Recently, there has been a noticeable increase in the use of expert witnesses to resolve business disputes over franchising. See, e.g., Philip F. Zeidman, “The Rise of the Expert Witness,” Franchise Times, Jan. 2016. This trend seems likely to continue, and it is one that franchisers, franchisees, and their attorneys should take note of. This article discusses instances in franchise litigation where expert witnesses can be of tremendous value.
Generally, “There is almost no facet of franchising that does not lend itself to expert witness testimony, and almost any you can identify has probably been the subject of such testimony.” According to one franchising attorney, topics that expert witnesses have addressed in court “have included the adequacy of a franchisor’s discharge of its obligations.” There are certain key instances in franchise litigation where expert evidence is particularly useful. For example:
(1). Regulatory Scheme: Expert witnesses can be extremely helpful in explaining the regulatory scheme that governs a particular franchise/franchise agreement, because “most judges, juries, and arbitrators are unfamiliar with the technical workings of franchise law.” Rupert M. Barkoff Et Al., “Using Franchise Attorneys as Expert Witnesses—Not Just for Legal Malpractice Cases Anymore,” American Bar Association 35th Annual Forum on Franchising, 2012. For example, where the issue being litigated is whether a business’s failure to register as a franchise should be illegal, the question appears to whether or not that business actually was, in fact, a franchise (and therefore, required to register as such). See id. In such examples, expert witness testimony can assist in “explain[ing] that the law was authorized to regulate the sale of franchises so that the buyer would get accurate information and the statute was designed to insure that and insure that the regulatory agency had an opportunity to review the disclosures.”
(2). Industry Custom: In all likelihood, the area in which expert witnesses are most frequently used in franchise litigation involves determining what the industry’s practices and customs are. Experts who have extensive familiarity with a particular franchise industry can make very useful witnesses for attorneys on either side of a franchise dispute. Past courts have allowed testimony that indicates franchise industry-specific patterns and practices to address whether a particular contact or duty was breached. See, e.g., TCBY Systems, Inc. v. RSP Co., Inc., 33 F.3d 925, 929 (8th Cir. 1994). Moreover, expert evidence regarding custom and practice may be “admissible where a contract is ambiguous or uses words that have a certain meaning in the trade that is not necessarily obvious to the average juror.” Barkoff, supra.
(3). Causation & Damages: As one legal commentator notes, “Issues of causation often arise in franchise cases when a franchisee claims damages based on failures or unfair or improper conduct by the franchisor. A franchisor may oppose, in response, that the franchisee or some third party caused the claimed damages.” Id. Where such allegations are made on either side, an expert witness can be invaluable. Expert testimony can address such issues as “whether the challenged conduct could have caused the claimed damages” in franchise litigation. Id.
Franchise litigation can be difficult for the laypeople who involve juries to understand, but even judges and arbitrators may require assistance in understanding its complexities. Expert witnesses who are familiar with many issues and nuances of franchise law provide attorneys with an indispensable resource that can help to resolve legal matters successfully.