The Franchise Memorandum

The United States Supreme Court has denied a petition for a writ of certiorari filed by the International Franchise Association ("IFA") in International Franchise Ass'n v. Seattle, 2016 WL 1723297 (S. Ct. May 2, 2016). In its petition, the IFA asked the Court to consider whether a state or local law that discriminates against certain in-state businesses based solely on their ties to interstate commerce violates the Commerce Clause of the United States Constitution. In the underlying case, the United States Court of Appeals for the Ninth Circuit had upheld a lower court's denial of the IFA's request for a preliminary injunction to prevent the City of Seattle from implementing part of its recently enacted minimum wage ordinance. The IFA had challenged the portion of the ordinance that classifies small franchisees of franchise systems that have at least 500 employees nationwide as large employers and therefore requires those franchisees to phase in the ordinance's $15 per hour minimum wage requirement at a more accelerated pace than similarly situated independent small businesses. In denying the injunction, the Ninth Circuit concluded that the IFA failed to show that the ordinance had a discriminatory purpose or resulted in discriminatory effects on out-of-state companies or interstate commerce, instead finding that the IFA established only that the ordinance burdened in-state franchisees. The court also held that even if the ordinance had a disparate impact on national chains, the IFA had presented insufficient evidence to establish that interstate franchise networks would face higher costs or would decrease their operations or investments in Seattle or that franchisors would suffer adverse effects. The Supreme Court's denial of certiorari means that the Ninth Circuit's ruling will stand.