Horvitz & Levy helped El Pollo Loco obtain a favorable settlement that resulted in a stipulated reversal of the trial court’s judgment, which had included a multimillion dollar jury award and an injunction that would have invalidated industry-standard contract terms in agreements between the company and all its franchisees.
A couple owning an El Pollo Loco franchise in Lancaster sued the company after it opened two restaurants in the same city as their restaurant. Although the parties’ franchise agreement allowed El Pollo Loco to open new restaurants anywhere it chose—a term both common in the industry and permitted by federal law—the trial court ruled that the nonexclusivity provision was unconscionable and unenforceable. As a result, the case went to trial on plaintiffs’ claims of breach of the implied covenant of good faith and fair dealing and violation of California’s Unfair Competition Law. The trial court ultimately entered judgment on the jury’s award of $8.8 million in damages and issued an 11-point injunction barring El Pollo Loco from enforcing various industry-standard terms in its franchise agreements with all its franchisees.
After Horvitz & Levy LLP filed El Pollo Loco’s opening brief on appeal asserting numerous independent grounds for reversing the judgment, the plaintiffs agreed to settle the case on mutually agreeable terms, including a stipulation to reverse the judgment. Horvitz & Levy obtained the Court of Appeal’s approval of the stipulation — a rare remedy that appellate courts may grant only upon a showing that several strict criteria have been satisfied. The reversal resulted in both the elimination of the injunction and dismissal of the plaintiffs’ damages claims with prejudice.