The State Bar of California
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Firm Cases

Firm Cases - Lagarias, Napell & Dillon, LLP

Our partners have personally tried and argued many significant cases for franchisees. On each of the noteworthy cases for franchisees below, one of our partners was the lead attorney representing the franchisee client, and handled the courtroom arguments and trials and argued the appeals. If you have questions about any of these cases, please contact the attorney noted directly at Lagarias, Napell & Dillon, LLP.

Husain v. McDonald’s Corporation

205 Cal.App.4th 860, 140 Cal.Rptr. 3d 370 (2012)

Lagarias won a preliminary injunction allowing a McDonald’s franchisee to stay in three franchise stores pending a trial centered on renewal issues. The preliminary injunction hearing lasted many weeks and Lagarias established a likelihood of his franchisee client prevailing and trial and that the balance of hardships warranted a preliminary injunction for the franchisee client. McDonald’s appealed and the Court of Appeals affirmed the preliminary injunction. The decision rejected McDonald’s multiple arguments and made rulings helpful to other franchisees seeking preliminary injunctions. The Court of Appeal rejected McDonald’s claim that “continuous supervision” by the court was needed to enforce preliminary injunctive relief in a franchise setting. Such prior case law was archaic. Next the Court of Appeal refused to bar preliminary relief as McDonald’s argued the franchise agreement was a personal services contract. California and several states generally bar specific performance of personal services contracts. But the Court of Appeal ignored a label of specific performance and instead found that the McDonald’s contract terms detailed much performance by the franchisee rather than calling for personal discretion and skills. Thus the detailed nature of performance for the franchisee, as common in franchise agreements, did not bar specific performance or preliminary injunction relief as personal services. The decision turned the tide of many old cases often barring franchisees from preliminary relief.

Zantum LLC v. Wencel

2010 WL 2638747 (2010)

Lagarias won a judgment for the franchisee client in the trial of a fraud action against the founder of an insolvent franchisor. The Court of Appeal affirmed the judgment finding misrepresentations in the sale of franchises by the President of the franchisor including about the quality and quantity of remanufactured computer printing cartridges sold in the franchise business.

Bridge Fund Capital Corp. v. Fastbucks Franchise Corp

622 F.3d 996 (9th Cir. 2010)

Lagarias won a victory for franchisees before a federal district court and later the Ninth Circuit Court of Appeals. The Ninth Circuit decision affirmed that the arbitration clause was unconscionable and that California law applied despite a Texas choice of law provision in the franchise agreement. In addition, the court adopted Lagarias’ argument that there is no requirement that franchisees challenge an arbitration clause in the franchisees’ complaint and instead that a challenge could be presented for the first time in the opposition to a motion to compel arbitration. The result was Lagarias’ franchisee clients were entitled to a jury trial in court instead of a hearing before an arbitrator.

Prudence Corp. v. Shred-It America, Inc.

2010 WL 582597 (9th Cir. 2010)

Lagarias successfully represented a Shred-It franchisee in trial and later before the Ninth Circuit Court of Appeals. The Ninth Circuit decision affirmed the trial court judgment in favor of Lagarias’ franchisee client requiring the franchisor to renew the franchise on the original terms. The franchisor had sought to delay and unfairly take advantage of the delay to negotiate unfair renewal terms. The Ninth Circuit also upheld the award of attorney’s fees and costs in excess of $100,000 which Lagarias had obtained for the franchise client at trial.

1-800-Got Junk? LLC v. Superior Court

(2010) 189 Cal.App.4th 500

Dillon and Napell successfully represented a wrongfully terminated California franchisee. In upholding the trial court, the California Court of Appeals ruled that the choice of Washington law in the franchise agreement was not unconditionally voided by the California Franchise Relations Act. Instead, the Court held that the Franchise Relations Act is intended to protect franchisees, and if the franchisee would receive greater protection under the law chosen in the franchise agreement, it was consistent with the Franchise Relations Act to apply the chosen law. In other words, the franchisee could do no worse than provided for under the California statute, but could do better. This important case reaffirmed the intent of the Franchise Relations Act and clarified that it should be applied to protect franchisees, not used to weaken them by franchisors.

McGuire v. CoolBrands Smoothies Franchise, LLC

2007 WL 2381545 (2007)

Lagarias successfully defended a franchisee against a franchisor’s motion to compel arbitration. The trial court found that the arbitration clause was unconscionable and unenforceable. In addition, the trial court applied California law despite a New York choice of law provision in the franchise agreement. The California Court of Appeals affirmed the trial court ruling in favor of our franchisee client.

Independent Ass’n of Mailbox Center Owners, Inc. v. Superior Court

133 Cal.App.4th 396, 34 Cal.Rptr.3d 659 (2005)

Lagarias successfully represented a large group of franchisees defending against a franchisor’s motion to enforce an unconscionable arbitration clause in a franchise agreement. The trial court ruled the unfair arbitration clause was enforceable, but Lagarias carried on and argued the case in the Court of Appeal. The Court of Appeal reversed the trial court and ruled in favor of Lagarias’ client. The Court of Appeal struck down the unfair franchise agreement provisions improperly limiting damages and statutes of limitations. The Court of Appeal finally held that such a clause could not be used to force franchisees to litigate their claims on an individual basis as opposed to group actions and/or class actions. This seminal case provided a road map for franchisees to challenge unconscionable arbitration clauses in unfair franchise agreements.

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