Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Home electric services franchisor seeks declaratory relief to terminate franchise agreement, (Jan 28, 2015)

By Linda O’Brien, J.D., LL.M.

A franchisor of electric services businesses is seeking a declaratory judgment that it may terminate the franchise agreement of a Las Vegas-based franchisee for a violation of the agreement’s non-competition provision, according to a complaint filed in the federal district court in Tampa, Florida (Mister Sparky Franchising, L.L.C. v. On Time Electricians, Inc., January 26, 2015).

Mister Sparky Franchising, L.L.C. is in the business of franchising and licensing its business format, systems, specifications, and procedures using the name and service mark “Mister Sparky®” and associated logos for the operation of residential electrical services businesses.

The complaint alleges that, in February 2013, the franchisor entered into a franchise agreement with On Time Electricians (OTE) for the territory surrounding Las Vegas. The term of the agreement was for ten years, and OTE agreed to pay continuing franchise fees beginning in August 2013 and a minimum franchise fee of $250,000 per year commencing in February 2018. The agreement provided that it was a valid, binding obligation of OTE and OTE’s sole owner and president, George Donaldson, jointly or severally.

According to the complaint, in December 2014, Donaldson accepted employment as Division President with American Residential Services (ARS). ARS provides residential electrical services, as well as plumbing and heating and air conditioning services. The franchise agreement between the parties also provided that, during the term of the agreement, the franchisee and its owner could not be involved with a competitive business. A competitive business was defined as a business that offered residential electrical products and services competitive with or similar to those offered by Mister Sparky.

Donaldson’s employment with ARS was alleged to constitute involvement with a competitive business in direct violation of the non-competition provisions of the franchise agreement. Donaldson was alleged to have failed to cure such violation. Thus, such violation constituted grounds for immediate termination of the franchise agreement, since it adversely affected the goodwill associated with Mister Sparky, the complaint charged.

The plaintiff seeks a declaratory judgment under 28 U.S.C. 2201 and 2202 any other just and proper relief.

The case is No. 8:15-cv-00164-VMC-TGW.

Attorneys: R. Eric Bilik and Kimberly Tolland Mydock (McGuire Woods LLP) for Mister Sparky Franchising, L.L.C.

Companies: Mister Sparky Franchising, L.L.C.; On Time Electricians, Inc.

News: FranchisingDistribution FloridaNews