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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Little Caesar Enterprises, Inc. v. S&S Pizza Enterprises, Inc., 2024 U.S. Dist. LEXIS 89645 (E.D. Mich. May 17, 2024) Prior ruling challenged by the Franchisee Defendants: In the original Judgment, the Court: granted Plaintiffs’ request for declaratory relief that S & S committed material breaches of the franchise agreements between the parties, giving Plaintiffs good cause to terminate the agreements; ordered Defendants and anyone acting in active concert or participation with them to immediately and fully comply with the post-termination obligations in the franchise agreements; entered Judgment in favor of Plaintiffs and against Defendants S & S, Claeys, and Matthews, jointly and severally, in the amount of $128,818.56, plus interest, representing the liquidated damages due under the franchise agreements. After the ruling against them, the Franchisee Defendants challenged the initial ruling arguing the following: Defendants, through counsel, now seek to alter or amend the judgment pursuant to Federal Rule of Civil Procedure 59(e) or request relief from judgment pursuant to Federal Rule of Civil Procedure 60(b)(1) or (2). (ECF No. 37.) In support of their motion, Defendants assert that Claeys and Matthews discovered previously misplaced documents during the past several weeks suggesting that Matthews was released and discharged from any obligation as a personal guarantor. Defendants attach these three documents to their motion: two franchise agreements and a document terminating a franchise located in Troy, Michigan. (ECF Nos. 37-2, 37-3, and 37-4.) They attach no evidence, however, supporting their assertion that these documents were only recently discovered. Defendants further state […]

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LeTip World Franchise LLC v. Long Island Soc. Media Grp. LLC, 2024 U.S. Dist. LEXIS 53489 (D.Ariz., March 26, 2024), involved a legal dispute where LeTip World Franchise LLC (LeTip) accused Long Island Social Media Group LLC and others (LISMG) of violating terms of a franchise agreement. The agreement allowed LISMG to operate a LeTip business and use its trademarks in a designated area of Suffolk County, New York, subject to certain operational standards, advertising approvals, and restrictions on the use of LeTip Marks. Key points from the summary include: Alleged Contract Breaches:The defendants are accused of operational failures, improper use of intellectual property, violating advertising approvals, and running a competing business post-termination, contradicting the non-compete clause. Preliminary Injunction:LeTip’s motion for a preliminary injunction was granted, restraining the defendants from conducting competing business activities in Suffolk County, in order to prevent loss of business and damage to goodwill pending the trial’s outcome. Legal Considerations:The summary highlights the court’s consideration of legal standards for a preliminary injunction, with emphasis on the four elements like the likelihood of success, irreparable harm, balance of hardships, and public interest. Defendants’ Counterarguments:The defendants contended that LeTip first breached the agreement by transferring members out of their chapter and that they had permission to modify the LeTip logo. The court, however, found these arguments unconvincing due to inadequate evidence or misinterpretation of permissions involved. Enforceability of Contractual Provisions:The court examined the reasonability and enforceability of post-termination restrictive covenants related to time and geographic limitations, ultimately siding […]

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In the intricate legal dispute involving Pizza Hut LLC v. Pandya, 79 F.4th 535 (5th Cir. 2023), the United States Court of Appeals for the Fifth Circuit delved deeply into the nuances of contractual obligations and the right to a jury trial as enshrined in the Seventh Amendment. Pandya, a major franchisee of Pizza Hut, operated 43 restaurants in Pennsylvania and one in Connecticut. However, due to Pandya’s failure to fulfill contractual obligations, Pizza Hut terminated Pandya’s franchise agreements. To manage the transition and find new buyers, Pizza Hut and Pandya entered into two post-termination agreements, the latter of which, the Transfer Agreement, led to the litigation in question. The Transfer Agreement allowed Pandya to continue operating certain restaurants under strict conditions while actively seeking a buyer. The agreement’s terms were meticulously discussed over several weeks, with Pandya agreeing to various operational conditions in exchange for Pizza Hut’s assistance in finding a buyer and a potential financial benefit from the sale. A critical aspect of the Transfer Agreement was the last paragraph, a clause explicitly waiving the right to a jury trial in any litigation arising from the agreement. When disputes arose again, leading Pizza Hut to terminate the agreement and sue Pandya for breach of contract, Pandya counterclaimed, alleging Pizza Hut breached the Transfer Agreement and brought additional tort claims including fraud, breach of fiduciary duty, and tortious interference. Pandya demanded a jury trial, and Pizza Hut moved to strike this demand, citing the waiver clause in the Transfer Agreement. The […]

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In BMW of N. Am., LLC v. MacLean, the Court of Appeals of Ohio addressed the standard for good cause in determining whether a franchisor should deny a franchise transfer. BMW of N.Am., LLC v. MacLean, 2021-Ohio-2388 (Ohio Ct. App. July 13, 2021). Kirtlund Frye wanted to transfer his BMW dealership to the dealership’s general manager, Colin MacLean (Plaintiff). However, BMW denied the transfer. In response, MacLean and Frye filed a protest with the Ohio Motor Vehicle Dealer’s Board, which evaluated the protest under the statutory requirement that a franchisor shall not deny a franchise transfer if the Board determined that good cause did not exist for such denial. The Board determined that BMW had not met its burden of persuasion in showing good cause and that the transfer should be approved. BMW subsequently appealed to the common pleas court, which affirmed the Board’s decision, noting that the decision fulfilled statutory requirements and was supported by evidence that was reliable (“it can be depended on to state what is true”), probative (“it has the tendency to establish the truth of relevant facts”), and substantial (“it has importance and value”), which in turn statutorily empowered the common pleas court to affirm. BMW then appealed to the Court of Appeals of Ohio and presented two assignments of error: (1) the common pleas court erred as a matter of law by concluding that BMW did not have good cause to deny the transfer and (2) the common pleas court abused its discretion when it found […]

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