The Franchise Memorandum

Relying substantially on admissions from the franchisee’s deposition, a federal court in Washington granted the defendant franchisor’s motion for summary judgment on the franchisee’s claims for misrepresentation. DiNardo v. Wow 1 Day Painting, LLC, 2018 WL 513584 (W.D. Wash. Jan. 23, 2018). Wow licenses a system for providing single-day interior and exterior painting services. DiNardo entered an agreement with Wow in May 2014 to open a franchise in Connecticut, but stopped operating it in late 2015. In May 2016, he brought suit against Wow in Connecticut state court, alleging that Wow had misrepresented the profitability of its franchises and its plans to market the business in Connecticut. Wow first removed the case to federal court and then transferred it to the Western District of Washington, in accordance with the franchise agreement’s forum selection clause.

In granting Wow’s summary judgment motion, the court dismissed three claims against Wow, including one for intentional misrepresentation. It first noted that DiNardo had testified in his deposition that the representations of which he complained were made in late 2014 or early 2015. Since this period falls after the date of the franchise agreement, DiNardo could not have relied on those representations to enter the franchise agreement. Undaunted, DiNardo responded to Wow’s motion for summary judgment with an affidavit asserting for the first time that Wow had made additional misrepresentations prior to signing the franchise agreement, pointing to the text of the franchise agreement in support. The court rejected these new misrepresentation claims because DiNardo had testified in his deposition that he had not read the franchise agreement; therefore, there could not have been a misrepresentation. The court also rejected these new claims based on the “sham affidavit rule,” which provides that a party cannot manufacture an issue of fact to defeat a summary judgment motion by submitting an affidavit that contradicts his prior deposition testimony. As a result, the court dismissed DiNardo’s misrepresentation claims, as well as his claims for violations of Connecticut’s Unfair Trade Practices Act and Business Opportunities Act. It then ordered Wow to show cause as to whether the court still had jurisdiction over Wow’s counterclaims for amounts due under the franchise agreement and an injunction against DiNardo to observe his noncompete obligations.