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Liberty Tax Ruled Vicariously Liable for Illegal Franchisee Advertising

Liberty Tax Service
An unrelated franchise outside California advertises its services. photo/bmm

Franchisor Liberty Tax Service was ruled vicariously liable by a California state appellate court for its franchisees' illegal advertising. Liberty tried to win the day by stating that its control over its franchisees was limited, so it should not be held liable for their ads. The court consulted Liberty's operations manual and arrived at a decision.

Attorneys Quentin R. Wittrock and Maisa Jean Frank of law firm Gray Plant Moody write on Lexology's website:

The appellate court found that the Liberty operations manual demonstrated a level of control far in excess of what it needed to police its mark. The court emphasized Liberty’s “particularly extensive” right of control over franchisee advertising, which Liberty used to not only protect its marks, “but also to dictate business strategy to franchisees.”

In fact, continue authors Wittrock and Frank, the court found:

. . . that Liberty retained the right to “complete control” over franchisee advertising operations.

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