Despite Successes in Fending Off Claims Based on Actual Authority, Franchisors Still Face Difficulties in Defending Claims Based on Ostensible Authority

by Charles G. Miller

June 2017 – The recent settlement last year of a class action against McDonald’s Corp. for $3.75 million based on claims that McDonald’s Corp. was liable for Labor Code violations of its franchisee brings home the dilemma that many franchise companies are facing. The settlement is the culmination of a disturbing trend in franchise vicarious liability cases that has emerged in the past several years, where the courts have blindly accepted ostensible authority arguments to defeat what should have been summary judgment motions in the franchisor’s favor on the issue of ostensible authority. This article briefly discusses the legal landscape and offers possible drafting solutions to the business lawyer.  See a copy of the article here.