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The Role of Motive in Franchise Termination Cases
Should the franchisor's motive in a franchise termination case ever become the central issue? Some courts answer that seeking the true reason for termination is the target inquiry, as if a franchisor could not have a mixed motive for termination. The question turns the trial into a search as to whether the franchisor has breached an implied covenant of good faith and fair dealing which augments the terms of a written franchise agreement. Often the outcome depends on where in the life of the franchise relationship the dispute arises. At the end of the relationship, courts considering the propriety of termination and nonrenewal often treat the role of good faith and fair dealing differently than when, for example, reviewing whether the franchisor imposed unreasonable standards of performance.
In the recent series of cases, Dunkin' Donuts, Inc. v. Liu, Bus. Franchise Guide (CCH) ' ' 12,392, 12,393 (ED Pa., 2000-2002), the franchisee was unsuccessful in asserting that the franchisor had an improper motive in terminating the franchises. Dunkin' as franchisor had filed a complaint alleging termination was warranted based on its franchisees' failure to obey all laws, particularly by committing willful tax offenses and/or by knowingly making false statements on tax returns and credit statements. Franchisees claimed they relied on the erroneous advice of their accountants and that Dunkin' had an improper motive for terminating the franchise. Based upon a Magistrate's Report and Recommendation, the District Court denied Dunkin's motion for summary judgment on its claims, finding that franchisees may not have knowingly violated the “obey all laws” clauses. The District Court granted Dunkin's motion for summary judgment dismissing the franchisees' counterclaims for breach of contract and fraud because the evidence did not support the counterclaims that the franchisees failed to receive the contractually mandated operations manual and training.
In later dispositions of Dunkin' Donuts, Inc. v. Liu reported at Bus. Franchise Guide (CCH) ' ' 12,394, 12,395, based again on the Report and Recommendation of the Magistrate, the District Court granted summary judgment in favor of Dunkin' on its termination based on failure of the franchise to timely pay the sublease and franchise agreement, and an injunction was granted to prevent post-termination use of trademarks. The court rejected the unclean hands defense of the franchisees, especially since they were given the opportunity to sell their franchise and refused. The court held that the right of a franchisor to terminate was independent of any claims the franchisee might have against the franchisor, including any improper motive. The court also determined that the franchisees failed to establish that Dunkin' had an improper motive. The case is currently on appeal to the Third Circuit Court of Appeals.
Major Differences In UK, U.S. Copyright Laws
This article highlights how copyright law in the United Kingdom differs from U.S. copyright law, and points out differences that may be crucial to entertainment and media businesses familiar with U.S law that are interested in operating in the United Kingdom or under UK law. The article also briefly addresses contrasts in UK and U.S. trademark law.
Strategy vs. Tactics: Two Sides of a Difficult Coin
With each successive large-scale cyber attack, it is slowly becoming clear that ransomware attacks are targeting the critical infrastructure of the most powerful country on the planet. Understanding the strategy, and tactics of our opponents, as well as the strategy and the tactics we implement as a response are vital to victory.
The Article 8 Opt In
The Article 8 opt-in election adds an additional layer of complexity to the already labyrinthine rules governing perfection of security interests under the UCC. A lender that is unaware of the nuances created by the opt in (may find its security interest vulnerable to being primed by another party that has taken steps to perfect in a superior manner under the circumstances.
Removing Restrictive Covenants In New York
In Rockwell v. Despart, the New York Supreme Court, Third Department, recently revisited a recurring question: When may a landowner seek judicial removal of a covenant restricting use of her land?