Skip to content
Actual Property Case Serves as a Reminder About Adherence to the Phrases of a Franchise Settlement—Till a Courtroom Permits In any other case | Foley & Lardner LLP

In Integrity Actual Property Consultants v. Re/Max of New York, Inc.a franchisee, Integrity Actual Property Consultants (“Integrity”), sued an actual property service supplier franchisor, Re/Max of New York, Inc. (“Re/Max”), in New York state courtroom. Integrity alleged Re/Max breached the events’ franchise settlement when Re/Max tried to terminate the settlement earlier than its expiration. As a part of that lawsuit, the courtroom entered a brief restraining order and preliminary injunction that prohibited Re/Max from terminating the franchise settlement within the interim.

Re/Max countersued for breach of the settlement as effectively, searching for, amongst different issues, unpaid franchise charges and attorneys’ charges pursuant to the settlement. Re/Max contended that it solely sought to terminate the settlement as a result of Integrity had already violated the fabric phrases of the settlement beforehand when Integrity relocated to an unauthorized location. As a result of they have been guarantors on the settlement, Re/Max additionally introduced a third-party motion in opposition to the homeowners of Integrity for that alleged breach.

The third-party defendants in that new motion counterclaimed in opposition to Re/Max as effectively, alleging that Re/Max breached the settlement by eradicating Integrity from Re/Max’s promoting and web site.

Throughout a bench trial, the events stipulated that Integrity not appeared on Re/Max’s regional web site after the short-term restraining order and preliminary injunction had been issued. Integrity and the homeowners additionally confirmed that Integrity didn’t seem in Re/Max’s print ads in that very same timeframe. Integrity and the homeowners additionally testified that they refused to resume the franchise or pay franchise charges and likewise closed their workplace location following these occasions. The trial courtroom discovered for Re/Max on all points and granted Re/Max the past-due franchise charges and attorneys’ charges requested.

Integrity and its homeowners appealed. The appeals courtroom thought-about solely two factors of attraction. First, Integrity and the homeowners argued that they weren’t accountable for unpaid franchise charges or attorneys’ charges as a result of Re/Max materially breached the franchise settlement by reducing off their promoting. Second, additionally they argued that the conduct following the short-term restraining order and preliminary injunction violated the franchise settlement and the restraining order and injunction, warranting each civil contempt and the fee of Integrity’s and the homeowners’ attorneys’ charges.

The courtroom agreed that Re/Max ought to have continued performing below the franchise settlement through the pendency of the short-term restraining order and preliminary injunction and that it breached that settlement when it withheld Integrity from its promoting. Thus, Integrity’s supposed breaches after that time have been excused, precluding Re/Max’s restoration of unpaid franchise charges from that interval. On that foundation and construing the attorneys’ charges provision within the franchise settlement strictly, the appellate courtroom additionally held in favor of Integrity on the request to disclaim Re/Max its attorneys’ charges as a result of the supply required attorneys’ charges to accrue “on account of” Integrity’s “failure . . . to adjust to [the] Settlement,” such that Re/Max needed to “implement[] . . . the phrases of [the] Settlement.” As a result of Re/Max contributed to the breaches and misplaced on its declare for franchise charges, the appellate courtroom held that attorneys’ charges weren’t payable to Re/Max below the settlement’s attorneys’ charges provision.

Additional, the appellate courtroom disagreed with Integrity and its homeowners and upheld the trial courtroom’s choice to not maintain Re/Max in contempt for exclusion of Integrity from print promoting. The courtroom discovered that the foundations round civil contempt are strict and require violation of a unequivocal courtroom mandate regarding the conduct at concern. No such mandate existed about Re/Max persevering with to incorporate Integrity in Re/Max’s promoting. Consequently, although it could have violated the franchise settlement, Re/Max’s conduct didn’t rise to the extent essential to warrant contempt.

This case is instructive as a result of it reminds events to franchise agreements to stick intently to the phrases of these franchise agreements till a courtroom permits in any other case. This adherence consists of refraining from failing to carry out on a fabric time period of a contract throughout a brief restraining order or preliminary injunction. In any other case, a celebration could discover themselves in violation of a courtroom order and/or in breach of contract and fail to recuperate a considerable a part of their claims for reduction.

[View source.]


Leave a Reply

Your email address will not be published. Required fields are marked *