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State Farm Agents Seek to Prove Franchisee Relationship with Insurer

BY Kevin Adler
January 01, 2004

Discovery will be completed this month in a lawsuit brought by the National Association of State Farm Agents (NASFA) for breach of contract and violation of franchise laws. The case, which is in the Superior Court for the District of Columbia, has already generated important rulings for franchisors and franchisees about whether the trade association has the standing to sue as a representative of its members, and whether the case should be heard in state or federal court.

In a response to the original lawsuit (which was filed in Baltimore County Court in Baltimore, MD, in December 2001), State Farm argued that: 1) the independent agents do not have standing to sue State Farm as a franchisor; and 2) the case, if it was to be heard, should be heard in federal court. Separate decisions went against State Farm on each issue.

The superior court ruled in October 2002 that NASFA has standing to bring suit for equitable relief and injunctive relief against State Farm (see Business Franchise Guide: CCH, paragraph 12,431). State Farm had moved to dismiss the case on the basis that NASFA, though an association, nevertheless could not fulfill the requirements to sue on behalf of its members; State Farm argued NASFA lacked “representational standing.”

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