Mealey's (June 3, 2016, 3:18 PM EDT) -- TRENTON, N.J. — A New Jersey federal judge on May 31 granted 7-Eleven Inc.’s request for a declaratory judgment that the franchise agreements of defendants who occupy and operate six 7-Eleven convenience stores have been properly terminated (7-Eleven Inc. v. Karamjeet Sodhi, et al., No. 3:13cv3715, D. N.J.; 2016 U.S. Dist. LEXIS 70794).
(Unpublished opinion available. Document #98-160614-040Z.)
U.S. Judge Michael A. Shipp of the District of New Jersey also granted 7-Eleven’s motion for summary judgment on counterclaims brought by defendants Karamjeet Sodhi, Manjinder Singh and Karamjit Singh.
7-Eleven sued Sodhi and the Singhs, alleging that they committed “incurable breaches” of their franchise agreements, that 7-Eleven lawfully provided notice of its termination of the franchise agreements and that, as a result, the defendants should be compelled to vacate and surrender the properties at issue.
Conduct
7-Eleven alleged that Sodhi and the Singhs engaged in conduct in violation of the franchise agreements governing the stores. 7-Eleven sued the defendants for alleged violations of the Racketeer Influenced and Corrupt Organizations Act, its New Jersey analog and New Jersey Statute Annotated 2C:41-42, trademark infringement and various common-law claims, including breach of the respective franchise agreements.
7-Eleven alleged that the defendants engaged in a scheme to under-report gross sales and thus deprived 7-Eleven of its share of those revenues. After an audit of the stores, 7-Eleven on June 25, 2013, sent Sodhi a notice of material breach and termination of the franchise agreements that pertained to all the stores.
The defendants on Feb. 29 filed counterclaims for violation of the New Jersey Franchise Practices Act (NJFPA), breach of the implied covenant of good faith and fair dealing, violation of the Fair Labor Standards Act (FLSA) and violation of the New Jersey Law Against Discrimination (NJLAD).
‘Unreasonable Standards’
The defendants claimed that 7-Eleven violated the NJFPA by imposing “unreasonable standards” on Sodhi’s stores and attempting to terminate the franchise agreements without good cause.
“Defendants have not, however, adduced any evidence of 7-Eleven’s ‘unreasonable standards,’” Judge Shipp wrote. “Indeed, Defendants’ opposition is entirely silent as to this claim. . . .
“Next, with respect to Defendants’ assertion that 7-Eleven is attempting to terminate the Franchise Agreements without ‘good cause,’ Defendants’ opposition does not rebut the evidence showing that Mr. Sodhi violated the Franchise Agreements. Here, Mr. Sodhi has admitted that he failed to pay payroll taxes, provide workers’ compensation insurance, or withhold and pay Social Security taxes for employees of his Stores.”
The defendants’ FLSA claim fails because Sodhi should not be classified as an employee for the purposes of the FLSA, Judge Shipp wrote. He also ruled that the defendant’s NJLAD claim fails because the NJLAD does not cover “discrimination during the ongoing execution of a contract.”
‘Good Cause’
Judge Shipp said 7-Eleven was entitled to judgment as a matter of law on the counterclaim for breach of the implied covenant of good faith and fair dealing given the court’s finding of “good cause” for termination of the franchise agreements.
The defendants are represented by Gerald Allen Marks of Marks & Klein in Red Bank, N.J. 7-Eleven is represented by Andrew O. Bunn of DLA Piper in Short Hills, N.J., Ingo W. Sprie of Arnold & Porter in New York and Stephen N. Sussman of Lebensfeld Sharon & Schwartz in Red Bank.
(Additional documents available. Second amended complaint. Document #98-160614-041C. Defense answer and counterclaims. Document #98-160614-042W.)...