Franchisor Prevails on Motion to Dismiss Out of State Law Claims
, White, William D.
, Coldwell, Deborah S.
Services: Franchise and Distribution
, Franchise Litigation
A federal court ruled that Texas law trumped out-of-state statutory claims asserted by franchisees, even in states whose franchise statutes contained anti-waiver provisions. The initial actions were brought by franchisees asserting claims against Curves and its president in Texas, New Jersey, New York, and Florida federal courts. In addition to other causes of action, Plaintiffs asserted twenty-six (26) claims alleging violations of non-Texas, out-of-state franchise and deceptive trade practices acts. Curves moved to dismiss the out-of-state claims under Federal Rule of Civil Procedure 12(b)(6) based on the Texas choice of law provision in the franchise agreements and on the “most significant relationship” test contained in the Restatement (Second) of Conflicts of Law.
Because Texas had the most significant relationship to the franchisees’ claims, the laws of the franchisees’ home states, including those states with anti-waiver provisions, were inapplicable. Thus, the court granted Defendants’ Rule 12(b) (6) motion and dismissed twenty-six (26) of the thirty-one (31) pending claims. Momentum Marketing Sales & Services, Inc. v. Curves Int’l, Inc.,
Business Franchise Guide (CCH), ¶14,047 (W.D. Tex. Dec. 17, 2008).