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TexLaw, Attorney
Category: Legal
Satisfied Customers: 4430
Experience:  Lead trial/International commercial attorney licensed 11 yrs
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i was part of a franchise there was a 15 year agreement that

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i was part of a franchise there was a 15 year agreement that expired the contract had a none compete clause after the contract expired so basically your forced to renew . when you sign the orginally agreement they promise you exclusive territory saying they will not grant or locate another franchise within 1.5 miles after 15 years and desperate to find a way out of the contract i dicovered ther was another franchise that was 1.48 miles away which is basciaaly 75 feet difference. after consulting with several attorneys my first attorney said it might be considered diminish and not sure how a judge would rule . me and the other franchise coexisted for 14 years and the other franchise sold his store 9 years ago. instead of chancing the cost of litigation i offered them a buyout they excepted i know feel mainly because i am in a dying industry and they took the money and ran. i was granted a release the release consisted a background of the case which gave a brief history of my relationship with the franchisor and one paragraph said it was alleged that the franchisor breached the agreement based on the distance between the two stores . after the background came the terms of the agreement and as said the parties desire to enter into this agreement to resolve my default and termination which pertained to the fact that i stoped paying royaltys for almost a year. and that i would be taken to court to get a injuction to close my business would be resolved to avoid the burden and expense of litigation or arbitration without making any admissions of liability to any other party there was no mention of the distance breach in the terms of the agreement. there was a confidentialty section based on the terms of the agreement . mainly how much i payed and that iwould not use any of there logos or operating systems etc... sorry to be so long winded but here is were my concerns come in the other franchise who i thought was a friend called me and asked if there was a distance breach between the two stores i did not deny it but said he needed to talk to the franchisor before that he measured the distance between the two stores and then called the franchisor and said i told him about it . now i am afraid they will sue me for a breach of confidentialty which i believe would be expennsive on there part but not sure if it would be hard to prove so there is my concerns please reply

Thank you for your question.

My understanding of your situation is that you entered into a settlement agreement with the franchisor regarding the settlement of your non-payment of royalties and the franchisor's potential violation of the exclusive territory clause. In essence, the settlement agreement provided you with a payment in return for the mutual release of the claims. It also included a confidentiality provision.

Sometime later, the franchisee which was in your territory contacted you and asked you if there was a breach of the exclusive territory clause in the franchise agreement regarding the distance between the two locations. You did not deny that there was a breach and instructed the franchisee to contact the franchisor about the issue. After that, the franchisee contacted the franchisor and told the franchisor that you said there was a distance breach.

You are now concerned that you are going to be sued under the settlement agreement's confidentiality provision.

My initial impression is that there is not a breach. The franchisee made a fraudulent misrepresentation about where he got the information regarding the distance breach. Since you did not say anything, there is no breach of confidentiality. Generally, the confidentiality terms only go to the terms of the settlement, not to the fact that there was an underlying disagreement.

Can you type in the exact language of the confidentiality provision so that I can provide you with further analysis?
Customer: replied 3 years ago.

the parties and their counsel agree that the terms of this agreement are expressly made confidential and that each party and their counsel agree not to disclose the terms of this agreement nor to disclose the existence of this agreement except to the parties financial and tax advisors who have a need to know . failure to keep the confidentiality of this agreement shall be a breach of this agreemnet for which damages and injunctive relief may be afforded.

Thank you. That's as I suspected. It is my opinion that there are no grounds for a charge that you breached the confidentiality provision in this agreement.

Please let me know if you have any further questions. Please also kindly consider rating my answer positively so that I am compensated by the website for my work on your question. Rating positively does not cause an additional charge and does not prevent us from further discussing your questions.

Best Regards,
Customer: replied 3 years ago.

one last thing because i was concerned i exchanged a email with the ceo we said nothing about me being the source of the information i just said now that the information was in the public domain what should do if i was asked by anyone why i was no longer a franchise . here is his reply my franchise agreement expired and in considering my renewel i became aware of a very small breach of my protected terrotory that the franchisor was not aware of . to the best of my knowledge the franchisor strongly enforces their franchise agreements to protect the chain and it was only afterlearning of this inadvertant breach that we came to an agreement to allow me not to renew for which i paid a considerable sum of money i cannot of course disclose the amount but i can tell you that they have only done this in very rare circumstances when an exception like this breach had been noted. so in essence one could say by sending that e mail that he disclosed information that may have been considered confidential . and also to the best of my knowledge there is no conflick between the other franchise and the franchisor because the other franchise believes he does not have the same case because first he is still under contract in which in my case mine expired and also i was preexisting so it was my territory that was violated and not his meaning i opened first and he was second . and one last thing even if the other franchise decides to sue would it not be too expensive to the franchisor to drake me into the case and try to sue me even if the other franchise testifed against me

So wait, the franchisor's ceo sent that email to you?
Customer: replied 3 years ago.

yes based on the fact that i emailed him i told him the information was now in the public domain and he responed with that e mail telling me what i should say

As he is the ultimate representative of the other party, this would be considered an amendment or waiver to the confidentiality provision, allowing you to say what the ceo wrote for you. With that email as evidence, there is no way you could be held liable for breach of confidentiality, even though I do not believe you breached the agreement in the first place.

If I were in your shoes, I would not mention any settlement agreement at all, or why you settled at all. I think you are free to point out that there is a distance exclusivity violation though.
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