https://www.asianhospitality.com/trends-n-issues/Terrorist+attacks+to+peepholes+/2530 THE DEADLY TERRORIST attack in Pakistan on the Marriott Islamabad Hotel in 2008; the filming of Erin Andrews in her hotel room through a peephole at the Nashville Marriott in 2008; the alleged contraction of Legionnaires’ Disease from the whirlpool tub and swimming pool at the Sheraton Hotel North Charleston in 2009. How are these dreadful events related? They are connected by similar lawsuits in which injured hotel guests sought, unsuccessfully, to impose damages liability on the franchisors.

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Court Not Interested in Terminated Franchisee’s Excuse for Failing to Pay Franchise Fees By: Jeffrey M. Goldstein, Esquire (202) 293-3947 goldlawgroup.com Franchisees and dealers facing a termination grounded on a failure to pay franchise fees frequently make one of three arguments: (1) the franchisor waived the right to insist on the prompt payment; (2) the amount of the arrears was not material; or (3) the franchisor’s wrongful conduct caused the franchisee’s inability to pay. Courts, however, have little patience for such attempts by franchisees to justify the non-payment of fees. Indeed, from a legal standpoint, there is no worse position for a franchisee than to have been terminated for a failure to pay. A recent case in the United States District Court for the District of Puerto Rico clearly demonstrates how most courts deal with a franchisee terminated for failure to pay. Kemco Food Distributors, Inc. v. R.L. Schreiber, Inc., 2016 U.S. Dist. LEXIS 27349 (D.P.R. February 29, 2016). Kemco is notable as it shows that the franchisee was treated harshly despite the existence of an applicable general state franchise statute providing some protection to franchisees from the economic power of franchisors. In the Kemco case, Schreiber, a family-owned and operated food manufacturing company in South Florida, designated Kemco as its exclusive distributor in Puerto Rico, contingent upon Kemco's remaining current on its payments to Schreiber. The evidence showed that Kemco made untimely payments for every invoice that was issued from January 1, 2014 through the termination of the relationship. […]

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RIDING THE CIRCUITS FOR HOTEL FRANCHISEE CASES: Good news and bad news for THI franchisee defaulted for failure to appear in Court: [Judge: “I will enter a default judgment. THI is awarded $327,213.03, comprising: (i) $207,414.71 in outstanding fees; (ii) liquidated damages of $76,500; (iii) $34,711.60 in interest on the LDs.” However, the Judge in his discretion denied THI’s request for $164,768.40 in trebled damages for post-termination Lanham Act violations. Travelodge Hotels v. S.S.B. Assoc. 7/27/15]; Court cuts Super 8 Franchisor slack for its failure to prosecute: [Judge: “The Court finds that reinstatement of  (Super 8’s) Complaint would result in little, if any, prejudice to the defendants. The defendants do not appear to have incurred any expense or inconvenience in defending this litigation. In any event, the delay between dismissal and the motion for reinstatement—less than 5 months—is too slight to detrimentally affect the proceedings.” Super 8 v. Kusum 7/29/15]; Appeals Court reverses trial court’s refusal to allow Red Lion Franchisee to use Washington State Franchisee Bill of Rights: [Judge: “We conclude the best interpretation of FIPA's bill of rights is the same as our interpretation of California's analogous Equipment Dealers Act. In the case now before us, the franchisor is incorporated in Washington and has its headquarters in Washington, and the franchise agreement provides for the application of Washington law. We hold that FIPA's bill of rights applies to this dispute even though the franchise is located outside Washington.” Red Lion Hotels v. MAK 2012]; Although Franchisor shows infringement […]

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Terminated Franchisee Beats the Odds and Sidesteps Injunction 3/6/16 By: Jeffrey M. Goldstein Goldstein Law Firm goldlawgroup.com (202) 293-3947 jgoldstein@goldlawgroup.com   In a recent decision by the United States District Court for the District of Colorado, the Court denied the plaintiff franchisor’s motion for a preliminary injunction, showing that, in rare situations, it is possible for a terminated franchisee to escape the lethal injunctive pincers of the Lanham Act, the federal law that is frequently relied upon by franchisors to shut down a franchisee’s operations during termination disputes. The Intelligent Office System, LLC v. Virtualink Canada, LTD., 2016 U.S. Dist. LEXIS 20374 (USDC Col. February 18, 2016). In Virtualink, IO was a Boulder-based LLC that had developed methods for establishing, operating, and promoting "virtual" offices, in which customers were enabled to split overhead costs by "sharing" the use of office personnel, office equipment, and office space. On February 1, 2006, IO and the Franchisee Virtualink Canada, LTD (“Virtualink”) entered into a 20-year "Master License Agreement" (“MLA”). Pursuant to the MLA, Virtualink was permitted to use IO’s "licensed methods" to license subfranchisees in most of Canada. In exchange, Virtualink agreed to unremarkable reciprocal franchisee obligations, including: (1) paying IO a percentage of the gross royalty receipts it collected from subfranchisees in Canada; (2) using IO's standards and specifications in developing new subfranchisees, including using IO’s form franchise agreement; and (3) hitting specified minimum "sales and opening goals" of virtual office centers in each year of the 20-year agreement. The Franchisor began […]

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