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Court Watch

By Cynthia M. Klaus and Sejal Desai Winkelman
August 31, 2007

Federal Court Rejects PA Choice-of-Law Provisions

Franchisors likely realize that choice-of-law provisions may not immunize them from the franchise laws of their franchisees' various states, but, as happened in Cottman Transmission Systems, LLC, et. al. v. Dale Kershner, et. al., CCH ' 13,641 (E.D. Pa. 2007), a franchisor likely would not anticipate that it would have to defend itself against the disclosure laws of multiple states in a single lawsuit.

Cottman Transmission Systems, LLC is a Pennsylvania franchisor of stores that service and repair automobile transmissions. Several of Cottman's franchisees from various jurisdictions brought an action in federal court in Pennsylvania, claiming that Cottman misrepresented its franchise system to induce them to enter into franchise agreements. They alleged, among other things, that Cottman under-represented the initial investment and failed to provide the support it promised under the franchise agreement.

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