Franchise Litigation FAQs
Below are some questions many clients have when they first contact us as well as general responses.
- What Is A Certified Franchise Law Specialist?
- What Can I Do If My Franchisor Breaches the Franchise Agreement?
- What Can I Do If My Franchisor Commits Fraud?
- What Steps Do I Take When I Have a Dispute with My Franchisor?
- What Happens in a Franchise Lawsuit?
- What are “Franchise and Business Opportunity Laws”?
- How Does an Arbitration Clause Affect My Case?
- What Is My Case Worth?
- How Does Bankruptcy Affect My Case?
- Can I Join My Case with Other Franchisees?
- What Should I Bring to My First Meeting with You?
1.What Is A Certified Legal Specialist In Franchise And Distribution Law?
A lawyer that has demonstrated to the California Board of Legal Specialization that he or she is substantially involved in and has special competence in the area of Franchise and Distribution Law as well as favorable peer reviews. In California, there are only about 60 lawyers certified in franchise and distribution law and California is currently the only state that certifies lawyers as specialists in Franchise and Distribution Law.
2.What Can I Do If My Franchisor Breaches the Franchise Agreement?
If your franchisor has breached the agreement, contact an experienced franchise attorney promptly. Many franchise agreements contain shortened time periods within which to bring an action. Failure to comply with such deadlines may doom your case from the start. Consulting an attorney experienced in franchise law will allow you to best evaluate the significance of the breach of contract claims and plan the appropriate strategy. Given the nature of the breach, it might be better to negotiate rather than sue. In other cases, you may have no choice but to sue. These decisions involve a number of complexities including cost, likelihood of prevailing on the merits, the impact of the breach on your franchise, the impact of a lawsuit on the future relationship between the parties, and other alternatives. An attorney experienced in franchise law can assist you in determining your best options.
3.What Can I Do If My Franchisor Commits Fraud?
If you feel that you have been defrauded in relation to your franchise, contact an experienced franchise attorney to assist you in the recovery of your investment and/or damages. Many states have enacted franchise laws prohibiting fraud in connection with the offer and sale of the franchises. In addition to statutory remedies, you may have claims for what are known as common law fraud and negligent misrepresentation causes of action. It is important for you to contact an attorney experienced in franchise law immediately when you suspect that the franchisor has misrepresented information or concealed material information from you.
4.What Steps Do I Take When I Have a Dispute with My Franchisor?
If you think you’ve been injured by the conduct of your franchisor, you may be wondering what to steps to take. Here are some things to keep in mind:
- Don’t give any recorded statements to the franchisor or sign anything before speaking with an experienced franchise attorney.
- Do not destroy any written or computer files or documents or communications (including e-mail) related to your franchise — these documents may be extremely helpful in proving whatever case you may have.
- Keep thorough notes and records of everything that happens. Keep a diary of everything that happens and write down anything that you were told by any franchisor representatives.
- Create a file with all of your relevant information involved in your case including your franchise agreement, any other agreements with the franchisor, your lease agreements, any letters or documents you received from your franchisor prior to or subsequent to becoming a franchisee that are relevant to the issues at hand. Be prepared to describe the who, what, how, where, when, and why of circumstance surrounding your case.
- Contact an experienced franchise attorney immediately so that you may begin to evaluate and ultimately prepare your case. Our experienced franchise attorneys are always available to talk to you about your case at no cost of obligation. Consider calling Robert Boulter at 1-855-372-6529.
5.What Happens in a Franchise Lawsuit?
Franchise lawsuits, like any other lawsuit, can be time consuming and expensive to prosecute. Certain aspects of franchise lawsuits can make them more expensive than other types of cases. Franchise lawsuits can involve a number of different areas of the law and may require asserting alternative theories of liability in order to give you the best opportunity for success. With these alternative theories of liability also come additional responsibilities in proving the case as well as discovery of relevant information.
Franchisors will often vigorously fight even the most meritorious cases because to admit defeat might expose them to similar claims by all of its franchisees. An experienced franchise attorney can help you get the compensation that you are owed. Once you have determined the likely parameters of your dispute with an experienced franchise attorney, the decision needs to be made about where to file a lawsuit. Often times, the franchise agreement will spell out where suits must be brought. Such provisions may or may not be enforceable and experienced franchise attorney can assist you in making strategic decisions that will benefit your case in the long run and help determine the most favorable court in which to litigate your dispute.
Once your lawsuit has been started, the parties enter a phase called “discovery.” Discovery is a process whereby the parties are entitled to demand the production of documents, things, admissions, and testimony from the opposing parties. Testimony may be taken under oath in the form of a “deposition” or interrogatories. Depositions are used for two general purposes. One is to discover information that the other side possesses including the identity and location of witnesses, the existence of documents, and to generally pin down the other side in terms of the facts to which they will testify in trial. Depositions are also used to secure testimony for trial of witnesses that are beyond the subpoena power of the courts at issue.
You can expect to give a deposition in most cases. When giving a deposition, it is important to always tell the truth in response to question asked. This does not mean you must volunteer information. You can expect that the opposing lawyers will be skilled attorneys and subject you to a vigorous cross examination about the merits of your case. Generally speaking, depositions will last a day or more depending upon whether you are in federal or state court.
You can expect your lawyer to also take depositions of parties and key witnesses on the other side. Once depositions have been completed, one side or another may bring what is known as a summary judgment. Summary judgment is a procedure whereby the parties can use the materials gathered in discovery in order to request that the court enter a judgment in favor of one party without permitting the case to go to a jury. If a summary judgment is entered, the case is over and the losing party will have the right of an appeal. Otherwise, the case will be decided by a judge or jury depending upon the choice that you have made.
Another aspect of franchise cases is the necessity of hiring experts to testify as to liability and damage issues. Experts can be a very key but also expensive part of preparing a case for trial. You will need to confer with your experienced franchise attorney on the pros and cons of hiring an expert to represent your case.
At the trial of a franchise lawsuit, you will be required to provide testimony as to both liability and damages. As the plaintiff, you will have the burden of proving liability and damages. Assuming that you are entitled to a jury trial in your franchise lawsuit, it will be the jury that decides whether you have proven that the franchisor is legally responsible to you for damages and the amount of such damages. At the end of the case, the jury will render its decision and you will either win or lose on all or some of your claims. Even if you win, you will get paid right away. Both sides will have the opportunity to appeal if they are dissatisfied with any part of the jury’s decision.
6.What are “Franchise and Business Opportunity Laws”?
The United States Congress has not enacted any specific federal franchise legislation. However, the United States Federal Trade Commission has promulgated a disclosure obligation known as the Franchise Rule as well as a Business Opportunity Rule. Under the Franchise Rule franchisors are required to provide franchisees with certain information about the prospective franchise investment. There is no private right of to sue a franchisor for a violation of the FTC rule.
However, some states adopt the FTC rule or the standards of the FTC rule as the predicate for violations of other statutes and/or certain common law duties. A number of states have enacted both disclosure and registration requirements for franchisors and the sellers of other kinds of business opportunities. Franchisors and business opportunity sellers that do not comply may be subject to liability.
Some states prohibit the use of misleading devices, misrepresentation s, and concealment of information that would be important for franchisees to know about the opportunity. In these states, actions can be brought for such statutory violations. An experienced franchise law attorney can advise you as to whether any of these various state laws may be applicable to your particular situation.
Some states also have franchise relationship statutes which govern the termination and non-renewal of franchises. Franchise stores that refused to renew a franchise for reasons are not permitted under the law may be subject to an action for violation of the franchise relationship statute. Again, it is important for franchisees to consult with an experienced franchise law attorney to determine what protections may be afforded under various state relationship laws
7.How Does an Arbitration Clause Affect My Case?
Franchisors often put arbitration clauses in their franchise agreements as a way to discourage court lawsuits can impose one-sided provisions that make it more difficult for the franchisee to get just compensation. Such arbitration provisions may or may not be enforceable. An experienced franchise law attorney will be able to help guide you in terms of what may be properly challenged in a court of law.
Attorneys unfamiliar with the nuances of arbitration agreements and other onerous provisions may not be aware of the fact that these agreements can effectively be challenged in a court of law if the proper procedures and arguments are presented. Robert Boulter is experienced in reviewing various terms of franchise agreements and in particular arbitration clauses with an eye toward maintaining the actions in a court of law wherever feasible.
8.What Is My Case Worth?
The short answer is: it depends. The value of your case will depend upon such things as the nature of the injuries that you have suffered, the claims you can bring, and whether you have a right to a jury trial. Your economic damages are related to the amount of actual money that you have lost in the business including how much money oyu have made as a franchisee, how much capital you have invested in the business and/or loans you have undertaken and things of that nature. If you have been defrauded, you may also be entitled to emotional distress and punitive damages. The determination of how much your case might be worth is best made by you and consultation with an experienced franchise attorney.
9.How Does Bankruptcy Affect My Case?
Robert Boulter is not a bankruptcy attorney. Generally speaking, when bankruptcy is filed, the trustee of the bankruptcy estate becomes the owner of all the assets of the bankrupt person or entity and this would include any filed or potential lawsuits. As estate property, the trustee has the option of prosecuting the case, settling the lawsuit with the franchisor with or without your consent, or abandoning the lawsuit back to you.
10.Can I Join My Case with Other Franchisees?
Joining with other franchisees in a lawsuit over common claims is generally possible and is good way to spread the costs of prosecuting such an action. When multiple clients are suing the same defendant, there may be conflicts of interests presented between the clients. We cannot represent a group of clients against a franchisor without obtaining the express consent and a waiver of conflicts of interest from each client. Also, some franchise agreements prohibit joining more than one franchisee in an action. In California, we have defeated such clauses. See Independent Ass’n of Mailbox Center Owners, Inc. v. Superior Court, 133 Cal.App.4th 396, 34 Cal.Rptr.3d 659 (2005).
11.What Should I Bring to My First Meeting with You?
- Franchise contracts, offering circulars, lease agreements, loan documents, check registers, significant e-mails and correspondence.
- Chronology of Events Written For Your Lawyer. Drafting a chronology of events is an excellent way to think about and describe the various factors involved in your case and is a great time saver for your attorney. If you choose to request Robert Boulter to review your matter, we will provide you with a template for your chronology.
- Quality Control Reports. If your franchisor has provided you with periodic quality control reports or other feedback on your operations, please provide these.
- Pictures. If you have picture of your location, by all means bring them.
- Income documents. You may have a claim for lost profits. In order to bring a claim for lost profits, your lawyer needs to be able to show what kind of money you were making before the dispute. Bring any income statements as well as any tax returns you have filed related to the franchise. If you made no money in the franchise but left a productive income producing opportunity to start the franchise, you should bring documents related to that opportunity.
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