Exclusive vs. Protected Franchise Territories

Exclusive vs. Protected Franchise Territories

Varnum Viewpoints

  • Protected territories are now the industry norm. Franchisors increasingly favor protected territories because they balance franchisee protection with flexibility for brand growth and market adaptation.

  • “Protected” does not mean exclusive. While protected territories prevent same-brand units from opening nearby, franchisors often retain rights to sell online, operate alternative brands, serve national accounts, and use non-traditional locations.

  • Territory rights require careful review and negotiation. The scope of territorial protections varies by system and is detailed in Item 12 of the FDD and the franchise agreement, making due diligence critical before signing.

In franchising, territorial rights play a central role in shaping the relationship between franchisors and franchisees. These rights determine where franchisees can operate, the level of competition they face, and how a brand can grow. While territorial structures vary widely, most systems rely on exclusive or protected territories, with a trend toward less exclusive ones. Understanding the differences between these two models is essential for evaluating franchise opportunities and negotiating territory rights.

Overview: Exclusive vs. Protected Territories

Franchisors throughout the industry offer both exclusive and protected areas. While each aims to minimize competition and provide a viable market for the franchisee, exclusive territories offer the greatest protection. Exclusive territories can limit a franchisor’s ability to expand the brand’s presence and adapt to changing market conditions. For this reason, franchisors have grown to prefer granting protected territories over exclusive territories.

Under a protected franchise territory, the franchisor agrees not to establish any additional franchised or company-owned units of the same brand in that territory. This shields the franchisee from direct intra-brand competition, but does not guarantee full exclusivity. Franchisors or other franchisees may still engage in certain competitive activities within the protected area. Common examples include:

  • Online and e-commerce sales;
  • Wholesale distribution to third-party retailers (e.g., supermarkets or convenience stores);
  • Operation of alternative brands or private labels within the same industry;
  • Non-traditional outlets or locations (e.g., airports, grocery stores, bookstores, universities, or hospitals), even when located within a franchisee’s territory, and
  • National accounts (e. g., certain customers that are big enough to merit the franchisor’s attention and reserve the right for the franchisor to manage the relationship).

Protected territories provide a competitive middle ground, offering franchisees some protection while giving franchisors greater flexibility to expand the brand and adapt to market changes. As a result, protected territories have become more common than exclusive territories. 

Territory rights, including whether a franchisee receives an exclusive or protected territory, are outlined in Item 12 of the legally required Franchise Disclosure Document (FDD) and further detailed in the franchise agreement.

Key Differences Between Exclusive and Protected Territories

Exclusive Territories

An exclusive territory provides franchisees the sole right to operate within a defined geographic area. Typically, neither the franchisor nor other franchisees may establish a competing business in that territory, providing the franchisee with the highest level of protection against intra-brand competition.
Exclusive territories have become less common because they limit a franchisor’s ability to expand and respond to market demands. Franchisees may have more success negotiating exclusivity when committing to significant monetary investments or substantial multi-unit development within a given territory. In the absence of these circumstances, franchisees may negotiate options or rights of first refusal to expand into adjacent territories.

Protected Territories

Protected territories ensure that no other same-brand franchised or company-owned unit will be placed within the defined area. However, they do not prohibit competitive activity. For example, Franchisors often reserve the right to:

    • Sell products or services online;
    • Distribute products wholesale to retailers;
    • Operate alternate brands;
    • Open units in non-traditional venues, such as airports or universities; and
    • Manage larger national accounts directly.

    Not all protected territories are structured the same. Franchise systems may vary significantly in the protections offered, making a careful review essential for prospective franchisees.

    Franchisor’s Competitive Activities Within Territories

    Regardless of whether a territory is exclusive or protected, franchisors may retain certain competitive rights. Common examples include:

    • Online sales: Direct-to-consumer e-commerce operations;
    • Wholesale distribution: Sales through supermarkets, convenience stores, or other retailers;
    • Alternative brands and private labels: Multiple brands under the same franchisor operating in overlapping areas;
    • Non-traditional outlets: Locations, such as airports, grocery stores, bookstores, universities, or hospitals; and
    • National accounts: Large clients handled at the franchisor level, with certain work assigned to franchisees as needed.

    Territory structures are a critical element of any franchise relationship and can significantly affect both the franchisee’s competitive environment and the franchisor’s ability to grow and expand. Exclusive territories offer strong protection but limit brand expansion, while protected territories strike a balance between franchisee security and franchisor flexibility. With the industry’s continued shift toward protected territories, prospective franchisees should carefully review Item 12 of the FDD and understand the rights and limitations of their territory before entering into any agreement.

    For more information on how this affects your business, contact your Varnum franchise attorney.

    Frequently Asked Questions About Franchise Territories

    What is the main difference between exclusive and protected territories?

    Exclusive territories prevent both the franchisor and other franchisees from operating within the territory. Protected territories prevent same-brand units but allow other forms of competition.

    Often, yes. Many franchisors reserve the right to conduct online sales, even within a protected territory.

    Sometimes, but such is generally limited. Franchisees making significant investments or pursuing multi-unit development may have more negotiating leverage.

    Territory rights appear in Item 12 of the FDD and are further detailed in the franchise agreement.

    The Hidden Risks of Adding Children as Joint Owners on Your Home

    A common estate planning question is whether adding adult children as co-owners of a home is a simple way to avoid probate. Many families are familiar with instances in which this approach worked seamlessly, with property transferring from parents to children without court involvement.

    While joint ownership may be appropriate in limited circumstances, it often creates legal, tax, and financial risks that undermine broader estate-planning goals.

    Exposure to Creditors, Lawsuits, and Divorce

    When a child becomes a co-owner, that ownership interest is generally exposed to the child’s creditors. If the child is sued, files for bankruptcy, or goes through a divorce, their interest in the property may be subject to liens, judgments, or division in a divorce proceeding.

    Even if you have paid the mortgage, taxes, and insurance, the home can become entangled in your child’s financial issues. This exposure can force negotiations with third parties or complicate future sales and refinancing.

    Gift Tax and Reporting Obligations

    Adding a child as a co-owner is treated as a present gift for federal tax purposes. Depending on the value of the interest transferred and the property’s fair market value, you may be required to file a federal gift tax return (Form 709).

    In 2026, gifts exceeding $19,000 per individual or $38,000 per married couple must be reported. While gift tax is rarely owed at the time of transfer due to the high lifetime exemption ($15 million for individuals or $30 million for married couples in 2026), the gift in excess of the annual exclusion amount reduces that lifetime exemption and can affect long-term estate and transfer tax planning.

    Reduced Step-Up in Basis and Higher Capital Gains Taxes

    One of the most significant tax consequences involves the loss of a full step-up in basis. If full ownership is retained until death, beneficiaries typically receive a step-up in basis to fair market value, reducing capital gains taxes if the property is later sold.

    When a child is added as a co-owner during your lifetime, the child generally receives a carryover basis on the transferred portion. At death, only the portion you still own receives a step-up. This partial step-up can significantly increase the family’s capital gains taxes.

    Unintended Outcomes If a Child Dies First

    Joint ownership can also produce unintended results if a child predeceases you. If the child holds a tenancy-in-common interest, that share becomes part of the child’s estate, potentially triggering probate and introducing new co-owners, such as a surviving spouse or minor children.

    If the child holds joint tenancy with rights of survivorship, the child’s interest passes back to the other owner(s), which may unintentionally exclude that child’s own children from inheriting a share of the home. Either scenario can disrupt family expectations and, in some cases, require court involvement to resolve.

    Consider Safer Estate Planning Alternatives

    For many families, alternatives such as a revocable living trust or an enhanced life estate deed, commonly called a “Lady Bird” deed, can avoid probate while preserving control, minimizing tax exposure, and reducing risk. These tools are often more flexible and better aligned with comprehensive estate planning objectives.

    Before adding a child to your deed, consulting with Varnum’s estate planning attorneys can help ensure your plan protects your assets, your family, and your long-term goals.

    To Amend or to Amend and Restate – Which Do You Need?

    Community association attorneys are often asked whether an association should pursue a targeted amendment to its governing documents or undertake a full amended and restated project. The answer depends.

    Before weighing those options, it helps to understand which documents are typically involved.

    • For condominiums, these typically include the Declaration of Condominium, the Articles of Incorporation, and the Bylaws.
    • For homeowner’s associations, the governing documents are generally the Declaration of Covenants, the Articles of Incorporation, and the Bylaws.
    • For cooperative associations, these documents are the Proprietary Lease or Owner’s Agreement, the Articles of Incorporation, and the Bylaws.

    In most cases, amending or amending and restating these documents requires a vote of membership. The approval threshold varies and is set forth in the document being amended.

    Individual Amendments

    An individual amendment revises a specific provision within a recorded document and is the most common type of amendment. This option is often appropriate when an association needs to make only a few changes while keeping the remainder of the document intact.

    Amended and Restated Projects

    An amended and restated project revises and republishes the entire document. This approach is typically recommended when an association plans to make several changes or where broader updates are needed. Common scenarios include:

    • Incorporating changes required or permitted by the newly enacted Florida Statutes
    • Removing outdated developer-related provisions following turnover to member control
    • Consolidating multiple prior amendments into a single, streamlined document for clarity and ease of use

    How Amendments Are Prepared

    Amendments and amended and restated documents are generally prepared in one of two ways:

    1. Redlined Format: When changes are limited or when transparency is especially important, associations may request a redlined version showing additions and deletions. Florida law requires additions to be underlined and deletions struck through. The format is most commonly used for individual amendments.
    2. Clean rewrite with statutory notice: When a provision, or entire document, is substantially rewritten, Florida Statutes allow for a clean version without redlining, provided it includes a notice stating: “Substantial rewording of Declaration/Articles/Bylaws. See provision ____ for present text.” This method is often best suited for amended and restated projects.

    How the Process Works

    Ideally, attorneys work with board members or a board-appointed committee to draft the proposed amendment or amended and restated document. Boards may then present the proposal directly to membership for a vote or hold a town hall meeting to review changes and gather feedback. Any input received can be evaluated and, if appropriate, incorporated before the final vote.

    Ultimately, approval depends on meeting the voting requirements set forth in the applicable governing document.

    Choosing the Right Approach

    The right approach depends on several factors, including:

    • The number of amendments being considered
    • The age of the current governing documents
    • Recent statutory changes
    • Whether developer-related language needs to be removed
    • The volume of prior amendments already in place

    For guidance in determining which choice works best for your community association, contact your Varnum community association attorney.

    Texas SB 140 After the November Settlement: Consent In, Cold Texting Out

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    Texas Senate Bill 140 (SB 140), effective September 1, 2025, expands the Texas Business & Commerce Code by treating text messages as “telephone solicitations”. The law also links violations of Chapters 302, 304, Texas No‑Call and caller ID, and 305, certain mobile‑call limits, to the Texas Deceptive Trade Practices Act (TDTPA), opening the door to enhanced remedies and uncapped repeat recoveries.

    The takeaway for clients and marketers is clear: Unless an exemption applies, businesses conducting direct marketing must register with the Texas secretary of state, post a $10,000 security bond, and file quarterly reports before sending text messages to Texas consumers.

    What the November Settlement Changed

    In a November 2025 settlement resolving litigation over SB 140’s application to text messaging, Texas agreed that consent-based marketing texts that would otherwise trigger the law are exempt from Chapter 302’s telemarketing registration, bonding, and quarterly-reporting requirements.

    As a result, well-run opt-in SMS programs previously subject to the law no longer need to register or post the $10,000 bond solely because they send marketing texts, provided the programs are genuinely consent-based and not a pretext for cold outreach. This is a meaningful win for compliant programs, but it is not a free pass.

    Chapters 304 and 305 remain fully in force, and the TDTPA linkage remains intact. Marketers must continue to comply with the Texas No-Call law for text messages, including scrubbing the No-Call list and honoring the 60-day prohibition window after numbers are added. Caller ID spoofing or interference is prohibited.

    Any compliance failure, or any deceptive or misleading content, may trigger private litigation under the TDTPA. Federal law remains unchanged, so programs must continue to comply with the Telephone Consumer Protection Act (TCPA) consent standards and promptly honor opt-out requests.

    How to Operate Consent-Based Programs in Texas

    Statements by the attorney general in the settlement reflect enforcement intent but do not create binding precedent for courts or nonparties. Courts may interpret SB 140 differently, and private litigants may continue to bring TDTPA or other state-law claims.

    For opt-in programs, organizations may forgo Chapter 302 registration and bonding in Texas while strengthening the controls that most directly affect risk:

    • Explicit and informed consent capture
    • Clear disclosures at or before sign-up
    • Robust opt-out mechanics
    • Message content that avoids deception or harassment

    Because the settlement is nonbinding, organizations should memorialize their reliance in a short internal memorandum describing consent workflows, opt-out processing, and vendor governance, and maintain an auditable record of consent timestamps, disclosure screenshots, and suppression-list synchronization.

    Direct marketing that includes prospecting, third-party lead lists, or texts without prior consent remains subject to Chapter 302. Companies deploying such marketing on their own behalf should register with the secretary of state, post the $10,000 bond, and file quarterly reports unless a separate statutory exemption applies.

    Lingering Ambiguities and How to Manage Them

    Two issues remain unresolved. First, the “former or current customer” exemption in Section 302.058 is risky because the statute does not define “customer”. Organizations relying on this exemption should apply defensible criteria and document the basis for inclusion.

    Second, SB 140’s reference to outreach to “a purchaser located in this state” creates uncertainty, given real-time location challenges in SMS messaging. These risks are best managed conservatively by maintaining strong consent for Texas numbers, scrubbing against the No-Call list, and documenting compliance decisions.

    A Short Compliance Checklist

    • Texas No‑Call. Chapter 304 applies to text messages sent to mobile numbers. Do not send marketing texts to numbers on the list more than 60 days after they appear, and caller‑ID spoofing or interference is prohibited.
    • Marketing Alignment. Align on registration determinations or well‑documented exemptions, consent standards and proof, No‑Call scrubbing, opt‑out mechanics, disclosure placement (e.g., landing pages before purchase), and cadence controls. Vendor agreements should require compliance with Chapters 301–305 and the TCPA, mandate record retention, provide audit rights, and require prompt notice of complaints.
    • Quiet Hours. Although Chapter 301 applies to voice calls, adopting quiet hours outside of 9 a.m. to 9 p.m. Monday through Saturday and noon to 9 p.m. Sunday (Central Time) for text messaging is a conservative risk‑reduction measure.
    • Section 302.058 Exemptions. If you solicit only former or current customers and have operated under the same name for at least two years, you may be exempt from Chapter 302 registration. Because “customer” is undefined, you should document the factual basis for any exemption. For a comprehensive list of other exemptions, see: Business and Commerce Code Chapter 302.
    • Record‑keeping. Maintain auditable files covering consent capture and revocation, No‑Call subscriptions and 60‑day scrubs, internal do‑not‑contact lists, message content and links, landing‑page disclosures, quiet‑hour controls, registration status and bonds, and complaint logs. Strong records reduce TDTPA exposure and support defenses under state and federal law.

    While the settlement meaningfully lowers Chapter 302 risk for true opt-in SMS programs in Texas, the safest course is to maintain rigorous consent practices, No-Call discipline, and strong vendor governance. Until courts or regulators provide formal guidance, treat the settlement as a persuasive safe harbor and operate Texas texting programs with heightened care.

    Varnum’s Corporate and Data Privacy and Cybersecurity Practice Teams continue to monitor developments related to SB 140 and Texas telemarketing enforcement. If you have questions about how these changes affect your text messaging, marketing, or compliance programs, please contact a member of the Varnum team to discuss practical next steps.

    Michigan Extends NIL Opportunities to High School Student-Athletes

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    The Michigan High School Athletic Association (MHSAA) has amended its regulations to permit high school student-athletes to earn compensation from their name, image, and likeness (NIL), referred to under the MHSAA rules as Personal Branding Activity (PBA).

    The change marks a significant shift in Michigan interscholastic athletics and aligns the state with a growing national trend, allowing high school athletes to monetize individual endorsement and branding opportunities.

    While the new rule expands opportunities for student-athletes and their families, it also imposes strict limitations designed to preserve amateur competition, prevent recruiting inducements, and insulate schools from NIL activity. Schools, families, businesses, and advisors should understand these boundaries before engaging in any PBA arrangement.

    What is Personal Branding Activity?

    Under the new MHSAA regulation, PBA includes situations in which a student-athlete receives compensation in exchange for promoting or endorsing a product, service, or brand using the student’s NIL.

    Permitted activities may include social media endorsements, appearances, camps or clinics, merchandise sales, modeling, or other individual promotional efforts, provided all MHSAA requirements are satisfied.

    PBA opportunities must be individualized and may not be tied to athletic performance, team success, or school affiliation.

    Key Limitations on High School NIL Activity

    Although the rule authorizes compensation, the MHSAA has established clear guardrails to distinguish permissible NIL activity from prohibited pay-for-play or recruiting inducements. Key restrictions include:

    No Pay-for-Play or Performance-Based Compensation

    Compensation may not be contingent on athletic performance, statistics, awards, team participation, or competition outcomes. Bonuses tied to scoring, championships, awards, or honors remain prohibited, as does compensation simply for being a member of a team.

    No Use of School Identifiers or Facilities

    Student-athletes may not use school names, logos, mascots, uniforms, facilities, or other school intellectual property in connection with any PBA activity. Sponsored content must be created independently of the school and outside of any school-related setting or event.

    No School or Booster Involvement

    Schools, coaches, school employees, booster clubs, and other associated entities or individuals are prohibited from arranging, facilitating, negotiating, or promoting PBA opportunities. Improper involvement may jeopardize student eligibility and a school’s MHSAA membership.

    Timing and Location Restrictions

    PBA activities may not occur during school hours or while the student-athlete is participating in any MHSAA-related activity, including practices, meetings, games, or tournaments. Sponsored content may not be created or posted from the sidelines, locker rooms, or competition venues.

    Prohibited Products and Industries

    The MHSAA may prohibit PBA arrangements involving products or industries deemed inappropriate for interscholastic athletics. Prohibited categories include alcohol, tobacco, cannabis, gambling, firearms, performance-enhancing substances, and adult entertainment.

    Disclosure and Compliance Obligations

    Student-athletes must disclose all PBA agreements to the MHSAA within seven business days of finalizing any such agreement. The association will review disclosures for compliance and may require modifications to preserve eligibility.

    There is no cap on compensation, provided the arrangement reflects fair market value and complies with MHSAA regulations and applicable law. Student-athletes and their families remain responsible for tax obligations, employment compliance, and evaluating any potential impacts on collegiate eligibility with the NCAA, NAIA, or NJCAA.

    Practical Considerations

    The new policy presents opportunities and risks:

    • Families should consider engaging experienced legal or financial advisors who are not affiliated with the school.
    • Businesses must avoid structuring deals that could be viewed as performance-based or school-connected.
    • Schools and coaches should maintain strict separation from PBA activity and avoid informal involvement.

    Violations may result in student ineligibility and potential sanctions against member schools.

    Impact and Outlook

    Michigan’s adoption of high school NIL rules reflects the continued expansion of athlete branding rights across all levels of competition. As NIL regulations evolve, compliance expectations are likely to develop alongside them.  

    Stakeholders should monitor MHSAA guidance and enforcement trends, particularly as disclosure reviews and interpretations of “associated entities” continue to mature.

    For questions regarding NIL compliance, contract review, or policy implementation, contact a member of Varnum’s Name, Image, and Likeness Practice Team.

    Equal Employment Opportunity Commission Rescinds Biden-Era Workplace Harassment Guidance

    Equal Employment Opportunity Commission Rescinds Biden-Era Workplace Harassment Guidance

    On January 22, 2026, the Equal Employment Opportunity Commission (EEOC) voted to rescind its “Enforcement Guidance on Harassment in the Workplace.” While this move has generated attention, it does not significantly change most employers’ legal obligations, including Michigan employers, whose compliance responsibilities remain governed largely by existing federal and state law.

    What the EEOC Harassment Guidance Addressed

    The rescinded guidance issued on April 29, 2024, was not a binding law. Rather, it outlined how the EEOC interpreted federal anti-harassment law under certain statutes, including Title VII of the Civil Rights Act, the Americans with Disabilities Act, and the Age Discrimination in Employment Act.

    Although the guidance addressed a broad range of protected characteristics, such as race, sex, religion, age, and disability, public attention largely centered on provisions related to gender identity, sexual orientation, and reproductive-rights-related issues. Those sections relied heavily on the U.S. Supreme Court’s decision in Bostock v. Clayton County and included examples of harassment, such as repeated misuse of an employee’s name or pronouns, or denial of access to restrooms and locker rooms consistent with an employee’s gender identity.

    Why the EEOC Rescinded the Harassment Guidance

    The basis for the EEOC’s action appears to address provisions interpreting the scope of legal prohibitions related to gender-identity. Those provisions were enacted by a 2-1 vote, over the dissent of the current EEOC Chairperson, and later vacated by a federal district court.

    The EEOC has now rescinded the guidance in its entirety, rather than revising or withdrawing only the provisions related to sexual orientation and gender identity. That approach is notable as the agency could have narrowed its action to specific sections. In the EEOC’s announcement of the rescission, it did not address the rationale for this chosen approach. The announcement noted that federal laws clearly prohibit workplace harassment based on protected class, and affirmed the agency’s continued dedication to preventing and remedying unlawful workplace harassment.

    Impact of the EEOC Decision on Employers

    From a practical standpoint, the rescission does not significantly change the law. The guidance did not create any new legal obligations, but it did provide insight into how the EEOC evaluated harassment claims and approached its enforcement. Its withdrawal introduces uncertainty regarding future enforcement priorities and whether revised guidance will be issued.

    Title VII and State Anti-Discrimination Laws Still Apply

    Employers should not view this development as a rollback of substantive obligations. Bostock v. Clayton County remains binding precedent, and Title VII continues to prohibit discrimination based on sexual orientation and gender identity, even though the extent of those protections is still being developed.

    In addition, many states, including Michigan, maintain separate laws that expressly prohibit discrimination and harassment based on sexual orientation and gender identity. Those laws remain fully in effect.

    Varnum’s Labor and Employment Practice Team will continue to monitor developments and provide updates as the enforcement landscape evolves.

    Five 2025 Cases Every Michigan Business Should Know

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    Michigan businesses face an ever-evolving legal landscape, fueled in part by courts issuing decisions that can have significant impacts beyond the parties. Varnum’s Appellate Practice Team tracks these decisions for the purposes of providing our clients with up-to-date legal advice.

    As part of these efforts, the appellate team has identified five 2025 decisions that every Michigan business should know. These decisions  affect a company’s day-to-day operations, including employment contracts, commercial contracts, tax status, and compliance initiatives:   

    1. Rayford v. American House Roseville I, LLC, — N.W. 3d –, 2025 217754 (Mich. 2025)

    Court: Michigan Supreme Court

    Clients and Sectors Most Impacted: Employers across industries, HR and compliance teams, healthcare systems, senior living, retail, manufacturing, education, and nonprofits.

    Summary: In a reversal of longstanding precedent, the Michigan Supreme Court held that adhesive employment agreements, non‑negotiated “take-it-or-leave-it” agreements, that shorten the time for an employee to sue the employer are no longer enforced strictly according to their terms, but rather are subject to judicial review for reasonableness. During this review, courts will consider various circumstances beyond the four corners of the contract, including whether the agreed-upon time period is sufficient to investigate a claim, assess damages, and file a lawsuit. 

    Why the Case Is Important: Michigan employers who use standardized employment agreements to shorten the time period during which employees can sue should reassess those provisions to ensure their enforceability, confirming that employees fully understand these periods during the onboarding process and will have sufficient time to investigate and file their claims.

    2. In re FirstEnergy Corporation, 154 F.4th 431 (6th Cir. 2025)

    Court: U.S. Court of Appeals for the Sixth Circuit

    Clients and Sectors Most Impacted: Public companies, audit committees, financial institutions, utilities and energy companies, life sciences and healthcare, technology, and issuers conducting internal investigations amid regulatory or litigation exposure.

    Decision and Reasoning: After a trial court ordered a company to produce all documents related to an internal investigation conducted by the company’s outside counsel, the Sixth Circuit reversed, holding that the sought-after documents were protected by attorney-client privilege and the work-product doctrine. In doing so, the court recognized that the company had engaged outside counsel to secure legal advice, regardless of whether that advice also had ancillary business purposes, and squarely placed all documents related to outside counsel’s investigation within the protections of the attorney-client privilege.

    Why the Case Is Important: To secure the protections of the attorney-client privilege when conducting an internal investigation, businesses should retain external counsel. The privilege will attach, even if the investigation touches upon businesses. 

    3. VCST International B.V. v. BorgWarner Noblesville, LLC, 142 F.4th 393 (6th Cir. 2025)

    Court: U.S. Court of Appeals for the Sixth Circuit

    Clients and Sectors Most Impacted: Manufacturers and suppliers; automotive and mobility companies; cross-border distributors; technology hardware and capital equipment manufacturers; private equity portfolio companies with multi-jurisdictional supply chains; and businesses using layered purchase order terms across affiliates.

    Decision and Reasoning: In this automotive-supply dispute, the buyer issued several purchase orders, addenda, letters, and other communications, each containing competing forum-selection and choice-of-law clauses, making it unclear whether Mexican or Michigan law governed and where disputes arising from the purchase order were to be filed. The Sixth Circuit held that factual disputes precluded the court from deciding these issues, forcing the parties to further litigate them in district court before they could reach the merits of the breach-of-contract claims.

    Why the Case Is Important: To avoid having to litigate the enforceability of forum-selection and choice-of-law provisions in terms and conditions and other contractual agreements, businesses should re-evaluate these provisions to ensure that they are consistent among agreements. Moreover, in contractual relationships in which the parties issue back-and-forth agreements, such as buyers and sellers in the automotive supply industry, businesses should carefully review the counterparty’s terms and conditions and seek legal advice to ensure they are consistent with the business’s own terms and expectations.

    4. HBKY, LLC v. Elk River Export, LLC, 150 F.4th 480 (6th Cir. 2025)

    Court: U.S. Court of Appeals for the Sixth Circuit

    Clients and Sectors Most Impacted: Any company that purchases goods.

    Decision and Reasoning: During a one-off transaction, a company purchased goods from a seller without realizing that the goods served as security for the seller’s debt. When the creditor later sought to recover the goods, the company argued that, under the Uniform Commercial Code, it was a “buyer in the ordinary course of business” and therefore took title free of the security interest. The Sixth Circuit held that, to avail itself of this defense, the buyer must affirmatively establish that the seller is “in the business of selling goods of that kind” and that the sale occurred in the “ordinary course” of such business. A single transaction, or even a series of isolated transactions, is not sufficient. Because the buyer failed to meet its burden, the creditor prevailed. 

    Why the Case Is Important: Purchasers must perform sufficient due diligence on sellers before a transaction, especially for one-off transactions. Failure to document this due diligence sufficiently could result in issues if an undisclosed secured creditor materializes after the transaction. 

    5. Blake’s Farm, Inc. v. Armada Township, — N.W.3d –, 2025 WL 1415150 (Mich. Ct. App. 2025)

    Court: Michigan Court of Appeals

    Clients and Sectors Most Impacted: Michigan agricultural landowners, agritourism operators, and farm markets.

    Decision and Reasoning: An agribusiness owns property that contains apple orchards, a market, a restaurant, and a gift shop, as well as facilities for apple canning and cider production. Although the agribusiness attempted to claim Qualified Agricultural Tax Exemptions (QAEs) for the entire property, the Michigan Court of Appeals held that the property’s non-agriculture uses, such as a market, gift shop, and cannery, were commercial purposes, meaning that the agribusiness was entitled to only a partial QAE.

    Why the Case Is Important: Agritourism operators and farm markets should anticipate scrutiny of mixed-use improvements and be prepared to substantiate agricultural use portions. 

    As these decisions illustrate, appeals can have far-reaching effects, affecting parties beyond those involved in the suit. Varnum’s Appellate Practice Team has extensive experience litigating high‑stakes cases and advising companies on strategic compliance initiatives following important decisions.

    DOL Launches Project Firewall to Enforce H-1B Visa Compliance

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    The U.S. Department of Labor (DOL) announced “Project Firewall,” an enforcement initiative to ensure employer compliance with the H-1B visa program.

    The DOL outlines key employer obligations under the H-1B visa program, including filing a Labor Condition Application (LCA), meeting posting requirements, and maintaining public access files. Varnum assists clients by filing LCAs and providing guidance on posting and public access file requirements in anticipation of enforcement under Project Firewall.

    Employers with questions are encouraged to contact Varnum’s Immigration Practice Team.