The Franchise Memorandum
The U.S. District Court for the Northern District of Georgia has dismissed claims that a franchisor and its franchisees violated the Racketeer Influenced and Corrupt Organizations Act (RICO) through an alleged companywide policy of buying sick puppies, certifying their health for sale, and then covering up the source of their illness after they grew sick. Cisneros v. Petland, Inc., Bus. Franchise Guide (CCH) ¶ 16,177 (N.D. Ga. Apr. 17, 2018). The plaintiff bought a Shih Tzu puppy from a Petland franchisee that was certified as healthy but died of parvovirus soon after she brought him ...
In Jennings v. Bonus Building Care, Inc., Bus. Franchise Guide (CCH) 9115,284 (W.D. Mo. May, 7, 2014), a federal district court dismissed a lawsuit brought by four unit franchisees under the federal Racketeer Influenced and Corrupt Organizations Act ("RICO") because the franchisees could not meet any of the five elements required to sustain a RICO action. The franchisees alleged fraudulent and deceptive business practices against a total of 55 defendants associated with the Bonus Building Care franchise system, including corporate entities owned by the franchisor, multiple ...
An Ohio federal court ruled June 4 that a franchisee’s claims under federal racketeering law must be dismissed for failure to plead the existence of an illegal “enterprise.” The case is Arnold v. Petland, Inc., 2010 U.S. Dist. LEXIS (S.D. Ohio June 4, 2010). Federal RICO claims, to be viable, must include the presence of an enterprise separate and distinct from the defendant itself. The complaint in this case did not define a separate enterprise, but in opposition to the motion to dismiss, the plaintiff argued that the franchisees in the system may serve as the requisite ...
In Jones v. Petland Inc., 2010 U.S. Dist. LEXIS 12538 (S.D. Ohio Feb. 11, 2010), franchisees sued franchisor Petland, asserting in a class action complaint numerous claims of fraud and misrepresentation as well as a RICO claim. Petland moved to dismiss all claims. The court granted Petland’s motion and dismissed all of the franchisees’ claims with prejudice. The court found that the plaintiffs had failed to plead their fraud and misrepresentation claims with particularity as required under the Federal Rules of Civil Procedure. The court also found the franchisees’ RICO ...
In re U.S. Foodservice Inc. Pricing Litigation, 2009 WL 5064468 (D. Conn. Dec. 15, 2009), the court denied U.S. Foodservice’s (“USF’s”) motion to dismiss a RICO claim filed by plaintiffs Frankie’s Franchise System and others. The plaintiffs alleged that USF had created a number of shell companies to procure products, which were then sold to USF at inflated prices. In turn, USF allegedly would pass the inflated prices to plaintiffs, thus receiving a higher profit margin than it would have otherwise received under the parties’ contracts.
USF contended that ...
In HT of Highlands Ranch, Inc. v. Hollywood Tanning Systems, Inc., 2008 WL 5109745 (D. N.J. Dec. 1, 2008), four unrelated franchisees joined together to sue their system’s franchisor and its related entities, setting forth several causes of action, including a claim under the Racketeer Influenced and Corrupt Organizations Act (RICO). The plaintiffs’ RICO claim was based on their allegation that the franchisor fraudulently created vague equipment leases, which it then used as a basis to invoice the plaintiffs for equipment that did not exist or for used equipment that was ...
A recent decision by the United States District Court for the Northern District of Illinois in Wooley v. Jackson Hewitt, Inc., 2008 WL 836010 (N.D. Ill. March 25, 2008), granted in part a franchisor’s motion to dismiss a class action suit brought against a tax service franchisor under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1961, et seq.
The plaintiff engaged a franchisee of Jackson Hewitt, Inc. to prepare his taxes for 2003. The taxpayer paid an extra fee for Jackson Hewitt’s “Gold Guarantee,” which was supposed to provide the ...
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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP.
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