Franchisor Wins Attorneys’ Fees and Costs in Termination Decision

Foley & Lardner LLP

Foley & Lardner LLPThe U.S. District Court for the Eastern District of Virginia recently issued a decision in AFC Franchising, LLC, et al., v. Fairfax Family Practice, Inc., et al., 1:18-cv-1356 (LMB/IDD), awarding a franchisor attorneys’ fees and costs following a drawn-out suit based on, among other things, alleged breach of a franchise agreement. 

Plaintiff AFC Franchising, LLC (“AFCF”) operated a franchise system consisting of urgent care centers.  In June 2014, AFCF entered into a franchise agreement with defendant Fairfax Family Practice, Inc. (“FFP”), subject to a weekly royalty fee that AFCF could electronically debit from FFP.  The agreement provided that any default from FFP on royalty or other payments would constitute a basis for termination of the agreement unless FFP cured the default.  Finally, the agreement specified that both defendants, Ahmad Fazal Nusrat (“Nusrat”) and FFP, would be liable for attorneys’ fees if FFP breached the agreement.

In 2017, FFP missed some royalty payments, and in July 2018, Nusrat removed AFCF’s ability to electronically debit those royalty payments.  Defendants received a notice of default, but failed to cure. AFCF terminated the franchise agreement in early September 2018. AFCF filed suit seeking damages for unpaid royalties and a declaration that it validly terminated the agreement.  The court granted AFCF’s motion for summary judgment.

The parties then litigated the issue of attorneys’ fees and costs. Defendants did not contest that they owed attorneys’ fees, but sought to cap them at $25,000. The court held that the hourly rates for AFCF’s attorneys and the hours worked were reasonable with a few exceptions for duplicative work or administrative fees like delivery services. The court ultimately reasoned that the parties had agreed AFCF would be entitled to fees in the event it prevailed in a suit for breach of the franchise agreement and should receive them in this case in the amount of $128,957.50, plus some costs.

The case is instructive to in-house attorneys and outside counsel alike.  Notably, the franchise agreement provided for attorneys’ fees.  Though the amount of fees was more than five times the amount of past-due royalties awarded to AFCF, this did not stop the court from awarding fees where they were due.  This case underscores the simple—yet important—lesson to include a clear attorneys’ fees provision in franchise agreements.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Foley & Lardner LLP | Attorney Advertising

Written by:

Foley & Lardner LLP

Foley & Lardner LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.