Franchisee Unable to Navigate Legal Gauntlet Protecting Franchisor Against Fraud

Apr 5, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Many esoteric legal doctrines have evolved historically to blunt the impact of fraud accusations and claims, especially in franchise cases. These include the requirements that the false representation be of a material fact that a reasonable person would reply upon, and that the defendant know that his representation is false. Further, fraud usually cannot be based on a promise or failure to meet a promise (versus a fact) unless the promisor never intended to perform. In a recent case, the court applied all of these principles to reject a franchisee’s fraud allegations reasoning that the franchisee’s allegations were merely “a business deal gone bad.” Kiddie Acad. Domestic Franchising, LLC v. Wonder World Learning, LLC, Civil Action No. ELH-17-3420, 2019 U.S. Dist. LEXIS 56126, at *44-46 (D. Md. Mar. 31, 2019). In this regard, the Court summarized some of the franchisee’s rejected fraud claims: For example, counterclaimants contend that on May 9, 2011, during the couple’s visit to Kiddie Academy in Maryland, Commarota allegedly told the defendants that “‘his team’ would guide them through the entire construction process.” ECF 25, ¶ 24. As Kiddie Academy’s VP of Construction, Commarota held himself out as knowledgeable in construction and certainly knowledgeable in Kiddie’s construction process. The Amended Counterclaim alleges that Commarota’s statements were false because he knew that Kiddie “did not typically guide franchisees through the entire construction process” and, allegedly, Kiddie never intended to guide defendants. Id. ¶ 24. In addition, counterclaimants assert that Helwig and Wise falsely assured “Kiddie’s support,” and […]

Read More

Franchisee’s Inflammatory Unilateral Conduct Ensnares Him on Covenant Not-to-Compete

Apr 5, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Covenants against competition or covenants not-to-compete are included in almost every franchise agreement. Disputes regarding the validity and enforceability of relevant post-term covenants usually arise when distribution, dealership or franchise agreements come to an end, either through a termination or expiration. Although courts are quick to recognize that restrictions on trade are spiritually disfavored under the US legal and economic systems, many of these same courts do not hesitate to grant a franchisor’s request to enforce one of these covenants when a franchisee decides to compete with its former franchisor at the end of the franchise term. From a litigation point of view, the franchisee’s motivation for his post-termination conduct can play a significant role in whether a court views the post-term covenant to have been violated. In a recent case, Handel’s Homemade Ice Cream & Yogurt v. Moonlight 101, Inc., United States Court of Appeals, 2019 WL 1466968 (6th Cir. April 1, 2019), the franchisee did himself no favors in this regard. In Handel’s, the Defendant, a Handel’s ice-cream franchisee, was on the verge of purchasing a second Handel’s franchise in addition to the one it had originally purchased and had been operating. During negotiations with the franchisor, the franchisee allegedly “informed Handel’s that he did not think he should have to pay a separate franchise fee for the new location, did not wish to sign another franchise agreement, and refused to provide a final lease of the proposed Gaslamp Location to Handel’s.” Consequently, Handel’s did not approve the […]

Read More

Esteemed Lawyers of America Logo

Esteemed Law Firm Complex Litigation

Global Law Experts Logo

Recommended Firm in Franchise Litigation

Who's Who Attorney Logo

Top Attorney USA – Litigation

Avvo Franchise Lawyer Symbol

Superior Attorney in Franchising

Avvo Franchise Lawyer Symbol

Superior Attorney in Antitrust

Finance Monthly Global Award Winner Logo

Franchise Law Firm of the Year

Lead Counsel logo

Chosen Law Firm for Commercial Litigation

BBB of Washington DC

A+ Rated

Washington DC Chamber of Commerce

Verified Member

Lawyers of Distinction logo

Franchise Law Firm of the Year

ISSUU

Best Law Firm for Franchise Disputes in 2017

Law Awards Finanace Monthly

Franchise Law Firm of the Year - 2017

Top Franchise Litigator for Franchisees and Dealers

Top Franchise Litigator for Franchisees and Dealers

2017 Finance Monthly Award

2017 Finance Monthly Award

ACQ5 LAW AWARDS 2018

Franchise Law Firm
of the Year
ACQ5 LAW AWARDS 2018

ACQ5 LAW AWARDS 2019

Franchise Law Firm
of the Year
ACQ5 LAW AWARDS 2019

Franchise Law Firm of the Year

Franchise Law Firm of the Year

Franchise Law Firm of the Year

Franchise Law Firm of the Year
Global Awards 2017

Global Law Experts

Franchise Law Firm
of the Year
in New York – 2019

Finance Monthly Law Awards - 2018

Finance Monthly Law Awards - 2018

Franchise Law Firm of the Year

Franchise Law Firm
of the Year
Global Awards 2018

Contact Us

Goldstein Law Firm, PLLC

1629 K St. NW, Suite 300,
Washington, DC 20006

Phone: 202-293-3947
Fax: 202-315-2514

Free Consultation

Free Consultation