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Jury to Decide If Denny’s Is Vicariously Liable for Death of Franchisee’s Employee

ALBUQUERQUE – A district court last November denied Denny's, Inc. motion for summary judgment, asserting that it could not be held vicariously liable in the wrongful death of a franchisee's employee killed during an armed robbery.

Leo Bautista of Lewis Brisbois Bisgaard & Smith reported that the U.S. District Court for New Mexico felt there were issues that should be tried by a jury regarding whether Denny's franchise agreement showed enough control over the day-to-day operations of the franchisee's business to create vicarious liability.

The Los Angeles attorney states the facts of the case. "On June 20, 2009, Stephanie Anderson was working at a franchised Denny's restaurant located in Albuquerque, New Mexico. Three assailants shot and killed her during an armed robbery at the restaurant."

The estate of the deceased employee brought the wrongful death suit against franchisee Barreras Enterprises and Denny's, Inc., the franchisor. The Anderson Estate argued that the franchisee and Denny's corporate caused Anderson's death by "failing to properly train personnel on emergency procedures, failing to implement adequate security measures, failing to exercise due care in respect to Anderson, and willfully ignoring the foreseeability of the crime which took place on June 20, 2009."

Bautista explained there was no dispute that Anderson was not an employee of Denny's, Inc. "Denny's, Inc. brought a motion for summary judgment seeking to have the claims against it dismissed on the grounds that it did not owe a duty to safeguard the franchisee's work premises from the criminal acts of third parties, and that it should not be held vicariously liable for any negligence committed by the franchisee in failing to provide appropriate security measures."

In analyzing the issue of vicarious liability, the court gave a summary of the franchisor's unique position, as to past law. It noted that franchisors are often caught between failing to exercise sufficient control to protect its trademark, and exercising so much control they are vicariously liable for the torts of the franchisees.

The court told of the countless requirements Denny's franchise agreements mandated, without commenting on their importance. Included were that Denny's, Inc. must approve restaurant site development, construction, and remodeling; Denny's, Inc. can enter the premises to make modifications necessary to protect the Denny's marks and related proprietary rights; the franchisee must comply with Denny's operations manual, food service standards, restaurant maintenance and repair, hours of operation, personnel standards, inspections, and training;  Denny's, Inc. may terminate the agreement if the franchisee fails to comply with the Denny's, Inc. requirements, including failing to remodel; the franchisee must operate twenty-four hours a day and seven days a week, or receive permission from Denny's, Inc. to deviate from that schedule.

Under New Mexico law, the district court noted that a franchisor may be vicariously liable for the franchisee's torts, depending on the degree of control the franchisor exercises or has a right to exercise over the franchisee. Because there is no clear precedent in various states the court stated, "The courts probably should have bright-line rules: either all franchisors should be vicariously liable or none should. Either rule is defensible, and would produce certainty to the franchise industry and to the insurance industry that insures the participants."

In the end, the district court saw its duty as determining how New Mexico's Supreme Court would rule on the issue. It concluded that it should be presented to a jury regarding whether Denny's, Inc., the franchisor, controlled or had the right to control the day-to-day operations of franchisee Barreras Enterprises' restaurant.  

The court denied Denny's motion for summary judgment.


Article:  U.S. District Court in New Mexico Weighs in on Franchisor Vicarious Liability

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