Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—S.D. Ohio: Magnolia Soap franchisee’s false advertising claims survive dismissal, (Oct 28, 2026)

By Martin A. Steinberg, J.D.

A franchise agreement’s integration clause did not bar Lanham Act and state false advertising claims alleging misleading representations about franchise profitability and product ingredients.

The federal district court in Columbus, Ohio largely denied a motion to dismiss a lawsuit brought by a Magnolia Soap & Bath Co. franchisee alleging false advertising, fraud, breach of contract, and violations of Ohio law arising from alleged misrepresentations about franchise profitability, operating costs, and product ingredients. The court held that the franchisor failed to timely invoke a contractual mediation requirement and declined to enforce a Mississippi forum-selection clause because of Ohio’s public policy protecting franchisees, although it left open the possibility of reconsidering venue after further factual development. The court also ruled that the franchise agreement’s integration clause did not bar the franchisee’s false advertising claims under the Lanham Act and Ohio Deceptive Trade Practices Act, allowing those claims to proceed without determining their ultimate merits. However, the court dismissed all claims against Magnolia’s founder and owner, finding insufficient allegations to justify piercing the corporate veil (Array Of Soap, LLC v. Magnolia Soap and Bath Co. FRCH, LLC, No. 2:25-cv-00339-DRC-CMV (S.D. Ohio Oct. 25, 2026)).

Background. Array of Soap, LLC, operates a Magnolia Soap & Bath Co. franchise in Lancaster, Ohio. Before Array signed its April 2023 franchise agreement, Magnolia provided a Franchise Disclosure Document (FDD) reporting 2021 revenues of $218,035 to $758,037 for corporate and licensed outlets. Its representatives allegedly claimed that the listed locations earned 30%–40% net profits and that the cost of goods sold would not exceed 30% of revenue. Array paid a $49,500 franchise fee and agreed to ongoing payments totaling 8% of gross sales.

After opening in September 2023, Array alleged that Magnolia failed to provide promised training and advertising, imposed excessive markups on required supplies, and repeatedly mishandled orders. Supply costs allegedly reached 39% of revenue. Array also claimed Magnolia inflated franchise revenue figures and falsely advertised products as domestically sourced and phthalate-free.

In December 2024, Array sent Magnolia a demand letter, but Magnolia allegedly failed to invoke mediation within the contractual 30-day period. Array sued for violations of the Ohio Business Opportunity Plans Act, Lanham Act, and Ohio Deceptive Trade Practices Act, as well as fraud, breach of contract, and unjust enrichment.

Defendants sought dismissal for failure to mediate, alternatively requested transfer to Mississippi, and moved to dismiss claims against Magnolia founder Magen Bynum and the false advertising claims.

Failure to mediate. The court rejected Magnolia’s argument that Array’s lawsuit should be dismissed for failure to comply with the franchise agreement’s mandatory mediation provision. Under the agreement, Array was required to provide written notice of its claims, after which Magnolia had 30 days to submit the dispute to nonbinding mediation. The court determined that compliance with this contractual condition precedent should be evaluated under Federal Rule of Civil Procedure 12(b)(6), rather than as a jurisdictional issue under Rule 12(b)(1).

Array sent its demand letter by certified mail to the address specified in the agreement, and delivery was confirmed on December 13, 2024. Although Magnolia maintained that it never actually received the letter, the agreement expressly provided that notice was effective upon delivery. Magnolia did not request mediation until February 14, 2025, well beyond the January 12 deadline. Accordingly, the court concluded that Array satisfied its contractual obligations and Magnolia failed to timely exercise its mediation rights.

Forum-selection clause. The court also denied Magnolia’s request to transfer the litigation to Mississippi under 28 U.S.C. § 1404(a), notwithstanding the franchise agreement’s mandatory Mississippi forum-selection clause.

Although forum-selection clauses generally receive substantial deference, the court explained that they may be unenforceable when they contravene a strong public policy of the forum state. The Ohio Business Opportunity Plans Act (OBOPA) expressly invalidates contractual provisions requiring litigation outside Ohio or application of another state’s law with respect to claims enforceable under the statute. The court determined that these provisions establish a strong Ohio public policy against enforcing such clauses in covered franchise disputes.

Magnolia argued that OBOPA did not apply because it had complied with the Federal Trade Commission’s franchise disclosure requirements, which would exempt the transaction from the Ohio statute. However, Array specifically alleged material misrepresentations in Magnolia’s Franchise Disclosure Document (FDD). Because the limited record did not allow the court to determine whether Magnolia materially complied with federal disclosure requirements, the court declined to enforce the forum-selection clause at this stage. Magnolia could renew its transfer motion upon establishing compliance.

Claims against Bynum. The court dismissed all claims against Magnolia founder and owner Magen Bynum, finding that Array failed to plausibly allege grounds for piercing the corporate veil. Applying Mississippi law, the state in which Magnolia was organized, the court explained that veil piercing requires evidence of frustrated contractual expectations, flagrant disregard of corporate formalities, and fraud or equivalent misconduct.

Although Array alleged that Bynum controlled Magnolia, participated in fraudulent conduct, commingled assets, and used corporate funds for personal expenses, the allegations lacked sufficient factual specificity. Array also failed to allege that it believed it was contracting with Bynum individually rather than Magnolia. Without details identifying the allegedly commingled assets or personal expenditures, the allegations did not establish the extraordinary circumstances necessary to disregard Magnolia’s separate legal existence.

Lanham Act and Ohio Deceptive Trade Practices Act claims. The court refused to dismiss Array’s false advertising claims under the Lanham Act and Ohio Deceptive Trade Practices Act (ODTPA), rejecting Magnolia’s argument that the franchise agreement’s integration clause and the parol evidence rule barred reliance on representations outside the agreement. The court, however, acknowledged potential weaknesses in Array’s claims.

The Lanham Act generally addresses competitive injuries resulting from false statements made in commercial advertising or promotion, rather than injuries suffered by purchasers deceived into acquiring disappointing products or franchises. Consequently, statements appearing exclusively in an FDD might not constitute actionable commercial advertising, and Array's alleged injuries might not qualify as commercial injuries.

However, Magnolia did not advance those arguments, relying instead exclusively on the integration clause and parol evidence rule. The court found this defense insufficient because at least some alleged misrepresentations appeared to arise from the FDD or franchise agreement itself. Moreover, an integration clause defining the parties’ contractual obligations does not necessarily preclude statutory false advertising claims based on extracontractual statements.

The alleged misrepresentations included statements concerning franchise revenues, operating costs, profitability, and the composition and sourcing of Magnolia products. Although these allegations might face other legal obstacles, the integration clause did not independently foreclose liability under the Lanham Act or ODTPA. Accordingly, the court granted the defendants’ motion only as to Bynum, allowing the remaining claims to proceed in Ohio federal court.

The Case is No. 2:25-cv-00339-DRC-CMV.

Judge: Cole, D.

Attorneys: Katherine C. Ferguson (Allen Stovall Neuman & Ashton LLP) for Array of Soap, LLC. Barbara L. Gibson (Fisher Zucker LLC) for Magnolia Soap and Bath Co. FRCH, LLC.

Companies: Array of Soap, LLC; Magnolia Soap and Bath Co. FRCH, LLC

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