Category Archives: lawsuit

Is a NJ Franchisee Normally Entitled to Reimbursement of its Attorneys Fees When it Sues a Franchisor?

No one enters into a franchise assuming that someday, they will need to file a lawsuit to enforce their rights. Unfortunately, however, sometimes that need does arise. The first and foremost question at that point, from the franchisee’s perspective, is can I receive reimbursement for my legal fees and costs?

Fortunately, in limited circumstances, the law does provide just such a remedy. The New Jersey Franchise Act (N.J.S.A. 56:10-10) states:  “Any franchisee may bring an action against its franchisor for violation of this act in the Superior Court of the State of New Jersey to recover damages sustained by reason of any violation of this act and, where appropriate, shall be entitled to injunctive relief.  Such franchisee, if successful, shall also be entitled to the costs of the action including but not limited to reasonable attorney’s fees. “

The court in Westfield Centre Service, Inc. v. Cities Service Oil Company, 172 N.J. Super 196, 203 (Ch. Div. 1980) analyzed the need for this statutory provision from the perspective of the disparity in bargaining power between the franchisor and franchisee.  “Where such disparity exists the right to award counsel fees against the more powerful party is justifiable in an effort to maintain a reasonable balance between them.”  Id. Thus in order to level the playing field, a franchisee can usually recover his attorney fees in a successful suit against a franchisor.

The general rule of thumb is that when a statute includes an attorney’s fee reimbursement provision, the Legislature is seeking to encourage lawsuits that would further a public policy objective.  Essentially, the Legislature is hoping that private individuals and entities will litigate such matters and, therefore, discourage the very practices that the statute outlaws.  For example, in this case, the Legislature determined that it was in the public’s interest to encourage lawsuits by the franchisees against franchisors who might take advantage of the latter’s superior bargaining power and resources.

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC

When does a “grossly exaggerated claim” by a business become so misleading that it can result in a lawsuit?

Harrison Research Laboratories, Inc., v. HCRAmerica, LLC 2010 WL 5343197 (D.N.J.) concerned the issue of whether a grossly exaggerated claim can be so misleading that it can be the subject of a lawsuit.

The case was filed in the Federal District Court for the District of New Jersey. It began with Harrison Research Laboratories (“HRL”) suing HCRAmerica and another party for trademark infringement.

HCRAmerica countersued HRL alleging that HRL had made false statements on its website and in its brochure.  Specifically, HCRAmerica claimed that HRL’s statement that HRL passed “numerous FDA audits” was false and misleading and rose to the level of a false representation under the Lanham Act § 43(a).  HCRAmerica based its claim that the statement was false on the fact that HRL had been subject to only a few audits (not numerous audits), one of which was conducted by the Environmental Protection Agency (“EPA”) and resulted in criminal convictions.  HCRAmerica’s position was that it was misleading to state that a company was beyond reproach because it had been the subject of numerous audits, when in fact, there were only a few audits and, in any event, the President of HRL and the company itself were criminally convicted as a result of the audits.

Section 43(a) of the Lanham Act provides that a false representation occurs when:

(1) Any person who, on or in connection with any goods or services, or any container for goods, uses in commerce any word, term, name, symbol, or device, or any combination thereof, or any false designation of origin, false or misleading description of fact, or false or misleading representation of fact, which-

(A) is likely to cause confusion, or to cause mistake, or to deceive as to the affiliation, connection, or association of such person with another person, or as to the origin, sponsorship, or approval of his or her goods, services, or commercial activities by another person, or 

(B) in commercial advertising or promotion, misrepresents the nature, characteristics, qualities, or geographic origin of his or her or another person’s goods, services, or commercial activities,

shall be liable in a civil action by any person who believes that he or she is or is likely to be damaged by such act.

15 U.S.C. § 1125(a)(1).

Under the Lanham Act, a false representation can occur if a company makes a statement that misleads or confuses consumers or makes an inaccurate statement. 

HCRAmerica claimed that HRL’s statement was both false and misleading.  First, HCRAmerica claimed that HRL’s statement was false, because HRL had not been subject to numerous audits.  Second, HCRAmerica claimed that HRL’s statement could cause confusion among consumers because it omitted information about the result of the EPA’s audit and criminal convictions.

The court allowed the case to proceed finding, “it cannot be said at this early stage in the litigation that the conviction and EPA audit ‘have no possible relation’ to Defendants’ false representation, deceptive and unlawful practice and unfair competition claim.” Harrison Research Laboratories, Inc., v. HCRAmerica, LLC 2010 WL 5343197 *4 (D.N.J.).

Comments/Questions: gdn@gdnlaw.com

© 2011 Nissenbaum Law Group, LLC