A recent Dunkin' Donuts opinion out of the Northern District of Illinois held that a franchisee who asserted bad faith counterclaims against its franchisor (and later withdrew those claims) was required to pay all attorneys' fees incurred by the franchisor in connection with those claims. Judge Milton Shadur stated:
"This diversity action between Dunkin' Donuts, Inc. (Dunkin’) and certain of its franchisees [Cherian] . . . has been distressingly acrimonious. In any event, Cherian met Dunkin's Complaint for asserted violation of the Franchise Agreements between them with an attack--a 96 paragraph, nine count Counterclaim.
"When Dunkin' then filed a motion for partial summary judgment as to the matters advanced in that Counterclaim, Cherian opted to withdraw the aspects of its Counterclaim that had been sought to be grounded in negligence, unjust enrichment, conversion and breach of fiduciary duty. . . . Dunkin’ then responded by asking to be reimbursed for the attorneys' fees and expenses that it had incurred in defending against those contentions before Cherian dropped them."
Judge Shadur concluded that:
"Each of Cherian’s four withdrawn claims shares a common flaw: None could have been asserted in the objective good faith that is demanded by Section 1927 [of section 28 of the United States Code]. Accordingly Dunkin' is entitled to be reimbursed for the attorneys' fees and expenses that it incurred in seeking the defeat of those claims before Cherian, who should never have advanced them in the first place, withdrew them in the face of Dunkin's Rule 56 motion."
You can retrieve the opinion by accessing the "recent opinion website" for the Northern District of Illinois here, and searching for Judge Shadur’s ten most recent opinions or search by case number 1:02-cv-1272.
If you have access to Westlaw, you may also look up the case at 2003 WL 21361742.
Posted by franchiselawblog at June 19, 2003 09:49 AM