Monthly Archives: June 2019

Auto Manufacturer’s Charge-back of Rebates to Car Dealer Fails

Jun 23, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

AUTOBAHN IMPORTS, L.P., Doing Business as Land Rover of Fort Worth v. JAGUAR LAND ROVER NORTH AMERICA, L.L.C., 896 F.3d 340 (United States Court of Appeals, Fifth Circuit) (July 13, 2018) Auto Manufacturer’s incentive and chargeback programs were shown to be an unenforceable and unreasonable sales standard that failed to legally justify the chargeback of the car franchisee by the franchisor of $317,000 of auto manufacturer’s holdbacks. After franchisee, a car dealer, successfully complained to Board of Texas Department of Motor Vehicles, asserting that franchisor’s charges of $317,000 back to franchisee for violation of rules of sales incentive program was an unreasonable sales standard, and during pendency of franchisor’s appeal of the Board’s order to the Texas Court of Appeals, franchisee brought action in state court against franchisor, seeking damages based on Board’s ruling, and claiming breach of contract and violations of the Texas Deceptive Trade Practices Act (DTPA). Franchisor removed to federal court, and the United States District Court for the Northern District of Texas, John McBryde, District Judge, 2017 WL 2684055, granted franchisee’s summary judgment motion. Franchisor appealed, and in the interim the Texas Court of Appeals affirmed the Board’s order. The genesis of the lengthy dispute, spanning across many years, courts, and court systems, hinged on incentive programs offered by Jaguar. First, Jaguar offered an incentive known as the “Business Builder Program,” which provides dealers a percentage of the retail price of every vehicle sold if certain conditions are met. The relevant terms are set out in […]

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Tim Hortons Prevails on Termination Injunction Motion Against Restaurant Franchisee

Jun 19, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Crux of Court’s Decision (Not including any subsequent appeals): Tim Hortons prevailed on its preliminary injunction motion terminating its restaurant franchisees. The franchisor was entitled to a preliminary injunction terminating the franchisees because the franchisees refused to pay fees owed to the franchisor. June 17, 2019 Name of Court: United States District Court for the Southern District of Florida Short Case Name: Tim Hortons v. Tims Milner Short Factual Background and Parties: Plaintiff is the franchisor of the Tim Hortons brand and franchises restaurants throughout the United States. In 2016, Defendants and Plaintiff and its affiliate Tim Donuts U.S. Limited, Inc. (hereafter, “Plaintiff’s Affiliate”) entered into Franchise Agreements and Lease Agreements (together, the “Agreements”) that provided for Defendants’ ownership and operation of franchised Tim Hortons restaurants at seven locations in Michigan (the “Restaurants”). Each of the Franchise Agreements grants Defendants the right to operate one Tim Hortons restaurant in a specific location and to use the Tim Hortons trademarks. Defendants, however, maintain that they reached a verbal agreement with two employees of Plaintiff prior to execution of the Agreements, that they are only required to pay rent based on a flat percentage of gross sales, and are not required to pay as additional rent all real estate taxes and assessments, sales taxes, common area maintenance charges and assessments, certain utilities, and personal property taxes (together, the “Additional Rent Amounts”) On or about June 19, 2018, Defendants entered into an Asset Purchase Agreement with Kava, for the sale of the Restaurants […]

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Court Refuses to Dismiss Dealer’s Claims that Teamsters Converted Dealer’s Territory

Jun 16, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Crux of Court’s Decision (Not including any subsequent appeals): Dealer claimed that the Teamsters converted the Dealer’s Territory. The United States District Court for the District of Kansas refused to dismiss the Plaintiff Dealer’s claims that the Teamsters converted the dealer’s territory. The Court held that the Plaintiff sufficiently alleged in its Complaint that with full knowledge of his exclusive distribution rights, the Teamsters conspired with BIMBO, the franchisor/distributor, to have union drivers take over and abruptly terminate plaintiff’s routes. Facts as Alleged Underlying Court’s Decision (Not including any subsequent appeals): Bimbo Foods, Bimbo Bakeries and their predecessors (collectively, “BIMBO”) sold individuals and small businesses the exclusive right to sell and distribute certain bakery products throughout the United States, including the Greater Kansas City Area. Specifically, BIMBO’s business model for product distribution involved the formation and operation of an “Independent Operator (IO) Distribution Network” in which BIMBO sold independent distributors the exclusive right to purchase, resell and distribute its bakery products. Under the agreement, plaintiff’s exclusive distribution rights were to continue until such time as plaintiff voluntarily sold or transferred such rights. In 2011, BIMBO’s parent company, Mexico-based “Grupo Bimbo, S.A.B. de C.V.,” purchased Sara Lee Corporation’s North American fresh bakery business, which resulted in overlapping distribution routes with BIMBO’s existing IO distribution network. The Sara Lee distribution model relied on union employee drivers. In 2017, BIMBO negotiated for the drivers of Teamsters to take over the routes owned by plaintiff and other independent route owners in the Kansas City […]

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Domino’s Franchise Agreement Supports Employee’s Antitrust Conspiracy Claim

Jun 15, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Domino’s Franchise Agreement Supports Employee’s Antitrust Conspiracy Claim Crux of Court’s Decision (Not including any subsequent appeals): Domino’s Franchise Agreement Supports Employee’s Antitrust Conspiracy Claim. The Court rejected Domino’s motion to dismiss concluding that a ‘no-hire’ provision in Domino’s franchise agreements supported the allegation that the franchisor had formed and participated in an antitrust conspiracy. In so concluding, the Court ruled that Blanton, the plaintiff employee of a Domino’s franchisee, had adequately pled that Domino’s used the franchise agreements to orchestrate a conspiracy among their franchisees to not compete for labor; Blanton says that the no-hire provision is evidence of that conspiracy and violates the Sherman Antitrust Act because it unreasonably restrains competition for Domino’s franchise employees and depresses employee wages, lessens employee benefits, and stifles employee mobility Name of Court: United States District Court for the Eastern District of Michigan, Southern Division Short Case Name: Blanton v. Domino’s Crux of Dispute: Blanton says Defendants violated the Sherman Antitrust Act by orchestrating an employee no-hire agreement among their nationwide network of franchisees. Under the no-hire provision at issue—included in every Domino’s franchise agreement from at least January 2013 to April 2018—Domino’s franchisees agreed not to solicit or hire current employees of other Domino’s franchisees and affiliated entities. Blanton worked for a Domino’s franchise in Port Orange, Florida, from January 2017 until April or May of that year; he says he quit because his hours were repeatedly cut back. The Domino’s franchise that Blanton worked for is one of many in […]

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Auto Franchise Dealer Termination Claim Permitted to Proceed

Jun 9, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Auto Franchise Dealer Termination Claim Permitted to Proceed By: Jeffrey M. Goldstein Judicial Update — Nissan N. Am., Inc. v. Tillman, No. 2018-CC-00462-SCT, 2019 Miss. LEXIS 220 (June 6, 2019) In a recent case, the Supreme Court of Mississippi ruled that in an auto franchise dealer termination dispute between an automobile dealer and an automobile manufacturer the dealership had timely filed a complaint under the Mississippi Dealership Act after the auto franchisee received the auto manufacturer’s letter providing notice that the dealership was being terminated. The MDA has two provisions applicable to the dispute: first, the MDA statute requires an auto manufacturer seeking to terminate a dealer agreement to provide a notice of termination to is vehicle dealer at least sixty days before the effective date of the termination; and, second, another statutory provision provides a dealer an opportunity to challenge a notice of termination by filing a verified complaint with the Mississippi Motor Vehicle Commission “within the sixty-day notice period.” In this case, because the parties’ franchise agreement required ninety days’ notice before a termination, the franchisor Nissan served the 90-day notice on November 23, 2016. In turn, the franchisee car dealership filed its complaint on February 17, 2017; although the dealership’s filing was within the 90 days period it was not within the initial 60 days period following service of the notice. The Motor Vehicles Board, in dismissing the franchisee’s complaint as untimely, framed the issue as: “does the statutory language ‘within the sixty-day notice period’ refer to the […]

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