This is the second part of a two-part post on the most common claims plaintiffs assert to impose liability on a franchisor.  In the first post, we looked at claims involving the criminal acts of third parties.  We will now review a few other types of claims that can also impose liability on franchisors.

Liability Under The Dramshop Act

The Illinois Liquor Control Act (commonly referred to as the Dramshop Act), states in part:  Any person owning, renting, leasing or permitting the occupation of any building or premises with knowledge that alcoholic liquors are to be sold therein, or who having leased the same for other purposes, shall knowingly permit therein the sale of any alcoholic liquors that have caused the intoxication of any person, shall be liable, severally or jointly, with the person selling or giving the liquors.

Based on Illinois law, the Act requires a meaningful degree of control over the premises or other factors indicating involvement in the business of selling alcoholic beverages before liability under the Act can be established.  See, Wendt v. Myers, 319 N.E.2d 777 (1974); Linson v. Crow, 342 N.E.2d 350 (5th Dist. 1975); Cantrell v. DuQuoin State Bank, 647 N.E.2d 1114 (5th Dist. 1995).

The case of Jackson v. Moreno, 663 N.E.2d 27 (1st Dist. 1996) demonstrates how a franchisor can be found liable under the Dramshop Act at a franchised location.  In this case, a man purchased beer at a convenient store, became intoxicated and caused a motor vehicle accident resulting in the death of one person.  A Dramshop action was filed against the convenience store franchisor.  The franchisor leased the property and the lease contract gave the franchisor the exclusive right to sell alcoholic beverages on the leased premises.  The franchisor then entered into a franchise agreement, whereby the franchisee agreed to operate the convenience store.  The franchise agreement also provided the franchisee with training and ongoing services.   The appellate court found these facts supported that the franchisor maintained a meaningful degree of control over the premises, and could be considered owners or permitters subject to dramshop liability.

In contrast, in Pate v. Alian, 49 P.3d 85 (Oklahoma 2002), a restaurant franchisor was not considered a “commercial vendor” for on-premises sale of alcoholic beverages, and was thus not liable in a Dramshop action filed by an injured motorcyclist.  The franchisor did not hold an alcoholic beverage license, the decision to serve alcohol was the franchisee’s, and the franchisee had a duty of abiding by state alcoholic beverage laws.

Creating An Unsafe Environment / Retaining Control

There are many cases around the country involving delivery drivers causing motor vehicle accidents.  In those situations, plaintiffs attempt to impose liability on the franchisor for retaining control over the franchisee and/or creating an unsafe environment.

In Bruntjen v. Bethalto Pizza, LLC, 2014 IL App (5th) 120245 (2014), a pizza delivery driver crossed the yellow line while making a delivery, causing an accident.  The plaintiff filed a direct negligence count against the franchisor, alleging that it created an environment with its franchisees that put timely  delivery of food products ahead of public safety, and allowed the driver to operate a motor vehicle to deliver pizzas on its behalf without first ascertaining that he was capable of safely operating a motor vehicle.  The franchisor lost a motion for summary judgment and the jury ruled in favor of the plaintiff.

A similar ruling was made in Parker v. Domino’s Pizza, Inc., 629 So.2d 1026 (Florida 1993), where the court found that a franchisor exercised sufficient control over the franchisee’s operations and the franchisee was not a mere independent contractor, for purposes of determining whether the franchisor could be held liable under agency principles for injuries allegedly caused by the franchisee’s delivery driver.

In contrast, in Rainey v. Langan, 998 A.2d 342 (Maine 2010), the franchisor was not found liable for an accident that took place during a food delivery because the franchisor did not retain sufficient control over the franchisee so as to subject itself to vicarious liability for motorcyclist’s injuries.

Apparent Agency

The idea behind apparent agency is that if a principal creates the appearance that someone is his agent, he should not then be permitted to deny the agency if an innocent third party reasonably relies on the apparent agency and is harmed as a result.  Gilbert v. Sycamore Municipal Hospital, 622 N.E.2d 788 (1993).  Under the doctrine, a principal can be held vicariously liable in tort for injury caused by the negligent acts of his apparent agent if the injury would not have occurred but for the injured party’s justifiable reliance on the apparent agency. Gilbert, 622 N.E.2d 788.

Typically, this is not an easy claim to make against a franchisor but it is one way plaintiffs attempt to impose liability on franchisors.  The most significant obstacle to a plaintiff is the element of reliance.  As discussed in O’Banner v. McDonalds Corp., 670 N.E.2d 632 (1996), even if the plaintiff can prove that the franchisor’s advertising and other conduct could entice a person to enter a restaurant in the belief it was dealing with an agent of the corporation itself, that is not sufficient. In order to recover on an apparent agency theory, the plaintiff would have to show that he actually did rely on the apparent agency in going to the restaurant where he was allegedly injured. Id.; Miller v. Sinclair Refining Co., 268 F.2d 114, 118 (5th Cir.1959) (apparent agency theory rejected in affirming directed verdict for Sinclair Oil because there was absolutely no evidence as to the reason why appellant patronized filling station where he was injured).

In contrast, see Miller v. McDonald’s Corp., 945 P.2d 1107 (Oregon 1997), which held that a franchisor is vicariously liable only where the franchisor controlled the specific instrumentality or method that caused the plaintiff’s injury.  However, in so holding, the court determined there was a genuine issue of material fact as to whether a restaurant franchisor retained sufficient control over franchisee’s daily operations to create actual agency relationship and allow the franchisor to be held vicariously liable for a customer injured by a foreign object in her food.

As many of you know, plaintiffs have attempted other theories of recovery against franchisors, but often times those claims are not successful.  Knowing under what circumstances courts tend to impose liability on franchisors is very important for both franchisors and franchisees so they can act accordingly.