Recent Cases — Issue 9
Franchisees Bound by Arbitration Clauses The U.S. Court of Appeals in Boston found that a group of janitorial business owners, who became franchisees as transferees of franchise agreements, had adequate notice of the arbitration provisions contained in those agreements prior to their transfer. Thus, the court ruled that the franchisees were required to arbitrate their myriad claims against the franchisor. The transfer agreements executed by the franchisees incorporated the arbitration clauses by reference, and each of the franchisees had guaranteed the performance of “all responsibilities, duties, indebtedness and obligations of the [previous [f]ranchisee] under the [Franchise] Agreement.” While the franchisees… Read more
Issue 9 — New Laws and Regulations
“Sugary Drink” Ban – New York A state judge invalidated New York’s so-called “sugary drink” ban, which was to come into effect on March 13, 2013, holding the regulation to be “arbitrary and capricious.” The new law would have banned sales by food service establishments of “sugary drinks” larger than 16 ounces in the City of New York. The law utilized an expansive definition of “sugary drink,” to include any carbonated or non-carbonated beverage that is (i) non-alcoholic, (ii) sweetened by the manufacturer or establishment with sugar or another caloric sweetener, (iii) has greater than 25 calories per eight fluid… Read more
Legislative/Policy Updates
Massachusetts Fair Franchise Act The Massachusetts legislature is considering, once again, the enactment of a franchise relationship/termination statute titled the “Massachusetts Fair Franchise Act” (the “Act”). The bill, similar to those proposed in other states such as California and Vermont, would prohibit a franchisor from terminating or cancelling a franchise, or from substantially changing the competitive circumstances of a franchise agreement without “good cause.” Under the Act, “good cause” must be based upon legitimate business reasons, including a franchisee’s refusal or failure to comply with express obligations of the franchise agreement. In addition to the foregoing, the Act would require… Read more