Violations Of State Franchise Laws

Gold, et al. v. Melt Franchising, LLC, et al.

By Mulcahy LLP on January 08, 2013

In Gold, et al. v. Melt Franchising, LLC, et al. (Los Angeles County Superior Court, June 2008 & California Court of Appeals, April 2010), fifteen persons and entities purporting to represent a nationwide class of franchisees of Melt Franchising filed a class action suit against Melt, alleging fraud and violations of state franchise laws. Melt retained Mulcahy LLP, who filed a demurrer to plaintiffs’ complaint on the grounds that the franchise agreement contained a class action and multi-party waiver provision based on the laws of the state of each franchisee.

On June 20, 2008, after acknowledging that “it is rare to dispose of multi-party and class action allegations on demurrer,” the Court rejected plaintiffs’ arguments, granted Melt’s demurrer and dismissed the action in its entirety with prejudice on the grounds that: (1) each cause of action would improperly unite multiple parties in violation of the franchise agreements’ dispute resolution provisions prohibiting class claims or multi-party claims; (2) plaintiffs lacked sufficient unity of interest for the consolidated action because the substantive law of their respective states would apply to the claims; and (3) plaintiffs’ claims asserted under the laws of states not their own were improper pursuant to the choice of law provision in the franchise agreement. The California Court of Appeal affirmed the trial court in full on April 16, 2010.

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