Follow up to Rock Music Franchising Decision- Significant Reward in
Favor of Franchisor
by Ed Teixeira
In a previous article on the FranchiseKnowHow web site, Craig Tractenberg
of Nixon Peabody reported on a favorable ruling on behalf of the NP client,
Paul Green School of Rock Music Franchising (PGSORM).
The case involved disputes between School of Rock and two of its
franchisees—Smith and the Giammarrusco’s, who collectively acted to
repudiate their franchise agreements to start a competitor, Rock Nation (the
“Smith” and “Rock Nation” cases respectively). The cases had similar facts.
Each involved California franchisees, breach of the respective franchise
agreements, and similar claims including non-payment of royalties to School
of Rock. Both cases involved franchise agreements that contained arbitration
and non-compete clauses. The fundamental difference between them is that the
franchise agreement in Smith provided for arbitration in Pennsylvania
pursuant to Pennsylvania law, while the franchise agreement of the
Giammarrusco’s in Rock Nation required arbitration in California under
Moreover the defendants used typosquatting against the competitive Rock
Nation site. Typically, a typosquatter will register several possible input
errors for a domain or brand name Web to generate accidental traffic to
these sites. The ruling was in favor of PGSORM.
Rock Skool LLC, Rock Nation LLC, John Giammarrusco, Cindy Giammarrusco,
Binh Hoang, and each of them, are required to pay PGSORM the sum of
$100,000.00 in compensatory damages resulting from their having engaged in
unfair competition against PGSORM.
In addition, attorney’s fees in the sum of $183,550.50 were awarded to
PGSORM against Rock Skool, Inc., John Giammarrusco, Cindy Giammarrusco, and
each of them, jointly and severally, pursuant to the terms of the Franchise
Agreement and the Guaranty, Indemnification and Acknowledgement Agreement.
Further, out of pocket expenses incurred in connection with this Arbitration
in the sum of $9,871.76 were awarded to PGSORM against Rock Skool, Inc.,
John Giammarrusco, Cindy Giammarrusco, and each of them, jointly and
severally, pursuant to the terms of the Franchise Agreement and the
Guaranty, Indemnification and Acknowledgement Agreement. The award was
ordered by Alan P. Ribakoff, Arbitrator dated October 13, 2010.