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Court Watch

By Cynthia M. Klaus and Meredith A. Bauer

No Affirmative Duty on Franchisor to Enforce Territory Restrictions

A recent case out of the district court in Michigan highlights the tensions that can arise when disputes occur among franchisees. Although not directly involved, a franchisor can unwittingly be pulled into a lawsuit or be subject to a claim based on a franchisee's frustration that it is failing to do enough to resolve the dispute. Cottage Inn Carryout & Delivery, Inc. v. True Freedom Investments, LLC et al., 2010 U.S. Dist. LEXIS 113170 (E.D. Mich. Oct. 20, 2010), began with a dispute among two franchisees related to sales outside of their protected territories, but it ended with a claim against the franchisor for its failure to stop one of its franchisees from encroaching on the protected territory of the other franchisee.

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