Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Mich.: Additional discovery needed in L.A. Insurance franchise dispute, (Aug 25, 2016)

By Greg Hammond, J.D.

An insurance franchisor was not entitled to summary judgment on claims that the owner of multiple franchises breached franchise agreements, the federal district court in Ann Arbor, Michigan, has decided. Additional discovery was needed concerning the execution of the franchise agreements; the franchisor’s alleged signing of the franchise owner’s name on various documents; the impact of a competing insurance agency opened across the street of a franchise; and into allegations that the franchisor improperly cut off the franchise owner’s access to insurance carriers (L.A. Insurance Agency Franchising, LLC v. Montes, August 24, 2016, Grand, D.).

L.A. Insurance Agency Franchising, LLC filed suit against the owner of four L.A. Insurance Agency stores, alleging breach of contract, trademark infringement, and unfair competition claims due to the owner’s unilateral termination of a franchise location and opening of a competing insurance agency. The owner of the franchises countered that L.A. Insurance made various misrepresentations to induce her to open the original franchise location; that revised franchise agreements were "adhesion contracts," which L.A. Insurance "foisted upon" the franchisees after placing them in duress; that L.A. Insurance fraudulently induced the owner into signing the various franchise agreements; that the owner was not provided with the required 14-day notice period to review the franchise agreements prior to execution; and that the revised agreements were unenforceable because they were not supported by consideration. L.A. Insurance moved for summary judgment.

The court denied the motion, finding that various factual matters in controversy were not fully developed. In particular, additional factual development concerning the execution of the franchise agreements would be needed. Details also needed to be fleshed out regarding L.A. Insurance’s signing of the owner’s name to numerous third-party documents, and the impact—if any—of that conduct on the defendants’ argument that the agreements benefitted L.A. Insurance while disadvantaging the defendants. The court also noted that additional discovery would be needed on L.A. Insurance’s position as to the impact of the new competing insurance agency across the street from one of the owner’s franchises. Lastly, more factual development was needed as to L.A. Insurance’s contention that the franchise owner acknowledged that there was no evidence that L.A. Insurance improperly cut off her access to insurance carriers.

The case is No. 14-14432.

Attorneys: Bernard J. Fuhs (Butzel Long) for L.A. Insurance Agency Franchising, LLC. Fred M. Thurber for Claudia Montes.

Companies: LA Insurance Agency Franchising, LLC

Cases: FranchisingDistribution MichiganNews