FRANCHISE: Do franchise “Anti-Poaching Provisions” unlawfully limit franchisee employees’ job mobility and compensation in New Jersey?

“Anti-Poaching Provisions” in the franchise context are designed to prevent franchisees from stealing each other’s employees.  Oftentimes, such provisions are limited to preclude solicitation and recruitment of employees.  But Jackson Hewett’s franchise system added that franchisees could not hire another franchisee’s employee, even if no action was taken to solicit or recruit the person.    Recently, the New Jersey District Court permitted a class action by Jackson Hewitt employees to go forward in which the employees claimed that “anti-Poaching Provisions” negatively affected their job mobility and compensation.  See Robinson v. Jackson Hewitt, 2019 WL 5617512 (D.N.J. Oct. 31, 2019).

FRANCHISE: Does New Jersey uphold choice-of-law provisions in the franchise context?

Recently, the District Court of New Jersey refused to enforce a choice-of-law provision designating Illinois law in a franchise lawsuit.   Lentini v. McDonalds, 2019 WL 4746420 (D.N.J. Sept. 30, 2019).r New Jersey’s courts will honor a choice-of-law provision unless (a) the chosen state has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties’ choice, or (b) application of the law of the chosen state would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue.   The New Jersey Supreme Court has made clear that the state has a strong policy in favor of protecting its franchisees.

FRANCHISE: Did 7-11 enact “Operation Philadelphia” to get rid of franchisees?

Several lawsuits have claim that 7-11 schemed to scheme to drive out franchisees in Philadelphia and South Jersey and take back their stores.  More recently, a New Jersey federal court permitted a franchisees claim of an “Operation Philadelphia” to go forward under a theory of a breach of the covenant of good faith and fair dealing. The Court found that the franchisee Korchid sufficiently plead this claim as the initial stages of the proceeding.  See Korchid v 7-Eleven, Inc., 2019 WL 3812472 (D.N.J. August 14, 2019).

Will we find out if Korchid ultimately prevails?  Probably not – the Judge referred the case to arbitration as required the franchise

LITIGATION: Can a Law Firm Avoid A Legal Malpractice Claim Under The Entire Controversy Doctrine?

Yes, under certain circumstances, according to a March 9, 2019 opinion by the New Jersey Supreme Court in the case of Dimitrakopoulos v. Borrus, Goldin, Foley, Vignuolo, Hyman and Stahl, P.C.  Dimitrakopoulos hired the Borrus firm to represent him in a business dispute with Steven Eleftheriou.  The Borrus firm withdrew from that case, but sought to be paid over $93,000 for its work up to that point, and filed a lawsuit against Dimitrakopoulos to collect.  Dimitrakopoulos made no legal malpractice claims in response to the collection case.  After both the collection case and the case against Eleftheriou were resolved, Dimitrakopoulos made a legal malpractice claim against the Borrus firm.

Generally, the entire controversy doctrine requires litigants to consolidate their claims arising from a single controversy whenever possible.  If a party fails to assert a claim that the entire controversy doctrine requires to be joined in a given action, a court may bar that claim.  The New Jersey Supreme Court carved out an exception in the 1997 case of Olds v. Donnelly, holding legal malpractice claims are exempt from the entire controversy doctrine to the extent that they need not be asserted in the underlying action.  This exception was created in large part because the claimant could still be victorious in the underlying case which would preclude a legal malpractice claim.

But the Dimitrakopoulos Court held that the Olds exception does not apply to a separate collections case brought by a law firm against its client.  Once the case against Eleftheriou was resolved, the legal malpractice claim became ripe, and could have been asserted in the collection case.

FRANCHISE: New Jersey Among States Making Agreement With Franchisors Prohibiting “No-Poach” Agreements In Fast-Food.

On March 12, 2019 it was announced that 17 states, including New Jersey, made Agreements with Arby’s, Dukin’, Five Guys, and Little Ceasars to prohibit the use of “No-Poach” provisions in their franchise agreements.  “Non-Poach” provisions restrict a franchisee’s ability to recruit or hire employees from one franchise to another.  As a result, employees (many of whom are low-wage workers) may be unable to obtain better pay and benefits by working for a competing franchisee within the same franchise system.

While this may be appropriate with low-skilled workers, will this trend continue for highly-skilled workers for other franchise systems?  Does this rationale apply to a general manager of an Outback Steakhouse earning a six-figure salary?  Does it make sense to restrict the poaching of senior automotive technicians in an automotive franchise whose skills cannot be easily replaced?

CONSUMER: Can You Avoid Arbitration In a Consumer Contract?

On January 10, 2019 the New Jersey Supreme Court held an arbitration clause in a home warranty contract unenforceable.  Arbitration is a non-judicial process to resolve disputes with very different rules and protections than a case filed in a court.  The Court focused on whether there was mutual assent between the parties to agree to arbitrate any dispute.  Without mutual assent, there can be no meeting-of-the-minds sufficient to create a contract.

The Court found there was no mutual assent because: 1) the agreement to arbitrate was inconspicuously located in a section labeled mediation; 2) the small print violated the New Jersey Plain Language Act; and 3) and the contradictory nature of arbitration, mediation, and the agreement’s reference to “Commercial Mediation Rules”.   See Kernahan v. Home Warranty Administrator of Florida, Inc.