Kentucky Supreme Court Clarifies and Limits Franchisor Liability in Kentucky

February 4, 2008

The Kentucky Supreme Court ruled that Papa John's International, Inc. was entitled to summary judgment on defamation and malicious prosecution claims based on the alleged conduct of a franchisee's pizza delivery driver. The Court set forth the standard governing a franchisor's vicarious liability for its franchisee's tortious conduct as a matter of first impression in Kentucky:

[T]he franchisor is vicariously liable for the tortious conduct of the franchisee [including its employees] when it, in fact, has control or right of control over the daily operation of the specific aspect of the franchisee's business that is alleged to have caused the harm.

The Court noted that the franchise relationship is “unique” and that vicarious liability principals are “not easily transferrable to the franchise relationship.” Likewise, the Court determined that general “right to control” provisions in franchise agreements, and provisions regarding a franchisor's control of aspects of the business not pertinent to the tortious conduct, do not give rise to franchisor liability. A franchisor's control or right to control the franchisee must be specific to the alleged wrong.

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