The federal court in Arizona recently dismissed some, but not all, California Franchise Investment Law (CFIL) claims by franchisees against a franchisor’s former President of Franchise Development. Enlightened Armadillo Inc. v. Freeman, 2026 WL 1506027 (D. Ariz. May 29, 2026). Franchisees Enlightened Armadillo and Snug Holding Company entered into franchise agreements with Xponential Fitness brand YogaSix in 2021. The franchised businesses failed. The franchisees sued YogaSix and Xponential’s former President of Franchise Development Lance Freeman in California state court asserting CFIL claims. The California state court dismissed Freeman—an Arizona resident—for lack of personal jurisdiction. Franchisees then sued Freeman in federal court in Arizona, asserting seven CFIL claims, one Arizona Consumer Fraud Act claim, and one claim for common law fraudulent misrepresentation. Freeman moved to dismiss the claims.
The Arizona federal court dismissed franchisees’ common law fraud and Arizona Consumer Fraud Act claims because it concluded that the CFIL preempted common law and non-CFIL fraud claims based on the same alleged conduct. The court further held that the CFIL’s two-and four-year limits operate as statutes of repose which cannot be tolled, and thus dismissed all of Snug Holding’s CFIL claims and some of Enlightened Armadillo’s CFIL claims as time-barred. However, the court rejected Freeman’s contractual waiver and other contractual liability-shifting arguments. The court declined to give dispositive effect to the franchise agreements’ non-reliance and risk allocation clauses at the pleading stage and permitted some of Enlightened Armadillo’s CFIL claims to proceed.
*Frankie Barth is a Summer Associate for Lathrop GPM who contributed to the writing of this post.