Law.com Subscribers SAVE 30%

Call 855-808-4530 or email [email protected] to receive your discount on a new subscription.

Commercial Leasing Law & StrategyKickerFeaturesSectionsNewsLJN Newsletters

Necessary Formality in Franchise Agreements

By Craig R. Tractenberg and Gregg Rubenstein

Courts are often confronted with the pesky problem of enforcing a covenant against competition against non-signatories to a franchise agreement. Few courts have provided guidance on the enforcement of a restrictive covenant against even a family member who colludes with a terminated franchisee to circumvent the post-contract restrictions against competition. Add to this uncertainty the requirement that an arbitration clause cannot be enforced against a non-signatory. Absent perfect drafting, how should a court address an enforcement of a covenant against competition in an arbitration where the party violating the covenant is in collusion with the former franchisee?

A recent federal court decision from Wisconsin suggests that expansive and formal franchise agreements are a necessary evil. At issue in Everett v. Paul Davis Restoration, 2012 U.S. Dist. LEXIS 133682 (E.D. Wis. Sept. 18, 2012), was whether franchise owner Matthew Everett's wife Renee, who did not sign the non-competition covenant, was nonetheless bound by it. The franchisor argued the wife was equitably estopped from avoiding the covenant because she actively participated in running the franchise. The wife, not surprisingly, argued she was not bound because she never signed the covenant. Although the court initially issued a preliminary injunction compelling the wife to arbitrate her claims, thereby suggesting she was bound, it subsequently reversed itself and vacated the arbitration award enforcing the covenant against her personally.

This premium content is locked for Entertainment Law & Finance subscribers only

  • Stay current on the latest information, rulings, regulations, and trends
  • Includes practical, must-have information on copyrights, royalties, AI, and more
  • Tap into expert guidance from top entertainment lawyers and experts

For enterprise-wide or corporate acess, please contact Customer Service at [email protected] or 877-256-2473

Read These Next
The Article 8 Opt In Image

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.

Beach Boys Songs Written Decades Ago Triggered Current Quarrel With Lawyers Image

There's current litigation in the ongoing Beach Boys litigation saga. A lawsuit filed in 2019 against Nevada residents Mike Love and his wife Jacquelyne in the U.S. District Court for the District of Nevada that alleges inaccurate payment by the Loves under the retainer agreement and seeks $84.5 million in damages.

Major Differences In UK, U.S. Copyright Laws Image

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 Image

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.

When Is a Repair Structural or Nonstructural Under a Commercial Lease? Image

A common question that commercial landlords and tenants face is which of them is responsible for a repair to the subject premises. These disputes often center on whether the repair is "structural" or "nonstructural."