Claims for Breach of Contract


New Court Decision - California District Court applies New Jersey choice-of-law provision to defeat

By James M. Mulcahy on November 08, 2012

On August 8, 2012, Hon. William B. Shubb, Judge for the U.S. District Court for the Eastern District of California, filed a 28-page decision granting franchisor Century 21 Real Estate LLC’s (“Century 21”) motion for summary judgment against its former franchisee. As a result of the summary judgment, all of the former franchisee’s claims were dismissed, and Century 21’s claims for breach of contract, breach of guarantee, and trademark infringement were granted.

The case involves a lengthy but typical fact pattern often encountered in franchise litigation. Century 21 asserted claims against its former franchisee for failure to comply with the monetary obligations of the franchise agreement, and the former franchisees' continued unauthorized use of Century 21's trademarks after termination of the franchise agreement. The former franchisee premised its claims on allegations that Century 21 (1) disclosed the former franchisee’s confidential financial information to other franchisees, allowing those franchisees to recruit the former franchisee’s employees, (2) allowed other businesses to dilute its trademark causing customer confusion and the resulting loss of business to the former franchisee, and (3) terminated the franchise agreements in bad faith in order to move a different franchisee into the territory.

Ultimately, Century 21’s successful application of the New Jersey choice-of-law provision in the parties' franchise agreements defeated the California franchise law and Cafornia Unfair Competition Law claims, paving the way for the favorable summary judgment ruling.

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