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11 Franchise L.J. 1 (1991-1992)

handle is hein.journals/fchlj11 and id is 1 raw text is: a-nchise aw .  ur i.

Defending Against Litigation by
Third Parties in the Franchise Context
by Carmine R. Zarlenga*
Washington, D.C.

Litigation between franchisors and
their franchisees has become com-
monplace. Attorneys familiar with
the types of claims commonly
made in franchise litigation can,
for the most part, counsel their
clients on a rational basis. Books,
articles, and even treatises are
available to assist. But no sooner
than   the  franchise  litigator
achieves a modicum of comfort, a
whole new type of franchise liti-   Carmine R. Zarlenga
gation begins to emerge. Third parties, who may be com-
plete strangers to the franchise relationship, have entered
the picture with increasing frequency. Some examples of
third parties who may bring lawsuits relating to a franchise
relationship are franchise creditors, prospective franchi-
sees, customers, shareholders, and employees. They have
leveled their claims against franchisors and franchisees alike,
bringing more uncertainty into an already complex field.
Some examples illustrate that third-party lawsuits can be
as diverse and imaginative as any. In one case, the bank of
a terminated franchisee brought suit against the franchisor
on eleven different causes of action, including claims that
the franchise had been wrongfully terminated.' More re-
cently, a repairman filed a personal injury suit against a fast-
food franchisor because he was injured on the premises of
one of its independently owned franchisees.2 Many third-
party lawsuits appear unpredictably on the franchisor's
Third parties have attempted to predicate liability on a
vast array of common law and statutory theories. This anal-
ysis considers the most common types of actions pursued
by third parties and illustrates ways to resolve such litiga-
*Mr. Zarlenga is an associate with the firm of Howrey & Simon in Wash-
ington, D.C.

tion at the early stages based on existing precedent. Also
offered are practical suggestions to minimize exposure to
third-party claims altogether.
Breach of Contract Theories
Third parties often attempt to bring breach of contract
actions for damages or injunctive relief against both fran-
chisors and franchisees. While not always well articulated,
such claims usually attempt to rely on the terms of the fran-
chise contract. The best defense to such claims is to empha-
size that the third party is not a party to the franchise
contract. As a general rule, courts have not permitted third
parties to maintain suit for breach of a franchise contract
(continued on page 19)

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