Massage Heights Franchising, LLC v. Hagman (2025 Tex. LEXIS 359): Negligence and Duty of Care: The central legal issue was whether Massage Heights Franchising, LLC (the franchisor) owed a duty of care to Hagman, a customer who was sexually assaulted by a massage therapist employed by MH Alden Bridge, a franchisee. The court examined whether the franchisor had sufficient control—either contractually or through actual exercise—over the hiring process of the franchisee to give rise to such a duty. Control Over Franchisee’s Operations: The court analyzed whether the franchisor’s franchise agreement and operations manual gave it the right or actual control over the specific activity (hiring of employees) that led to the injury. It was determined that the franchisee was designated as an independent contractor with sole responsibility for employment decisions, including hiring, firing, training, and supervision. The franchisor’s role was limited to providing guidance and advice, which was deemed insufficient to establish a duty of care. Negligent Undertaking: The issue of whether Massage Heights undertook a duty to protect customers by providing training and operational standards was considered. The court found no evidence that any failure by the franchisor to train or investigate the franchisee’s operations proximately caused the injury, nor that the franchisor undertook to make the premises safe for customers. Vicarious Liability and Proximate Cause: The court addressed whether the franchisor could be held vicariously liable for the acts of the franchisee or its employees. It was held that, absent control over the injury-causing conduct, such liability could […]

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Letip World Franchise LLC v. Long Island Soc. Media Grp. LLC_2025 U.S. Dist. LEXIS 95666 (July 2025) LeTip World Franchise LLC (“LeTip Franchise”), a business leads networking organization with over 250 franchises, filed a lawsuit against Long Island Social Media Group LLC (“LISMG”), BxB Professionals LLC, Clifford Pfleger, Heather Pfleger, and Saranto Calamas. The dispute centered around allegations that LISMG, operated by Clifford Pfleger and Saranto Calamas, breached their franchise agreement with LeTip Franchise by modifying the franchise’s logo and improperly competing through BxB Professionals LLC. LeTip Franchise, based in Arizona, entered into a franchise agreement with LISMG on April 10, 2020, granting them the right to operate a LeTip franchise in Suffolk County, New York, for five years. The agreement prohibited LISMG and its operators from running a competing business in the same area during the agreement’s term and for two years after its termination. The agreement also allowed the use of LeTip trademarks and logos but prohibited any modifications to them. In 2021, Clifford Pfleger modified the LeTip logo by adding the word “Just” above it on his boat, claiming he had permission from LeTip International’s CFO, John Pokorny, via a text message. The boat was drydocked until April 2023, when Pfleger moved it to a private marina and posted a picture on social media. Upon seeing the modified logo, LeTip’s owner, Summer Middleton, and an officer, Paul Della Valle, requested its removal, both in person and through a letter from LeTip’s trademark counsel, threatening termination of the […]

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Zest Anchors, LLC v. Biomet 3i, LLC United States District Court for the Southern District of New York June 5, 2025, Decided; June 5, 2025, Filed Case No. 1:23-cv-07232 (JLR) Reporter 2025 U.S. Dist. LEXIS 106986 *; 2025 LX 140064; 2025 WL 1591707 In Zest Anchors, LLC v. Biomet 3i, LLC, the Court addressed a dispute arising from a terminated distribution agreement between dental implant companies Zest and Biomet. After the termination, Section 13.4 of the agreement provided Zest with “the option, but not the obligation, to repurchase” Biomet’s remaining inventory of Zest products “in its sole discretion.” Biomet claimed that Zest initially exercised this option through its invoking of its contractual rights and proposal of an altered distribution agreement on September 3, 2021, thereby triggering reasonable reliance and operational decisions by Biomet based on the belief that repurchase would occur. However, Zest allegedly reversed its decision without explanation, refused to accept the products or pay for them, and leveraged the situation to pressure Biomet into renegotiating distribution terms—actions that, Biomet argued, went beyond mere discretion and constituted bad faith. “Biomet claims that Zest reneged on its decision to repurchase its product from Biomet in order to gain the upper hand in ongoing contract negotiations and to cause harm to Biomet in the marketplace. Id. ¶¶ 19, 38. Biomet also alleges that Zest’s subsequent refusal to repurchase any of the product caused Biomet to suffer financial harm and loss of reputation, and interfered with Biomet’s contracted-for benefit under the Distribution Agreement, […]

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Fetch_ Pet Care_ Inc. v. Atomic Pawz Inc._2025 U.S. Dist. LEXIS 132647 (July 2025) Result: In Fetch! Pet Care, Inc. v. Atomic Pawz Inc., the United States District Court for the Eastern District of Michigan considered a motion for a preliminary injunction by the plaintiff, Fetch! Pet Care, Inc., against multiple franchisee defendants accused of breach of contract, trademark infringement, misappropriation of trade secrets, and conspiracy to commit tortious interference with business relationships. The court’s reasoning centered on the application of established legal standards for granting a preliminary injunction, detailed factual findings as to each of the four governing factors, and the substantial influence of ongoing arbitration proceedings on the court’s analysis and ultimate disposition. The court began by articulating the legal framework for preliminary injunctions, explicitly following precedent from the United States Court of Appeals for the Sixth Circuit. The four factors that courts must weigh in such cases are: whether the movant has a strong likelihood of success on the merits; whether the movant would suffer irreparable injury absent a stay; whether granting the stay would cause substantial harm to others; and whether the public interest would be served by granting the stay. The court emphasized that these are not prerequisites that must each be met independently, but are interrelated concerns to be balanced together. It also underscored that preliminary relief is “an extraordinary remedy” to be granted only if the movant clearly establishes entitlement. Further, the court noted that where a dispute is subject to arbitration, as in this […]

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The United States District Court for the Northern District of California recently ruled that a franchisee gas station dealer had failed to plead in its complaint certain necessary allegations to support a Petroleum Marketing Practices Act violation against its franchisor. In essence, the PMPA aims to protect gas station dealers from arbitrary actions by larger oil companies, ensuring a degree of fairness and stability in the franchise relationship. As discussed below, although the court’s reasoning for the dismissal appears straightforward and correct, it also demonstrates how some pro-franchisee statutes, either on their face or as interpreted and applied, lead to loopholes for franchisors. Edwards & anderson, Inc. v. Peninsula Petro., LLC, No. 25-cv-00882-MMC, 2025 U.S. Dist. LEXIS 87586 (N.D. Cal. May 7, 2025) The Petroleum Marketing Practices Act (PMPA), a federal statute, provides significant protections for gas station dealers (franchisees) against unfair termination or non-renewal of their franchise agreements by oil company franchisors. The key safeguards include the following: Limitations on Termination and Non-Renewal: Just Cause Requirement: A franchisor can only terminate or not renew a franchise for specific reasons outlined in the PMPA. Examples of Permitted Reasons: These reasons include franchisee’s failure to comply with reasonable and material provisions of the franchise agreement, failure to act in good faith, withdrawal from the market, or certain events like fraud or bankruptcy. Notice Requirements: The PMPA mandates that franchisors provide franchisees with a specific period of written notice (typically 90 days) before terminating or non-renewing a franchise. Right of First Refusal: Sale of Leased Premises: If a […]

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In TKG Assocs., LLC v. MBG Monmouth, LLC, No. 24A-PL-1270, 2025 Ind. App. LEXIS 121 (Ct. App. Apr. 16, 2025), TKG Associates, LLC (“Buyer”) appealed the trial court’s judgment in favor of MBG Monmouth, LLC and other related entities (“Seller”) regarding a dispute over the purchase of four Sky Zone franchises. The disagreement arose during the due diligence period concerning the accuracy of financial information provided by Seller. The trial court ruled in favor of Seller, allowing them to retain Buyer’s deposit, but the appellate court found this judgment to be clearly erroneous due to Seller’s material breach of the agreement. Facts Buyer, operated by Ajay Keshap and his family, and Seller, consisting of several LLCs operated by Barbara and Mark Glazer, entered into an Asset Purchase Agreement on January 19, 2022, for $6,500,000. The purchase price was based on Seller’s EBITDA, which was later found to be inflated due to undisclosed rent abatements and deferments. Buyer discovered these discrepancies during a site visit from February 22 to February 24, 2022. Due Diligence and Breach The Agreement required Seller to provide all due diligence materials within ten days of execution, but Seller failed to disclose certain lease amendments and rent abatements until February 28, 2022. Buyer did not receive the required thirty days to review these documents, which constituted a material breach by Seller. Despite this, the trial court initially found that Buyer breached the Agreement by not providing written notice of conditions satisfied or waived by March 5, 2022. […]

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In a recent case decided by the United States District Court for the District of Colorado, Rosenbauer America, LLC (“RBA”), a Delaware limited liability company that manufactures fire and emergency vehicles, faced a lawsuit filed by Max Fire Apparatus, Inc. (“Max Fire”), a Colorado corporation engaged in selling and distributing RBA vehicles. Max Fire alleged that RBA’s termination of the Dealer Agreement constituted breaches of the Dealer Agreement and the associated Dealer Handbook, as well as a violation of the duty of good faith and fair dealing. RBA filed a Motion for Partial Summary Judgment, seeking to preclude Max Fire from recovering damages for future lost profits or business value resulting from the termination of the Dealer Agreement. Max Fire opposed this motion, to which RBA replied. The court ultimately partially granted and partially denied the motion. Max Fire and RBA entered into a Dealer Agreement in 2016.  The Dealer Agreement was set to automatically renew annually unless terminated in writing by either party. Termination of the Agreement required written notice within thirty days via Certified Mail by either party. The agreement also referenced a “Dealer Handbook,” which required Max Fire to adhere to RBA’s established policies and the latest version of the Handbook. In November 2022, Max Fire received the August 2022 version of the Dealer Handbook. The Handbook included a termination section stating that termination, while uncommon, could occur due to non-performance, marginal performance, or critical ethical failures. Termination decisions would be based on reasons deemed adverse to […]

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In a recent case decided by the Court of Chancery of Delaware, California Safe Soil, LLC (“CSS”) filed a lawsuit against KDC Agribusiness, LLC (“KDC”) and its officers—Hal, Matthew, Justin, and Barry Kamine (“Individual Defendants”)—alleging trade secret misappropriation, tortious interference with a contract, conspiracy, unjust enrichment, and fraud. The claims revolved around CSS’s innovative process for recycling food waste into a nutrient-rich byproduct, which could be used to create environmentally friendly fertilizers and animal feed. CSS sought to protect this process as a trade secret. The law of trade secrets including trade secret misappropriation frequently is an issue in disputes regarding franchise, dealer agreements and license agreements in general. On December 11, 2015, CSS entered into a License Agreement with KDC, granting KDC a nonexclusive license to use the CSS Process under specific terms. The agreement required milestone payments tied to facility development and running royalties on product sales. KDC was also provided the option for exclusivity if certain financial obligations were met. KDC sought to leverage the CSS Process to construct a large-scale facility in Pennsylvania, aiming to expand production. However, disagreements arose when KDC stopped making the required payments under the agreement, resulting in CSS terminating the license. Despite this, KDC continued to utilize the CSS Process without authorization and did not pay royalties, prompting CSS to initiate legal action. Legal Issues The central legal issue before the court was whether the CSS process qualified as a trade secret under both federal and Delaware law and, if so, […]

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Colony Place S., Inc. v. Volvo Car USA, LLC, 2024 U.S. App. LEXIS 29681 By: Jeffrey M. Goldstein In a recent case decided by the United States Court of Appeals for the First Circuit, two Massachusetts Volvo automobile dealerships sued Volvo Car USA, Volvo Car Financial Services, and Fidelity Warranty Services for allegedly violating Massachusetts General Laws Chapter 93B. The claims related to Volvo-branded Prepaid Maintenance Program (PPM) contracts administered by Fidelity that allow customers to prepay for future routine maintenance at discounted rates. The alleged violations related to Volvo-branded Prepaid Maintenance Program contracts (“PPMs”) — a financial product allowing customers to pay up front at a discounted rate for future, routine maintenance services like oil changes at Volvo dealerships — that Fidelity administers and issues to Volvo dealers, who in turn sell the PPM contracts to their customers. The dealers argued they were being underpaid for servicing these contracts. The court disagreed, ruled against the dealers, holding that the “Dealers’ Bill of Rights” did not protect them. The alleged violations related to Volvo-branded Prepaid Maintenance Program contracts (“PPMs”) — a financial product allowing customers to pay up front at a discounted rate for future, routine maintenance services like oil changes at Volvo dealerships — that Fidelity administers and issues to Volvo dealers, who in turn sell the PPM contracts to their customers. The parties cross-moved for summary judgment. After hearing argument on the cross-motions, the district court granted the defendants-appellees’ motion and denied the plaintiffs-appellants’ motion, concluding that entities like Fidelity […]

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On July 12, 2024, The FTC and its Staff undertook four semi-permanent measures in support of franchisees. These actions were announced by the FTC in its July 12, 2024, press release (“Press Release”). This article discusses the first of these – the FTC’s Policy Statement on Franchisors’ Use of Contract Provisions, Including Non-Disparagement, Goodwill, and Confidentiality Clauses. Introduction – The Four Actions Announced in the Press Release The FTC’s Press Release initially states that the FTC was carrying out its current actions “to address a growing concern about unfair and deceptive practices by franchisors” and to “ensure that the franchise business model remains a ladder of opportunity to owning a business for honest small business owners.” Clearly, the FTC believes that the franchise industry was intended to be an effective method of creating a strong small business sector. Implicit in this view is that the franchise model, when run ‘fairly,’ can achieve and has achieved this societal goal. Second, and relatedly, the FTC also appears to believe that at present the franchise model is under attack through “unfair and deceptive practices” by franchisors. It has taken too many years for the FTC to arrive at this conclusion. The first action identified by the FTC was a “Policy Statement” warning franchisors that contract provisions including non-disparagement clauses that prohibit franchisees’ communications with the government violate the law. The FTC appeared especially angered by such contracts in that they allegedly undercut the FTC’s investigatory functions to protect franchisees. In the Press Release, […]

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