Anti-Waiver Provisions in Franchisees' State Franchise Statutes Trumped by Texas Law
The federal court for the Western District of Texas dismissed all of the Curves franchisees’ causes of action based on the laws of their home states because Texas law, the law of the franchisor’s location and the law set forth in the choice of law clauses, applies. In this consolidated action, several Curves franchisees located across the United States asserted twenty-six non-Texas statutory claims based on the franchise act and consumer protection laws in the states where the franchisees are located. Franchisees argued that the anti-waiver provisions found in the laws of eleven states that contain franchises owned and/or previously owned by plaintiffs required the application of the laws where the franchisees are located. The federal court rejected this argument because the laws of the franchisees’ home states are inapplicable based on the application of the “most significant relationship” set forth in the Restatement (Second) of Conflicts of Law. Because Texas had the most significant relationship to the franchisees’ claims, the laws of the franchisees’ home states, including those states with anti-waiver provisions, were inapplicable. Thus, all of the franchisees’ twenty-six causes of action based on their home state laws were dismissed.
Momentum Marketing Sales & Services, Inc. v. Curves International, Inc., Bus. Franchise Guide (CCH) ¶ 14,047 (W.D. Tex. Dec. 17, 2008).
Forum Selection Clause Enforced in Spite of the New York Franchise Sales Act's Anti-Waiver Provision
Several fitness center franchisees filed suit against Curves, a Texas franchisor. The case was transferred to the federal court for the Western District of Texas by a federal district court in New York City. With respect to the convenience of the parties and the witnesses, the franchisees failed to articulate any compelling reasons for overriding the forum selection clause, which specified a Texas forum. Although the franchisees asserted that their witnesses would be inconvenienced by a transfer, the franchisor pointed out that its witnesses would also be inconvenienced if the case was tried in the instant court. Moreover, New York’s familiarity with the governing law (the franchisees asserted claims under the New York Franchise Sales Act) weighed slightly against transfer. Finally, in light of the franchisor’s uncontested assertion that related cases were already pending in the Western District of Texas, the interests of trial efficiency and justice favored transferring the action.
The federal court also rejected the franchisees' contention that the anti-waiver provision of the New York Franchise Sales Act rendered the forum selection clauses unenforceable. The franchisees’ reading of the anti-waiver provision, that it meant that they could not be required to contractually consent to litigating a dispute in a forum other than New York, was overly broad.
Luv2BFit, Inc. v. Curves Int'l, Inc., DC N.Y., Bus. Franchise Guide ¶13,996 (S.D. N.Y. Sept. 29, 2008).
Domino's Wins 8th Circuit Case on Mandate of Hardware and Software to System
The Eighth Circuit reversed the districts court’s grant of summary judgment in favor of franchisees who had filed suit against Domino’s for mandating that its franchisees install its proprietary PULSE hardware and software by a date certain. The Eighth Circuit remanded with instructions to enter a take-nothing judgment in favor of Domino's.
Kevin Bores, et al v. Domino's Pizza, LLC, 530 F.3d 671 (8th Cir. 2008).
ColorTyme Prevails on Enforcement of Arbitration and Forum Selection Clauses
Prevailed on enforcement of forum selection and arbitration clauses against signatories and a non-signatory to franchise agreement.
PP&G Consulting, Inc. v. ColorTyme, Inc.; Case No. 07-002496; Division L; 13th Judicial Circuit Court; Hillsborough County, Florida (November 2007) (also obtained final award in arbitration proceeding of damages, prejudgment interest, post-judgment interest, attorneys’ fees, costs and expenses).
Pizza Inn Enforces Forum Selection Clause
Prevailed in enforcement of a forum selection clause in a franchise agreement, in action involving Racketeer Influenced and Corrupt Organizations Act claim. The plaintiffs subsequently dismissed their RICO claim with prejudice against the franchisor.
Hull v. Pizza Inn, Inc., Civil Action No. 2:06-CV-346; United States District Court for the Eastern District of Texas, Marshall Division (August 2007).
Curves Wins Motion to Transfer from Florida to Texas Based on Forum Selection Clause
Prevailed on motion to transfer venue based on forum selection clauses of franchise agreements. Nina
Moss, et al. v. Curves International, Inc.; Bus. Franchise Guide (CCH) ¶ 13, 638 (S.D. Fl. Apr. 18, 2007).
Court Dismisses Roly Poly's Officers from Texas Case
Appellate court reversed and rendered judgment, dismissing president and vice president of franchisor from case based on lack of jurisdiction.
Linda Wolf and Julie Reid v. Summers-Wood, L.P. d/b/a Roly Poly Texas, Summers-Wood Management, L.L.C., John W. Summers, and J. Michael Wood; 214 S.W.3d 783 (Tex. App. - Dallas 2007, no pet.).
Franchisee Ordered to Produce Financial Documents to Franchisor
Obtained favorable discovery ruling allowing franchisor access to franchisee’s financial records, maintaining an advantageous posture for franchisor in litigation.
Sherman Street Assocs., LLC v. JTH Tax, Inc., No. 3:03-CV-01875, 2006 WL 3422576 (D. Conn. Nov. 28, 2006).
Liberty Tax Prevails in Enforcing Forum Selection Clause
Prevailed in enforcement of forum selection clause and obtained transfer of civil action.
Youngblood v. JTH Tax Servs., Inc., No. SA: 06-CA-380-XR; 2006 WL 1984656 (W.D. Tex. July 17, 2006).
Summary Judgment Upheld for Days Inns on Vicarious Liability Claim
Prevailed in the appeal of a summary judgment for franchisor in a vicarious liability matter in which court found that franchisor established as a matter of law that it did not retain actual or contractual control over its franchisee to subject it to tort liability.
Fitz v. Days Inns Worldwide, Inc., 147 S.W.3d 467 (Tex. App.—San Antonio 2004, pet. denied.)
Court Agrees to Enforce Post-Termination Covenants Against Franchisees
Court enforced post-term covenants against competition and other post-term obligations of terminated franchisees.
Brenco Enterprises, Inc. v. Takeout Taxi Franchising Systems, Inc., 2003 WL 21659422, Bus. Franchise Guide (CCH) ¶12, 596 (Va. Cir. Ct. May 2, 2003.).
Summary Judgment Granted for Ramada for Liquidated Damages and Recurring Fees
Received summary judgment for franchisor for liquidated damages, recurring fees, and attorneys’ fees for licensee and guarantors’ breach of license agreement.
Ramada Franchise Systems v. Jacobcart, Bus. Franchise Guide (CCH) ¶12,609 (N.D. Tex. Feb. 21, 2003.)
Choice of Law Clause Upheld for Franchisor with Court Dismissing Several Out-of-State Claims
Court granted defendants’ demurrers on franchisees’ claims for alleged violations of North Carolina, Tennessee and California deceptive trade practices acts and California franchise statutes holding that the Virginia choice of law clause in the franchise agreements specifically excluded any actions based upon breaches or torts under the laws of foreign jurisdictions.
Brenco Enterprises, Inc. v. Takeout Taxi Franchising Systems, Inc., Bus. Franchise Guide (CCH) ¶12,595 (Va. Cir. Ct. Jan. 13, 2003.)
Preliminary Injunction Granted for Ramada on Lanham Act Claims
Prevailed on a preliminary injunction for the franchisor for franchisee’s Lanham Act violations.
Ramada v. Jacobcart, Inc., 2001 WL 540213 (N.D. Tex. May 17, 2001.)
Chapter 11 - Jiffy Lube Franchisee Heartland Automotive
Represent Jiffy Lube International, Inc. in the Chapter 11 proceedings of its largest franchisee, Heartland Automotive Holdings, Inc., in Fort Worth, Texas. The debtor operates over 400 franchised Jiffy Lube service centers across the nation, raising complex issues regarding franchise agreements, non-residential real property leases, and franchisee relations.