The Toasted Subs Franchisee Association won a victory against Quiznos in Denver’s federal court on Thursday, May 3 – the same day that my feature story about the Denver-based chain hit newsstands.
Last November, a Quiznos franchisee in California killed himself in a Quiznos bathroom, leaving a suicide note that blamed Quiznos for his death. That letter was subsequently posted on the website of the Toasted Subs Franchisee Association -- an advocacy group comprised of Quiznos franchise owners that has had an acrimonious history with the company. Immediately after learning of the suicide note’s posting, Quiznos general counsel Pat Meyers directed that any franchisee affiliated with the TSFA be identified and their franchise rights be terminated. The next day, every board member of the TSFA received a termination notice.
On December 15, eight terminated franchisees filed suit in U.S. District Court in Denver seeking to keep their stores and recover damages after a trial. In the meantime, they sought injunctive relief to keep their stores open during the course of the litigation. A three-day preliminary hearing was held starting on February 12 in the courtroom of Judge John Kane. By then, five of the eight plaintiffs had settled with Quiznos.
Nearly three months later, Kane issued his ruling on the injunction. He granted the plaintiffs’ preliminary injunction and went on to write that "it is substantially likely that Plaintiffs will prevail on their claim that their terminations under the circumstances presented fall outside the authority given Q under ... the Franchise Agreement."
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Kane wrote that franchisors have a broad right to terminate the franchise agreement, but not to do it immediately and without investigation like Quiznos did in this case. Kane focused on the phrase "sole judgment" in the Quiznos franchise contract and decided Quiznos did not exercise judgment in making this decision.
"In exploring the parameters of what the term 'judgment' means within the plain language of the Agreement, I am certain that it does not mean the entirely impulsive and retaliatory reaction described by Mr. Meyers …
“Plaintiffs have provided evidence, essentially conceded by Quiznos, demonstrating that the decision to terminate their franchises was made without any investigation or consideration, to punish the swath of franchisees affiliated with the TSFA board regardless of whether those franchisees actually participated in the decision to post the Baber letter.” – Jessica Centers