Tip of the hat to Bruce Schaffer at Franchise Valuations for
reporting on this case in his "The Franchise
Valuation Reporter." Bruce is colleague from the American Bar
Association's Forum on Franchising who focuses his expertise on valuation and
damages, cyber crime, expert testimony, and tax nexus.
Our topic for this post is Lost Future Royalties - this has been
the subject of my earlier posts: Franchisees
- Damages Warning: Lost Future Royalties and Franchise
Valuation through Damage Analysis.
The case is Mister
Softee, Inc., Mister Softee Sales and Manufacturing, LLC, and Spabo Ice Cream
Corp. v. Reza Amanollahi, 2016 WL 5745105D. New Jersey. Civ.
No. 2:14-CV-01687(KM)(JBC) - As noted, the case involved a claim for lost
future royalties and the decision followed the well-known but controversial
decision in Postal Instant
Press v. Sealy, 43
Cal. App. 4th 1704 (1996). Postal
Instant Press v. Sealy and cases that adhere to its rationale, hold
that a franchisee cannot be liable for lost future royalties when the
franchisor ELECTED to terminate the relationship even though the franchisee's
act (ex, failure to pay royalties) gives rise to the termination.
After
reviewing New York case law, the judge in Mister Softee concluded
that summary judgment would be denied on Mister Softee's claim for lost future royalties:
"Here,
Mister Softee decided to terminate Amano's Franchise Agreements because Amano
moved his trucks out of the Manida Street Depot and stopped making payments
under the Truck Notes. Mister
Softee faced a choice: terminate the Agreements, or remain within the
Agreements and sue for the ongoing unpaid royalties. It chose the former."
So
mark one up for FRANCHISEES on this controversial topic! (even though Mister Softee brings back many childhood memories while growing up in south Jersey) Thanks Bruce!
If
you are planning to attend the American Bar Association's Annual Forum on
Franchising in Miami on November 2-4 don't forget to drop into Show Me the Money! Maximizing
Monetary Recovery in Franchise Cases, where
I will join Bethany Appleby (Wiggin & Dana, LLP) for an informative
session.