Franchising & Distribution Law Blog

Greensfelder summer associate Kiran Jeevanjee contributed to this blog post.

Native American tribes occupy a unique position within the American legal system, and understanding these issues is vital for any franchisor considering a tribe as a potential franchisee. Federally recognized Native American tribes are classified as “domestic dependent nations” — meaning that the tribes are considered “distinct independent political communities” and can govern their own internal affairs. The most important consequence of this classification from a business perspective is that such tribes are entitled to tribal sovereign immunity that protects them from any civil suits or criminal prosecutions to which they did not consent.

The holiday season is upon us. For many retailers, that means gift card sales are about to explode, which is great news. Not only can gift card sales help generate new customers, but industry data continues to confirm that consumers often never use some portion of their gift card balance, which can ultimately result in additional breakage profit.

A California judge dismissed a class action lawsuit against MillerCoors that alleged deceptive advertising related to the brewing conglomerate’s Blue Moon beverage — specifically its status as a “craft” beer.

In Evan Parent v. MillerCoors LLC, Case No: 3:15-cv-1204-GPC-WVG (S.D. Cal. Oct. 26, 2015), the plaintiffs alleged that MillerCoors was deceiving consumers by (a) advertising Blue Moon on its website as a “craft” beer, and (b) advertising it as “artfully crafted” and brewed by the Blue Moon Brewing Co. on bottles and commercials, then selling it at premium prices.

Starting Oct. 1, retailers lacking EMV compliance can be liable for fraudulent in-store purchases.

If your customers routinely use credit cards to pay you, you are likely already familiar with a new type of credit card with a tiny microprocessing chip built inside. These cards — known as “EMV cards,” “chip cards” or “chip-and-PIN” — are designed to reduce fraudulent in-person credit card transactions, also called “card present” transactions.

Although most prominent for its overhaul of national healthcare insurance rules, as part of its overall dedication to the improvement of American health, the Patient Protection and Affordable Care Act (“ACA”) also mandated regulations governing food labeling requirements in an effort to promote conscious, and hopefully healthier, food choices by American consumers. As its core directive on this issue, the ACA required the posting of calorie and other nutrition information for food items sold at restaurants and similar retail food establishments that are part of a chain of twenty (20) or more locations doing business under the same name and offering the same or substantially similar menu items. Similarly, subject to certain exceptions, all vending machine operators who own or operate more than 20 vending machines must disclose the calorie information for their goods. 

In 2010, the United States Supreme Court famously ruled that in cases under the Petroleum Marketing Practices Act (“PMPA”), 15 U.S.C. § 2801 et seq., a franchisee could not state a claim for constructive termination unless the franchisor’s actions actually caused the franchisee to abandon its franchise. Mac's Shell Service v. Shell Oil Prods. Co., 559 U.S. 175 (2010). Earlier this month, relying on this rule from Mac’s Shell, a federal district court in New Jersey ruled that two urgent care franchisees likewise could not state a claim for constructive termination under the New Jersey Franchise Practices Act where their franchisor’s challenged conduct did not actually cause them to abandon their franchises. See Pai v. DRX Urgent Care, LLC, Nos. 13–4333, 13–3558, 2014 WL 837158 (D. N.J. March 4,2014).

Emmanuel Joseph was a franchised gasoline retailer for Chicago-area fuel distributor Sasafrasnet, LLC, who operated a BP-branded gasoline station in Chicago. In November 2010, Sasafrasnet notified Mr. Joseph that it was going to terminate his franchise under the Petroleum Marketing Practices Act (“PMPA”) because, on three separate occasions, it had been unable to electronically debit Mr. Joseph’s account to pay for fuel deliveries because his bank account did not have sufficient funds. Mr. Joseph filed suit and sought a preliminary injunction under the PMPA to enjoin Sasafrasnet from terminating him, but the district court denied the motion.

In Wells v. Holiday Companies, Inc., No. A12–1476, 2013 WL 777384 (Minn. Ct. App. 2013), the Minnesota Court of Appeals reversed an order granting a motion to dismiss a class action lawsuit alleging that car wash receipts constitute gift cards that cannot expire under state law.

In response to the rapid growth of gift card sales and the variety of ways in which they are sold and redeemed, the IRS has been issuing guidance to address accounting issues associated with such sales. Most recently, the IRS issued Rev. Proc. 2013-29, which addresses the tax treatment of gift cards sold by one entity and redeemable by an unrelated entity. Prior to the issuance of Rev. Proc. 2013-29, if a taxpayer sold gift cards redeemable by an unrelated entity, the taxpayer would recognize as income the full value of the gift cards in the year of sale. The new guidance, however, allows a taxpayer to sell gift cards in one year, and in some circumstances, delay recognizing income from those sales until the subsequent year.

A former McDonald’s employee has brought a class action lawsuit against the franchisees of 16 McDonald’s locations in Pennsylvania (the franchisor is not named in the suit), claiming their practice of paying employees via mandatory payroll debit cards is unfair and illegal.