923 F. Supp. 2d 1004
W.D. Ky.2013Background
- Plaintiffs Long John Silver’s, Inc. and A & W Restaurants, Inc. sue Defendants over four Minnesota A & W franchises, including the Inver Grove drive-in franchise.
- Defendants assert three counterclaims against A & W focused exclusively on the Inver Grove Franchise, alleging MFA violations and common-law fraud.
- The Inver Grove Franchise opened Aug. 5, 2009 and closed Jan. 2011 amid alleged poor performance and cross-franchise funding issues.
- A & W moves for summary judgment on the counterclaims, arguing lack of standing, multiple MFA defenses, and other merits grounds.
- The Franchise Agreement contains a Kentucky-law forum clause and an MFA anti-waiver provision that the court must reconcile with Minnesota franchise-law rights.
- The court must determine applicable law, standing, and whether any MFA or common-law claims survive summary judgment at this stage.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Who has standing to pursue the MFA and common-law fraud claims? | Patricia Nickleson, LLC is the signatory; others lack standing. | Nickleson entities and guarantor seek standing via the agreement and guarantee. | Only Patricia Nickleson, LLC has standing; others’ claims are dismissed. |
| What law governs the counterclaims and does the MFA anti-waiver provision affect the forum clause? | MFA applies; forum clause valid; Kentucky law governs contract and Minnesota MFA applies to franchise rights. | Choice-of-law provisions may be limited by MFA anti-waiver provision; forum clause may be invalidated for Minnesota rights. | MFA governs Counts I–II; Kentucky law applies to Count III; forum clause enforced as MFA rights not diminished. |
| Are the MFA misrepresentation and disclosure claims subject to summary judgment given reliance and disclaimers? | Disclaimers negate reliance and should bar MFA misrepresentation claims. | Disclaimers cannot bar MFA protections; genuine issues as to reliance and causation exist. | Disclaimers do not bar the misrepresentation claim entirely; genuine issues remain as to reliance and causation; summary judgment denied on some MFA misrepresentation theories. |
| Is rescission a viable remedy for the Inver Grove Franchise under the MFA? | Rescission unavailable due to delay, lack of return of consideration, and ongoing performance. | Rescission may be warranted where MFA violations occurred and equitable restoration is possible. | Rescission is not fully resolved; court declines to grant summary judgment on rescission for the Franchise Agreement pending further development. |
Key Cases Cited
- Randall v. Lady of Am. Franchise Corp., 532 F. Supp. 2d 1071 (D. Minn. 2007) (discusses reliance and MFA misrepresentation damages; disclaimers do not bar actionable claims under MFA)
- Ellering v. Sellstate Realty Sys. Network, Inc., 801 F. Supp. 2d 834 (D. Minn. 2011) (addressed pre-registration timing and reliance; held that misrepresentation may be time-barred if accrual dates misaligned)
- Rivermont Inn, Inc. v. Bass Hotels & Resorts, Inc., 113 S.W.3d 636 (Ky. Ct. App. 2003) (fraud elements; misrepresentation vs. omission standards; duty to disclose analysis in Kentucky law)
- Clapp v. Peterson, 327 N.W.2d 585 (Minn. 1982) (MFA remedial purposes; protections for Minnesota franchisees; anti-waiver context)