Red Lion Hotels Franchising, Inc. v. MAK, LLC
663 F.3d 1080
9th Cir.2011Background
- Karimi operated a Red Lion franchise in Modesto, California under a Washington-law franchise agreement between Red Lion (WA) and MAK/Karimi; the district court granted summary judgment on FIPA counterclaims and later found for Red Lion on contract; Red Lion claimed FIPA did not apply extraterritorially; Red Lion issued PIP and brand standards requiring substantial renovations and new payments by Karimi; Karimi faced a June 2008 Notice of Default/Termination for failing to cure under the PIP; Red Lion inspected in July 2008, terminated the franchise, and suit ensued with counterclaims including FIPA, CPA, and breach; the district court found Karimi noncompliant and terminated, and entered judgment against Karimi and his wife; the Ninth Circuit addresses extraterritorial application of FIPA and related issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether FIPA bill of rights applies to out-of-state franchisees | Karimi—FIPA bill of rights applies extraterritorially | Red Lion—FIPA applies only to WA-based/franchisor-franchisee in this state | Yes, bill of rights applies to this dispute |
| Remedy if FIPA applies—CPA availability | Karimi may recover under CPA for FIPA violation | CPA may not apply or remedy may be limited | Remand to consider CPA remedy after FIPA analysis |
| Equitable estoppel defense to termination | Karimi relies on estoppel due to Red Lion’s letter response | Red Lion’s termination was justified by misrepresentations | District court did not err in rejecting estoppel defense; termination justified |
| Judgment against Karimi's wife | Jane Doe Karimi should not be personally liable | Judgment against marital community may reach both spouses | Remand for district court to determine propriety of judgment against wife; not resolved on appeal |
Key Cases Cited
- Gravquick A/S v. Trimble Navigation Int'l, Ltd., 323 F.3d 1219 (9th Cir. 2003) (extraterritorial application of California-like franchise law protecting non-Californians)
- Taylor v. 1-800-Got-Junk?, LLC, 632 F. Supp. 2d 1048 (W.D. Wash. 2009) (district court held FIPA not applicable where conduct outside WA; discusses territorial scope)
- Schnall v. AT&T Wireless Servs., Inc., 259 P.3d 129 (Wash. 2011) (territorial reach of CPA after FIPA concerns; later withdrawn portion affecting residents)
- Liebergesell v. Evans, 93 Wash.2d 881, 613 P.2d 1170 (1980) (elements of equitable estoppel and fault-free conduct)
- Mut. of Enumclaw Ins. Co. v. Cox, 110 Wash.2d 643, 757 P.2d 503 (1988) (requirement of good faith and clean hands in estoppel)