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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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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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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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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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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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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McDonald’s Fails to Shake Off Antitrust Fangs of Hourly Workers in Poaching Clause Case   By: Jeffrey M. Goldstein, Goldstein Law Firm, LLC Until recently, some franchise agreements, including those in the McDonald’s system, included a ‘no-poaching’ clause for workers from other franchises. These clauses historically had gone unchallenged by the government, franchisees, and workers. In a recent case involving the McDonald’s no-poaching clause, however, a United States District Court for the Seventh Circuit (“Court”) considered hourly workers’ claims that the no-poaching clause prevented them from taking higher-paying offers at other franchises and, as such, violated the antitrust laws. The district court decision that was challenged on appeal recognized that under Sherman Act Section 1, claims fall into two distinct categories: “naked restraints, akin to cartels, are unlawful per se, while other restraints are evaluated under the Rule of Reason. (The quicklook approach, see NCAA v. University of Oklahoma, 468 U.S. 85 (1984), is a subset of analysis under the Rule of Reason.).” In this regard, the district court rejected the per se theory of liability stating that “the anti-poach clause is not a naked restraint but is ancillary to each franchise agreement—and, as every new restaurant expands output, the restraint is justified.” The district court also deemed the complaint deficient under the Rule of Reason because it did not allege that McDonald’s and its franchises collectively had power in the market for restaurant workers’ labor. Under the Rule of Reason, failing to allege that the defendant or defendants held […]

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Franchise and Dealer Renewals: Every Minute Counts in Texas to Classicalists By: Jeffrey M. Goldstein In Pizza Inn, Inc. v. Clairday, 979 F.3d 1064 (5th Cir. 2020), a recent decision from the United States Circuit Court for the Fifth Circuit a franchisee entered into an area development agreement with a franchisor, which included an option to renew. However, the franchisee failed timely to notify the franchisor that he wished to renew and submitted a late notice of renewal. In turn, the franchisor did not honor the tardy notice of renewal. After the district court ruled in favor of the franchisee at trial, the Circuit Court reversed finding that the district court had erred in finding that the notice of renewal was sufficiently timely under the doctrine of equitable intervention. In denying the franchisee recovery, the Court of Appeal held that the equitable intervention doctrine was not applicable to support a recovery for the franchisee because the franchisee did not suffer an unconscionable hardship from the franchisor’s failure to honor the tardy notice of renewal since a partial forfeiture of the purchase price, a forfeiture of future profits, and the shuttering of a franchise store were not sufficient hardships warranting strict enforcement of the renewal deadline. The Pizza Inn case is very troubling for several reasons. First, it appears to be a shot over the bow by Texas courts (both state and federal) aimed at neoclassical contracts theory; however, the neoclassical contracts boat left the dock safely in 1950 with the […]

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Tim Hortons Franchisee Association Hits Brick Wall on Case Against Franchisor In a scathing rejection of a complex case filed by an international franchise association, the US District Court for the Southern District of Florida refused to recognize that the franchisee association of Tim Hortons members had associational standing to sue for myriad alleged unfair acts and practices including supply price-gouging, franchisee equity-stripping, and misuse of the franchise advertising fund; similarly, the court rejected the viability of those same claims on substantive grounds as well. Great White N. Franchisee Ass’n-USA v. Tim Hortons USA, Inc., No. 20-cv-20878, 2020 U.S. Dist. LEXIS 239160 (S.D. Fla. Dec. 18, 2020)   Excerpts of the Case: Franchisee Counsel:   For Great White North Franchisee Association-USA, Inc., Plaintiff: Natalie Marlena Restivo, LEAD ATTORNEY, Adam Gruder Wasch, Wasch Raines, LLP, Boca Raton, FL; Gerald A. Marks, PRO HAC VICE, Marks & Klein, LLP, Red Bank, NJ. Franchisor Counsel: For Tim Hortons USA, Inc., Defendant: Michael D Joblove, LEAD ATTORNEY, Aaron Seth Blynn, Genovese Joblove & Battista, Miami, FL; Adam Acosta, John Mark Gidley, PRO HAC VICE, White & Case LLP, Washington, DC. For Jose E. Cil, Defendant: Aaron Seth Blynn, Genovese Joblove & Battista, Miami, FL. Judges: BETH BLOOM, UNITED STATES DISTRICT JUDGE. Opinion by: BETH BLOOM Opinion BACKGROUND This case involves an allegedly illegal and predatory business scheme implemented by THUSA’s holding company to convert the Tim Hortons franchise system into a supply chain business resulting in large profits at the expense of Plaintiff’s franchisee members. Tim Hortons […]

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Burger King Franchisee Hoisted on Own Petard Burger King Corp. v. Berry, No. 1:20-cv-21801-UU, 2020 U.S. Dist. LEXIS 233700 (S.D. Fla. Dec. 9, 2020) A recent franchise decision by the US District Court for the Southern District of Florida appears to have wrecked a Burger King franchisee’s chances of prevailing in the litigation. Although the franchisee attempted to skewer Burger King by slashing wildly with a general covenant of good faith argument, under the Court’s ruling, the Burger King franchisee ended up hoisted on its own petard given that the franchise agreement explicitly accorded to the franchisor complete discretion regarding assistance and training.   Excerpts of Case   Burger King Corp. v. Berry United States District Court for the Southern District of Florida December 9, 2020, Decided; December 10, 2020, Entered on Docket Case No. 1:20-cv-21801-UU Counsel:   For FRANCHISEE Darryl D. Berry, Capital Restaurant Group, LLC, a Georgia limited liability company, Defendants, Counter Claimants: Robert Mitchell Einhorn, LEAD ATTORNEY, Michael Daniel Braunstein, Zarco Einhorn Salkowski & Brito, P.A., Miami, FL. For FRANCHISOR Burger King Corporation, Plaintiff, Counter Defendant: Jessica Serell Erenbaum, LEAD ATTORNEY, Michael D Joblove, Genovese Joblove & Battista, Miami, FL. Judges: URSULA UNGARO, UNITED STATES DISTRICT JUDGE. Opinion by: URSULA UNGARO Opinion   ORDER GRANTING IN PART MOTION TO DISMISS SECOND AMENDED COUNTERCLAIM … ANALYSIS A. The Second Amended Counterclaim Fails to Comply with this Court’s Order, D.E. 37. The Second Amended Counterclaim is full of allegations that the Court ordered Counterclaimants to omit from their Second Amended Counterclaim. For […]

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