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Franchisor Rights Confirmed

Disputes often arise regarding the proper interpretation of a specific state’s law as it applies to a particular type of contract. A Spencer Fane client faced such a challenge regarding Montana law. The client, a national tax preparation company, had a franchisee leave and openly violate her non-compete agreement. The company was concerned that these circumstances might encourage other franchisees to ignore or challenge their non-compete agreements as well.

Of course, any company with numerous franchisees had a critical interest in establishing that the foundation of its agreements with franchisees – a covenant not to compete – is enforceable. Thus, determining the scope and enforceability of the franchise agreement, which had been written over 25 years earlier, was critical to the client’s interests.

Spencer Fane thoroughly researched and analyzed applicable Montana law, crafted its arguments supporting enforceability of the non-compete agreement, and filed suit to enforce the agreement – seeking, at the outset, a preliminary injunction to require the franchisee to comply with her non-compete agreement.

On the eve of the preliminary injunction hearing, the defendant hired the largest law firm in the state as well as a highly-regarded expert witness in an effort to have the non-compete agreement declared unenforceable. Literally overnight, the Spencer Fane team prepared a comprehensive response to the arguments advanced by the defendant, and engaged her in a hotly contested preliminary injunction hearing.

Ultimately, the court entered a preliminary injunction in favor of Spencer Fane’s client and against the defendant. The court agreed with virtually every aspect of the arguments that Spencer Fane developed and advanced, under both Montana and Missouri law. Undeterred, the defendant appealed to the U.S. Court of Appeals for the Ninth Circuit, which upheld the trial court’s judgment in favor of Spencer Fane’s client.

The case represented a significant victory for both Spencer Fane and its client.