Franchisor Cannot Require Arbitration of Dispute With New Franchisee Where New Franchisee Failed to Sign a New Franchise Agreement as Part of Franchise Purchase From Prior FranchiseeSep 15, 2019 - Franchise, Dealer & Antitrust Decisions in One Sentence by Jeffrey M. Goldstein |
The United States Circuit Court for the Tenth Circuit ruled that a restaurant franchisor, Dickey’s Barbecue, was not entitled to require arbitration of disputes between it and a new franchisee, who had purchased the restaurant from a prior franchisee, because the new franchisee had never executed a franchise agreement, and because Utah law required that an arbitration agreement be contained in a written document setting forth the scope of the dispute to be arbitrated; without a signed franchise agreement between the new franchisee after its purchase of the franchise from a prior franchisee, the franchisor could not demonstrate—through recourse either to the text of the asset purchase agreement or evidence presented to bolster its “course of dealing” theory—that the new franchisee ever assumed the written obligations of the prior franchisee, including specifically the agreement to arbitrate disputes.
Campbell Invs., LLC v. Dickey’s Barbecue Rests., Inc., No. 18-4055, 2019 U.S. App. LEXIS 26980 (10th Cir. Sep. 6, 2019)
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Auto Manufacturer Franchisor Falls Prey to Amended Colorado Car Dealer Act’s New Expanded Relevant Market DefinitionSep 12, 2019 - Franchise, Dealer & Antitrust Decisions in One Sentence by Jeffrey M. Goldstein |
In a Colorado federal court case interpreting the Amended Colorado Car Dealer Act in which the car dealer agreement “expressly reserved” for the defendant car manufacturer “the unrestricted right to grant others the right to sell Kia products,” and noted also that plaintiffs are “not being granted an exclusive right to sell Kia products in any specified geographic area,” and stated that defendant “may add new dealers to, relocate dealers into or remove dealers from” the geographic area “as permitted by applicable law”, and where the plaintiff franchisee dealers alleged that defendant’s plan to establish the proposed dealership violated Colo. Rev. Stat. § 44-20-125 (“CDA”), a statute which creates a private right of action for “an existing motor vehicle dealer adversely affected by” a distributor’s plan to reopen, relocate, or establish a “same line-make motor vehicle dealer,” and where the CDA requires any manufacturer seeking to “establish an additional motor vehicle dealer, reopen a previously existing motor vehicle dealer, or authorize an existing motor vehicle dealer to relocate” to provide at least sixty days notice to all of its existing dealers “within whose relevant market area the new, reopened, or relocated dealer would be located”, and where the CDA was amended to define the “relevant market area” as the greater of “the geographic area of responsibility defined in the franchise agreement of an existing dealer” and “the geographic area within a radius of ten miles of any existing dealer of the same line-make of vehicle as the proposed additional motor vehicle dealer,” the car manufacturer would be held to the new ten miles benchmark, not the old five miles standard.
DC Auto., Inc. v. Kia Motors Am., Inc., Civil Action No. 19-cv-00318-PAB-MEH, 2019 U.S. Dist. LEXIS 150481 (D. Colo. Sep. 3, 2019)
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Little Caesars Easily Decimates Franchisees’ Anemic Legal Arguments and Obtains Preliminary Injunction OrderJul 17, 2019 - Franchise, Dealer & Antitrust Decisions in One Sentence by Jeffrey M. Goldstein |
In this breach of contract and trademark infringement case, where the pizza restaurant franchisor, Little Caesars Enterprises, Inc., sued the franchisee operators of several pizza restaurants for repeatedly violating the franchise agreement by, inter alia, violating operational standards, failing to pay royalties, and operating with the Little Caesars trademarks after the franchise terminations, the United States District Court for the Eastern District of Michigan granted the franchisor’s request for a preliminary injunction, thereby shutting down the franchisees’ operation of the restaurants pending trial; in so doing, the Court rejected resoundingly the franchisees’ poorly constructed and irrelevant legal and factual defenses to the preliminary injunction.
Little Caesar Enters., United States District Court for the Eastern District of Michigan, Southern Division, July 16, 2019, Decided, 2019 U.S. Dist. LEXIS 117942
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The United States District Court for the District of New Jersey rejected the petroleum franchisor’s request to dismiss on summary judgment the gasoline dealer franchisee’s case for wrongful termination because, according to the Court, the defendant bears the burden of proof in actions under the PMPA, and the bulk of defendant’s evidence was testimonial and thus subject to credibility determinations; material disputes existed regarding the following facts, going to the franchisor’s good faith in demanding changes to the renewal agreement:
(1) the existence of a formula for calculating increases in rent at Defendant’s franchises — although Defendant contended such a policy exists, it cited oral deposition, in-court testimony, or affidavits, uncorroborated by any written policy;
(2) whether the petroleum franchisor’s employees, Deakin and McGee, in fact warned plaintiff that rental values would increase when they initially met;
(3) whether the franchisor’s employees, Deakin and McGee, suggested, during that initial meeting, that plaintiff franchisee could operate a truck stop at the property;
(4) whether defendant failed to provide the franchisee dealer with training; whether the franchisee’s need for training was apparent; and whether the franchisor had a training program that was available;
(5) whether the franchisor placed franchisee dealer’s account on COD status in retaliation for her request to operate the station as a commission;
(6) whether the franchisor defendant had a motive not to renew the agreement, as shown by the strained relationship between Sathu, Deakin, and McGee;
(7) defendant franchisor received an offer from Tim Horton’s to open a franchise at the location; and
(8) the substantial increase in rent, which the Court noted was not conclusive of bad faith on the part of Defendant but was nonetheless relevant.
Four S Shell, LLC v. PMG, LLC, Civil Action No. 3:16-cv-5701 (PGS) (TJB), 2019 U.S. Dist. LEXIS 115034 (D.N.J. July 11, 2019)
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Tyler, the Franchisee Dealer, alleged a violation of the Automobile Dealers’ Day in Court Act; breach of contract; and tortious interference with existing contractual relations; all arising out of the Pierce defendants’ allegedly unlawful and fraudulent conduct toward Tyler concerning the marketing, sale, and service of fire and rescue trucks and related goods and equipment in the States of New York and Pennsylvania; the Court, however, dismissed the Franchisee Dealer’s claims because the Automobile Dealers’ Day in Court Act does not cover fire trucks; a contract terminable at will cannot be the basis of a tortious interference claim; and “in the absence of explicit contractual language stating that a party may not unreasonably withhold consent, parties may withhold consent for any reason or no reason, and that no implied obligation to act in good faith exists to limit that choice.”
Tyler Fire Equip., LLC v. Oshkosk Corp., No. 14-CV-6513-CJS, 2019 U.S. Dist. LEXIS 104539 (W.D.N.Y. June 21, 2019)
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Franchisor Nurse Next Door’s Damages Request for all Future Royalties That “would have been paid” But-For Termination Rebuffed by Federal CourtJul 4, 2019 - Franchise, Dealer & Antitrust Decisions in One Sentence by Jeffrey M. Goldstein |
Plaintiff Nurse Next Door Home Healthcare Services (USA), Inc.’s Motion for Default Judgment against Defendant Four Gloves, Inc., the franchisee, is GRANTED in part and DENIED in part, such that Plaintiff is entitled to damages of unpaid fees of $55,000 and royalties of $81,250, totaling $136,250, based primarily on the Court’s conclusion that Nurse Next Door is entitled to that amount which “to the extent possible, put[s] the injured party in as good a position as that party would have been in had the contract been performed,” specifically royalty payments for the five-year term, but specifically not those other fees (7% and a monthly technology fee), since under the Franchise Agreement the latter fees assumed the use by the franchisee of the Nurse Next Dorr’s Care Services Center, which, due to the termination, had never been made by the franchisee.
Nurse Next Door Home Healthcare Servs. (USA) v. Four Gloves, Inc., Civil Action No. 8:18-cv-02101-PX, 2019 U.S. Dist. LEXIS 106612 (D. Md. June 26, 2019)
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GNC Franchisor Prevails in Moving to Set-Aside a Default Entered Against it For Failure to Timely Answer GNC Franchisees’ claimsJun 28, 2019 - Franchise, Dealer & Antitrust Decisions in One Sentence by Jeffrey M. Goldstein |
Federal Court ruled in favor of franchisor GNC in setting aside a default entered against it where the franchisor asserted that the failure to timely respond fell short of constituting culpability because it was attributable to a mere miscommunication between GNC’s litigation counsel and GNC’s in-house legal department, and where GNC further contended that the existence of meritorious defenses to Plaintiffs’ claims and corresponding lack of prejudice to Plaintiffs warranted setting aside the clerk’s entry of default; and where Plaintiffs opposed GNC’s Motion on the basis that GNC’s explanation for its untimely participation in this matter evinced a deliberate, strategic choice rather than a negligent oversight.
Kyllonen v. GNC Franchising, LLC, No. 2:18-cv-01526-GMN-BNW, 2019 U.S. Dist. LEXIS 99822 (D. Nev. June 13, 2019)
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Bone Cement Recipe Owner Manufacturer’s Claims Against Competitor’s Manufacturer for Theft of a Trade Secret is not Time-BarredJun 28, 2019 - Franchise, Dealer & Antitrust Decisions in One Sentence by Jeffrey M. Goldstein |
In a distribution case, a bone cement recipe owner’s action against a manufacturer of bone cement for the owner’s competitor, alleging theft of a trade secret, misappropriations that were discovered or by the exercise of reasonable diligence should have been discovered more than three years before the suit was filed were time-barred under the Pennsylvania Misappropriations Act (PUTSA), but the owner of the trade secret was permitted to sue for misappropriations that occurred within the three-year period before filing of the Complaint because Pennsylvania applied the rule of separate accrual to trade secret misappropriations of a continuing nature based on the text of the PUTSA and Pennsylvania’s common law rule of separate accrual of the cause of action.
Heraeus Med. GmbH v. Esschem, Inc., No. 18-1368, 2019 U.S. App. LEXIS 18636 (3d Cir. June 21, 2019)
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