Edible Arrangements Franchisee Forced to Litigate Fraud Claims in Arbitration

Sep 9, 2020 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Edible Arrangements Franchisee Forced to Litigate Fraud Claims in Arbitration Fruit Creations, LLC v. Edible Arrangements, LLC, No. 3:20-cv-00479, 2020 U.S. Dist. LEXIS 156779 (M.D. Tenn. Aug. 27, 2020) In a recent case in the United States District Court for the Middle District of Tennessee, the Court rejected as ‘meritless’ the Edible Arrangements franchisee’s argument that the franchisee’s claims were not subject to arbitration under the Edible Arrangements franchise agreement stating that “the plaintiff’s claim that a reading of the “Enforcement” section of the contract as a whole leads to a conclusion that the parties did not intend to arbitrate their dispute borders on nonsense.” Excerpts of the Case: Fruit Creations, LLC v. Edible Arrangements, LLC United States District Court for the Middle District of Tennessee, Nashville Division August 27, 2020, Filed Case No. 3:20-cv-00479   Reporter 2020 U.S. Dist. LEXIS 156779 * FRUIT CREATIONS, LLC, FRUIT CREATIONS OF CLARKSVILLE, LLC, FRUIT CREATIONS OF NASHVILLE, LLC, TONY CONSTANT, and KIMBERLY CONSTANT, Plaintiffs, v. EDIBLE ARRANGEMENTS, LLC, NETSOLACE, INC., EDIBLE CONNECT, LLC, BERRY DIRECT, LLC, EDIBLE BRANDS, LLC, INCREDIBLE EDIBLES, LLC, and TARIQ FARID, Defendants. Counsel:  [*1] For Fruit Creations, LLC, Fruit Creations of Clarksville, LLC, Fruit Creations of Nashville, LLC, Tony Constant, Kimberly Constant, Plaintiffs: Colby Conforti, Robert F. Salkowski, Robert Zarco, Zarco Einhorn Salkowski & Brito, P.A., Miami, FL; James R. Tomkins, Smith & Tomkins, One Lakeview Place, Nashville, TN. For Edible Arrangements, LLC, Netsolace, Inc., Edible Connect, LLC, Berry Direct, LLC, Edible Brands, LLC, Incredible Edibles, LLC, Tariq Farid, Defendants: Kevin […]

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7-Eleven Prevails on Franchisee’s Vendor and Inventory and Good Faith Breach Claims

Sep 9, 2020 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

7-Eleven Prevails on Franchisee’s Vendor and Inventory and Good Faith Breach Claims By: Jeffrey M. Goldstein Takiedine v. 7-Eleven, Inc., No. 17-4518, 2020 U.S. Dist. LEXIS 161103 (E.D. Pa. Sep. 2, 2020) In a recent case in the United States District Court for the Eastern District of Pennsylvania, a former 7-Eleven franchisee Takiedine filed a complaint against 7-Eleven alleging breach of the covenant of good faith and fair dealing and breach of contract. The Court dismissed the franchisee’s complaint, but with leave to amend. In his amended complaint, Takiedine pleaded claims for breach of the covenant of good faith and fair dealing, breach of contract, unconscionability, unjust enrichment, impracticability, conversion, and fraud. In turn, 7-Eleven moved to dismiss the amended complaint and filed a separate motion to stay the arbitrable claims, arguing that certain of Takiedine’s breach of contract claims concerning vendor negotiating practices were required to be arbitrated under the terms of the Franchise Agreements. The Court granted 7-Eleven’s motion to stay the arbitrable claims, ruling that Takiedine’s vendor negotiating practices claims under Section 15 of the Franchise Agreements, including those concerning 7-Eleven’s proprietary products, fell within the scope of the Franchise Agreements’ arbitration provision. The Court also at that time dismissed three of the franchisee’s breach of contract claims concerning (1) fair and accurate merchandise audits under Section 14 of the Franchise Agreements; (2) failure to market and advertise under Section 22; and (3) recommended vendors under Section 15(g). Three of  Takiedine’s breach of contract claims survived relating to […]

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Liberty Tax Franchisee Represented by GLF Wins in Post-Term Covenant Case in Federal Court

Jul 21, 2020 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Liberty Tax Loses Preliminary Injunction to Former Liberty Franchisee Regarding Enforcement of Post-Term Restriction Liberty Tax Franchisee Represented by GLF Wins in Post-Term Covenant Case in Federal Court ——————————————————— UNITED STATES DISTRICT COURT WESTERN DISTRICT OF WASHINGTON AT TACOMA JTH TAX LLP, doing business as Liberty Tax Service , Plaintiff, v. MARK KELLY, Defendant. CASE NO. C20-5484RJB ORDER ON MOTION FOR TEMPORARY RESTRAINING ORDER AND PRELIMINARY INJUNCTION JULY 6, 2020 THIS MATTER comes before the Court on the Plaintiff’s Motion for Temporary Restraining Order and Preliminary Injunction (Dkt. 14). The Court is familiar with the file and all documents filed in support of and in opposition to the motion. DISCUSSION This is a business dispute. The facts are sharply in dispute. It is inappropriate, and not justified by the record, for the Court to preliminarily takes a side now for the following reasons: The Court is unable to determine that Plaintiff is likely to succeed on the merits; It does not appear that Plaintiff is likely to suffer irreparable harm in the absence of preliminary relief. If Plaintiff’s position ultimately prevails, monetary damages should adequately recompense Plaintiff. Nothing in the parties’ contract trumps this conclusion; The balance of equities is as hazy as is Plaintiff’s likelihood of success; A preliminary injunction or restraining order is not shown to be in the public interest. Particularly, third party taxpayers’ interests have not been successfully shown to be at risk under the status quo. For these reasons, Plaintiff’s Motion for Temporary Restraining Order […]

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Gambling, a Panamanian Government Takeover, and Liquidated Damages

Mar 26, 2020 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Gambling, a Panamanian Government Takeover, and Liquidated Damages By: Jeffrey M. Goldstein Although “force majeure” or “act of god” cases do not arise frequently in the franchise litigation world, a relatively recent case in the United States District Court for the Southern District of New York turned in part on this doctrine. Wyndham Hotel Grp. Int’l, Inc. v. Silver Entm’t LLC, No. 15-CV-7996 (JPO), 2018 U.S. Dist. LEXIS 52144 (S.D.N.Y. Mar. 28, 2018). In this regard, in 2015, the Veneto Hotel & Casino, a Wyndham franchise hotel, was seized by the Panamanian government for failure to pay gaming taxes, leading Wyndham to terminate its franchise agreement. Wyndham then sued for damages, and the hotel franchisee counterclaimed for Wyndham’s alleged breaches of the franchise agreement. The Veneto Hotel & Casino in Panama City, Panama, was owned by Alexander and Andrew Silverman (“the Franchisee” or “Veneto”), who bought the hotel through one of their corporate entities for $85 million in 2006. In March 2007, Silver Entertainment LLC (“Silver” or “the Franchisee”) signed a franchise agreement with Plaintiff Wyndham Hotel Group International, Inc. (the “Franchisor” or “Wyndham”). The hotel operated under the franchise agreement (“the Franchise Agreement”) as the “Veneto — A Wyndham Grand Hotel.” Under the Franchise Agreement, Silver was required to pay Wyndham recurring fees during the ten-year franchise term, including royalties, a marketing fee, reservation system fees, and an international sales fee.  Also under the Franchise Agreement Wyndham was permitted to terminate the agreement for myriad identified reasons, including but […]

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Multi-Unit Franchisee’s Failure to Sign both Franchise Agreements Contemplated by its Development Agreement Leaves its Dispute with its Franchisor Dickey’s Outside the Scope of any Mandatory Arbitration Provision

Nov 16, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Multi-Unit Franchisee’s Failure to Sign both Franchise Agreements Contemplated by its Development Agreement Leaves its Dispute with its Franchisor Dickey’s Outside the Scope of any Mandatory Arbitration Provision By: Jeffrey M. Goldstein In a recent decision by the United States Circuit Court for the Tenth Circuit, a franchisee’s (Campbell’s) case against its franchisor (Dickey’s), for various business torts was permitted to remain and  proceed in federal court after the circuit court affirmed the district court’s decision that Dickey’s could not identify a valid written agreement that expressed a mutual intent to arbitrate the dispute. Campbell Invs., LLC v. Dickey’s Barbecue Rests., Inc., 2019 U.S. App. LEXIS 26980 *; __ Fed. Appx. __; 2019 WL 4235345 (10th Cir. 2019). The franchisee, Campbell Investments, a Utah-based company, purchased and briefly operated a Dickey’s Barbecue franchise in South Jordan, Utah. The business relationship quickly deteriorated, and Campbell sued Dickey’s. Although Dickey’s argued that a franchise operating agreement requires arbitration to resolve disputes between the parties. Campbell contended that it never signed an operating agreement when it purchased the restaurant from a former franchisee. The district court ruled in favor of Campbell, denying Dickey’s motion to force the case out of court and into arbitration. Even though it was clear, and both parties agreed, that they had been conducting the franchise business pursuant to some form of operative understanding, the district court held that Dickey’s could not identify a written agreement that contained an arbitration requirement. Making matters somewhat murky on this issue was that […]

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Allegedly Fraudulent Truck Independent Contractor Relationship Held to Fall Within Confines of Ohio Business Opportunity Act

Nov 10, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Allegedly Fraudulent Truck Independent Contractor Relationship Held to Fall Within Confines of Ohio Business Opportunity Act By: Jeffrey M. Goldstein In a recent federal court case in the Northern District of Ohio, the Court denied Defendants’ Motion to Dismiss the Plaintiffs’ Ohio Business Opportunity Act (“OBOA”) claim based on alleged fraud. Goodwin v. Am. Marine Express, Inc., No. 1:18-cv-01014, 2019 U.S. Dist. LEXIS 190965 (N.D. Ohio Nov. 4, 2019). The issue decided by the Court was whether the business relationship between the Plaintiffs and Defendants was legally a “business opportunity” covered by the OBOA. The process engaged in by the Court in determining whether the business relationship was a ‘business opportunity’ is very similar to that carried out by courts in determining whether certain distribution relationships fall within the confines of various state and federal franchise laws. As alleged in the Goodwin Complaint, AMX was a common carrier based in Cleveland that provided intermodal drayage, local/regional cartage, and over the road trucking services, whose customers shipped goods via tractor trailers operated by company-employed drivers or owner-operators, with dedicated leased units. Per Plaintiffs, as part of their “fraudulent scheme,” the individual Defendants directed AMX to transfer titles of semi-truck cabs that they intended to lease to owner-operators, like Plaintiffs, to Gurai Leasing through lease agreements called “Independent Contractor Agreements.” According to Plaintiffs, AMX and Gurai Leasing–as directed and controlled by the individual Defendants–concealed from them the terms of the lease and/or purchase, misrepresented and concealed from them the party from whom […]

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Walk-In Tub Dealer Held to be Franchisee in Franchise Termination

Oct 22, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Antitrust Law Daily Walk-in tub seller’s operations qualify as franchises NEWS Walk-in tub seller’s operations qualify as franchises By E. Darius Sturmer, J.D. A marketer/seller/installer of walk-in bathtubs in the New York and New Jersey area could qualify as a franchise with standing to assert counterclaims against Safe Step Walk In Tub Co. under the franchising laws of those states and Connecticut and Rhode Island, the federal district court in New York City has ruled. Therefore, a motion by Safe Step for dismissal of these counterclaims was denied. However, because the allegations were outside the ambit of New York and Rhode Island’s “Little FTC” Acts, claims brought under those statutes were dismissed. The court also discarded numerous claims for unfair competition and breach of the implied covenant of good faith and fair dealing (Safe Step Walk In Tub Co. v. CKH Industries, Inc., March 17, 2017, Roman, N.). Safe Step had sued bathtub marketer/seller/installer CKH Industries, claiming nonpayment of certain marketing fees related to the use of Safe Step’s trademarks. CKH counter-sued, alleging that Safe Step was in fact a franchisor who attempted to structure “Dealership/License” agreements to avoid federal and state franchise laws. CKH alleged that Safe Step defaulted under the agreements by refusing to honor its obligations and by terminating those agreements, or failing to renew them, despite CKH’s performance of its side of the bargains. CKH contended that the manufacturer’s actions violated state franchise laws and state laws prohibiting unfair or deceptive business practices, and constituted a fraud […]

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Halal Guys Franchisee Fails to Obtain Preliminary Injunction from Illinois Court to Prevent Termination

Jul 31, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

A few days ago, the United States District Court for the Northern District of Illinois denied a plaintiff franchisee’s preliminary injunction request, thereby dooming the ‘Halal Guys’ franchisee’s legal attempt to remain in business after it was terminated by its franchisor. As with many other restaurant franchise terminations, the franchisee in this case was repeatedly defaulted for health and other operational food violations. At the end of the day, the federal court was not persuaded by the franchisee attorney’s focus on an email in which one of the franchisor owners had told the quality inspector to ‘go hard’ on the franchisee when conducting one of the last inspections. As the Court noted, the franchisee had failed to establish its right to the emergency injunction because it failed to individually specifically address, and rebut, under oath, each of the alleged food violations upon which the termination was based. The Court’s analysis of the denial of the emergency relief was exceedingly traditional; however, the decision did appear to contain a small analytical inconsistency when it found both that the plaintiff franchisee had an ‘adequate remedy at law’ [through a damages award in a later trial down the line] and that the franchise brand might not suffer if the Court had chosen to allow the franchisee to continue operating as a branded restaurant. H Guys Ltd. Liab. Co. v. Halal Guys Franchise, Inc., No. 19-cv-4974, 2019 U.S. Dist. LEXIS 124052 (N.D. Ill. July 25, 2019) Please Click on the Link Below to Read […]

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Auto Manufacturer’s Charge-back of Rebates to Car Dealer Fails

Jun 23, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

AUTOBAHN IMPORTS, L.P., Doing Business as Land Rover of Fort Worth v. JAGUAR LAND ROVER NORTH AMERICA, L.L.C., 896 F.3d 340 (United States Court of Appeals, Fifth Circuit) (July 13, 2018) Auto Manufacturer’s incentive and chargeback programs were shown to be an unenforceable and unreasonable sales standard that failed to legally justify the chargeback of the car franchisee by the franchisor of $317,000 of auto manufacturer’s holdbacks. After franchisee, a car dealer, successfully complained to Board of Texas Department of Motor Vehicles, asserting that franchisor’s charges of $317,000 back to franchisee for violation of rules of sales incentive program was an unreasonable sales standard, and during pendency of franchisor’s appeal of the Board’s order to the Texas Court of Appeals, franchisee brought action in state court against franchisor, seeking damages based on Board’s ruling, and claiming breach of contract and violations of the Texas Deceptive Trade Practices Act (DTPA). Franchisor removed to federal court, and the United States District Court for the Northern District of Texas, John McBryde, District Judge, 2017 WL 2684055, granted franchisee’s summary judgment motion. Franchisor appealed, and in the interim the Texas Court of Appeals affirmed the Board’s order. The genesis of the lengthy dispute, spanning across many years, courts, and court systems, hinged on incentive programs offered by Jaguar. First, Jaguar offered an incentive known as the “Business Builder Program,” which provides dealers a percentage of the retail price of every vehicle sold if certain conditions are met. The relevant terms are set out in […]

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Tim Hortons Prevails on Termination Injunction Motion Against Restaurant Franchisee

Jun 19, 2019 - Judge’s Distribution and Franchise Rulings from the Front Lines by |

Crux of Court’s Decision (Not including any subsequent appeals): Tim Hortons prevailed on its preliminary injunction motion terminating its restaurant franchisees. The franchisor was entitled to a preliminary injunction terminating the franchisees because the franchisees refused to pay fees owed to the franchisor. June 17, 2019 Name of Court: United States District Court for the Southern District of Florida Short Case Name: Tim Hortons v. Tims Milner Short Factual Background and Parties: Plaintiff is the franchisor of the Tim Hortons brand and franchises restaurants throughout the United States. In 2016, Defendants and Plaintiff and its affiliate Tim Donuts U.S. Limited, Inc. (hereafter, “Plaintiff’s Affiliate”) entered into Franchise Agreements and Lease Agreements (together, the “Agreements”) that provided for Defendants’ ownership and operation of franchised Tim Hortons restaurants at seven locations in Michigan (the “Restaurants”). Each of the Franchise Agreements grants Defendants the right to operate one Tim Hortons restaurant in a specific location and to use the Tim Hortons trademarks. Defendants, however, maintain that they reached a verbal agreement with two employees of Plaintiff prior to execution of the Agreements, that they are only required to pay rent based on a flat percentage of gross sales, and are not required to pay as additional rent all real estate taxes and assessments, sales taxes, common area maintenance charges and assessments, certain utilities, and personal property taxes (together, the “Additional Rent Amounts”) On or about June 19, 2018, Defendants entered into an Asset Purchase Agreement with Kava, for the sale of the Restaurants […]

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