Judge’s Distribution and Franchise Rulings from the Front Lines

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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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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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 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 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 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 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 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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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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