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While franchise lawyers, both domestically and in foreign jurisdictions, tend to focus their primary attention on matters of importance that are specific to franchise relationships, most are keenly aware that franchising is essentially just a form of distribution. Therefore, laws and regulations of broader impact can often be of critical importance. While distribution systems may often escape the applicability of franchise laws, franchise relationships nevertheless often have to deal with those affecting distribution generally.
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A recent decision from the Ohio Supreme Court may have an impact on the marketability of commercial lease agreements. In <i>Preferred Capital, Inc. v. Power Engineering Group, Inc.</i>, 112 Ohio St. 3d 429, 860 N.E.2d 741 (2007), the court held that an open-ended forum selection clause, often referred to as a 'floating forum clause,' was not enforceable. The <i>Preferred Capital</i> court found that a floating forum clause in a lease agreement, which provided that any lawsuit arising from the lease would be venued in the state of the lessor's <i>or its assignee's</i> principal place of business, was unreasonable and contrary to public policy. While one might conclude that the subject forum clause is innocuous, the court took issue with the fact that the designated forum could be transferred to another jurisdiction if the lease agreement were assigned. In other words, if the lease were assigned to an assignee with a principal place of business that differed from that of the lessor, the appropriate forum would change. Another significant consideration for the court was the disparity of information between the parties. At the time the lease agreements were executed, the lessor was aware that the leases would be assigned to a company that was based in a foreign jurisdiction. The court's refusal to enforce the forum clause was based, in large part, on the lessor's failure to disclose that information at the time the parties entered into the lease.
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Inside information on what's happening in the industry.
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Protecting the success of its business is of prime concern to any retailer client in the course of shopping center lease negotiations. A protection commonly found in leases is an exclusive use right granting a tenant either the exclusive right to sell a particular product in a center or the exclusive right to operate a particular business. An exclusive right in a lease is violated any time an occupant of the shopping center fails to comply with its restrictive terms. As such, it places a burden on the landlord to administer and police a tenant's exclusive throughout the term of the lease. Landlords have, therefore, started to move away from granting exclusive rights to giving leasing covenants ' a provision intended to give a retailer the protection for its use while removing the administrative burden from the landlord in enforcing exclusives. However, is the retailer really getting the benefit of protecting its use from future tenants? Below are some considerations to keep in mind when drafting a leasing covenant for a tenant.
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Operating leases are becoming increasingly important to many corporate lessees for a variety of reasons. The primary reason a corporate lessee prefers operating leases to capital leases is for balance sheet management reasons. Operating leases, or 'true leases' — as opposed to capital leases — reduce the lessee's outstanding debt recorded on the balance sheet, which results in a better debt-to-equity ratio. The other motivations behind the corporate lessee's preference for operating lease treatment vary. For example, many corporate credit facilities have covenants preventing corporations from creating debt, which usually includes capital leases. Also, many companies want to preserve current lines of credit and cash for other ventures, such as the acquisition of a new business line.
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Punitive damages long have been awarded 'to punish wrongdoers and thereby deter the commission of wrongful acts ... ' <i>Neal v. Farmers Ins. Exch.</i>, 21 Cal. 3d 910, 928 n.13, 148 Cal. Rptr. 389, 399 n.13 (1978). In order to accurately determine how large a punitive damage award should be, the financial condition of a defendant must be evaluated. If a punitive damage award is not large enough, then it is not likely to have any deterrent effect. Instead, because it simply would be a cost of doing business, it actually may serve as an incentive to further wrongful conduct. Therefore, in order to accurately determine how much of a punitive damage award is enough, but not too much, the financial condition of an insurance carrier needs to be evaluated. <i>Id.</i> at 928 (the wealth of defendant must be considered or else 'the function of deterrence ... will not be served if the wealth of the defendant allows him to absorb the award with little or no discomfort'); <i>Adams v. Murakami</i>, 54 Cal. 3d 105, 111-12, 284 Cal. Rptr. 318, 321 (1991) ('The most important question is whether the amount of the punitive damages award will have deterrent effect — without being excessive ... This balance cannot be made absent evidence of the defendant's financial condition.').
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Three instances of contaminated food with potentially wide-ranging impacts have received national media attention in the past six months.