News Briefs

Colorado Considers Ban on Fast-Food Lawsuits

The backlash against obesity lawsuits filed against fast-food franchises may be gathering steam, as the Colorado Senate in mid-January held a hearing on a bill that would prohibit those types of lawsuits. Colorado Senate Majority Leader Mark Hillman (R) introduced the bill, which is called “The Common Sense Consumption Act.”

Bill proponents acknowledge that even if the bill becomes law, it will not prevent a customer from suing a franchise in another state, and that Colorado-based franchisors that operate elsewhere would still be vulnerable. But they claim it is one step toward fighting against frivolous lawsuits.

In response, Mike Hodges, president of the Colorado Trial Lawyers Association, called the bill “frivolous legislation.”

Louisiana passed the nation's first anti-obesity lawsuit law in June 2003.

H&R Block Settles Lawsuits with Former Franchisees

H&R Block Inc. will more than double its compensation to 12 former franchisees in a settlement that ends litigation between the franchisees and the company. The parties came to the agreement less than 2 months after a jury in Jackson County, MO awarded extra compensation to one expired franchisee that had disputed H&R Block's valuation of its business (see FBLA, January 2004).

H&R Block will pay $130 million to the former franchisees, on top of the $107 million it has already paid, the company announced.

The disputes arose in 2003 when H&R Block chose not to renew a large number of franchise agreements that had expired. The company valued those franchises at 80% of the previous year's revenues, but the franchisees wanted a valuation based on their profits times a multiple of H&R Block's stock price. While the jury that heard the first case, brought by JBW Limited Partnership (Little Rock, AR), did require that H&R Block increase its compensation, the final figure was much closer to H&R Block's valuation than to the franchisee's.

The new settlements value the franchisees in the same range as did the jury. “We're pleased with the settlement and believe that is an appropriate resolution for all parties,” Mark Ernst, H&R Block's chairman and chief executive officer, said in a written statement.

Huge Punitive Damages Against ChevronTexaco Thrown Out

Miami-Dade Circuit Judge Fredricka Smith has thrown out a $33.8 million punitive-damages-only jury verdict in a fraud case that was brought against ChevronTexaco by prospective franchise developer Apex Development Corp. (Fort Lauderdale, FL). The case drew attention because, while the jury found in favor of Apex and awarded it millions in punitive damages, it did not award it any compensatory damages (see FBLA, September 2003). Judge Smith's ruling declared that the punitive damage award could not stand because the jury found that Apex had suffered no economic loss.

Apex sued ChevronTexaco because it claimed that Texaco (which merged with Chevron in 2000) made false promises in a business deal to open Texaco Xpress Lube franchises in South Florida.

During its deliberations after a 2-week trial in June 2003, the jurors sent two notes to Smith asking whether they could award punitive damages without any compensatory damages. Before Smith could discuss the question with the trial lawyers and reply to the jurors, the jury announced it had reached a verdict. Both sides agreed to take the verdict without first answering the question.

ChevronTexaco filed a post-trial motion to set aside the verdict, arguing that because damages are an essential element of proving a case of fraud, compensatory damages are a prerequisite to an award of punitive damages. Smith agreed. “Since the jury did not find that the misrepresentation resulted in compensatory damages, there was no express finding of liability,” Smith wrote. “There being no actual damages found by the jury or implied by law, the punitive damages award must fall.”

As the basis for her ruling, Smith cited a 1989 Florida Supreme Court case, Ault v. Lohr, and a recent Third District Court of Appeal ruling decertifying the Florida smokers' class action against cigarette makers, Liggett Group Inc., et al. v. Engle.

In the same order, Smith denied Apex's motion for a new trial on compensatory damages.

(This news brief is based on an article by Anne Gearan and Gina Holland that originally appeared in the Miami Daily Business Review, an American Lawyer Media publication.)

Colorado Considers Ban on Fast-Food Lawsuits

The backlash against obesity lawsuits filed against fast-food franchises may be gathering steam, as the Colorado Senate in mid-January held a hearing on a bill that would prohibit those types of lawsuits. Colorado Senate Majority Leader Mark Hillman (R) introduced the bill, which is called “The Common Sense Consumption Act.”

Bill proponents acknowledge that even if the bill becomes law, it will not prevent a customer from suing a franchise in another state, and that Colorado-based franchisors that operate elsewhere would still be vulnerable. But they claim it is one step toward fighting against frivolous lawsuits.

In response, Mike Hodges, president of the Colorado Trial Lawyers Association, called the bill “frivolous legislation.”

Louisiana passed the nation's first anti-obesity lawsuit law in June 2003.

H&R Block Settles Lawsuits with Former Franchisees

H&R Block Inc. will more than double its compensation to 12 former franchisees in a settlement that ends litigation between the franchisees and the company. The parties came to the agreement less than 2 months after a jury in Jackson County, MO awarded extra compensation to one expired franchisee that had disputed H&R Block's valuation of its business (see FBLA, January 2004).

H&R Block will pay $130 million to the former franchisees, on top of the $107 million it has already paid, the company announced.

The disputes arose in 2003 when H&R Block chose not to renew a large number of franchise agreements that had expired. The company valued those franchises at 80% of the previous year's revenues, but the franchisees wanted a valuation based on their profits times a multiple of H&R Block's stock price. While the jury that heard the first case, brought by JBW Limited Partnership (Little Rock, AR), did require that H&R Block increase its compensation, the final figure was much closer to H&R Block's valuation than to the franchisee's.

The new settlements value the franchisees in the same range as did the jury. “We're pleased with the settlement and believe that is an appropriate resolution for all parties,” Mark Ernst, H&R Block's chairman and chief executive officer, said in a written statement.

Huge Punitive Damages Against ChevronTexaco Thrown Out

Miami-Dade Circuit Judge Fredricka Smith has thrown out a $33.8 million punitive-damages-only jury verdict in a fraud case that was brought against ChevronTexaco by prospective franchise developer Apex Development Corp. (Fort Lauderdale, FL). The case drew attention because, while the jury found in favor of Apex and awarded it millions in punitive damages, it did not award it any compensatory damages (see FBLA, September 2003). Judge Smith's ruling declared that the punitive damage award could not stand because the jury found that Apex had suffered no economic loss.

Apex sued ChevronTexaco because it claimed that Texaco (which merged with Chevron in 2000) made false promises in a business deal to open Texaco Xpress Lube franchises in South Florida.

During its deliberations after a 2-week trial in June 2003, the jurors sent two notes to Smith asking whether they could award punitive damages without any compensatory damages. Before Smith could discuss the question with the trial lawyers and reply to the jurors, the jury announced it had reached a verdict. Both sides agreed to take the verdict without first answering the question.

ChevronTexaco filed a post-trial motion to set aside the verdict, arguing that because damages are an essential element of proving a case of fraud, compensatory damages are a prerequisite to an award of punitive damages. Smith agreed. “Since the jury did not find that the misrepresentation resulted in compensatory damages, there was no express finding of liability,” Smith wrote. “There being no actual damages found by the jury or implied by law, the punitive damages award must fall.”

As the basis for her ruling, Smith cited a 1989 Florida Supreme Court case, Ault v. Lohr, and a recent Third District Court of Appeal ruling decertifying the Florida smokers' class action against cigarette makers, Liggett Group Inc., et al. v. Engle.

In the same order, Smith denied Apex's motion for a new trial on compensatory damages.

(This news brief is based on an article by Anne Gearan and Gina Holland that originally appeared in the Miami Daily Business Review, an American Lawyer Media publication.)