Franchise, Dealership & Distribution Lawyer

Carmen Caruso has been actively engaged in franchise, dealership and distribution litigation for nearly 25 years when he joined a premier Chicago litigation firm that represented McDonald’s Corporation and Godfather’s Pizza in serious litigation matters.

In recent years Carmen has served as outside general counsel and trial counsel for the independent franchisee association of a major national brand, and has also served as outside general counsel and trial counsel for a large international retailer (whose interests were not in conflict with Carmen's franchisee clients). Carmen was also named by the Asian American Hotel Owners to a highly selective panel of trial lawyers who have demonstrated their committment to fairness in franchising. There are very few lawyers in the country who can claim this breadth of experience.

Carmen's main focus has always been challenging litigation, and many of Carmen's clients come to him to solve specific problems that are headed toward litigation or arbitration (or in some cases after litigation/arbitration is already filed, and occasionally when a new approach is needed for an appeal). In this capacity, Carmen has represented numerous other franchisors, multi-unit franchisees, area developers, distributors, franchisees and dealers. He has handled disputes in more than 100 systems, ranging from established brands to exciting start-ups.

Trial & Appellate Lawyer in
Franchise, Dealership & Distribution Cases

Carmen’s extensive franchise litigation and arbitration practice includes challenging, cutting edge franchise cases arising all over the country at all phases of franchise/dealership relationships.

Many of these cases involve legal issues unique to franchising and dealership, but many other cases involve legal issues that could ensnarl any business (e.g. disputes with key competitors, employees or suppliers, industry specific regulatory challenges, intellectual property, business ownership or real estate disputes).

Carmen is experienced in successfully resolving the following issues in the franchising, dealership, and distribution context:

“Alternative Channels of Distribution” for products or services in competition against a licensed franchisee or dealer.
Advertising fund controversies including accountability questions as well as concerns whether expenditures are made in good faith.
Antitrust issues arising under federal laws (the Sherman Act and Clayton Act) as well as state antitrust laws, including tying claims (requiring franchisees to purchase certain products or services as a condition of the franchise grant); group boycotts; refusals to deal; retail price maintenance; or price-fixing.
Association standing to sue asserted by independent franchisee associations in cases involving the interpretation of franchise agreement provisions or franchisor conduct with system-wide impact.
Attorney liability including alleged negligence in not being familiar with applicable franchising laws and conflicts of interest when attorneys represent multiple clients at different levels of distribution arrangements.
Audits of franchisee royalty payments, giving rise to claims to underreporting claims, and involving proof related to forensic accounting examinations, lifestyle audits (modeled after Internal Revenue Service investigations) and questions related to surveillance methods.
Bankruptcy and reorganization of both franchisors and franchisee/dealers and related issues which arise in Chapter 7 (liquidation) or Chapter 11 (reorganization) proceedings.
Brand damage allegations.
Business opportunity law claims.
Class actions in franchising.
Co-branding issues.
Collective bargaining in franchising of system-wide franchise agreements, including efforts in litigation to achieve that result through the assertion of associational standing to sue.
Concept evolution and coerced concept change issues, tending to effect mature brands.
Conflict of laws questions arising in multi-state disputes.
Consumer claims arising at licensed locations, where the consumer seeks to impose liability upwards in the distribution chain.
Contract Claims, including the Implied Covenant of Good Faith & Fair Dealing (applicable to discretionary decision-making at all phases of franchise and dealership relationships).
Controlling person liability asserted against franchising executives.
Damage claims, including attempts to enforce contractual limitations on recoveries; and claims for consequential damages or lost profits (which may be asserted when a relationship is ended or an opportunity is denied or misrepresented); claims for liquidated damages; and claims for punitive or exemplary damages, or statutory damage awards; and frequently arising complex expert testimony issues.
Defamation claims, e.g. arising from franchisee websites, press releases, association recruiting efforts etc.
Default notice issues, including the question of whether a default is curable as a matter of contract or state law.
Disclosure issues, giving rise to claims for rescission or damages, or enforcement actions.
Discrimination among franchisees in possible violation of state franchising laws or implied contractual duties.
Dormant Commerce Clause (and potential Due Process) challenges to local ordinances that may negatively impact a national brand or distribution system by unfairly discriminating in favor of local competitors.
Dual distribution issues, which arise when a franchisor operates “company owned stores” in competition with franchised units.
Employment claims in franchising contexts, including allegations of misconduct at licensed locations in which the aggrieved employee seeks to impose liability upwards in the distribution chain.
Encroachment of a territory or market area based on express contract provisions or implied protections.
Failure of performance by a franchisee, dealer, or area developer, e.g. failing to open, failing to meet unit development schedules, failing to meet sales quotas, or failing to protect licensed intellectual property.
Failure of performance by a franchisor or distributor, e.g. failing to maintain system standards or to provide adequate products or services; failure to provide adequate training or assistance; or the failure to protect intellectual property.
Federal Trade Commission Enforcement Actions.
Fiduciary duties.
Fraudulent inducement claims, which may be based on Franchise Disclosure Documents or other representations, and which may arise before or after the signing of a franchise or dealership agreement.
False financial representations or earning claims.
Governmental disputes, including controversies over access to franchise opportunities at airports or other public locations; challenges to local ordinances; or enforcement actions.
“Hidden Franchise” claims – i.e. the threshold issues of whether a license or dealership contract created an inadvertent franchise or violates a business opportunity law.
The Implied Covenant of Good Faith and Fair Dealing (see Contract Claims). The implied covenant is perhaps the most important and controversial legal doctrines in franchising cases. For this reason, and following his success in the Interim Health Care decision, Carmen is frequently asked to write on issues related to the implied covenant for the franchise law bar).
Injunctions against terminations, infringements, or unlawful competition; and including emergency motion practice as well as evidentiary hearings and trials.
Interference with contracts or business expectations, including franchising or dealership opportunities and supplier relationships.
International arbitration of disputes involving outbound U.S. companies doing business abroad; inbound entities doing business in the U.S.; or foreign franchisees or licensees of U.S. companies.
Intellectual property disputes involving patents, trademarks, copyrights or trade secrets, and other licensing arrangements.
Jury trials and jury trial waivers.
Leasing disputes including challenges to attempts to exclude clients from mall locations based on grants of categorical exclusivity to competitors.
“Little FTC Act” claims arising under state consumer protection laws (e.g., the Illinois Consumer Fraud & Deceptive Business Practices Act) and attempts to enforce standards imposed the Federal Trade Commission Franchise Rule through state law claims.
Liquidated damage claims.
Lost profit damage claims involving franchise terminations or lost franchising opportunities, or brand damages, have all involved complicated lost profit issues.
Market power issues, which impact potential antitrust liability.
Market withdrawal issues affecting automobile dealers, petroleum marketers and in other industries.
Materiality of alleged breaches, default or misrepresentation.
Mergers/acquisitions of competing companies or brands giving rise to grievances by affected franchisees or dealers; or claims arising by either the acquiring or selling entities or their owners for breach of contract or fraudulent inducement.
Multi-unit owner issues such as the denial of expansion opportunities, or invocation of cross-default clauses.
Non-competition agreements (both enforcement and defense); and including issues of alleged “selective enforcement”; the adequacy of the claimed “protectable interest” and questions of “local goodwill”; geographic and temporal reasonableness; and occasional questions of unclean hands.
Operation manual issues, including attempts to effectuate changes in behavior or a relationship by updating the manual.
Parent/subsidiary issues including attempts to “pierce the corporate veil” and disclosure issues.
Petroleum Marketing Practices Act claims.
Price discrimination claims under the Robinson-Patman Act.
Product (or service) supply issues including restrictions on approved suppliers and pricing controversies.
Punitive or exemplary damage claims arising by statute or at common law, and depending on proof of willful or serious misconduct.
Racial discrimination in the denial of a franchise opportunity in violation of 42 U.S.C. §1981.
Refusals to approve transfers or renewals.
Registration/disclosure violations, resulting in mandatory rescission offers to franchisees or other enforcement actions by state regulatory officials, and with franchisees, to resolve the issues; and also, on the other side, negotiating with franchisors on behalf of franchisees who received rescission letters, seeking improvements to the system in exchange for staying in.
Retaliation claims brought by leaders of independent franchisee associations or other franchisees who protest franchisor actions.
Racketeering Influenced and Corrupt Organization Act (R.I.C.O) claims in franchising, with “patterns” of racketeering activity being alleged where similar franchisor conduct affects multiple franchisees.
Reinvestment, remodeling, and modernization disputes.
Site selection issues.
System wide issues, often involving independent franchisee associations and/or collective bargaining of franchise agreements or amendments.
Terminations and post-termination and post-expiration disputes.
Trademark infringement claims against competitors or franchisees or licensees after termination or expiration (including efforts to set “trademark traps” against the unwary).
Trade secret misappropriation claims against franchisees or their employees.
Unconscionability claims (pertaining to contract terms that limit access to courts or remedies).
Unfair competition claims.
Zoning issues arising at specific locations.