| Emfore Corp. v Blimpie Assoc., Ltd. |
| 2008 NY Slip Op 04187 [51 AD3d 434] |
| May 6, 2008 |
| Appellate Division, First Department |
| Emfore Corp., Appellant, v Blimpie Associates, Ltd., et al.,Respondents. |
—[*1] Corbally, Gartland and Rappleyea, LLP, Poughkeepsie (Vincent L. DeBiase of counsel), forrespondents. Kaufmann, Feiner, Yamin, Gildin & Robbins LLP, New York (David J. Kaufmann ofcounsel), amicus curiae.
Order, Supreme Court, New York County (Richard B. Lowe, III, J.), entered September 18,2006, which, to the extent appealed from as limited by the briefs, upon the grant of reargument,granted defendants' motion for summary judgment dismissing the complaint and deniedplaintiff's cross motion for summary judgment dismissing certain affirmative defenses,unanimously modified, on the law, to the extent of reinstating the seventh, eighth, ninth and tenthcauses of action pursuant to the Franchise Act (General Business Law § 680 etseq.) and dismissing the individual defendants' second affirmative defenses and the corporatedefendant's first, second, and sixth affirmative defenses to the extent that they rely on release andwaiver clauses, and otherwise affirmed, without costs.
The court erred in dismissing plaintiff's claims pursuant to General Business Law§§ 683 and 687 based on the representations made by plaintiff concerninginformation supplied to it by defendant, and in not dismissing defendant's affirmative defensesbased on those representations. We agree with defendant that the questionnaire to which plaintiffresponded is not violative of General Business Law § 687 (4) and (5) on its face. Indeed,by requesting franchisees to disclose whether a franchisor's representatives made statementsconcerning the financial prospects for the franchise during the sales process, franchisors caneffectively root out dishonest sales personnel and avoid sales secured by fraud. However,defendant, in direct contravention of the laudatory goal it claims to be advancing, is asking thisCourt to construe the representations made by plaintiff in the questionnaire as a waiver of fraudclaims. Such waivers are barred by the Franchise Act. Accordingly, defendant's attempt to utilizethe representations as a defense must be rejected (see generally Draper v Georgia Props.,230 AD2d 455, 457-458 [1997], affd 94 [*2]NY2d 809[1999]).
The court correctly held that reliance is an element of a fraud claim under the Franchise Act,which refers to "artifice to defraud" (General Business Law § 687 [2] [a]) and "fraud"(General Business Law § 687 [2] [c]). Subsumed in the definition of "fraud" is the notionof reliance, since a plaintiff must show reliance to sustain a fraud claim (see e.g. Shisgal v Brown, 21 AD3d845, 846 [2005]). However, issues of fact exist as to the extent and reasonableness ofplaintiff's reliance on defendants' alleged oral misrepresentations. Furthermore, as GeneralBusiness Law § 683 requires that an offering prospectus be registered with the AttorneyGeneral prior to the offer or sale of franchises, plaintiff properly alleged that defendants'representations, which were not contained in the prospectus, ran afoul of General Business Law§ 683.
However, the court correctly dismissed plaintiff's common-law fraud claims. The disclaimerswere not generalized boilerplate exclusions, but were contained in a separate rider, whichplaintiff's principal read and initialed, stating specifically that she was not relying on anyrepresentations by defendants (see Citibank v Plapinger, 66 NY2d 90, 94 [1985];General Bank v Mark II Imports, 293 AD2d 328 [2002]).
The court also correctly dismissed plaintiff's claims for breach of contract, as it isuncontroverted that plaintiff failed to provide written notice of any breach pursuant to article 18.2of the franchise agreement (see e.g. F. Garofalo Elec. Co. v New York Univ., 270 AD2d76, 80 [2000], lv dismissed 95 NY2d 825 [2000]). Concur—Lippman, P.J.,Mazzarelli, Saxe, Williams and Buckley, JJ.
Reargument granted and, upon reargument, the decision and order of this Court entered onDecember 20, 2007 (46 AD3d 389 [2007]) recalled and vacated and a new decision and ordersubstituted therefor; leave to appeal to the Court of Appeals denied; amicus curiae brief servedwith the moving papers deemed filed.