Features

Highlights of the latest franchising cases from around the country.

Several states require a 'community of interest' between the parties to establish the requisite relationship to trigger the notice and disclosure requirements under the state's dealership or franchise laws. But ask franchise lawyers what is meant by this phrase, and what becomes clear is how unclear determining a community of interest can be. The U.S. District Court for the Eastern District of Wisconsin shed some light on the issue in its recent decision in <i>Miller-Bradford &amp; Risberg, Inc. v. VT LeeBoy, Inc.</i>, Business Franchise Guide '13,522 (filed Jan. 26, 2007).

Features

The New Franchise Rule deletes the four exclusions in the existing Rule for employer-employees and general partnerships, cooperative organizations, testing or certification services, and single trademark licenses, since a revised definition of 'franchise' in the Rule obviates the need for these exclusions. The New Rule retains the exemption for franchise sales under $500, fractional franchises, and leased departments, while adding an exemption for petroleum marketers governed by the Petroleum Marketing Practices Act, as well as for three categories of 'sophisticated investor.'

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With optional use of the updated Franchise Rule coming on July 1, 2007, and mandatory use beginning on July 1, 2008, the broad outlines of the Rule are well understood in the franchise industry even at this early point. Yet, as franchise attorneys work with individual clients, they are finding unique circumstances under which the Rule's guidance is confusing or even contradictory, particularly during the one-year transition period. Thus, two panel discussions at the International Franchise Association ('IFA') Legal Symposium on May 6-8 in Washington, DC, were the ideal opportunities for attorneys to raise what-if questions with regulators and their fellow franchise attorneys.

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The new franchise regulations recently issued by China's State Council became effective on May 1, 2007. Shortly after their promulgation, MOFCOM, the ministry that has authority to interpret and implement the regulations, issued two implementation guidelines, namely the Administration Rules on Commercial Franchise Filing and the Administration Rules on Commercial Franchise Information Disclosure. The regulations are intended not only to provide presale disclosure to prospective franchisees, but also to restrict use of franchising to legitimate business operators. Moreover, the regulations seek to gather statistical data on the scope of franchise activities in China through a franchise registration process.

News about lawyers and law firms in the partnership arena.

On March 15, 2007, the U.S. Court of Appeals for the Third Circuit (the 'Third Circuit') issued an important decision regarding the rights of equipment lessors who find themselves ensnarled in court proceedings as a result of a lessee's filing for bankruptcy protection. <i>In Re: Federal-Mogul Global Inc v. Computer Sales International</i> considered whether two lower courts properly modified an equipment lease under 11 U.S.C. '365(d)(5) of the Bankruptcy Code ' formerly codified at 11 U.S.C. '365(d)(10) ' by permitting proration of payment obligations as of the date of rejection of the leases. The Third Circuit reversed, holding that modification of the lease terms was improper.

States have recently, and with growing enthusiasm, embraced the use of public-private partnerships ('PPPs') as a highly effective method for addressing the significant capital needs associated with developing, expanding, and/or operating major roadway systems. Some of the largest roadway PPP deals to date have utilized leasing structures, and many states have enacted, or are in the process of enacting, legislation authorizing and encouraging leasing as a method to privatize toll roads. Leasing allows for an innovative teaming approach to the development and operation of various transportation-related assets, from design and construction through operation and toll collection. Leasing not only allows public sector officials to take advantage of private sector innovation and efficiencies, but it also provides a vehicle by which states can create large pools of money ' sometimes in the billions of dollars ' to address immediate and significant capital requirements without raising property or income taxes on their residents.