Monthly Archives: June 2024

Car Dealer Wins on Bad Faith Claims Against Manufacturer’s Attempt to Terminate

Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

A federal district court in Hawai’i recently found that the defendant, BYD Motors, Inc. (“BYD”), a California-based electric vehicle manufacturer, acted in bad faith in terminating its contract with the plaintiff, Soderholm Sales and Leasing, Inc (“Soderholm”), a licensed motor vehicle dealer conducting businesses in Hawai’i and the Pacific Islands. Soderholm Sales and Leasing, Inc. v. BYD Motors, Inc., 2022 WL 16847543 (9th Cir. Nov. 10, 2022). The dispute arose over a motor vehicle licensing and distributorship agreement the parties entered into in December 2016. The agreement granted Soderholm a non-exclusive right to purchase BYD’s electric buses and to operate as a BYD-authorized sales and service organization at preapproved locations. Soderholm was responsible for promoting, advertising, and selling BYD vehicles. If Soderholm failed to fulfill its end of the bargain, BYD was contractually authorized to terminate by noticing Soderholm at least 30 days before the date of termination. Soon after, Soderholm purchased several fleets of BYD automobiles and displayed and promoted them to its customers. Soderholm also showcased the vehicles at various auto shows in Hawai’i. At this time, the parties understood that it would take anywhere from three to five years for Soderholm to establish a customer base for BYD vehicles, due to customers’ relative unfamiliarity with electric cars and the lack of infrastructure needed to maintain the vehicles. In September 2018, BYD suddenly provided Soderholm with a written notice of its intent to terminate, citing dissatisfaction with Soderholm’s performance, particularly Soderholm’s “commercially unreasonable” margins on BYD buses and bullish […]

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Discovery Issues and Unclear Agreements Leads to Ruling Against UK Plaintiff

Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

In the intricate world of international business, where contractual agreements bind corporations across continents, the dissolution of such agreements often leads to complex legal battles that test the bonds of commerce and trust. This was precisely the scenario that unfolded between Plaintiff Slush Puppie Ltd. (“SPL”), a United Kingdom-based entity, and Defendant the ICEE Company (“ICEE”), an American corporation, whose once fruitful partnership deteriorated into a legal confrontation in the Southern District of Ohio. Slush Puppie Ltd. v. ICEE Co., 2024 WL 1556770 (S.D. Ohio Apr. 10, 2024). Plaintiff SPL brought suit against Defendant ICEE, alleging wrongful termination of their contractual agreements based on a disputed 2000 trademark license that SPL claimed superseded earlier agreements. In the legal dispute between SPL and ICEE, SPL operated as both a manufacturer and a distributor, similar to roles often held in franchising relationships. Although not formally a franchisee, SPL’s agreements for exclusive manufacturing and distribution rights closely mirror the obligations and operational dynamics typically seen in franchise and dealership setups. This dual role allowed SPL to produce and distribute Slush Puppie products exclusively in designated European territories, adhering to strict brand standards and reporting requirements akin to those expected of franchisees and dealers in similar industries. The origins of their partnership trace back to the entrepreneurial spirit of Will Radcliff (“Mr. Radcliff”), the founder of the Slush Puppie brand. Mr. Radcliff’s innovation and leadership propelled a simple slushy concept into a global phenomenon. In the mid-1990s, as part of a strategic expansion into Europe, […]

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Franchisee Fails to Show Unconscionability of Arbitration Clause

Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

In the intricate world of franchising agreements, disputes often arise over the interpretation and execution of contractual obligations. This is exemplified by the case between Plaintiff Ashwant Singh (“Singh”), owner of Clean Future Technologies, LLC (“Clean Future”), and Defendant Batteries Plus, LLC (“Batteries Plus”), a prominent franchisor of retail stores specializing in batteries and related products. Singh v. Batteries Plus, LLC, 2024 WL 2132525 (E.D. Cal. May 10, 2024). Singh filed a lawsuit against Batteries Plus, claiming that the company had misrepresented the costs of operating a franchise, provided inflated revenue projections, allowed another franchisee to infringe on his territory, and failed to provide the promised support, creating a hostile work environment. Central to this case was the arbitration clause within the Franchise Agreement (“FA”) and whether it was enforceable. The Court’s decision ultimately hinged on nuanced interpretations of contract law and unconscionability doctrines. Singh entered into a FA with Batteries Plus, a Wisconsin-based franchisor that operates over 600 retail stores under the “Batteries Plus” trademark. These stores sell batteries, light bulbs, and related items, and offer device repair services. Singh received the company’s 2021 Franchise Disclosure Document (“FDD”) on January 31, 2022, which included crucial information about purchasing a franchise and a summary of the FA and its provisions. The FDD explicitly advised prospective franchisees to consult an advisor and thoroughly review the document. Notably, it contained a clause requiring all disputes to be resolved through mediation and arbitration in Wisconsin. Singh, however, claimed he was not adequately informed about […]

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Inventor Fails to Prove Distributor Failed to Sufficiently Market Products

Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

In the complex and often competitive field of medical device innovation, disputes over contractual obligations can escalate into significant legal battles. This is exemplified by the case between Plaintiff Dr. Thomas A. Russell (“Dr. Russell”), an esteemed orthopedic trauma surgeon and prolific inventor, and Defendant Zimmer Inc. (“Zimmer”), a prominent global manufacturer and distributor of medical devices. Russell v. Zimmer, Inc., 82 F.4th 564 (7th Cir. 2023). Dr. Russell brought suit against Zimmer, alleging that Zimmer failed to use “Commercially Reasonable Efforts” as contracted, in the marketing and sales of innovative orthopedic products developed by Dr. Russell and his team, leading to insufficient earnout payments and contractual breaches. This case, which reached the United States Court of Appeals for the Seventh Circuit, revolved around nuanced interpretations of contractual terms specifically concerning the efforts required to commercialize a series of innovative orthopedic products. In the case of Russell v. Zimmer, Inc., the relationship between the parties can be likened to that of a distributor and a manufacturer in a franchising context. Dr. Russell and his team, through CelgenTek Innovations Corporation, entered into an exclusive distribution agreement with Zimmer, under which Zimmer acted as the distributor, leveraging its extensive network to market and sell the innovative orthopedic products developed by Dr. Russell’s team. This exclusive arrangement required Zimmer to employ “Commercially Reasonable Efforts” in promoting and distributing the products, similar to the expectations in a franchising partnership where the franchisor provides the brand and the franchisee markets it locally. Dr. Russell, together with other […]

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Court Blocks Football Franchise From Joining New League

Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

In the competitive realm of sports franchising, conflicts frequently emerge over the interpretation and enforcement of contractual terms. This is demonstrated by the case between National Arena League, Inc. (“National Arena League”), and WTX Indoor Football, LLC (“WTX”), the owner of the indoor football team the West Texas Desert Hawks. Nat’l Arena League, Inc. v. WTX Indoor Football, LLC, 2024 WL 2000647 (N.D. Ga. May 6, 2024). National Arena League sought a preliminary injunction against WTX to prevent it from joining and participating in the Arena Football League (AFL). The Court’s decision hinged on whether WTX’s actions constituted a breach of the Membership Agreement (“MA”) and whether National Arena League was entitled to injunctive relief. National Arena League entered into a MA with WTX on August 12, 2022, for the team, then known as the West Texas Warbirds, to operate in Odessa, Texas, and compete in National Arena League’s indoor football league. According to the MA, the team would be National Arena League’s exclusive franchisee within a 35-mile radius of Odessa for a three-year term. The MA prohibited the team and its owners from participating in any other men’s professional or semi-professional arena or indoor football league in the United States for three years after the termination of the MA. Additionally, the MA granted National Arena League the right to terminate the MA upon any violation by WTX. In August 2023, after only one year in National Arena League’s league, WTX left to join the AFL, which National Arena League claimed […]

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Court Upholds Restrictive Covenant Against Manager’s Claims of Unenforceability

Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

In the complex legal dispute between Charles Baldwin (“Mr. Baldwin”) and Express Oil Change, LLC (“Express Oil Change”), the Eleventh Circuit Court of Appeals examined the application of restrictive covenants under the Georgia Restrictive Covenants Act (“GRCA”). Baldwin v. Express Oil Change, LLC, 87 F.4th 1292 (11th Cir. 2023). The appeal stemmed from a preliminary injunction issued by the United States District Court for the Northern District of Georgia, which challenged the restrictive covenant’s geographic scope and duration. Plaintiff Mr. Baldwin brought suit against Defendant Express Oil Change alleging that the restrictive covenants imposed on him were not enforceable under the GRCA due to their unreasonable geographic scope and duration. In this dispute, Mr. Baldwin was intricately involved in the operations of various franchisees under Express Oil Change. Though not a franchisee himself, Mr. Baldwin’s roles and the nature of the restrictive covenants in question are highly pertinent to franchisee-franchisor relationships, especially given the complex interactions and agreements between Mr. Baldwin, the franchisees, and the franchisor, Express Oil Change. This case, thus, offers valuable insights into the dynamics and legal considerations within franchising networks. Mr. Baldwin’s journey with Express Oil Change began in 1998, initially as a store manager. Over two decades, his role expanded significantly, with Mr. Baldwin eventually becoming an area manager, overseeing multiple franchise locations. His relationship with franchisees Adam Fuller (“Mr. Fuller”) and Darrell Lamb (“Mr. Lamb”) was pivotal in his career progression. As Mr. Fuller and Mr. Lamb expanded their number of franchise locations under Express […]

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