The Eastern District of California recently denied a franchisee’s motion for summary judgment on its California Franchise Investment Law claims and denied the franchisee’s request to add new affirmative defenses a year after the pleading amendment deadline. Badger Daylighting Corp. v. Dig Alert Done Right, LLC, 2026 WL 457141 (E.D. Cal. Feb. 18, 2026).
Badger Daylighting Corp. (“BDC”) is a franchisor of non-destructive excavating businesses; BDC sued its former franchisee, Dig Alert Done Right, alleging breach of contract and over a million dollars in damages. Dig Alert moved—more than a year after the pleadings closed, and after the close of discovery—to add seven new affirmative defenses. In support of its motion, Dig Alert contended that the new affirmative defenses were based on the BDC Franchise Disclosure Document, which Dig Alert alleged it did not have until four months before the close of discovery. The court denied the motion, finding no good cause for Dig Alert’s untimeliness, specifically noting that the record established that Dig Alert received the FDD in 2022 before executing its franchise agreement.
The court also denied Dig Alert’s motion for summary judgment that sought to invalidate the franchise agreement on the basis of alleged violations of California’s Franchise Investment Law. First, Dig Alert alleged that BDC violated Cal. Corp. Code § 31101, which exempts franchisors from registration requirements if the franchisor and its parent company satisfy certain net worth and guaranty requirements. Dig Alert alleged that BDC did not provide Dig Alert with required financial statements or an unconditional guaranty as required by the statute. The court found summary judgment was inappropriate because there was a genuine dispute of material fact on this issue, as Dig Alert’s principal confirmed receipt of the statements and guaranty before signing the franchise agreement. Second, Dig Alert alleged that BDC violated Cal. Corp. Code § 31125, which restricts the modification of existing franchises. The court held that this statute was inapplicable because, as the parties had not executed the franchise agreement at the time of the proposed modifications, BDC did not propose modifications to an “existing franchise.”
Finally, Dig Alert alleged that BDC violated Cal. Corp. Code § 31200 by making misleading statements or omitting material facts in the FDD. Dig Alert alleged three misrepresentations: (1) that its territory of potential customers was in fact limited despite the FDD stating that “there are no limitations on customers to whom you may sell,” (2) that BDC improperly failed to disclose that it lacked prior business experience in “minority-diversity-veteran-set-aside” work, and (3) that BDC misrepresented its willingness to provide pre- and post-opening assistance to Dig Alert and permit Dig Alert to use BDC’s trademarks. The court denied summary judgment on all three misrepresentations. The court noted evidence that BDC had in fact disclosed to Dig Alert, pre-signing, that its territory was restricted to diversity veteran work in particular counties. The court also cited testimony from Dig Alert’s principal that BDC told him, before the FDD was even provided, that BDC had never sold a franchise premised on pursuit of diversity veteran work. Finally, the court noted that to establish a misrepresentation, rather than simply breach of contract, California law requires the plaintiff to prove that the other party “ha[d] no intention of performing,” but Dig Alert proffered no evidence of intent other than alleged failure to perform, which was insufficient. The court thus denied Dig Alert’s motion for summary judgment in its entirety.