The Franchise Memorandum

This is the second in our series of articles reviewing the progeny of what we identified in our December 2007 ten-year anniversary edition as the most significant franchise case decisions summarized in Issues 1 through 100 of The GPMemorandum, which covered the period from late 1997 through 2007. The second of those ten significant rulings was United States v. Days Inns of America, Inc., which actually represented a series of cases brought around the country against franchisors under the building accessibility requirements of the Americans With Disabilities Act. (Gray Plant Mooty defended many of those cases.) The main Days Inns case ended in 1998 and, nine years later, The GPMemorandum’s ten-year anniversary issue reported that the ADA cases were an example of “what did not become a long-lasting issue.”

Today, after the time period covered by Issues 101-151 of The GPMemorandum, it is clear that the volume of ADA litigation has continued to be very small. In fact, the only case we have reported during those four years (and the only one since Days Inns in 1998) has been the California federal court case of Vallabhapurapu v. Burger King Corp. Unlike Days Inns and the other cases from the 1990s, which had been filed by the federal government, Vallabhapurapu was a nongovernmental action brought on behalf of a class of private-party customers who alleged that the restaurants in question were inaccessible to customers in wheelchairs, in violation of the federal ADA and California statutes. In one May 2011 ruling in that case, the court denied the franchisor’s motion to dismiss—a motion brought based on standing and the failure to join necessary parties. Vallabhapurapu is part of a series of attempted class action lawsuits against Burger King as franchisor of 96 restaurants leased to franchisees in California. Another case in the same series, Castaneda v. Burger King Corp., apparently had settled by the time of the May 2011 ruling in Vallabhapurapu. In both cases, all that we summarized were initial procedural skirmishes about whether the franchisees were “necessary parties” to the cases. No final, substantive rulings were reported.

The lack of cases involving either private-party or federal challenges under the ADA and similar statutes is itself very significant. If the Days Inns cases had gone strongly against the franchisors, and if the government (or private parties) had continued to bring such claims, they could have resulted in substantial exposure and liability.