Breach of Contract Claim Fails Motion for Summary Judgement, Must Provide Facts Proving Opportunity to Cure
Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |A federal district court in Arkansas recently granted partial summary judgement in a case that involved a contract dispute between the national warehouse club chain Sam’s West, Inc. (“Sam’s Club”) and Mint Solar, LLC (“Mint”), a Utah-based provider of home security systems and solar power equipment. Mint Solar, LLC v. Sam’s West, Inc., 2021 WL 1723095 (W.D. Ark. Apr. 30, 2021). The dispute concerned whether Mint had fulfilled the terms of the contract, which allowed Mint to operate in Sam’s Club stores. Sam’s Club and Mint entered into a contract in September 2017 for Mint to sell its products in Sam’s Club locations. According to the agreement, Mint would offer its products in 216 locations. By May 2018, Mint was selling in 64 locations. In June 2018, Sam’s Club removed Mint from its stores, without providing a 30-day written notice and an opportunity to cure as required by the notice-and-cure contract provision. In August 2018, Sam’s Club sent Mint a letter as a written confirmation of the termination of the agreement, which was based on Sam’s Club’s determination that Mint was in material breach of the agreement and was unable to cure its breaches. Mint filed a claim for breach of contract in 2019, arguing that Sam’s Club violated the termination clause by failing to give the requisite 30-day notice. Sam’s Club counterclaimed for breach of contract, alleging three counts: (1) Mint was insolvent as of April 2018 and thus, was in breach of the agreement; (2) Mint failed to meet […]
Dealer’s Claims Against Manufacturer’s Attempt to Modify Agreement Survives Motion to Dismiss
Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |A federal judge for the District of Minnesota recently dismissed General Motors’ (“GM”) motion to dismiss for failure to state a claim regarding an alleged unlawful modification to a dealer’s agreement. The dispute involves the major car manufacturer and an auto dealer, Shakopee Chevrolet (“Shakopee”), located to the west of the Twin Cities area.Shakopee Chevrolet Inc. v. Gen. Motors LLC, 2021 WL 1785229 (D. Minn. May 5, 2021). Shakopee served as a GM dealer pursuant to a sales and service agreement, which must be renewed every five years, per GM’s customary practice. The agreement included a satisfactory performance provision that required the dealer to maintain a baseline of sales, determined using an index known as the Retail Sales Index (“RSI”). A dealer’s RSI was calculated based on the dealership’s area of primary responsibility (“APR”), a geographic area listed in the agreement. Per the 2010 agreement, Shakopee had an APR of seven census tracts. The 2015 agreement retained the same APR and allowed GM sole discretion to make modifications “consistent with dealer network planning objectives.” In 2016, GM proposed a change via a notice, which would expand Shakopee’s APR to a thirteen-census tract area. Shakopee objected, arguing that the change violated Minnesota Statutes, and requested to resolve the dispute through the mechanism provided in the agreement. GM allegedly refused to participate in the process. In September 2020, when the 2015 agreement was set to expire, GM provided Shakopee with a contract for execution, which included the additional six tracts proposed in the […]
Car Dealer Wins on Bad Faith Claims Against Manufacturer’s Attempt to Terminate
Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |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 […]
Discovery Issues and Unclear Agreements Leads to Ruling Against UK Plaintiff
Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |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, […]
Franchisee Fails to Show Unconscionability of Arbitration Clause
Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |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 […]
Inventor Fails to Prove Distributor Failed to Sufficiently Market Products
Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |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 […]
Court Blocks Football Franchise From Joining New League
Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |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 […]
Court Upholds Restrictive Covenant Against Manager’s Claims of Unenforceability
Jun 6, 2024 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |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 […]
Burger King Franchisee Hoisted on Own Petard
Dec 22, 2020 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |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 […]
Edible Arrangements Franchisee Forced to Litigate Fraud Claims in Arbitration
Sep 9, 2020 - Judge’s Distribution and Franchise Rulings from the Front Lines by Jeffrey M. Goldstein |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 […]
