Dady & Gardner Attorneys Prevail In Protecting Franchises with State Franchise Laws

Dady & Gardner Attorneys Prevail In Protecting Franchises with State Franchise Laws

Philadelphia – August, 2007 — The U.S. District Court for the Eastern District of Pennsylvania recently handed the franchisees in Cottman Transmission Systems, LLC, et al. v. Dale Kershner, et al. a big victory, ruling that the franchisor could not deprive Cottman franchisees in California, Wisconsin, and New York of the protection of these states’ franchise statutes. Dady & Gardner attorneys Ron Gardner, Barbara Bagdon, and Kristy Zastrow argued, and the court agreed, that a franchise agreement’s language requiring a court to use Pennsylvania law to decide the claims of out-of-state franchisees was ineffective. States like California, Wisconsin and New York had expressed a clear intent to provide a heightened degree of protection to prospective franchisees regarding misrepresentations about a franchise system, and those laws contained “anti-waiver” provisions, i.e., provisions that preclude a franchisor from using a written provision in a franchise agreement to evade the protections of each state’s franchise act. The court agreed, and struck down the provision requiring Pennsylvania law.

The court’s decision was significant because it rejected an earlier case involving Cottman, in which the court had upheld Pennsylvania law.

The Cottman franchisees are suing the franchisor for falsely representing the earnings potential of their franchises.