Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—3rdCir: Company President Lacked Standing to Pursue Claims Against Child Care Center Franchisor, (Oct 17, 2012)
Organizations Mentioned:Kiddie Academy | Nixon Peabody, LLP
By Jeffrey May, J.D.
An action against Kiddie Academy Domestic Franchising LLC, a franchisor of child care learning centers, brought by the president of an apparently unsuccessful franchise was properly dismissed, the U.S. Court of Appeals in Philadelphia has ruled in a not-for-publication opinion (Meade v. Kiddie Academy Domestic Franchising, October 15, 2012, per curiam).
The plaintiff had established a corporation in 2006 in order to open the franchise. The corporation and Kiddie Academy entered into a franchise agreement for the operation of a center in Jackson, New Jersey. The relationship did not go well. The plaintiff filed suit alleging that Kiddie Academy and its employees took advantage of the fact that he was a first time business owner with “no experience in the field of child care,” and fraudulently induced him into signing the franchise agreement. The complaint set forth a host of other alleged wrongdoings by the Kiddie Academy, including violations of state consumer rights laws, federal racketeering violations, bank fraud, and more. The plaintiff sought approximately $8 million in damages.
The complaint was properly dismissed because the plaintiff did not have standing to seek damages for injuries sustained by the corporation that had entered into the agreement with Kiddie Academy, the court held. It was well established that, absent a direct individual injury, the president and principal shareholder of a corporation lacked standing to sue for an injury to the corporation. Because the plaintiff's claims all involved injuries to the corporation stemming from the franchise agreement, and because the plaintiff did not allege that Kiddie Academy took any actions against him in his individual capacity, he did not have standing to sue.
The case is No. 12-2147.
Mark C. Meade, pro se. Craig R. Tractenberg (Nixon Peabody, LLP) for Kiddie Academy Domestic Franchising LLC.
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