IFA FILES BRIEF TO PROTECT FRANCHISE BUSINESS ACTIVITIES
WASHINGTON, June 23, 2009—The International Franchise Association has filed an Amicus Curiae or “friend of the court” brief in Ganezer, et al v. DirectBuy, Inc. et al, asking the U.S. Court of Appeals for the Ninth Circuit to clarify that franchisees are legally distinct from franchisors, and therefore, the business activities of franchisees are irrelevant to determining the principal place of business of franchisors.
“Franchisors and franchisees are legally distinct entities, and we are concerned that the district court’s ruling reflects a fundamental misunderstanding of the nature of the franchisor/franchisee relationship,” said David French, IFA vice president of Government Relations. “Specifically, we are seeking clarification that the relationship between a franchisor and franchisee is defined entirely by contract, and therefore has less relevance to a diversity jurisdiction analysis than does the relationship between parent and subsidiary corporations.”
The case involves a ruling by a Los Angeles federal judge to remand to state court a consumer class action that DirectBuy had removed to federal court in accordance with the provisions of the Class Action Fairness Act (“CAFA”). The ruling at the district court was based on a diversity jurisdiction analysis that determined that DirectBuy failed to account for the activities of its franchisees in California in asserting that its principal place of business is Indiana.
French explained that the ruling poses a risk for franchising if it is not reversed by the Ninth Circuit, because the case could be cited as authority in a wide range of circumstances by other parties interested in ignoring the essential structure of franchising.
About the International Franchise Association
The International Franchise Association, the world’s oldest and largest organization representing franchising, is the preeminent voice and acknowledged leader for the industry worldwide. Approaching a half-century of service with a growing membership of nearly 1,300 franchise systems, 10,000-plus franchisees and more than 500 firms that supply goods and services to the industry, IFA protects, enhances and promotes franchising by advancing the values of integrity, respect, trust, commitment to excellence, honesty and diversity. For more information, visit the IFA Web site at