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Emfore v. Blimpie: License to Commit Fraud or Common-Sense Decision?

By J. David Mayberry and Rupert M. Barkoff

Better ingredients, it is said, make for a better pizza, and, as Emfore Corp. v. Blimpie Associates, Ltd. (N.Y. Sup. Ct. Sept. 18, 2006) suggests, better documents make for better decisions, at least if you are the franchisor.

The facts of Emfore are unremarkable in that most of us have come across similar situations in our careers. Plaintiffs franchisees want to buy a franchise. During the course of the sales negotiations, defendant franchisor's sales representatives toss out various numbers, presumably to whet the interests of the prospective purchasers. In this case, the numerical representations were in some cases puffery, and in other cases factual. In any event, franchisees buy the franchise, fail, and then bring suit claiming that they were defrauded in the sales process. Franchisor points out that the documents contain an integration clause, making reliance on these outside-the-document representations inherently suspect. Generally, franchisor wins.

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