Terminating a franchise can pose several potential pitfalls and expose a franchisor to significant liability. A franchisor may not simply cancel, terminate, or refuse to renew a franchisee for just any reason. In most situations, there must be “good cause,” timely notice, and proper documentation to support the decision. Failure to understand and follow these rules may violate the New Jersey Franchise Practices Act, N.J.S.A. § 56:10-1 et seq. (“Act”) and expose a franchisor to liability for monetary relief and an award of attorney fees and costs to the franchisee.
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Use It or Lose It: Supreme Court Rules Against Special Rules Favoring Arbitration When Deciding Waiver of That Right
On May 23, 2022, the U.S. Supreme Court, in a unanimous decision, decided Morgan v. Sundance, Inc., No. 21-328, in favor of an employee who sued her employer, a Taco Bell franchisee, for wage theft. The Court concluded that waiving arbitration rights does not require a showing that the party seeking to have their case heard in federal court would be prejudiced by continuing with arbitration. The case, although decided on narrow grounds, demonstrates the risk that a party takes when it decides to delay enforcing a contractual arbitration provision. By eliminating the prejudice requirement, the Court removed a safety valve that saved parties who decided to forgo arbitration for a period of time, then ultimately opted for arbitration. As a result of the holding, a party seeking to invoke the right to arbitrate should not delay, or they will risk forfeiture of the right to arbitrate at a later time.
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Deferral Agreements – Considerations for Extending Relief to Troubled Franchisees
Deferral agreements, or workout agreements, are a favorable option for franchisors seeking to restructure and manage the obligations of a struggling franchisee before more draconian measures, such as termination of a franchise agreement and litigation. These agreements allow parties to agree to restructured conditions under a franchise agreement and/or postpone certain events before further action is required. The most common example is the franchisee who is having problems paying royalties or performing contractual obligations on a timely basis. The failure to make payments under a franchise agreement usually indicates a larger problem with the franchisee’s business, and bankruptcy court may be the next avenue if things do not improve.
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COVID-19 Procedural Hurdles Eased to Evict Commercial Tenants in New Jersey
On July 14, 2020, the Supreme Court of New Jersey issued an order authorizing several steps to support the resumption of landlord/tenant cases during the COVID-19 crisis. As discussed in another blog of mine, although there were limited circumstances to evict a commercial tenant, it was a difficult and timely process and, in most circumstances, the proofs needed to proceed were not present.
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New Jersey Expands Outdoor Dining Opportunities for Breweries, Distilleries and Restaurants
On February 5, 2021, Governor Murphy signed legislation expanding outdoor dining opportunities for breweries, distilleries, restaurants, and bars in New Jersey during the ongoing COVID-19 pandemic.
The bill (S3340) provides a framework for municipalities to allow restaurants, bars, distilleries, and breweries to operate outdoor spaces or public sidewalks as extensions of their business premises. This is a step many municipalities across the state have already taken since the Governor authorized outdoor dining in June 2020.
COVID-19 Brings New Procedural Hurdles to Evict Commercial Tenants in New Jersey
On July 14, 2020, the Supreme Court of New Jersey issued an order authorizing several steps to support the resumption of landlord/tenant cases during the COVID-19 crisis. The good news is that the procedures allow for resumption of adjudication. The bad news is that there still could be a delay/lag in getting a tenant out. The following is a brief discussion and some practical pointers for commercial landlords.
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New Jersey Property Tax Appeal Filing Deadline Extended to July 1, 2020
On May 28, 2020, Governor Murphy signed legislation to fix the deadline to file property tax appeals for the 2020 year to July 1. The regular tax appeal deadline was April 1 (or May 1 for municipalities undergoing a reassessment or revaluation.) The Supreme Court previously extended the deadline due to the COVID-19 public health crisis, but the final deadline was not fixed by the Court. The new law now establishes July 1 as the firm deadline. The law also extends the time frame to September 30, 2020 for the county boards of taxation to decide appeals.
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Third Circuit Rules Class Action Wage Claim Should be Arbitrated Under Franchise Agreement
In a recent opinion, the Third Circuit ruled that an arbitrator, not a state or federal judge, should decide claims raised by workers alleging that they were mischaracterized as “independent contractors” in violation of the New Jersey Wage Payment Law (“WPL”), N.J.S.A. § 34:11-4.1 et seq.
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New Jersey Property Tax Appeal Filing Deadline Extended to May 1st
As a result of the COVID-19 coronavirus public health crisis, on March 19, 2020, the New Jersey Supreme Court issued an order extending the filing deadline for local property tax appeals from April 1st to at least May 1st.
Pursuant to the terms of the order, the filing deadline was extended to May 1, 2020 or 30 days following a determination by the governor that the State of Emergency declared under Executive Order No. 103 has ended.
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Protecting Your Brewery, Brew Pub or Distillery’s Trade Secrets, Confidential Information and Customers From Former Employees
Your company’s recipes, methodologies and customer base are what distinguish it from the competition. If this information is disclosed to third parties, it could detrimentally hurt your business because a competitor could seemingly replicate the same or similar beverage. It is important that you protect your company’s trade secrets, customer relationship and other confidential information from employees, especially the brew master or distiller, in the event the employment relationship ends.
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