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The Appellate Court has issued its opinion on the Farrell's appeal. As a result of this, most of the battles surrounding Farrell's may be over. At the same time, it is unclear whether this allows new parlours to open. History Throughout 2003, there was much banter about Farrell's coming to The Block at Orange. Suddenly, all mention of this new parlour vanished from the FarrellsUSA.com website. What happened? After some searching, I was able to determine that there was a legal bruhaha between Parlour Enterprises (developers of Farrell's in California) and The Kirin Group (owners of the Farrell's trademarks and master development rights). I was able to get copies of some of the early court documents and this is what I found: On January 23, 2004, Parlour Enterprises (the Plaintiff) filed suit against The Kirin Group (the Defendant) in the Superior Court of the State of California. In this complaint, several causes of action were listed:
On October 19, 2004, The Kirin Group countered with a cross-complaint against Parlour Enterprises. This complaint listed the following causes of action:
In a nutshell, Parlour's suit alleged that Kirin refused to sign off on new lease locations that he verbally approved, used delaying tactics which caused Parlour to miss key milestones that were outlined in their area development agreement, and without notice terminated the agreement for non-payment of legal fees. Kirin's cross-complaint alleged that Parlour failed to open the required number of restaurants per the agreement, misrepresented its ability to develop, finance and run restaurants, and published false, defamatory information about the principal of Kirin. In September, 2005, the case went to trial. After about 2 weeks of testimony, the jury sided with Parlour Enterprises and awarded $6.6 million in damages. This was around 20% more than the plaintiffs had requested, and served as a strong indicator that Parlour's case was very convincing. In December, 2005, Kirin appealed the case. On September 19, 2006, oral arguments were heard in the California Appellate Court. On April 6, 2007, the court issued its opinion affirming the lower court judgement, with some modifications. The $6.6 million award was reduced to $202,929. The opinion was published on the appellate court website. On April 17 and 18 petitions for rehearing were filed by Parlour Enterprises and Kirin, respectively. On May 4, the appellate court issued an order granting rehearing. On June 19, the court issued its modified opinion, further reducing the award to $130,255 and reversing one of the lower court judgements. While the appeal was underway, Parlour filed another complaint against Kirin and the franchisee for the Hawaii Farrell's, alleging that their franchise agreement was established in violation of a restraining order that was issued after the original trial. According to the trial judge, the complaint alleges that Kirin "made a transfer of trademarks and trade names with the intent to defraud Plaintiff, that Defts. concealed from the other defendants, the fact that they did not have the right to transfer the trademark and trade name and that the transfer was made without receiving a reasonably equivalent value in exchange for the transfer." What does this mean for Farrell's? Further appeals are not likely at this point. Given the reduced award, Kirin may just pay it and be done. The other court issue still needs to be resolved, though. Will new parlours now be able to open? Wait and see... |