Reduced application by 50%
• United Marketing Solutions, Inc. v. Fowler, 2011 WL 837112, at *1 (E.D. Va. Mar. 2, 2011).
• Franchisee did not sufficiently prove "prevailing market rate" because affidavits only stated
the attorney's rate and the application failed to include affidavits from local attorneys
regarding local market. And another case from same jurisdiction describing market rates
insufficient

Warren Distributing Co. v. Inbev USA, LLC, Bus. Franchise Guide
(CCH) 14,564 (D.N.J. Feb. 28, 2011).
• Who was prevailing party?
• Wholesaler sues brewer seeking higher "fair market value" for
distribution rights after termination
• Claimed cash flow approach was appropriate method
• Jury agreed with Brewer that a market multiples approach
was correct, but awarded same damages.
• Awarded higher damages to Brewer on counterclaims
• Court found Wholesalers was prevailing party under the New
Jersey Beer law, but reduced award to 0 based on over-all
result
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Cumberland Farms, Inc. v. Lexico Enterprises, Inc., 2012 WL 526716 (E.D.N.Y.
Feb. 16, 2012).
• Holding that language "enforcing rights and remedies" in
prevailing party attorney fee clause included fees of successful
defending case
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Jackson Hewitt, Inc. v. H.E.A.T. Enterprises, LLC, 2011
WL 6347883; 2011 U.S. Dist. LEXIS 144759 (D.N.J. Dec.
15, 2011)
• Court found individual guarantor bound by
injunction even though did not sign franchise
agreement
• Evidence showed 2 individual defendants
were in active concert with entity, even if did
not own it
• were bound by injunction and could be found
in contempt if violate the non-compete
IFA’s 45
LEGAL SYMPOSIUM
th Annual

AAMCO Transmission, Inc. v. Dunlap, 2011 U.S. Dist. LEXIS 91130,
2011 WL 3586225, Bus. Franchise Guide (CCH) 14,680 (E.D. Pa.
Aug 16, 2011)
• Court grants preliminary injunction
against franchisee from operating
pending arbitration
• Issue in arbitration is whether franchisee
may continue operating
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
TRO and Notice
• Domino’s Pizza Franchising, LLC v. Seraig, 2011 U.S. Dist. LEXIS
122034, 2011 WL 5025517, Bus. Franchise Guide (CCH)
14,716 (E.D. Mich. Oct 21, 2011)
• Franchisor did provide notice and could not
show immediate irreparable harm if court
denies until former franchisee gets notice

Stuller, Inc. v. Steak N Shake Enterprises, Inc., 2011 WL 2473330
(C.D. Ill. June 20, 2011).
• Franchisee obtains injunction against
franchisor from enforcing new mandatory
pricing and from terminating franchise
agreement for failure to follow that pricing
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Stuller, Inc. v. Steak N Shake Enterprises, Inc., 2011 WL 2473330
(C.D. Ill. June 20, 2011).
• Court finds franchise agreement ambiguous
regarding whether Franchisor could mandate pricing
• Court finds Franchisee established irreparable harm
– Ambiguity shows harm not self-inflicted
– Money damages insufficient to compensate for loss of
franchise business
– franchisee could not convert property to different business
and covenant not to compete
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
No Franchisee Fee
• Clear Wave Hearing Instruments v. Starkey
Holding Corp., 2012 U.S. Dist. LEXIS 37444 (D.
Minn. Mar. 20, 2012)

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Other Fees
• Atchley v. Pepperidge Farm, Inc., 2012 U.S.
Dist. LEXIS 30878 (E.D. Wash. Mar. 8, 2012)
• Bondling fee charge could be franchise fee
• Fact issue

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Not Substantially
Associated with Mark
• See Roberts v. C.R. England, Inc., Bus. Franchise
Guide (CCH) 14, 737 (N.D. Cal. Nov. 22, 2011)
• Echo, Inc. v. Timberland Machines & Irrigation, Inc.,
2011 WL 148396, 84 Fed. R. Evid. Serv. 692 (N.D. Ill.
Jan. 18, 2011) (aff’d, 661 F.3d 959 (7 th Cir. 2011)
• Missouri Beverage Co. v. Shelton Bros., Inc., 796 F.
Supp. 2d 988, 2011 WL 2458069, Bus Franchise
Guide (CCH) 14,651 (W.D. Mo. June 17, 2011)
(aff’d, 669 F.3d 873 (8thCir. Feb. 28, 2012)

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Insurance Agent
• Garbinski v. Nationwide Mut. Ins. Co., 11 U.S. Dist.
LEXIS 81639, 2011 WL 3164057, Bus Franchise Guide
(CCH) 14,655 (D. Conn. July 26, 2011)
• Agreement suggested marketing plan prescribed in
substantial part by the insurance company and such
claim was substantially associated with the insurance
company’s trademark
• Arrangement could fall under the CFA

IFA’s 45
LEGAL SYMPOSIUM
th Annual
ANTI TRUST: Tying claim
• Shamrock Mktg., Inc. v. Bridgestone Bandag,
LLC, 775 F. Supp. 2d 972 (W.D. Ky. 2011).
• Kodak does not apply well or at all in franchise
context
• Court dismissed "lock-in claims"

Significance of Declaration
Firehouse Restaurants Group, Inc. v. Scurmont, LLC,
Bus. Franchise Guide (CCH) 14,738 (D.S.C. Oct. 17,
2011)
• Claimed FRG’s trademarks obtained by fraud
• FRG on notice 6 months prior to filing its application for
“Firehouse” word mark
• “No other person, firm, corporation or association has the
right to use the mark in commerce.”
• Declaration essential to registration
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Naked License
• Original Rex, LLC v. Beautiful Brands International,
LLC, Bus. Franchise Guide (CCH) 14,628 (N.D. Okla.
May 27, 2011)
• Mark deemed abandoned when use discontinued
with intent not to resume such use
• The party asserting abandonment has to prove that
the owner 1) discontinued use of the mark, and 2)
intended not to resume its use

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Counterfeit
• Century 21 Real Estate, LLC v. Destiny Real Estate
Properties, 2011 U.S. Dist. LEXIS 147075, (N.D. Ind.
Dec. 19, 2011)
• Four elements
– “Counterfeit”
– Principal register
– Not authorized to use mark
– Knowledge and intent
• Continued use by holdover franchisee constituted
use of a counterfeit mark

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Copyright
• Rundquist v. Vapiano S.E., 2011 U.S. District
LEXIS 78781 (D.D.C. July 20, 2011)
• Subject matter jurisdiction as to claims related
to actions in foreign jurisdictions

IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Association Standing
• EA Independent Franchisee Ass’n, LLC v. Edible Arrangements
Int’l, Inc., 2011 U.S. Dist. LEXIS 78008, Bus. Franchise Guide
(CCH) 14,650 (D. Conn. July 18, 2011).
• Members had individual standing
• Redressability satisfied because declaratory relief would
address franchisor's conduct
• Arbitration clause in individual agreements did not apply to
association
• Each member's testimony not needed

Fantastic Sams Franchise Corp. v. FSRO Ass'n, Ltd., __ F. Supp. 2d __, 2011 WL
4899975 (D. Mass., Oct. 12, 2011).
• Class action ban in arbitration provision
of individual member's franchise
agreements prevented association from
pursuing claims
• Association's action = inappropriate "end
run"
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Applicable to Out of State Franchiees
• A Love of Food I, LLC v. Maoz Vegetarian USA, Inc.,
2011 U.S. Dist. LEXIS 103298, 2011 WL 4102084, Bus.
Franchise Guide (CCH) 14,684 (D. Md. Sept. 13,
2011).
• American Estates, Inc. v. Marietta Cellars, Inc., 2011
U.S. Dist. LEXIS 44278, 2011 WL 1560823, Bus.
Franchise Guide (CCH) 14,605 (D. N.J. April 25,
2011).

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Not Applicable to Out of State Franchisee
• Hockey Enterprises, Inc. v. Total Hockey Worldwide,
LLC, 762 F. Supp. 2d 1138 (D. Minn. Jan. 10, 2011).
Minn Franchise Act does not extend to out-of-state
franchisees
• Kaeser Compressors, Inc. v. Compressor & Pump
Repair Services, Inc., 2011 WL 1900175 (E.D. Wis.,
May 19, 2011).

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Buy Back
• Maehal Enterprises, Inc. v. Thunder Mountain
Custom Cycles, Inc., 2011 WL 2650236, Bus.
Franchise Guide 14,634 (Colo. App. July 7,
2011)
– Required to repurchase inventory “acquired”
within 12 months of termination
– “Acquired” means physical possession

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Buy Back
• Weeks Tractor & Supply Co. v. Arctic Cat Inc.,
784 F. Supp. 2d 642, Bus. Franchise Guide
(CCH) 14,592 (W.D. La. Mar. 28, 2011)
• Dealer terminated in 2009
• Had inventory on hand for 2008 and 2009
• “Current inventory” meant currently in
circulation (2010)

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Successor Manufacturer
• Bellas Co. v. Pabst Brewing Co., 2011 U.S. Dist. LEXIS
24781 (S.D. Ohio Mar. 16, 2011)
• Beverage Distributors, Inc. v. Miller Brewing Co., 803
F. Supp. 2d 765 (S.D. Ohio Mar. 22, 2011)
• Esber Beverage Co. v. Labatt USA Operating Co.,
L.L.C., 2012 Ohio 1183, 2012 Ohio App. LEXIS 1036,
2012 WL 983171 (Ohio Ct. App. Mar. 12, 2012)

IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Venue
• Jackson Hewitt v. Barnes Enterprises, 2011 U.S. Dist. LEXIS
41356 WL 1467193 & 2011 WL 2020787 (D. N.J. Apr. 15, 2011)
• Jackson Hewitt, Inc. v. DJSG Utah Tax Service, LLC, 2011 WL
90311 (D.N.J. Jan. 10, 2011) and Jackson Hewitt, Inc. v. DJSG
Utah Tax Serv., LLC, 2011 WL 601585 (D.N.J. Feb. 17, 2011)
• Jackson Hewitt, Inc. v. Barnes Enterprises, 2011 U.S. Dist.
LEXIS 41361 (D.N.J. June 13, 2011)
• Jackson Hewitt, Inc. v. National Tax Network, LLC, 2011 WL
601594 (D.N.J. Feb. 17, 2011)
• Jackson Hewitt, Inc. v. H.E.A.T. Enterprises, LLC, 2011 WL
6347883; 2011 U.S. Dist. LEXIS 144759 (D.N.J. Dec. 15, 2011)

Century 21 Real Estate, LLC v. Gateway Realty, Inc., 2011 WL
1322006 (D.N.J. Mar. 31, 2011)
• Franchisee and guarantors not allowed out of NJ
• "absurd" to suggest that by defaulting the forum
selection clause no longer binding,
• that forum selection clause expired or
• that the NJFPA policy suggests out-of-state
franchisees should not be required to litigate in NJ
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Innovative Technology Distributors, LLC v. Oracle America, Inc.,
2011 U.S. Dist. LEXIS 44930, 2011 WL 1584297 (D. N.J. Apr. 25,
2011).
• Federal Court in New Jersey transferred case to
California
• Court held that the NJFPA makes venue clauses in NJ
presumptively invalid, but that is a rebuttable
presumption
IFA’s 45
LEGAL SYMPOSIUM
th Annual

Homewatch International, Inc. v. Pacific Home Care Services, Inc.,
2011 WL 1660612 (D. Colo. May 2, 2011).
• Colorado federal court transferred to California on basis of 28 USC 1404
• Court first found venue clause calling for venue in Colorado unenforceable
because of CFRA
• but that meant venue clause simply void and court analyzed traditional
venue requirements and found venue in Colorado proper
• After further briefing, Court found the case should be transferred to
California
– Compulsion of witnesses key (and franchisor can fly its employees)
– California statute interpretation and California interest
IFA’s 45
LEGAL SYMPOSIUM
th Annual

JTH Tax v. Houle, 2011 U.S. Dist. LEXIS 122319 (E.D. Va. Sept. 23,
2011).
• VA court transferred to CA under 1404 balance factors
(witness compulsion key). venue clause not valid because
agreement had been terminated and claims were not for
breach of contract
IFA’s 45
LEGAL SYMPOSIUM
th Annual

MKJA, Inc. v. 123 Fit Franchising, LLC, 119 Cal. Rptr. 3d 634 (Cal.
Ct. App. 2011).
• Stayed California action in favor of Colorado arbitration under
CA state statute
• under § 1281.4, once any court of competent jurisdiction,
even a court from another state, has ordered arbitration, the
California court must stay the proceeding and thereafter loses
all but vestigial jurisdiction.
IFA’s 45
LEGAL SYMPOSIUM
th Annual

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Bankruptcy
• In re FPSDA I, LLC, 450 B.R. 392 (Bankr. E.D.N.Y.
2011)
• Can debtor/ franchisee assume lease without
curing defaults under franchise agreement?
• No, agreements are “economically interrelated
and interdependent.”

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Good Cause
• Toor Petroleum Inc. v. Marathon Petroleum Co. LP,
2011 WL 4351614 (S.D. Ohio Sept. 16, 2011)
• Traditionally offered Agreement and a Owner-
Operator Agreement
• Discontinued offering Seller Agreement
• Franchisee claimed good faith
• Marathon made decision in its normal course of
business

IFA’s 45
LEGAL SYMPOSIUM
th Annual
Termination
• Poquez v. Suncor Holdings-COPII, LLC, Bus. Franchise
Guide (CCH) 17,700 (N.D. Cal. Sept. 20, 2011)
• Pertinent inquiry was whether the franchisor actually
terminated or failed to renew the franchise
• Metroil, Inc. v. ExxonMobil Oil Corp., 2012 WL
913681 (D.C. Cir. Mar. 20, 2012)
• “[T]he obligation to renew goes to the ‘franchise
relationship,’ not to the franchise contract.”

Pro Fit Management, Inc. v. Lady of America Franchise Corp.,
2011 WL 765836, 2011 WL 939182, 2011 WL 939226,
2011 WL 939246 (D. Kan. Feb. 25, 2011).
• Objection to written discovery and then stating
“subject to objections,…will produce all responsive,
non-privileged documents in [its] possession,
custody and/or control to the extent that such
documents exist” is meaningless.
IFA’s 45
LEGAL SYMPOSIUM
th Annual