(Sept. 19) – Houston and Dallas lawyers from Gray Reed & McGraw have secured a $3.15 million appellate win for a cleaning franchisor that had a contract dispute with its partner in the United Kingdom.
In a one-sentence unpublished opinion, the U.S. Court of Appeals for the Fifth Circuit affirmed three previous orders by U.S. District Judge Jane Boyle and retired U.S. District Judge Jorge Solis of the Northern District of Texas that ruled in favor of Gray Reed’s client, Addison-based Jani-King Franchising, the world’s largest commercial cleaning franchise company.
Jani-King sued its UK franchisee, Jani-King (GB) Ltd., after it stopped paying its franchise fees and terminated the agreement in 2014. In its lawsuit, Jani-King also named as a defendant JKGB’s principal shareholder, Ian Thomas, who provided a personal guarantee on the franchise agreement.
On April 7, 2016, Judge Solis (who now practices in Katten Muchin’s Dallas office) rendered a summary judgment in Jani-King’s favor and against JKGB’s counter claims for breach of the franchising agreement. He also declined to re-write the agreement and imply any promises for which the parties had not bargained. He ordered JKGB to pay its American franchisor $3.15 million – $2 million of it in “unpaid contractual obligations” and the rest in damages, the judgment says.
JKGB had denied any liability and countered that Jani-King’s “American business involved fraudulent practices, causing American franchisees to write negative social media commentary. In defendants’ words, ‘Jani-King’s business was only a step removed from a Ponzi scheme,’ ” court documents say.
JKGB appealed the summary judgment to the Fifth Circuit, which heard oral arguments on the case Sept. 6. Like the district judges, the three-judge appellate panel, which included Judges Jerry Smith, Edith Brown Clement and Gregg Costa, also did not buy JKGB’s arguments. They ruled in Jani-King’s favor Sept. 13.
“We are very pleased by the court’s verdict and our success in representing Jani-King,” Houston Gray Reed partner Jonathan Hyman said in a statement. “Enforcing its franchise agreements is critical to protecting the Jani-King brand for the benefit of its entire franchising system.”
Judge Boyle took over the case a couple weeks after Judge Solis rendered his April 2016 summary judgment, and JKGB appealed two more opinions signed by Judge Boyle: 1) an Oct. 24, 2016 order that denied the defendants’ request to reconsider the summary judgment, and 2) a new summary judgment rendered on Oct. 20, 2017 which clarified that Thomas, the guarantor, was not off the hook for paying JKGB’s franchise fees.
The Fifth Circuit also cited these two opinions for why it was ruling in favor of Jani-King.
Dallas attorney Ernest Leonard of Friedman & Feiger, who represents JKGB, did not immediately respond to a request for comment.
Other attorneys on the Gray Reed legal team included Cary Gray and David Leonard in Houston, as well as Jim Moseley, Angela Brown and William Drabble in Dallas.