Class Action and Choice-of-Law

It is expensive for a franchisee to bring suit against their franchisor, particularly where they must litigate in a distant state. Litigation is expensive, and it helps to have several plaintiffs contributing to the legal fees and expenses. For this reason, franchisees seeking to act against their franchisor often attempt to be certified as a class.

There are federal rules relating to franchising, but most aspects of the Zee-Zor relationship is governed by state law.

The question becomes whether those differing state laws mean that a class action may not be certified, and 2 decisions this summer have given opposite views.

In General Motors v. Bryant (June 2008), the Arkansas Supreme Court held that a trial court was not even permitted to conduct a choice-of-law analysis, and permitted class certification. This was a broad holding, and it is worth noting that the Bryant case potentially involves application of the state law of 39 different states.

To the contrary, the following month a New York federal court ruled In re Grand Theft Auto Video Game Consumer Litigation (S.D.N.Y. July 30, 2008) that the multiplicity of states whose law would have to be applied meant that the class could not be certified.

Given that many putative franchisee class actions would involve similar choice-of-law concerns, is the franchisee class action going the way of the dodo? The answer may depend on where the suit is brought.