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Court Watch

By Genevieve A. Beck and Cynthia Klaus
February 06, 2006

California's Anti-SLAPP Statute Barred Franchisee's Claim of Fraud

The California Court of Appeals held that a franchisee's claims should be stricken under the anti-SLAPP (Strategic Lawsuits Against Public Participation) statute because the allegedly fraudulent statements were made in the context of a judicial proceeding and because the franchisee failed to show a probability of success on her fraud claims. Navarro v. IHOP Properties, Inc., 36 Cal. Rptr.3d 385 (Cal. Ct. App. 2005).

In 2003, IHOP Properties, Inc. (“IHOP”) commenced an action against one of its franchisees for unlawful detainer of an IHOP restaurant, alleging that the franchisee breached a sublease and related franchise documents and was in arrears on rent. A stipulated judgment was filed on Aug. 21, 2003, for possession and damages, but execution was stayed as long as the franchisee met certain requirements, including timely payments and financial reporting. If the franchisee defaulted twice or defaulted once and failed to cure, then the judgment could be enforced immediately. In addition, the franchisee had until Dec. 12, 2003 to attempt to sell her franchise with IHOP's approval. IHOP agreed to review any proposed sale “without undue delay.”

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