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The Franchise Memorandum

Court Denies Summary Judgment to Franchisor on Basis of Franchisee's Fraudulent Inducement Claim
Posted in Terminations

In Luxottica Retail North America, Inc. v. Stonybrook Ventures, Inc., 2010 U.S. Dist. LEXIS 46265 (M.D. Fla. May 11, 2010), Luxottica was unsuccessful in seeking summary judgment on a collection action against a terminated franchisee. Luxottica, which previously owned Lens Crafters stores, had acquired the Pearle Vision franchise system shortly after the defendants entered into a franchise agreement to open a Pearle Vision store. In response to Luxottica’s motion for summary judgment on its damages claims under the franchise agreement, the defendants argued that they had been fraudulently induced to enter the agreement by Pearle Vision, which had not disclosed the pending sale of the franchise system to Luxottica. The defendants alleged that they were encouraged to open their Pearle Vision store near a Lens Crafters store and that Pearle Vision had represented to them that the proximity of the two stores would not matter   because Pearle Vision offered superior programs.

Luxottica argued that it was entitled to summary judgment because the franchise agreement permitted Pearle Vision, in its discretion, to assign the agreement to any third party. The court found, however, that the defendants’ defense of fraudulent inducement was an intentional tort claim that was independent of the terms of the parties’ contract. While the terms of the franchise agreement controlled Luxottica’s breach of contract claim, they did not necessarily foreclose the fraud defense. Finding that fact issues surrounded the negotiation of the agreement, the court denied Luxottica’s motion for summary judgment.

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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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