Craig Tractenberg of Fox Rothschild. Courtesy photo Case Dismissed for False Start: Lessons on Drafting and Strategy
In the case of Waldron v. SVHB Marketing, franchisees' RICO case was dismissed on summary judgment for failure to exhaust the mediation prerequisite to filing a lawsuit against the franchisor and its personnel.
April 22, 2024 at 12:36 PM
6 minute read
Dispute resolution clauses in franchise agreements are constructed to provide advantages to franchisors. Often, the clauses provide the franchisor with flexible options as disputes arise and require the franchisees to exhaust certain remedies before filing litigation or arbitration. In the case of Waldron v. SVHB Marketing, No. 2:23-cv-03485-MSG (E.D. Pa. March 20, 2024), franchisees' RICO case was dismissed on summary judgment for failure to exhaust the mediation prerequisite to filing a lawsuit against the franchisor and its personnel.
The Rationale for Stepped Dispute Resolution
The Federal Trade Commission (FTC) regulates the offer and sale of franchises as do some 17 states. Part of the regulation is the requirement that all franchise prospects receive a franchise disclosure document (an FDD) that discloses the material claims franchisees has brought against the franchisor and their disposition. This information is essential to franchisees who consider purchasing a franchise as litigation history and judgments against the franchisor may provide fair warning of issues with the franchise opportunity.
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