News Briefs

Best Western Wins Trademark Litigation Against U.S. Franchise Systems

Best Western International, which bills itself as “the world's largest hotel chain,” announced that U.S. Franchise Systems (USFS) will abandon the names Best Inn and Best Suites for its franchisees, in exchange for Best Western ending litigation for trademark infringement and unfair competition. In total, USFS will have to change the names on about 110 of its 500 motels under the “Best” brands (the remainder operate under the brands Hawthorne Suites and Microtel Inns and Suites). Best Western filed suit in April 2001.

“We cannot allow the Best Western brand to be confused with another entity's brand,” said Best Western President Tom Higgins in a press statement issued by the company. “By pursuing a settlement, both parties were able to achieve an equitable solution without investing the time and money required for complicated litigation.”

Mike Leven, chairman of USFS and a 40-year veteran of the hotel industry, said that the company has two preferences for renaming the hotels affected by the settlement: America's Best Inns or USA's Best Inns. The company has contacted the U.S. Patent and Trademark Registration Office to determine if the new names are available. He estimated that the company will be able to make a decision late this fall.

“We have told our franchisees that they will not have to pay for any exterior signage – which is the majority of the cost involved. They will have considerable amount of time, a year or so, to change the name on all of the collateral materials,” Leven added.

In recent years, Best Western has aggressively protected its trademarked name in an increasingly competitive and overbuilt industry. It has a case pending in the U.S. District Court, District of Arizona against Thirty-Eight Street, Inc., Best Value Inn Brand Membership, Inc., and Cal-Vegas, Limited. Best Western has about 4,000 properties worldwide.

Florida To Open New Court Specializing in Business Cases

Florida's Ninth Judicial Circuit Court will launch a pilot project next year to create a business court, and officials say that it may hear as many as 1,500 cases per year, including franchisor-franchisee disputes. Florida will become the 15th state with a business court.

“We think this will provide better efficiency, enable us to process cases quicker, and encourage parties to resolve lawsuits through mediation,” said James Burton Murphy, Jr., chairman of the Business Law Section of the Florida Bar Association. “We are very optimistic.”

Judge Rene A. Roche will preside over the court when it begins on the first business day in January 2004. She will serve for a 5-year term.

Florida's circuit court judges are elected (unless someone is appointed to finish an elected judge's term), and those judges might not have a background in hearing business disputes. “With the new business court, we believe judges can develop expertise, which will be beneficial for everyone,” said Murphy.

Judge Roche does not have a background in franchise law, but she will be able to call on one of the other judges in the Ninth Circuit, who is a former franchise attorney, as a resource.

Starting a business court in Florida has taken nearly a decade since the idea first surfaced, according to Circuit Court Judge Thomas Smith. “I was an attorney in the Miami area, where the Business Law Section of the Florida Bar had proposed this idea about 8 or 9 years ago. We were unsuccessful,” he said. “When I started as a judge in the Orlando circuit in January 2002, I spoke with [Ninth Circuit Court] Judge Belvin Perry, and he was very receptive.”

If the experiment is successful, Smith predicts that a second judge will be named to the Ninth Circuit by the end of 2004 and that Miami, Fort Lauderdale, and Tampa will seriously consider opening similar courts.

Similar to other states with business courts, such as Massachusetts and New York, Florida has developed a timeline to move cases through the system (go to http://www.ninja9.org/ for a description of the timetable). “We want to manage actively,” said Smith. “Historically, courts have allowed plaintiffs' lawyers to set the pace in litigation. Judges did not really get involved until the attorneys have held depositions and filed motions for a trial. But it is beneficial to move cases through more quickly.”

Costs for the new program will be minimal, at least in 2004. “Ultimately, we will seek resources for case management support and a special master, but in the short term we can do this more or less with our existing budget and a little money from the legislature,” said Smith. “A senior judge will serve as special master this year.”

Jury Hits ChevronTexaco with $33.8 Million in Punitive Damages

In an unusual juxtaposition, Texaco Refining and Marketing was found not liable for compensatory damages in a fraud lawsuit, but a six-person jury nonetheless hit the company with a $33.8 million punitive damages verdict.

On June 30, the jury found that the company, a subsidiary of ChevronTexaco, had knowingly made false promises to Apex Development Corp. (Fort Lauderdale, FL) to induce Apex to build seven Texaco Xpress Lube retail sites in Florida. The jury found that Apex had suffered no economic damages, but it delivered the huge punitive damages judgment in order to punish ChevronTexaco for bad behavior. The case was tried before Miami-Dade County Circuit Judge Fredricka G. Smith. Apex Development Corp. v. Texaco Refining and Marketing Inc., No. 99-11204-CA-21.

ChevronTexaco will appeal, said company spokesman David Sander. “It is our firm belief that the jury's verdict on this issue is not in accordance with the law of Florida or the decisions of the U.S. Supreme Court,” he said.

In 2003, the U.S. Supreme Court, in State Farm v. Campbell, “held that the punitive damages should be limited to reasonable relationship to compensatory damages, which would not seem to apply here,” said Jim McCann, a partner in Akerman Senterfitt's West Palm Beach, FL, office. “I think there will be a lot of room for argument on appeal by Texaco's lawyers.”

Elliott Scherker, an appellate attorney and partner in the Miami office of Greenberg Traurig, said that a Florida Third District Court of Appeal ruling in 2003 held that in fraud cases punitive damages can be awarded only when compensatory damages are awarded.

Apex's attorney, Adam M. Moscowitz, a partner at Kozyak Tropin & Throckmorton in Miami, declared otherwise. “We are glad that the jury has decided that Texaco's conduct should not be accepted and look forward to finally resolving this matter for our client,” he said.

The case itself involves oral promises made to Apex in 1997 that Texaco would pay rent on all franchised Xpress Lube sites. However, after Apex agreed to the deal, Texaco informed the company in 1998 that its employee, Scott Sutton, did not have the authority to make such promises. In May 1999, Apex sued on the ground that it had been fraudulently induced into the deal, later also seeking punitive damages on the ground that either Sutton was authorized to enter into the lease guarantees or that Texaco knew about his promises and did nothing to stop him. Texaco argued that it investigated Sutton's conduct and eventually fired him.

Apex is a privately held company that owns franchises such as Papa John's Pizza and Ponderosa Steakhouse. (Note: This news brief was excerpted from an article by Matthew Haggman in the National Law Journal, July 14, 2003. The National Law Journal is an American Lawyer Media publication.)

PETA Withdraws Lawsuit Against KFC After Deal

On Sept. 1, People for the Ethical Treatment of Animals (PETA) announced that it is dropping its California Superior Court lawsuit against chicken restaurant franchisor KFC. As described in the August issue of FBLA, PETA, an animal-rights group, has been boycotting KFC for several years to protest the treatment of chickens that are raised and slaughtered by contractors who supply KFC restaurants. The lawsuit, filed earlier this year, challenged KFC's public statements that have been issued in response to the boycott.

Under a settlement filed with the court, KFC and its parent company, Yum! Brands, agreed to modify the text on its Web site and the scripts that its phone operators use when responding to consumers who ask about PETA's boycott. KFC's operators will now say: “KFC disagrees with PETA's claims. KFC believes that animals should be treated humanely. For this reason, KFC has established animal welfare guidelines for vendors who supply KFC restaurants with chicken.”

Despite the settlement, PETA said that its boycott will continue, as KFC has not changed its animal welfare guidelines sufficiently, nor created a system to ensure supplier compliance with the guidelines.

McDonald's 'Fat' Lawsuit Rejected in New York

On Sept. 4, U.S. District Judge Robert Sweet threw out the class action lawsuit that blamed McDonald's for making people fat, stating that the plaintiffs failed to show that the fast-food chain misled consumers into believing its food was nutritious and part of a healthy diet (see FBLA “Court Watch,” February 2003). The lawsuit had been originally filed in January 2003 and then refiled later in the spring with new claims that McDonald's violated New York's consumer protection laws and engaged in deceptive advertising.

The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment advisory or other professional assistance is required, the services of a competent professional person should be sought.

Best Western Wins Trademark Litigation Against U.S. Franchise Systems

Best Western International, which bills itself as “the world's largest hotel chain,” announced that U.S. Franchise Systems (USFS) will abandon the names Best Inn and Best Suites for its franchisees, in exchange for Best Western ending litigation for trademark infringement and unfair competition. In total, USFS will have to change the names on about 110 of its 500 motels under the “Best” brands (the remainder operate under the brands Hawthorne Suites and Microtel Inns and Suites). Best Western filed suit in April 2001.

“We cannot allow the Best Western brand to be confused with another entity's brand,” said Best Western President Tom Higgins in a press statement issued by the company. “By pursuing a settlement, both parties were able to achieve an equitable solution without investing the time and money required for complicated litigation.”

Mike Leven, chairman of USFS and a 40-year veteran of the hotel industry, said that the company has two preferences for renaming the hotels affected by the settlement: America's Best Inns or USA's Best Inns. The company has contacted the U.S. Patent and Trademark Registration Office to determine if the new names are available. He estimated that the company will be able to make a decision late this fall.

“We have told our franchisees that they will not have to pay for any exterior signage – which is the majority of the cost involved. They will have considerable amount of time, a year or so, to change the name on all of the collateral materials,” Leven added.

In recent years, Best Western has aggressively protected its trademarked name in an increasingly competitive and overbuilt industry. It has a case pending in the U.S. District Court, District of Arizona against Thirty-Eight Street, Inc., Best Value Inn Brand Membership, Inc., and Cal-Vegas, Limited. Best Western has about 4,000 properties worldwide.

Florida To Open New Court Specializing in Business Cases

Florida's Ninth Judicial Circuit Court will launch a pilot project next year to create a business court, and officials say that it may hear as many as 1,500 cases per year, including franchisor-franchisee disputes. Florida will become the 15th state with a business court.

“We think this will provide better efficiency, enable us to process cases quicker, and encourage parties to resolve lawsuits through mediation,” said James Burton Murphy, Jr., chairman of the Business Law Section of the Florida Bar Association. “We are very optimistic.”

Judge Rene A. Roche will preside over the court when it begins on the first business day in January 2004. She will serve for a 5-year term.

Florida's circuit court judges are elected (unless someone is appointed to finish an elected judge's term), and those judges might not have a background in hearing business disputes. “With the new business court, we believe judges can develop expertise, which will be beneficial for everyone,” said Murphy.

Judge Roche does not have a background in franchise law, but she will be able to call on one of the other judges in the Ninth Circuit, who is a former franchise attorney, as a resource.

Starting a business court in Florida has taken nearly a decade since the idea first surfaced, according to Circuit Court Judge Thomas Smith. “I was an attorney in the Miami area, where the Business Law Section of the Florida Bar had proposed this idea about 8 or 9 years ago. We were unsuccessful,” he said. “When I started as a judge in the Orlando circuit in January 2002, I spoke with [Ninth Circuit Court] Judge Belvin Perry, and he was very receptive.”

If the experiment is successful, Smith predicts that a second judge will be named to the Ninth Circuit by the end of 2004 and that Miami, Fort Lauderdale, and Tampa will seriously consider opening similar courts.

Similar to other states with business courts, such as Massachusetts and New York, Florida has developed a timeline to move cases through the system (go to http://www.ninja9.org/ for a description of the timetable). “We want to manage actively,” said Smith. “Historically, courts have allowed plaintiffs' lawyers to set the pace in litigation. Judges did not really get involved until the attorneys have held depositions and filed motions for a trial. But it is beneficial to move cases through more quickly.”

Costs for the new program will be minimal, at least in 2004. “Ultimately, we will seek resources for case management support and a special master, but in the short term we can do this more or less with our existing budget and a little money from the legislature,” said Smith. “A senior judge will serve as special master this year.”

Jury Hits ChevronTexaco with $33.8 Million in Punitive Damages

In an unusual juxtaposition, Texaco Refining and Marketing was found not liable for compensatory damages in a fraud lawsuit, but a six-person jury nonetheless hit the company with a $33.8 million punitive damages verdict.

On June 30, the jury found that the company, a subsidiary of ChevronTexaco, had knowingly made false promises to Apex Development Corp. (Fort Lauderdale, FL) to induce Apex to build seven Texaco Xpress Lube retail sites in Florida. The jury found that Apex had suffered no economic damages, but it delivered the huge punitive damages judgment in order to punish ChevronTexaco for bad behavior. The case was tried before Miami-Dade County Circuit Judge Fredricka G. Smith. Apex Development Corp. v. Texaco Refining and Marketing Inc., No. 99-11204-CA-21.

ChevronTexaco will appeal, said company spokesman David Sander. “It is our firm belief that the jury's verdict on this issue is not in accordance with the law of Florida or the decisions of the U.S. Supreme Court,” he said.

In 2003, the U.S. Supreme Court, in State Farm v. Campbell, “held that the punitive damages should be limited to reasonable relationship to compensatory damages, which would not seem to apply here,” said Jim McCann, a partner in Akerman Senterfitt's West Palm Beach, FL, office. “I think there will be a lot of room for argument on appeal by Texaco's lawyers.”

Elliott Scherker, an appellate attorney and partner in the Miami office of Greenberg Traurig, said that a Florida Third District Court of Appeal ruling in 2003 held that in fraud cases punitive damages can be awarded only when compensatory damages are awarded.

Apex's attorney, Adam M. Moscowitz, a partner at Kozyak Tropin & Throckmorton in Miami, declared otherwise. “We are glad that the jury has decided that Texaco's conduct should not be accepted and look forward to finally resolving this matter for our client,” he said.

The case itself involves oral promises made to Apex in 1997 that Texaco would pay rent on all franchised Xpress Lube sites. However, after Apex agreed to the deal, Texaco informed the company in 1998 that its employee, Scott Sutton, did not have the authority to make such promises. In May 1999, Apex sued on the ground that it had been fraudulently induced into the deal, later also seeking punitive damages on the ground that either Sutton was authorized to enter into the lease guarantees or that Texaco knew about his promises and did nothing to stop him. Texaco argued that it investigated Sutton's conduct and eventually fired him.

Apex is a privately held company that owns franchises such as Papa John's Pizza and Ponderosa Steakhouse. (Note: This news brief was excerpted from an article by Matthew Haggman in the National Law Journal, July 14, 2003. The National Law Journal is an American Lawyer Media publication.)

PETA Withdraws Lawsuit Against KFC After Deal

On Sept. 1, People for the Ethical Treatment of Animals (PETA) announced that it is dropping its California Superior Court lawsuit against chicken restaurant franchisor KFC. As described in the August issue of FBLA, PETA, an animal-rights group, has been boycotting KFC for several years to protest the treatment of chickens that are raised and slaughtered by contractors who supply KFC restaurants. The lawsuit, filed earlier this year, challenged KFC's public statements that have been issued in response to the boycott.

Under a settlement filed with the court, KFC and its parent company, Yum! Brands, agreed to modify the text on its Web site and the scripts that its phone operators use when responding to consumers who ask about PETA's boycott. KFC's operators will now say: “KFC disagrees with PETA's claims. KFC believes that animals should be treated humanely. For this reason, KFC has established animal welfare guidelines for vendors who supply KFC restaurants with chicken.”

Despite the settlement, PETA said that its boycott will continue, as KFC has not changed its animal welfare guidelines sufficiently, nor created a system to ensure supplier compliance with the guidelines.

McDonald's 'Fat' Lawsuit Rejected in New York

On Sept. 4, U.S. District Judge Robert Sweet threw out the class action lawsuit that blamed McDonald's for making people fat, stating that the plaintiffs failed to show that the fast-food chain misled consumers into believing its food was nutritious and part of a healthy diet (see FBLA “Court Watch,” February 2003). The lawsuit had been originally filed in January 2003 and then refiled later in the spring with new claims that McDonald's violated New York's consumer protection laws and engaged in deceptive advertising.

The publisher of this newsletter is not engaged in rendering legal, accounting, financial, investment advisory or other professional services, and this publication is not meant to constitute legal, accounting, financial, investment advisory or other professional advice. If legal, financial, investment advisory or other professional assistance is required, the services of a competent professional person should be sought.