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July 2016

Gordon & Rees Attorneys Secure Extraordinarily Broad Writ of Possession for Client, the Largest Franchisor of Real Estate Brokerages in the World

In a significant victory for the Franchise Litigation Practice Group, the Los Angeles team of partner Calvin Davis, senior counsels Aaron Rudin and Eleanor Welke, and associate Candice Nam, secured an extraordinarily broad writ of possession against a large and prominent real estate brokerage in the South Bay Area of Los Angeles, that included all its real estate listings, bank accounts, furniture, fixtures and equipment. As a result of this order, the defendant which had long stubbornly refused to acknowledge its obligations to Gordon & Rees's client, was forced to either capitulate or file for bankruptcy.

The firm's client is the largest franchisor of real estate brokerages in the world. The defendant was a franchisee who had borrowed significant sums from Gordon & Rees's client without repaying, and also owed millions in unpaid royalties. These obligations were all secured by detailed security agreements. After patiently attempting to work out these issues but making no headway, it was determined there was no alternative to litigation. Accordingly actions were filed against the franchisee in Los Angeles Superior Court as well as in Colorado (with the assistance of Denver associate Christine Kroupa) as defendants also had franchises located in that state.

Gordon & Rees's attorneys immediately proceeded to court ex parte and obtained a temporary restraining order requiring defendants to refrain from using any of our client's collateral except under certain specified and very limited circumstances. We also obtained an order that the proceeds of our collateral, including from real estate listings, be placed in a segregated escrow account pending further order of the court.

The defendants recognized that this was "bet your company" litigation and retained counsel from Miami who were specialists in franchise litigation. The defendants filed extensive declarations in opposition accusing the firm's clients of malfeasance. However, after a lengthy hearing, the court rejected all of the franchisee's arguments and granted Gordon & Rees's client all the relief it was seeking.

Moreover, in an extraordinary move, the Court agreed with Gordon & Rees's attorneys' request that no bond be posted by its client as they argued the defendants debts to the firm's client totaled $6 million, while the total value of the collateral was $5 million. On the other hand the court ordered that if the defendant wanted to stop the writ of possession from being enforced, they could post a bond of $5.3 million dollars. The defendant did not post this bond.

The firm's client is very pleased by this outcome as it demonstrated both to this franchisee, as well as others, that it takes the obligations owed to it very seriously and will not hesitate to enforce its rights in court, including seeking any necessary provisional relief.

Calvin E. Davis
Christine Kroupa
Candice S. Nam
Aaron P. Rudin