Class Action

Quiznos Class Action Defense Cases–Harlow v. Sprint: Colorado Federal Denies Grants Class Action Treatment Of Class Action Complaint By Prospective Franchisees Against Quiznos Because Of Class Action Bar In Agreement

By Michael J. Hassen

Class Action Bar in Franchise Agreement Precluded Class Action Certification of Lawsuit by Franchisees Against Quiznos because Class Action Bar was not Unconscionable under Colorado Law Federal Court Holds

Plaintiffs filed a class action against various Quiznos entities and others (collectively “Quiznos”) alleging defendants misled prospective franchisees; the class action complaint asserted that it was only after plaintiffs signed 30-page franchise agreements that defendants revealed the restaurant locations were “not as profitable as Quiznos had promised.” Bonanno v. The Quizno’s Franchising Co., LLC, ___ F.R.D. ___ (D.Colo. April 20, 2009) [Slip Opn., at 1-2]. According to the allegations underlying the class action, Quiznos also failed to provide plaintiffs with “any of the promised expert help,” but nonetheless demanded that they open restaurants within the one-year deadline set forth in the franchise agreements or the agreement would be terminated and Quiznos would keep the franchise fee. Id., at 2. The class action centered, then, on claims on behalf of “sold but not opened franchisees,” id. (Defendants conceded that “not every signed franchise agreement results in a functioning restaurant,” id., at 4.) Plaintiffs moved the district court to certify the litigation as a class action, id., at 3. Defendants opposed class action treatment, primarily on the ground that Section 21.4 of the franchise agreement prohibits class action lawsuits between the franchisor and the franchisee. Id., at 3. The district court held that class action waiver was enforceable and, accordingly, that class action certification was not warranted. The federal court therefore denied the motion. (We do not discuss in detail the 53-page opinion filed by the district court; it is well worth reading and it is available at the link following this article. For our purposes, the important issue is the enforceability of the class action waiver in the franchise agreement.)

Plaintiffs argued that “[t]he most significant issue…is whether, in light of the provision of the franchise agreements that purports to bar class actions, this case can be maintained as a class action in the first instance.” Bonanno, at 3. The district court held a hearing on the validity of the class action bar, and accepted supplemental briefing on the issue. Id., at 3-4. The district court’s order contains a lengthy discussion of the facts that “help elucidate the Court’s decision to enforce the class action bar.” Id., at 4. We do not summarize those facts here, see id., at 4-17, or the federal court’s summary of the standard of review, see id., at 17-19, or the court’s summary of the “history and evolution of class action litigation,” see id., at 20-25, because the district court held that the class action bar was enforceable and therefore did not address the merits of Rule 23, id., at 19.

Full post as published by Class Action Defense Blog on May 04, 2009 (boomark / email).