Whenever you pursue a commercial litigation action, you’ll need to make several choices. It is important to make your decisions carefully because there are legal rules that prevent you from taking more than “one crack” at pursuing certain requests for relief. That’s because of the legal rule of res judicata, and it is just one example of why it pays to have knowledgeable Georgia business counsel representing you.
One example of when this rule mattered and limited a plaintiff’s ability to recover damages was a dispute between a franchisor and one of its franchisees. The Atlanta-based franchisee signed a 25-year franchise agreement with the Sugar Hill-based franchisor of child daycare centers in 2006. The contract had within it terms that called for franchisees to pay to the franchisor certain royalty and advertising fees. Just six years into the relationship, the franchisee announced that it was terminating its agreement with the franchisor. It took down all signs and anything else that bore the franchisor’s name. It also stopped paying advertising and royalty fees to the franchisor.
This lack of payment of fees led the franchisor to sue for the franchisee’s failure to perform under the agreement. Specifically, the franchisor sought fees and interest for the first two months of 2015. The franchisee, however, successfully defeated the franchisor’s efforts in both the trial court and the court of appeals. The key to the franchisee’s success was the two sides’ past litigation history. Shortly after the franchisee repudiated the contract, it also sued the franchisor for negligent misrepresentation and violation of federal franchise rules. In that case, the franchisor filed a counterclaim against the franchisee for its alleged breach of the agreement.