The Franchise Memorandum

An appellate court in Illinois upheld a trial court’s dismissal of claims that franchisor was vicariously liable for the alleged actions of its franchisees. Shavers v. The UPS Store, Inc., 2023 IL App (1st) 221407-U (Ill. App. Ct. Aug. 7, 2023). Reba Shavers brought a class action lawsuit against the franchisor, The UPS Store, alleging that UPS franchisees overcharged for notarizing documents in violation of the Illinois Notary Public Act (“Notary Act”). The trial court dismissed Shavers’ claims against The UPS Store, as a matter of law, finding that (1) she failed to plead facts demonstrating that The UPS Store directed, condoned, or otherwise failed to properly supervise any notary in the performance of their duties, and (2) her allegations regarding control over the individual franchise locations were conclusory and not factual.

On appeal, the plaintiff argued that The UPS Store was vicariously liable for the conduct of its franchisees due to the control it exerted over those franchisees. In rejecting that argument, the appellate court found that, although The UPS Store assists franchisees in site selection, lease negotiations, financing, networking, provides training and manuals to its franchisees, and is responsible for pricing policies of its franchisees, these facts do not demonstrate that The UPS Store exercises “such complete control over the franchisee so as to negate the intent of the franchise agreement not to create a principal agent relationship.” The appellate court held that Shavers had not alleged the kind of “all encompassing” day-to-day control required to overcome the franchise agreements’ explicit disclaimer of agency. The appellate court did, however, determine that Shavers had properly pled her claim that The UPS Store and its franchisees engaged in civil conspiracy. The appellate court held that although no cause of action existed directly against The UPS Store under the Notary Act, The UPS Store may be held liable for conspiring with its franchisees to violate the Notary Act. The appellate court reasoned that “where means are employed, or purposes are accomplished, which are themselves tortious, the conspirators who have not acted but have promoted the act will be held liable.”