A New York court recently denied a franchisor’s motion to dismiss claims brought by its franchisee. Schwartzco Enters., LLC v. TMH Management, LLC, 2014 U.S. Dist. LEXIS 160856 (E.D.N.Y. Nov. 17, 2014). Schwartzco brought multiple causes of action alleging that the franchisor and related individuals participated in a fraudulent scheme in the sale of franchise and area developer rights for The Meat House system, violating numerous state laws and regulations. According to Schwartzco, the franchisor made material misrepresentations, including providing false financial statements and earnings claims to induce Schwartzco to invest. One claim alleged misrepresentations by an individual defendant, Brown, in violation of the New York Franchise Sales Act, which is designed to prevent fraud in the sale of franchises. In response, Brown brought a motion to dismiss under Rule 9(b) of the Federal Rules of Civil Procedure, which requires a party alleging fraud to state the circumstances of the fraud with particularity. The court decided that it did not need to address whether the proposed claim against Brown was subject to Rule 9(b), because Schwartzco set forth factual allegations sufficient to state violations under either the heightened pleading requirements or the general liberal notice pleading requirements.
Maisa Frank represents clients in a variety of litigation matters. Whether conducting pre-dispute investigations, navigating litigation, or negotiating resolutions, Maisa’s advice and strategy is vital to clients facing ...
The information contained in this post is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.
About this Publication
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.
To subscribe to monthly emails for The Franchise Memorandum, please click here.