Mere breach of contract isn’t a tort in a franchise relationship

The distinction between franchisor actions that merely breach the contract and those that interfere with the business relations of franchisees—a tort—can be a little fine, but the New York Court of Appeals has clarified things considerably.  In Carvel Corp. v. Noonan the court ruled that a mere breach of the franchise agreement is not enough to trigger the tort; the plaintiff must show an illegal act, malicious motive, or egregious misconduct.

The implications of the decision on franchise agreements is analyzed in a client article by Lewis G. Rudnick, Barry Heller and W. Parker Baxter of Piper Rudnick LLP. Their take? The New York courts will look to contract law, not tort, to handle franchise disputes, so careful planning is critical.