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

Mealey's Franchise

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.).
November 09, 2020
Supplemental Class Notice Via Text Message Ordered In TCPA Settlement

CHICAGO — A federal magistrate judge in Illinois on Nov. 3 denied final class settlement approval in a Telephone Consumer Protection Act (TCPA) suit due a small number of claims and ordered supplemental class notice via text message, opining that those texts will not violate the federal law (Madeleine Yates, et al. v. Checkers Drive-In Restaurants, Inc., et al., No. 17-9219, N.D. Ill., 2020 U.S. Dist. LEXIS 205241).
November 09, 2020
Wendy’s Franchisee Pays Penalty After DOL Finds Child Labor Violations

EDGEWOOD, Ky. — Sinkula Investments Ltd. Co., which operates 10 Kentucky Wendy’s franchise locations, paid $16,160 for violating child labor requirements of the Fair Labor Standards Act (FLSA), the U.S. Department of Labor Wage and Hour Division (WHD) announced Nov. 6.
November 09, 2020
T-Mobile Retailer Will Pay $175,000 To End EEOC Disability Bias Suit

TACOMA, Wash. — A federal judge in Washington on Oct. 27 approved a consent decree reached between Northwest Wireless Enterprises LLC, an exclusive T-Mobile retailer, and the Equal Employment Opportunity Commission, under which the employer will pay $175,000 to end claims that it discriminated against a worker with a hearing impairment (Equal Employment Opportunity Commission, et al. v. Northwest Wireless Enterprises, LLC, No. 19-5696, W.D. Wash.).
November 05, 2020
Insurer’s Coronavirus Suit Is ‘Classic Example’ Of Proper Abstention, Judge Says

CHICAGO — A federal judge in Illinois on Nov. 3 dismissed a commercial property insurer’s lawsuit seeking a declaration that it has no duty to provide business interruption coverage for 31 restaurant insureds’ alleged losses arising from public health orders that restricted public gatherings in an effort to slow the spread of the novel coronavirus, noting that allowing the insurer’s case to proceed “would ‘be indulging in gratuitous interference’” with the insureds’ competing Ohio state lawsuit (State Auto Property and Casualty Insurance Co. v. Classic Dining Group LLC, et al., No. 20-04434, N.D. Ill.).
November 03, 2020
Hotel Franchisor Removes Class Suit Over Promised Revenue, Files Counterclaims

DALLAS — A hotel franchisor accused by a proposed class of franchisees of using the novel coronavirus pandemic as a cover for fraudulently revoking its promise of minimum revenues removed the complaint to a federal court in Texas on Oct. 28 and then filed counterclaims against the two named franchisees for failing to pay fees for terminating their contracts early (Shree Veer Corporation, et al. v. OYO Hotels, Inc., No. 20-3268, N.D. Texas).
October 28, 2020
Split 9th Circuit Tosses Ruling Denying Franchisee’s Motion To Reopen Class Action

PASADENA, Calif. — A 2-1 Ninth Circuit U.S. Court of Appeals panel on Oct. 21 overturned a federal judge in California’s denial of a franchisee’s motion to reopen his class action suit against a franchisor over his alleged misclassification as an independent contractor rather than an employee, 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 33216).
October 27, 2020
D.C. Circuit Sends Union Dispute Back To NLRB For Further Explanation

WASHINGTON, D.C. — The District of Columbia Circuit U.S. Court of Appeals on Oct. 23 declined to enforce a decision by the National Labor Relations Board in a union representation dispute with a Chicago-area hotel operator and remanded with instructions that the NLRB distinguish its precedents (Davidson Hotel Company, LLC v. National Labor Relations Board, No. 19-1235, D.C. Cir., 2020 U.S. App. LEXIS 33394).
October 27, 2020
Divided Panel Upholds Widow’s Award In Dispute Against Domino’s

DAYTONA BEACH, Fla. — The Fifth District Florida Court of Appeal on Oct. 23 summarily affirmed an $8.9 million award in favor of the widow of a man who died in an automobile accident caused by a Domino’s Pizza delivery driver; in a dissent, one judge indicated that he would instead reverse because Florida’s standard jury instruction on agency “does not adequately account for a franchise relationship” (Domino’s Pizza LLC v. Yvonne Wiederhold, No. 5D19-2343, Fla. App., 5th Dist., 2020 Fla. App. LEXIS 15080).
October 27, 2020
McDonald’s: Claims Of Bias Against Black Former Franchisees Are Without Merit

CHICAGO — Former black franchisees who have sued alleging that McDonald’s has “a decades-long history of racial discrimination” have made only vague claims of practices undermining franchisees that are “illogical” and also “untimely and inconsistent with the plain language of the contracts they signed,” McDonald’s USA LLC and McDonald’s Corp. (together, McDonald’s) argue in a motion to dismiss filed Oct. 23 in a federal court in Illinois (Christine Crawford, et al. v. McDonald’s USA, LLC, et al., No. 20-05132, N.D. Ill.).
October 26, 2020
In Applebee’s Wage Suit, New York Federal Judge Modifies Recommendations

BROOKLYN, N.Y. — In an Oct. 21 ruling, a federal judge in New York directed a federal magistrate judge in New York to revisit her 2017 report and recommendation (R&R) that a motion to certify two proposed subclasses in a dispute over alleged wage violations by an Applebee’s restaurant franchisor should be granted (Carlos Marin, et al. v. Apple-Metro, Inc., et al., No. 12-5274, Shaunta Dove, et al. v. Apple-Metro, Inc., et al., No. 13-1417, E.D. N.Y., 2020 U.S. Dist. LEXIS 195258).
October 22, 2020
Volkswagen Salespersons’ Class Suit Due To Drop In Sales Dismissed With Prejudice

SAN FRANCISCO — Three Volkswagen salespeople who brought class employment and unfair competition law (UCL) claims alleging that their business was harmed by the car maker’s emissions scandal failed to show that Volkswagen is their employer, a federal judge in California ruled Oct. 21, opining that evidence of training is insufficient to establish Volkswagen’s status as the employer and dismissing the claims with prejudice (In re: Volkswagen “Clean Diesel” Marking, Sales Practices, and Products Liability Litigation, No. 15-md-2672, MDL No. 2672, N.D. Calif., 2020 U.S. Dist. LEXIS 195614).
October 22, 2020
Judge Confirms Award To Eco-Auto Wash Franchisor Over Noncompete Clause

DETROIT — A Michigan federal judge on Oct. 19 confirmed in part an arbitration award in favor of the franchisor of an eco-friendly auto and truck wash that upheld a noncompete clause against a former franchisee, its principal and the principal’s family members (DetailXPerts Franchise Systems, LLC v. TKTM Enterprise, LLC, et al., No. 18-11823, DetailXPerts Franchise Systems, LLC v. Deck, Inc., et al., No. 19-10037, DetailXPerts Franchise Systems, LLC v. SRQ Detailers, et al., No. 19-12607, E.D. Mich., 2020 U.S. Dist. LEXIS 192673).
October 21, 2020
Hotel Chain Franchisors: Sex Trafficking Suits Were Properly Dismissed

ATLANTA — Allegations of sex trafficking in several hotel chains were properly dismissed, the hotel chains franchisors argue to the 11th Circuit U.S. Court of Appeals in separate Oct. 16 appellee briefs, because the complaints were impermissible shotgun pleadings (Jane Doe #1, et al. v. Red Roof Inns, Inc., et al., Nos. 20-11764, 20-11769, 20-11770 & 20-11771, 11th Cir.).
October 15, 2020
Restaurant, Hospitality Franchise Owners File $41M Coronavirus Coverage Lawsuit

NEWARK, N.J. — The owners of more than 120 franchise locations under the brands Wendy's, T.G.I. Friday's, Marriott and Hilton on Oct. 12 sued their all-risk commercial business insurer in a federal court in New Jersey for breach of contract and reformation, alleging that physical loss and damage caused by the novel coronavirus “directly led” to their subsequent $40,798,390 in economic damages (Manhattan Partners LLC, et al. v. American Guaranty and Liability Insurance Company, No. 20-cv-14342, D. N.J.).
October 15, 2020
Black Workers Accuse McDonald’s Of History Of Racial Discrimination

ROCK ISLAND, Ill. — McDonald’s Corp. was hit with a complaint on Oct. 13 in an Illinois federal court by two former employees and a current employee accusing it of racial harassment and discrimination against Black employees and favoritism toward white employees (Selynda Middlebrook, et al. v. McDonald’s Corporation, et al., No. 20-4214, C.D. Ill.).
October 12, 2020
Judge Gives Preliminary Approval Of $10M Settlement In Wage Putative Class Action

SACRAMENTO, Calif. — A California federal judge on Oct. 7 granted preliminary approval of a $10 million settlement in a putative wage and hour class action against a staffing agency, one of its franchisees and a wine servicing company because an issue of commonality in the class had been resolved (Michael H. Stoddart, et al. v. Express Services, et al., No. 12-1054, E.D. Calif.).