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The Franchise Memorandum

North Carolina Court of Appeals Affirms That Contractual Limitations Period Begins to Run When Franchisees Signed Agreements

The North Carolina Court of Appeals affirmed a lower court’s dismissal of claims against Family Fare, LLC for violations of the North Carolina Unfair and Deceptive Trade Practices Act and for rescission, fraud, misrepresentation, and breach of the duty of good faith and fair dealing on the grounds that the one-year contractual limitations period contained in the franchise agreements at issue expired prior to the franchisees’ filing suit. Sanghrajka v. Family Fare, LLC, 822 S.E.2d 789 (N.C. Ct. App. 2019). Sanghrajka operated a convenience store under the ownership and control of Family Fare until November 2013, when Family Fare advised Sanghrajka that the store would be converted to a franchise and that she could continue to operate the store only if she agreed to operate a second location. The parties executed franchise agreements relating to the two stores the following month. When Sanghrajka later attempted to sell her businesses, Family Fare required her to pay an amended transfer fee equaling 50 percent of the then-current franchise fee. Sanghrajka then sued Family Fare in May 2017, and Family Fare filed a motion to dismiss the lawsuit on the grounds that it was not filed “within one (1) year from the occurrence of the facts giving rise to such claim or action,” as required by the franchise agreements. The trial court granted Family Fare’s motion to dismiss.

The appellate court affirmed the trial court’s findings that Sanghrajka agreed to the amended transfer fee when the parties signed the franchise agreements in December 2013 and that the one-year contractual limitations period on Sanghrajka’s claims began to run on the date they signed the agreements. Because Sanghrajka did not file the action within one year of signing those agreements, or within the three-year limitations period provided under North Carolina law, her claims were barred. The appellate court also affirmed the lower court’s decision not to toll the statute of limitations under the “continuing wrong doctrine,” reasoning that any of Family Fare’s alleged continual unlawful acts were not separate violations but rather an “ill effect” of their actions in December 2013. Finally, the appellate court affirmed the dismissal of Sanghrajka’s claims under the North Carolina Unfair and Deceptive Trade Practices Act on the grounds that Sanghrajka’s injury was a result of her “failure to read the documents previously provided to her,” and not of any deceptive or unfair tactic Family Fare used in negotiating with her in 2013.

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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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