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July 2012

Gordon & Rees Knots Win for Wetzel's Pretzels

An LA team of franchise attorneys led by Calvin Davis and Aaron Rudin won a full award for firm client Wetzel's Pretzels after a binding arbitration before the American Arbitration Association. 

The case began when a franchisee of Wetzel's was terminated for failing to comply with the franchise’s system standards.  Despite this, the former franchisee refused to de-identify and continued to utilize the Wetzel's trademarks in its business.  We filed a trademark infringement action in the Central District of California and successfully obtained a preliminary injunction forcing the former franchisee to de-identify.  The franchisee then filed a counterclaim in that court for wrongful termination of their franchise, unfair business practices, and violations of California franchise law.  We then filed and won a motion to compel the dispute to arbitration.
 
In two days of hearings, the former franchisee argued that it deserved to be re-instated as a franchisee because Wetzel’s singled it out for termination and fabricated certain evidence to justify doing so  We demonstrated to the arbitrator, through testimony as well as photographic evidence, that the franchisee's operation fell far short of Wetzel's system standards.  We also undermined the allegation of fabricating evidence—the franchisee's central argument in the case—when the franchisee’s key witness admitted during cross-examination that (1) she was the sister-in-law of one of the franchisees and (2) had lied under oath when earlier denying a family relationship with the franchisee.
 
The arbitrator’s July 2, 2012 ruling confirmed the propriety of Wetzel's termination, affirmed that a permanent injunction should be entered, awarded Wetzel's damages for the franchisee's unauthorized use of its trademark, and ruled that Wetzel's was entitled to be assigned the lease for the premises as well as any lease for equipment being utilized at the location.  Finally, the arbitrator ruled that the former franchisee was not entitled to any of the relief sought in its counterclaim.

 

Calvin E. Davis
Aaron P. Rudin


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