Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—W.D. Okla.: Indiana Franchise Act claims against individuals fail, (Oct 6, 2015)

By John W. Arden, J.D., LL.M.

Franchisees’ claims against individuals for violations of the Indiana Franchise Act were dismissed by the federal district court in Oklahoma City. The court found that the statutory provision imposing individual liability applied to only violations of the Indiana Franchise Act—not to the alleged violations of the Indiana Deceptive Franchise Practices Act—and that fraud claims against the individuals brought under the Franchise Act were not pleaded with particularity. Thus, the claims against individuals, based on violations of the Deceptive Practices Act, were dismissed with prejudice, and the claims against the individuals for fraud under the Franchise Act were dismissed without prejudice (Yummy Yogurt Indy, LLC v. Orange Leaf Licensing LLC, October 5, 2015, Cauthron, R.).

The franchisees filed claims alleging common law fraud, violations of the Indiana Franchise Act, and violation of the Deceptive Franchise Practices Act against a franchisor and four individuals. The defendants contended that the common law fraud claims were not pleaded with particularity, the Indiana Franchise Act claims could not be applied to individuals, and the Deceptive Franchise Practices Act claims were not pleaded with the requisite particularity. The franchisees conceded that the common law fraud claims were inadequately pleaded.

The franchisees claimed that violations of the Deceptive Franchise Practices Act by the four individuals could be violations allowing individual liability under §23-2-2.5-29 of the Franchise Investment Act. However, the court disagreed, ruling that the provision applied solely to violations of Chapter 2.5 of the Indiana Franchise Act.

Individual claims based on the Deceptive Franchise Practices Act violations were unavailing, since the statutory provisions “by their plain language” do not apply to individual defendants. The individuals were clearly not parties to any relevant franchise agreement. While individuals could theoretically be liable under §27 of the Franchise Investment Act—covering fraudulent and misleading acts—the Indiana Supreme Court has held that a claim brought under this section must be pleaded with particularity, according to the court. Although the current complaint did not plead this violation with particularity, the franchisees were given the opportunity to amend their complaint.

The case is No. CIV-15-272-C.

Attorneys: Jason A. Sansone (Sansone Law PLLC) for Yummy Yogurt Indy LLC, Yummy Yogurt Mudga LLC, Aditi 3 Yummy Yogurt LLC, S&A Restaurant IV LLC and Yummy Yogurt Mudfl LLC. Adam J. Strange (Resolution Legal Group) for Orange Leaf Licensing LLC, Orange Leaf Holdings LLC, OT Holdings LLC, OT Holdings Norman LLC and OT Holdings Lawton LLC.

Companies: Yummy Yogurt Indy LLC; Yummy Yogurt Mudga LLC; Aditi 3 Yummy Yogurt LLC; S&A Restaurant IV LLC; Yummy Yogurt Mudfl LLC; Orange Leaf Licensing LLC; Orange Leaf Holdings LLC; OT Holdings LLC; OT Holdings Norman LLC; OT Holdings Lawton LLC

Cases: FranchisingDistribution OklahomaNews