Franchise companies are especially susceptible to class action complaints. The class actions are often brought by consumers buying the franchisor’s branded products and services, and by franchisees claiming systemwide contractual defaults.
Many franchisors seek to thwart class treatment by requiring arbitration of disputes by consumers and franchisees with arbitration clauses that contain waivers of class treatment. Recent U.S. Supreme Court decisions have confirmed this strategy will defeat class treatment for franchisees and consumers where the arbitration clause waives class treatment. (See Stolt-Nielson v. AnimalFeeds International Group (2010) and AT&T Mobility v. Concepcion (2011).) These decisions overrule state law decisions of unconscionability as conflicting with the federal policy encouraging arbitration.
