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Judge Proposes Franchisee Pay Hard Rock Café $732K in Attorney Fees, Costs

Photo: Hard Rock in Orlando, by Cards84664 (Wikipedia)

In a long, hard-fought legal dispute between franchisee and franchisor, a Florida federal judge recommended that the franchisee pay Hard Rock Café a total of $732,224 in legal fees and costs for successfully defending itself against allegations that it violated Florida's unfair trade practices law.

Law360 reported that the decision was made last Monday, after U.S. Magistrate Judge Karla R. Spaulding released her statement determining Hard Rock was owed $707,446 in attorneys' fees and $24,778.18 in costs and litigation expenses from Bahamas-based franchisee HRCC Ltd., in the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) lawsuit. The federal court's recommendation followed the Eleventh Circuit Court of Appeal's ruling that Hard Rock was "eligible for fees under the standards laid out by the act."

The franchisee entity filed its complaint in December 2014 asserting that its franchise agreement, signed in June 2000, gave it the rights to open a stand-alone retail store for Hard Rock Café Nassau beginning in December of that year. HRCC Ltd. claimed Hard Rock executives represented that the franchise "could expect to recoup its initial multimillion-dollar investment costs within three to five years and could expect a 15 percent to 30 percent return in annual revenues." The franchisee firm was required under its agreement to pay 5 percent royalties of its gross receipts and 10 percent of its gross receipts from all merchandise sales. HRCC claimed that Hard Rock Ltd., an affiliated entity of the parent company and counterparty to the franchise agreement, had warned that it wasn't receiving enough royalties and eventually terminated the franchisee's agreement earlier in 2014.

A Florida federal judge granted summary judgment to Hard Rock in September 2016, "ruling on HRCC's last remaining claims alleging violation of the Florida Deceptive and Unfair Trade Practices Act and civil conspiracy allegations against individual Hard Rock executives." On appeal, HRCC had urged the panel to "take up a broader definition of actual damages." The franchisee entity had argued that the district court's interpretation was too limited.

Judge Spaulding's report said that HRCC knew early on that it could not prove "actual damages," as required by the FDUTPA, but continued to pursue the legal action, "requesting large volumes of discovery from Hard Rock that cost defense counsel up to $100,000." While finding that Hard Rock's attorneys at Quarles & Brady LLP were entitled to fees, Judge Spaulding said that the majority of a request for compensation from a legal assistant "should be denied as the work at issue was mostly clerical."

Hard Rock Café, founded in 1971, is one of the world's leading hospitality companies, and prides itself in its collection of rock and roll memorabilia. In 2007, Hard Rock was acquired by the Seminole Tribe of Florida for $965 million (Wikipedia), and announced it was poised to expand its horizon to all corners of the globe. Its website states that it now has venues in 75 countries, including some 175 cafés, 23 hotels and 11 casinos.

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About Janet Sparks

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Public Profile

Janet Sparks is the former publisher of the Continental Franchise Review, an industry newsletter that covered the franchise community for over 30 years. She has also been a columnist for a leading franchise magazine for the past 13 years. Today she is an independent journalist who engages in investigative reporting, tackling complex issues that impact the franchise industry.

Janet can be reached at jsparks@bluemaumau.org or at 303-799-7398.