Franchising: Once You Start, Can You Stop?
If a company ceases to expand its brand and market penetration through the sale of franchises as part of a plan to convert to an employee-based operation, is it exposed to liability for breach of the implied covenant of good faith and fair dealing? The answer is yes, according to one California appellate court. In <i>Sherman v. Master Protection Corp.</i>, 2002 WL 31854905 (Cal. App. 6 Dist. Dec. 18, 2002)(rev. den. April 9, 2003) [Business Franchise Guide (CCH) '12,503], a non-published decision, a unanimous three-judge panel of the California Court of Appeal for the Sixth District recently awarded damages and legal fees to a franchisee on that very basis.
Counterpoint: A Consultant's-Eye View
Tension often exists between lawyer and consultant because many issues do not neatly fall into purely legal or purely business buckets. Consultants chafe at lawyers who make recommendations concerning business strategies that they feel are inappropriate or based upon limited knowledge or research. Lawyers chafe at consultants 'practicing law without a license.' Indeed, from the viewpoint of the professional consultants, the practice of business without due care by lawyers is as risky (maybe more so) for the client as is the practice of law by the non-lawyer.
INTERVIEW
In this exclusive interview with International Franchise Association (IFA) chairman Steve Siegel, Associate Editor Kevin Adler, asks about policy priorities for 2003, and other legislative and regulatory developments that affect the franchise industry.
Damages from Defaulting Franchisees: More Options Than You Think
When the relationship between a franchisor and a franchisee breaks down, one might think the standard measure of damages is just the lost franchise fees. However, just as a simple failure to perform is not the only type of wrong suffered by franchisors, unpaid fees are not the only types of damages available. This article examines a number of cases in which the franchisor's claims — and claimed damages — were outside the ordinary.
IN THE MARKETPLACE
Highlights of the latest equipment leasing news from around the country.
CASES IN COURT
A New Jersey medical magazine publisher recently agreed to pay $3.7 million to settle allegations it defrauded the postal service. On July 2, 2003, the U.S. Attorney's Office for the District of New Jersey issued a press release announcing that Medical World Communications, a Jamesburg, NJ, publisher, agreed to settle civil False Claims Act allegations that it defrauded the government over a 6-year period (1994 to 2000) through a scheme by which it inflated the number of subscribers to obtain a lower rate, thereby failing to pay adequate postage for mailing its periodicals.
Why We Need a No-Fault Compensation System for Drug Injuries
Part One of a Two-Part Article. The FDA's approval of a prescription drug or biologic is the product of an often-delicate risk-benefit analysis of public benefit as opposed to individual safety. The therapeutic balance of these products must always be weighed against the risks inherent in their use. And there are always inherent risks associated with their use. Accordingly, while millions of Americans reap the benefits of prescription drugs every day, these same drugs may pose an unavoidable health hazard to a narrow, and often unidentifiable, subset of potential users. The American legal system currently regulates these risks by two means ' through the federal regulatory system as administered by the FDA, and through the common-law tort liability regime.
Avoiding the Pitfalls of Stipulated Settlements
An officer of a corporation is named as a defendant in a shareholder derivative suit. After reading the complaint, which includes allegations that the officer committed a breach of certain fiduciary duties owed to the corporation, the officer promptly notifies his directors and officers' liability insurer of the lawsuit. Because the applicable policy contains exclusions that may potentially exclude some, if not all, of the claims, the insurer agrees to defend the officer subject to a full and complete reservation of rights.
Cybersticks and Cyberstones: Cybergriping after Bear Sterns and Taubman Company
Cybergriping occurs when one party (a 'cybergriper') i) establishes a Web site (the 'complaint site' or 'attack site') dedicated to the publication of complaints, claims, criticism, or parody of or against another party (the 'target company'), and ii) registers the Web site under a domain name comprised of the target's trademark and a pejorative suffix, such as 'sucks.com,' 'crooks.com' or 'ripoff.com.' Not surprisingly, target companies have attempted to combat this relatively new form of asymmetrical cyberwarfare by bringing suit against cybergripers under various legal theories, including trademark infringement, trademark dilution and cybersquatting.
