LUKINS & ANNIS CLIENT OBTAINS SIGNIFICANT 9TH CIRCUIT DECISION AGAINST RED LION HOTEL FRANCHISOR UNDER WASHINGTON FRANCHISE INVESTMENT PROTECTION AND CONSUMER PROTECTION ACTS
Lukins & Annis franchise litigation attorney Mike Maurer represented former Modesto, California, Red Lion Hotel franchisee MAK, LLC in defense of a damage lawsuit filed by Spokane-based franchisor Red Lion Hotels against MAK in U.S. District Court for the Eastern District of Washington. The trial court judge dismissed certain counterclaims against Red Lion Hotels that MAK had raised under both the franchisee bill of rights provisions of the Washington Franchise Investment Protection Act ("FIPA") and the Washington Consumer Protection Act ("CPA"). MAK appealed the dismissal of those counterclaims to the United States Court of Appeals for the Ninth Circuit.
The Ninth Circuit in a published December 7, 2011, decision reversed the dismissal of the FIPA and CPA counterclaims, remanding the lawsuit to the trial court to consider MAK's FIPA counterclaim, and to determine the availability of a remedy for MAK under the CPA. Although the franchise agreement between Red Lion Hotels and MAK included a provision that disputes arising out of the franchise relationship would be governed by Washington law, the trial court held that MAK (a California limited liability company) as an out-of-state franchisee operating a franchise outside the state of Washington was not entitled to benefits under FIPA or the CPA. The Ninth Circuit in a significant case of first impression under FIPA ruled otherwise, concluding that an out-of-state franchisee may assert such claims against an in-state franchisor. MAK's FIPA and CPA counterclaims against Red Lion Hotels now will proceed to trial. Mr. Maurer and Lukins & Annis franchise litigation attorneys Bryce Wilcox and Ted Stiles have been involved in other significant franchise relationship disputes which ended up in federal and state courts for resolution:
- A 2010 lawsuit filed in U.S. District Court, Eastern District of Washington, on behalf of local Jackson Hewitt franchisees against Jackson Hewitt, Inc., a national tax preparation service firm based in New Jersey. In the lawsuit the two local franchisees, who owned and operated four Jackson Hewitt franchise businesses located in Spokane County, contended that Jackson Hewitt wrongfully diverted fees earned by the franchisees to Jackson Hewitt's own account, failed to provide critical franchise services to the franchisees, and violated FIPA and the CPA. The franchisees asked the court to enjoin Jackson Hewitt from diverting the franchisees' fees and for monetary damages among other relief. This lawsuit was settled after it was transferred to U.S. District Court in New Jersey for trial.
- Representation of the owners of more than 30 hotel franchises (Best Inns, Best Inns & Suites, and Hawthorn Inn & Suites) in the franchisees' successful pursuit of multi-million dollar claims against franchisors Best Franchising, Hawthorn Suites Franchising, Microtel Inns and Suites Franchising, and U.S. Franchise Systems. The franchisors in that dispute initially filed suit against a number of the hotel franchisees in federal court in Georgia. The Lukins & Annis attorneys successfully moved the lawsuit to federal court in Spokane, and after joining a number of additional hotel franchisees to the lawsuit, pursued their collective claims against the franchisors.
- The firm's' franchise litigation experience also has included representation of franchisors Marie Callendar's Restaurants, Check Write Systems, and Speedy Auto Glass in disputes that those companies had with their franchisees. Mr. Stiles also has served as an American Arbitration Association arbitrator in disputes between franchisor and franchisee.