Gambling, a Panamanian Government Takeover, and Liquidated Damages By: Jeffrey M. Goldstein Although “force majeure” or “act of god” cases do not arise frequently in the franchise litigation world, a relatively recent case in the United States District Court for the Southern District of New York turned in part on this doctrine. Wyndham Hotel Grp. Int’l, Inc. v. Silver Entm’t LLC, No. 15-CV-7996 (JPO), 2018 U.S. Dist. LEXIS 52144 (S.D.N.Y. Mar. 28, 2018). In this regard, in 2015, the Veneto Hotel & Casino, a Wyndham franchise hotel, was seized by the Panamanian government for failure to pay gaming taxes, leading Wyndham to terminate its franchise agreement. Wyndham then sued for damages, and the hotel franchisee counterclaimed for Wyndham’s alleged breaches of the franchise agreement. The Veneto Hotel & Casino in Panama City, Panama, was owned by Alexander and Andrew Silverman (“the Franchisee” or “Veneto”), who bought the hotel through one of their corporate entities for $85 million in 2006. In March 2007, Silver Entertainment LLC (“Silver” or “the Franchisee”) signed a franchise agreement with Plaintiff Wyndham Hotel Group International, Inc. (the “Franchisor” or “Wyndham”). The hotel operated under the franchise agreement (“the Franchise Agreement”) as the “Veneto — A Wyndham Grand Hotel.” Under the Franchise Agreement, Silver was required to pay Wyndham recurring fees during the ten-year franchise term, including royalties, a marketing fee, reservation system fees, and an international sales fee.  Also under the Franchise Agreement Wyndham was permitted to terminate the agreement for myriad identified reasons, including but […]

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Another Franchise Decision in One Sentence: Former Franchisee Manager Not Liable for ‘Violating’ Post-term Restrictive Covenant Pillar to Post, Inc. v. Md. Home Inspectors, Inc., Civil Action No. DKC 18-3761, 2020 U.S. Dist. LEXIS 41327 (D. Md. Mar. 10, 2020) Where Pillar to Post, Inc. (“Pillar to Post”) a franchisor of home inspection businesses, sued its former franchisee, James Williams (“J. Williams”) and his daughter (Rachel Oslund) for violation of the post-term restrictive covenant, and where the franchisee’s daughter (who had a management role in the franchise before it went out of business) had not herself signed the franchise agreement, and even though the franchise agreement stated that all officers of the franchisee were bound by the franchise agreement, the Court refused to hold the daughter liable for operating an independent business either under the franchise agreement or the “closely related doctrine.” EXCERPTS OF CASE Pillar to Post, Inc. v. Md. Home Inspectors, Inc. United States District Court for the District of Maryland March 10, 2020, Filed Civil Action No. DKC 18-3761 Reporter 2020 U.S. Dist. LEXIS 41327 *; 2020 U.S.P.Q.2D (BNA) 10151; 2020 WL 1158583 Background Unless otherwise noted, the facts outlined here are set forth in the amended complaint, (ECF No. 23), and construed in the light most favorable to Plaintiff. Pillar to Post, Inc. (“Pillar to Post”) is a Delaware corporation and franchisor of home inspection businesses.2 In 2006, James Williams (“J. Williams”) began operating a Pillar to Post franchise in Maryland called Maryland Home Inspectors (“MHI”). MHI […]

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Legal Life after the Coronavirus Death for Small Businesses, Franchisees and Dealers By: Jeffrey M. Goldstein  www.goldlawgroup.com Second in a Series: COVID-19 HAS KILLED MY BUSINESS – MAY I LEGALLY TERMINATE MY CONTRACTS? Those who hope or believe that the consequences, effects, and sources of COVID-19 will soon be arrested and contained might be wondering whether their inability to have complied with their contracts, leases, and mortgages during this waiting period can lead to a subsequent termination of or suit under their agreements for failure to have fully complied with all of the contractual obligations in these contracts. Although I don’t anticipate that ‘other parties to your contracts’ individually or as a group are preparing or conspiring to terminate, default, or cancel anyone’s agreements, this does not rule out the high probability that when things return to normal (when market forces begin to work again unimpeded by the myriad current external shocks), every firm will naturally begin to focus again on ‘maximizing profits’ – the legitimate and necessary goal of individual suppliers in a free market economy. In general, whether you’re able to use COVID-19 as a legal ‘excuse’ for your inability to pay or otherwise perform during the coronavirus downtime is subject to whether the agreement in issue contains a provision or language that excuses your performance for unanticipated or unforeseen events. While many agreements contain such clauses, referred to as ‘force majeure’ clauses (clauses that excuse performance based on unexpected events such as floods, epidemics, riots, wars, etc.), […]

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The coronavirus (COVID-19) (“the Virus”) has made it impossible or impracticable for many businesses to comply with their contracts. The party who must ultimately bear the loss associated with the Virus largely depends on whether the explicit language in their contract contains a ‘force majeure’ clause. In the absence of such language, liability for the non-performance will turn upon the law of ‘impossibility’ in the applicable jurisdiction. Not only has the Virus physically disabled those responsible for meeting contractual obligations, but it also has caused many state and local authorities to issue orders banning or severely restricting association, gatherings and travel, for instance, which, in turn, create such impossibility or impracticability. The evolution of the Virus, as well as government and business responses thereto (quarantine and containment orders), has caused many businessmen, and lawyers in unrelated niches, to ask whether any legal excuses exist to discharge promisors from contractual obligations impacted by the Virus. As discussed below, and as will be discussed in more detail in subsequent articles in this series, businesses, including franchisees, distributors and dealers, who find themselves unable to meet certain obligations in their contracts, should seek legal assistance to determine whether force majeure or the common law of impossibility or impracticability excuses their contractual performance. While force majeure generally refers to unforeseeable “acts of God,” impossibility is a broad-sweeping doctrine that picks up events and occurrences that arguably substantially impede performance even though they are not nature related (e.g., blindness or death of famous artist in […]

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Even though many industries have been devastated by COVID-19, the Antitrust Division in the Department of Justice has publicly warned all companies that they still are ‘being watched’ by government trust-busters. The DOJ Press Release singles out manufacturers and distributors of health products such as face masks, respirators, and diagnostics. Search form Search ABOUT OUR AGENCY PRIORITIES NEWS RESOURCES CAREERS CONTACT You are here Home » Office of Public Affairs » News SHARE JUSTICE NEWS Department of Justice Office of Public Affairs FOR IMMEDIATE RELEASE Monday, March 9, 2020 Justice Department Cautions Business Community Against Violating Antitrust Laws in the Manufacturing, Distribution, and Sale of Public Health Products The Department of Justice today announced its intention to hold accountable anyone who violates the antitrust laws of the United States in connection with the manufacturing, distribution, or sale of public health products such as face masks, respirators, and diagnostics.  The department’s announcement is part of a broader administration effort to ensure that federal, state, and local health authorities, the private healthcare sector, and the public at large are in the strongest possible position to respond to the outbreak of the respiratory disease named coronavirus disease 2019 (COVID-19). “The Department of Justice stands ready to make sure that bad actors do not take advantage of emergency response efforts, healthcare providers, or the American people during this crucial time,” said Attorney General William P. Barr.  “I am committed to ensuring that the department’s resources are available to combat any wrongdoing and protect the public.” Individuals or companies […]

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