The Franchise Memorandum

An Alabama federal court granted the motion of a franchisor’s affiliate to be dismissed from a putative class action in Lee v. Hyundai Motor America, Inc., 2016 WL 3194532 (N.D. Ala. June 9, 2016). Lee had sued both Precision Tune Auto Care, an entity related to Precision Franchising, LLC, the franchisor of retail automotive repair shops, along with automaker Hyundai, alleging that a defective aftermarket oil filter purchased from a Precision Tune franchise in Alabama had caused the engine to fail in his Hyundai car. Lee sued for violations of the Alabama Deceptive Trade Practices Act and breach of warranty. Lee argued that Precision Tune was subject to the court’s supplemental jurisdiction and that the complaint had stated a direct claim and an agency claim based upon the franchise system’s national warranty. Precision Tune argued that Lee had sued the wrong entity because it is distinct from the franchising entity that administered the national warranty program. Precision Tune further explained it “is not licensed, qualified, registered, or authorized to do business in Alabama and does not own or operate any retail automotive repair shops in Alabama or any state.”

In its decision, the court found, first, that it did not have general jurisdiction over Precision Tune because it was not incorporated in Alabama and did not have its principal place of business there. Then, the court found that it did not have specific jurisdiction because Precision Tune is a different corporate entity than the franchisor that had entered into the franchise agreement with the Alabama franchisee at issue. Therefore, the court found that Precision Tune had neither purposefully availed itself of the benefits and protections of Alabama’s laws nor established minimum contacts within the state. Because Lee only argued that fact questions existed as to personal jurisdiction and did not submit evidence to counter Precision Tune’s evidence that it was a distinct entity, the court found that Lee had not met his burden of proof as to jurisdiction.