Mealey's Franchise : Mealey's : Legal News & Analysis

Mealey's Franchise

December 17, 2020
Kuwaiti Car Dealer, Ford Motor Co. Both To Appeal Dismissal Of Contract Row

CINCINNATI — Ford Motor Co. on Nov. 23 filed a notice of cross-appeal in a federal court in Michigan, indicating its intent to bring before the Sixth Circuit U.S. Court of Appeals for the second time a Kuwaiti car dealership’s breach of contract suit against it in which the parties have disputed whether the Motor Vehicle Franchise Contract Arbitration Fairness Act (Fairness Act) applies to foreign dealers and, as such, whether the claims should be arbitrated (Arabian Motors Group W.L.L. v. Ford Motor Company, No. 16-13655, E.D. Mich.).
December 17, 2020
Federal Judge Denies Urgent Care Franchisee’s Bid To Halt Franchise Sales

HARTFORD, Conn. — A Connecticut federal judge on Dec. 2 refused to reconsider her Nov. 25 refusal to grant a temporary restraining order (TRO) to a franchisee of Doctors Express Urgent Care facilities, in which she concluded that the franchisee failed to provide evidence of irreparable harm if the franchisor moved forward with the purchase of certain franchises in the franchisee’s territory (Danilo Purugganan v. AFC Franchising LLC, No. 20-360, D. Conn., 2020 U.S. Dist. LEXIS 221288 and 2020 U.S. Dist. LEXIS 225638).
December 17, 2020
New York Justice Stays Suit Over Failed Subway Shops Pending Arbitration

NEW YORK — A New York justice granted Subway franchise defendants’ motions to stay pending arbitration a fraud suit brought by a franchisee over seven failed sandwich shops, concluding on Dec. 2 that the agreements between the parties clearly stated that an arbitrator must decide issues of arbitrability (Charles Fritschler, et al. v. Draper Management LLC, et al., No. 652056/2019, N.Y. Sup., New York Co., 2020 N.Y. Misc. LEXIS 10324).
December 17, 2020
Florida Burger King Franchisees May Allege Counterclaim Over Sale Of Restaurants

MIAMI — A Florida federal judge on Dec. 10 dismissed in part second amended counterclaims filed by Burger King franchisees sued for failing to pay amounts allegedly owed to their franchisor. The judge rejected the franchisees’ argument that Burger King failed to provide adequate training but upheld their counterclaim that the franchisor refused to approve or deny the sale of certain restaurants (Burger King Corp. v. Darryl D. Berry, et al., No. 20-21801, S.D. Fla., 2020 U.S. Dist. LEXIS 233700).
December 17, 2020
Ohio Federal Judge Won’t Dismiss Suit Against Franchisee Over Noncompete Agreement

CLEVELAND — An Ohio federal judge on Dec. 14 upheld claims against a Tennessee-based franchisee brought by a franchisor alleging that a former executive violated his noncompete agreement by going to work for a Tennessee company related to the franchisee. However, the judge dismissed the claims against the related company for lack of personal jurisdiction.
December 17, 2020
Franchisees Ask High Court To Decide Dispute Over Intent To Delegate Arbitrability Issues

WASHINGTON, D.C. — Two commercial cleaning business franchisees asked the U.S. Supreme Court on Nov. 27 to resolve a circuit court split and decide whether a passing reference to a set of arbitration rules constitutes “clear and unmistakable” intent to delegate arbitrability issues to an arbitrator, rather than a court (Ericka Richardson, et al. v. Coverall North America Inc., et al., No. 20-763, U.S. Sup.).
December 17, 2020
Government: Antitrust Law Misapplied In Burger King Suit Over Franchisee Hiring Ban

ATLANTA — A lower court misapplied federal antitrust law in dismissing a proposed class complaint challenging an agreement between Burger King corporate and its franchisees not to recruit or hire each other’s employees, the federal government tells the 11th Circuit U.S. Court of Appeals in an amicus curiae brief filed Dec. 7. The brief follows an appellant brief filed by Burger King franchise employees who maintain that the agreement led to depressed workers’ wages.
December 10, 2020
Judge: Suit Against Former Maryland Franchise Can Proceed In Tennessee

MEMPHIS, Tenn. — A Tennessee-based franchisor’s lawsuit against the owners of a former franchise in Maryland who are accused of continuing to use trademarks, trade secrets and proprietary information after the termination of a franchising agreement can proceed in federal court in Tennessee, a federal judge ruled Nov. 23, finding that the defendants waived their personal jurisdiction defense because they agreed to the entry of a permanent injunction and because the franchise agreement includes a forum-selection clause (Gus’s Franchisor LLC v. Terrapin Restaurant Partners LLC, et al., No. 20-2372, W.D. Tenn., 2020 U.S. Dist. LEXIS 219040).
December 10, 2020
9th Circuit Denies Franchisor’s Rehearing Request In Misclassification Suit

PASADENA, Calif. — A Ninth Circuit U.S. Court of Appeals panel on Dec. 1 denied a petition for rehearing or rehearing en banc filed by a franchisor after a split panel in an Oct. 21 memorandum overturned a trial court’s denial of a franchisee’s motion to reopen his class action suit against a franchisor over his alleged misclassification, holding that the judge should reconsider the decision and apply the ruling in Henson v. Fidelity National Financial Inc. (Sergio Gonzalez, et al. v. Coverall North America Inc., No. 19-55511, 9th Cir., 2020 U.S. App. LEXIS 37526).
December 08, 2020
Burger King Employees Ask 11th Circuit To Revive Suit Over Franchisee Hiring Ban

ATLANTA — An agreement between Burger King corporate and its franchisees not to recruit or hire each other’s employees led to depressed workers’ wages, three employees argue to the 11th Circuit U.S. Court of Appeals in a Nov. 30 brief, seeking to reverse a lower court’s dismissal of a proposed class complaint (Jarvis Arrington, et al. v. Burger King Worldwide, Inc., et al., No. 20-13561, 11th Cir.).
December 07, 2020
Federal Judge Explains Partial Judgment For 7-Eleven At 1st Circuit’s Request

BOSTON — At the request of the First Circuit U.S. Court of Appeals, a federal judge in Massachusetts followed up his entry of partial judgment in favor of 7-Eleven Inc. with a memorandum and order on Dec. 2, explaining there is little overlap between the issues disposed of and those that remain pending in four franchise workers’ action over their alleged misclassification as contractors (Dhananjay Patel, et al. v. 7-Eleven Inc., No. 17-11414, D. Mass., 2020 U.S. Dist. LEXIS 225628).
December 04, 2020
Missouri Federal Judge Stays Franchise Trademark Dispute Pending State Court Ruling

ST. LOUIS — In a dispute over two franchises’ unauthorized use of a window distributor’s trademarks, a Missouri federal judge on Nov. 30 stayed the litigation pending a ruling on the scope of the company’s trademark license by a North Carolina state court. However, the judge agreed to dismiss false advertising and trademark dilution claims, as well as claims against a franchise employee (Window World International LLC, et al. v. Jill O’Toole, et al., No. 4:19-2363, E.D. Mo., 2020 U.S. Dist. LEXIS 223071).
December 03, 2020
Washington Court: Former Car Dealership Owners Not Entitled To Settlement Funds

TACOMA, Wash. — Previous owners of a Volkswagen dealership were not entitled to payments from a class action settlement over the company’s emissions violations under the terms of the parties’ purchase and sales agreement, a Washington appeals court held Nov. 24, affirming a trial court ruling (Rodney R. Parr, et al. v. Haselwood Imports Inc., No. 53640-4-II, Wash. App., Div. 2, 2020 Wash. App. LEXIS 3085).
December 03, 2020
Domino’s Franchisee Worker Asks U.S. High Court To Consider Arbitration Question

WASHINGTON, D.C. — In a Nov. 16 petition for a writ of certiorari, an employee of a Domino’s franchisee asks the U.S. Supreme Court to take up his appeal and rule that “clear and unmistakable evidence” must exist in an arbitration agreement for a court to find that the parties agreed that an arbitrator rather than the court will decide questions of arbitrability (Derek Piersing, et al. v. Domino’s Pizza Franchising LLC, et al., No. 20-695, U.S. Sup.).
December 02, 2020
Reconsideration Denied, Summary Judgment Granted In Cleaners’ Wage Class Suit

FRESNO, Calif. — In a trio of orders issued Nov. 25 and Nov. 30, a federal judge in California declined to reconsider a January order granting summary judgment to three of the five defendants in a wage class suit brought by home cleaners, granted summary judgment to a fourth defendant and approved the cleaners’ class notice plan as they move forward with their claims against the remaining defendant, a cleaning company franchisee (Angela Cruz, et al. v. MM 879, Inc., et al., No. 15-1563, E.D. Calif., 2020 U.S. Dist. LEXIS 221722).
December 01, 2020
Insureds Oppose Insurer’s High Court Appeal Of Employment Practices Coverage Suit

WASHINGTON, D.C. — Insureds on Nov. 19 filed an opposition to an insurer’s petition asking the U.S. Supreme Court to review a Montana Supreme Court ruling that a lower court properly exercised personal jurisdiction over the insurer under Montana's long-arm statute and the due process clause of the 14th Amendment in the insureds’ lawsuit seeking coverage for an underlying class action employment dispute, challenging the insurer’s “new argument” that the high court should accept the writ of certiorari because the novel coronavirus “has introduced uncertainty into the insurance industry” (Philadelphia Indemnity Insurance Company v. Gateway Hospitality Group Inc., et al., No. 20-515, U.S. Sup.).
November 25, 2020
Franchisees Could Not Have Relied On Alleged Misrepresentations, Judge Says

RALEIGH, N.C. — A federal judge in North Carolina on Nov. 23 awarded summary judgment to three men who formed a hot dog and barbeque franchise, finding that two area franchisees and an individual franchisee could not establish that they reasonably relied on allegedly misleading statements in the franchise brochure and marketing materials because the documents did not influence the plaintiffs’ decision to enter into franchise agreements (Trident Atlanta LLC, et al. v. Charlie Graingers Franchising LLC, et al., No. 18-10, E.D. N.C., 2020 U.S. Dist. LEXIS 218836).
November 24, 2020
Virus Exclusion Bars Coverage For Losses Incurred By Novel Coronavirus

PHOENIX — An insured’s suit against its businessowners insurer cannot proceed because no coverage is afforded for losses sustained as a result of shutdown orders issued as a result of the novel coronavirus, an Arizona federal judge said Nov. 20 in determining that the policy’s virus exclusion clearly precludes coverage for the losses (Border Chicken AZ LLC v. Nationwide Mutual Insurance Co., et al., No. 20-785, D. Ariz., 2020 U.S. Dist. LEXIS 217649).
November 24, 2020
Judge Partially Grants Tax Franchisor’s Motion For Default Judgment

NEW YORK — A federal judge in New York on Nov. 20 granted in part an income tax franchisor’s motion for default judgment, ruling that while the plaintiff established claims for breach of contract, misappropriation of trade secrets, trademark infringement and false designation of origin, the franchisor was unable to establish liability for trademark dilution and is not entitled to damages and attorney fees (JTH Tax Inc., et al. v. Pawanmeet Sawahney, No. 19-4035, S.D. N.Y., 2020 U.S. Dist. LEXIS 217977).
November 23, 2020
Jack In The Box Settles Claims Over Marketing Fund Access, Disclosures

SAN DIEGO — In a Nov. 10 court filing in the San Diego County Superior Court, Jack in the Box Inc. (JIB) and an association representing nearly 85 percent of all JIB franchises revealed that they have reached a settlement in their dispute over access to a $180 million marketing fund (National Jack in the Box Franchise Association v. Jack in the Box Inc., No. 37-2019-00031267-CU-BC-CTL, Calif. Super., San Diego Co.).
November 20, 2020
Franchise Groups Challenge Calif. Independent Contractor Test’s Constitutionality

SAN DIEGO — Four franchising-related groups filed a complaint on Nov. 17 in a federal court in California challenging the constitutionality of California’s “ABC Test” used for determining whether a worker is an employee or independent contractor and calling it “irreconcilable” with laws regulating franchising (International Franchise Association, et al. v. California, et al., No. 20-2243, S.D. Calif.).
November 13, 2020
Current McDonald’s Franchisees Sue Franchisor For Race Discrimination

CHICAGO — McDonald’s history of discrimination against Blacks that began when the franchise system started in 1955 and Blacks were not permitted to be franchisees continues today, with the franchisor steering Black franchisees to underperforming Black neighborhoods where it charges them higher rents, forces them to pay for renovations or rebuilds and then forces them out when they can’t keep up with the costs, two current franchisees allege in an Oct. 29 class complaint filed in an Illinois federal court (James Byrd, Jr., et al. v. McDonald’s USA, LLC, et al., No. 20-6447, N.D. Ill.).
November 12, 2020
Michigan Federal Judge: Franchisee Entitled To Fee Return, Nothing Else

DETROIT — In Nov. 6 findings of fact and conclusions of law, a federal judge in Michigan largely rejected the positions advanced at a January bench trial by a plaintiff franchisee, including allegations of fraudulent inducement and negligent misrepresentation leveled against a former franchisor (MTR Capital LLC v. LaVida Massage Franchise Development Inc. et al., No. 17-13552, E.D. Mich., 2020 U.S. Dist. LEXIS 208061).
November 10, 2020
Judge Denies Franchisees’ Motion For TRO, Construes As Preliminary Injunction Motion

SACRAMENTO, Calif. — A federal judge in California on Nov. 5 denied a motion for a temporary restraining order brought by small businesses and franchisees against the seller of bone density improvement center franchises and construed the motion as one for a preliminary injunction in their lawsuit alleging fraud, negligent misrepresentation, unjust enrichment, violation of California’s unfair competition law (UCL) and other claims (John P. Baird, et al. v. OsteoStrong Franchising, LLC, et al., No. 20-cv-02010, E.D. Calif., 2020 U.S. Dist. LEXIS 208500).
November 09, 2020
Secretary Of Labor, Groups Will Appeal Joint Employment Ruling

NEW YORK — The U.S. secretary of Labor and trade groups separately filed notices on Nov. 6 in the U.S. District Court for the Southern District of New York that they will appeal a Sept. 8 ruling deeming the portions of the U.S. Department of Labor’s (DOL) final rule revising its regulations interpreting vertical joint employer liability as “arbitrary and capricious,” in conflict with the Fair Labor Standards Act (FLSA) and “flawed in just about every respect” (New York, et al. v. Eugene Scalia, et al., No. 20-1689, S.D. N.Y.).