LJN Newsletters

Highlights of the latest franchising cases from around the country.

In Papa John's International, Inc. v. Rezko et al., 2006 WL 1697134 (N.D. Ill.), the U.S. District Court for the Northern District of Illinois was called upon to determine whether a post-term covenant not-to-compete was reasonable in scope. The defendant alleged that the covenant would bar him from the restaurant business nearly everywhere in the country. In the limited procedural posture of the case (a motion to dismiss), the court allowed the claim of unreasonableness to go forward.

With the recent Congressional elections returning leadership of the U.S. Senate and House to Democrats for the first time in more than a decade, the business community is keenly interested in the priorities of the new Congress. While it is apparent that Congress will initially focus on issues outside the direct domain of franchising (Iraq, Congressional ethics, etc.), numerous matters of importance to franchisors and franchisees are on the table, too.

Better ingredients, it is said, make for a better pizza, and, as Emfore Corp. v. Blimpie Associates, Ltd. (N.Y. Sup. Ct. Sept. 18, 2006) suggests, better documents make for better decisions, at least if you are the franchisor.

Highlights of the latest equipment leasing news from around the country.

Part One of this series discussed how the federal government is stepping up its aggressive enforcement of anti-money laundering/combating the financing of terrorism ('AML/CFT'). This second installment addresses action steps for leasing and financing businesses affected by the AML/CFT program.

Any equipment leasing or finance company desiring to access the debt capital markets must quickly become adept at dealing with a unique feature of that world: the credit rating and its gatekeeper, the credit rating agency. Entering this realm can be a jolt for finance officers used to the relationship-friendly, competitive environment of commercial banks. Dominated by two monoliths, Standard & Poor's and Moody's, the rating agency process is steeped in the clinical analytics of credit modeling. Rating agencies are viewed by many as academic in perspective and, to some, remote and obscure in their approach.

In August 2006 the U.S. Bankruptcy Appellate Panel of the Ninth Circuit rendered a decision in a case titled In Re: Commercial Money Center, Inc. (Netbank, FSB v. Kipperman), U.S. Bankruptcy Appellate Panel of the Ninth Circuit, BAP No. SC-05-1238-MoTB; Bk.No. 02-09721-H7; Adv. No. 03-90331-H7, holding that payment streams stripped from equipment leases are payment intangibles, not chattel paper, and thereby overturning the bankruptcy court decision. Accordingly, the assignment of the payment streams could be automatically perfected under '9-309(3) of Revised Article 9. Additionally, the court agreed with the bankruptcy court and held that the transactions in this case were loans, not sales, so there was no automatic perfection. Finally, the court held that there were unresolved factual and legal issues as to whether the lender had perfected its security interest in the leases by taking possession through a third-party agent, and therefore remanded the case for further proceedings.