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Court Watch

By Rupert Barkoff
January 31, 2015

Rare Franchisee Judicial Victory Sets Dangerous Precedent for Franchisors

Most franchisee practitioners will admit that fraud and similar cases are difficult litigation that much more often than not lead to judgments in favor of the franchisor. An exception to this status quo can be found in Legacy Academy v. Mamilove, LLC, 761 S.E. 2d 880, Bus. Franchise Guide '15,336 (Ga. Ct. App. 2014, cert. granted , Nov. 3, 2014), where the franchisee received a victory against a day care center franchisor based on fraud and other theories that are not often franchisee successful. In particular, claims in this case were made under a Georgia statute that, essentially, gives a franchisee an indirect cause of action under the Federal Trade Commission's Franchise Rule, plus the franchisee also asserted claims under the Georgia RICO statute, for negligent misrepresentation, and for rescission.

The most interesting of these theories are the ones granting the franchisee a claim based on the FTC Franchise Rule violation and the fraud claim.

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