When did the trial commence for the J&D Restaurant Group case involving Del Taco?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
and fee award, for an additional $9.5 million. These amounts are included within "Accrued liabilities" on our condensed consolidated balance sheet as of January 19, 2025. The Company will continue to accrue for post-judgment interest until the matter is resolved.
J&D Restaurant Group — On April 17, 2019, the trustee for a bankrupt former franchisee filed a complaint generally alleging the Company wrongfully terminated the franchise agreements and unreasonably denied two prospective purchasers the former franchisee presented. The parties participated in a mediation in April 2021, and again in December 2022, but the matter did not settle. The trial commenced on January 9, 2023 and on February 8, 2023, the jury returned a verdict finding the Company had not breached any contracts in terminating the franchise agreements or denying the proposed buyers. However, while the jury also found the Company had not violated the California Unfair Practices Act, it found for the plaintiff on the claim for breach of implied covenant of good faith and fair dealing, and awarded $8.0 million in damages. On May 9, 2023, the court granted the Company's post-trial motion, overturning the jury verdict and ordering the plaintiff take nothing on its claims. As a result, the Company reversed the prior $8.0 million accrual, and as of January 19, 2025, the Company has no amounts
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the trial for the J&D Restaurant Group case commenced on January 9, 2023. This case involves a complaint filed on April 17, 2019, by the trustee for a bankrupt former franchisee, alleging that Del Taco wrongfully terminated franchise agreements and unreasonably denied potential purchasers presented by the franchisee.
The case proceeded to a jury verdict on February 8, 2023, where the jury found that Del Taco had not breached any contracts in terminating the franchise agreements or denying the proposed buyers. However, the jury found for the plaintiff on a claim for breach of implied covenant of good faith and fair dealing, awarding $8.0 million in damages. Subsequently, on May 9, 2023, the court overturned the jury verdict, ordering the plaintiff to take nothing on its claims, leading Del Taco to reverse the $8.0 million accrual.
As of January 19, 2025, Del Taco has no amounts accrued for this case on its condensed consolidated balance sheet. The plaintiff has appealed the trial court's post-trial rulings, and the parties are awaiting the appellate court's ruling and have been ordered to participate in an appellate-level mediation. This ongoing legal matter highlights the potential for disputes with franchisees and the associated financial implications, even after a favorable initial court ruling.