Franchising Primer K-19
this topic. See, Winston Franchise Corp. V.
Williams, Bus. Franchise Guide (CCH) Part
9940 (S.D. N.H. 1992) (holding that the
franchisee's noncompetition covenant was
neither a business sale nor a personal services
agreement but a third category, "commercial
contract" judged according to the rule of
reason).
The third issue is what, if any, legitimate
business interest the franchisor has to support
the covenant. Peat Marwick Main & Co. v.
Haass, 818 S.W. 2d 381 (Tex. 1991);
Alphagraphics Franchising, Inc. v. Babbet, 1989
W.L. 2427 (Tex. App. - Houston [1st Dist]
1989) (Not for publication opinion affirming
denial of temporary injunction to enforce
franchisee's noncompetition covenant due to lack
of imparted "special training or knowledge from
Alphagraphics").
The final issue is the reasonableness of
the time, geographical area and the scope of
activity restraints necessary to protect those
legitimate business interests. Butts Retail, Inc.
v. Diversifoods, Inc., 840 S.W.2d 770 (Tex.
App. - Beaumont 1992); Meineke Discount
Muffler Shops v. Jaycees, Bus. Franchise Guide
(CCH) Part 9959 (S.D. Tex. 1991). The
equities of the case, probability of successes on
the merits of the claims, etc. are factors.
Because the franchisee is typically
personally obligated on a real estate lease tying
him to a specific location, any enforcement of
the covenant not-to-compete is often fatal. All
citations of legal authorities and effective
presentation of facts to the contrary, covenant-
not-to compete enforcement ultimately rests on
the judge's sense of fairness and is unpredictable.
5. OTHER THEORIES
Choice of law is often a key issue. CCS-
Wisconsin Office v. Houston Satellite Systems,
Inc., Bus. Franchise Guide (CCH) Part 9955
(E.D. Wisc. 1991) (choice of Texas law
concerning construction of the contract did not
control franchisee's claim concerning
enforcement of it); DeSantis v. Wackenhut
Corp., 793 S.W.2d 670 (Tex. 1990) (State's
fundamental policies preempt parties' choice of
law); Instructional Systems, Inc. v. Computer
Curriculum Corp., 614 A.2d 124 (N.J. 1992).
The issues of fiduciary duty, confidential
relationship, unconscionability, implied and
expressed representations, promissory estoppel,
quasi estoppel, fraud, Ralston Purina Co. v.
McKendrick, 850 S.W.2d 629 (Tex.App - San
Antonio 1993, writ denied) (fraudulent
nondisclosure), negligent misrepresentation,
collateral estoppel, Universal American Barge
Corp. v. J-Chem, Inc., 946 F.2d 1131, 1136 (5th
Cir. 1991); See R.E. Spriggs Co. v. Adolph
Coors Co., 156 Cal. Rptr. 738, 743-45 (Ct. App.
1979), cert. denied, 444 U.S. 1076 (1980),
conversion, economic duress, Lee v. Wal-Mart
Stores, Inc., 943 F.2d 554 (5th Cir. 1991)
(Texas recognizes the tort of economic duress.
Id at 560, note 11), Bain v. Champlin Petroleum,
692 F. 2d 43, 48 (8th Cir. 1982), interference
with actual and prospective beneficial
contractual relationships, reformation (to what
the franchisor's representatives stated the
agreement provided), Racketeer Influenced and
Corrupt Organizations (RICO) claims, and
breach of express and implied warranty are often
raised in franchise litigation. While Eastman
Kodak Co. v. Image Technical Services, Inc.,
112 S.Ct. 2097, Bus. Franchise Guide (CCH)
Part 10,017 (1992) (holding that a tie-in might
exist in Kodak's repair parts in spite of its lack of
market power in the new copier market) has
revived interest in antitrust tie-in attacks on
franchisor required purchases, the requirement
that the franchisee show antitrust injury may
blunt it. Town Sounds and Custom Tops, Inc. v.
Chrysler Motors Corp., Bus. Franchise Guide
(CCH) Part 9983 (3rd Cir. 1992).
Some states impose a tort duty of good
faith and fair dealing in franchise relationships.
Rau, Implied Obligations in Franchising: Beyond
Terminations, The Business Lawyer, Vol. 47,
No. 3, page 53 (1992); Carvel Corp. v.
Diversified Management Group, Inc., Bus.
Franchise Guide (CCH) Part 9794 (2nd Cir.
1991); West Court Video Enterprises, Inc. v.
Ponce de Leon, 1991 W.L. 49566 (N.D. Ill.