At one time or another, many people have occasion to be renters who feel mistreated by a landlord. This may be due to delays in repairs, responses, or just turning on the heat. A typical reaction is the temptation to retaliate by withholding rent. However, someone who watches court TV (or knows someone who does) knows that no matter how much one is in the right, failing to send the rent check is a wrong approach and often makes things worse.

In Dunkin' Donuts Franchising LLC v. Claudia III, LLC, a Pennsylvania court proved this when owners of a Dunkin' Donuts franchise did not complete a required renovation of their franchise location, and then stopped paying fees altogether. Due to their defaults, the franchisor terminated the franchise. But the owners continued operating as a Dunkin' Donuts store, claiming the original default - failure to complete renovation on time - was at least partly the franchisor's fault, because the franchisee owners had submitted a remodel plan that Dunkin' Donuts took an unusually long time to approve.

Nevertheless, the court found for the franchisor, issuing an injunction against the franchisee, prohibiting the owners from ever operating a store that used or infringed upon Dunkin's trademarks. The court noted that even if the franchisee could win its claim that the franchisor was at fault, that would not prevent the franchisor from terminating the franchise. The court held that a franchisee's remedy for wrongful termination is a claim for money damages, not continued unauthorized use of the franchisor's trademarks. The court noted that the franchisee never disputed its default nor questioned Dunkin's ownership of the trademarks, and therefore decided there was no choice but to rule against the franchisee.

Franchisees may have valid claims against their franchisor. But, to continue operating the franchise, a franchisee must stay in compliance with the franchise agreement - even if the franchisor does not. Failure to maintain this contractual moral high ground will give a franchisor the right to terminate.

To read the full opinion, click here: Dunkin' Donuts Franchising LLC v. Claudia III, LLC, DC Pa., para. 15,584.