Thursday, February 21, 2008

Franchisor Officer Could Be Liable for Misrepresentation Under Florida Franchise Law

This posting was written by Pete Reap, Editor of CCH Business Franchise Guide.

A franchisee of an electric vehicle sales and rental business adequately stated a claim for violation of the Florida Franchise Act against an officer of the franchisor for intentionally misrepresenting the prospects of success for the franchise, a Florida appellate court has determined.

Thus, dismissal of the claim for lack of specific allegations that the officer personally participated in the conduct constituting the violation was reversed and the action was remanded for further proceedings.

The franchisee alleged that the officer participated in the development of spreadsheets to provide to the prospective franchisee and had actual knowledge of the spreadsheet’s contents and omissions, the appellate court held.

The complaint asserted that the spreadsheets were based on “conjecture and speculation” without any substantive research, which resulted in documents containing “unsubstantiated and misleading” representations. It alleged that the officer, along with other defendants, authorized the delivery of the misleading documents to the prospective franchisee.

Further, the complaint asserted that the officer misrepresented the known total investment required for the franchise, leading to the prospective franchisee’s payment of a $50,000 franchise fee and the investment of money into the franchise.

There were ample allegations in the complaint that, if true, would support a judgment for damages against the officer, according to the court.

The decision is KC Leisure, Inc. v. Haber, Florida Court of Appeals, Fifth District, filed January 25, 2008 (CCH Business Franchise Guide ¶13,806).

No comments: