August 13, 2025|Franchise Frontlines
August 13, 2025 | Appellate Division, Second Department, New York | Published Opinion
Executive Summary
In a published decision, the Appellate Division held that Budget Rent A Car—a U.S.-based franchisor—was not subject to general jurisdiction in New York but denied Budget’s requests for dismissal based on specific jurisdiction and for summary judgment on vicarious liability. The case arises from a car accident in Jamaica involving a vehicle owned and operated by a Jamaican company alleged to be a Budget franchisee. The plaintiffs argued that Budget exercised sufficient control over its international franchisee to establish a principal–agent relationship. Budget denied that allegation and moved to dismiss before discovery. The appellate court found that Budget established it was not “at home” in New York, but that factual disputes remained regarding potential specific jurisdiction and the extent of Budget’s operational control under the International Unit Franchise Agreement. The court affirmed the trial court’s ruling and allowed discovery to proceed.
Relevant Background
According to the allegations, the plaintiffs were passengers in a rental vehicle driven in Jamaica by another defendant when the vehicle allegedly developed mechanical issues that caused a loss of control and resulted in personal injuries. The vehicle was owned by Tropic Island Trading Company, a Jamaican entity. The plaintiffs allege that Tropic operated under an International Unit Franchise Agreement with Budget Rent A Car, and that Budget, as franchisor, exercised operational control over Tropic’s rental operations abroad. Budget disputes these allegations and asserts that Tropic is independently owned and operated.
The plaintiffs commenced suit in New York against both the driver and Budget. Budget moved to dismiss for lack of personal jurisdiction and separately moved for summary judgment, arguing that it could not be liable as a franchisor and that it lacked any relevant conduct in New York connected to the Jamaican accident. Budget submitted an affidavit stating it is a Delaware corporation with a principal place of business in New Jersey, operates rental locations in all fifty states, and maintains international franchise relationships worldwide. Based on those facts, Budget argued that it was not “at home” in New York and that the New York courts lacked authority to adjudicate claims arising from injuries abroad.
The plaintiffs opposed dismissal and argued that Budget’s extensive commercial activity in New York, combined with its alleged control over Tropic’s operations under the franchise agreement, warranted jurisdictional discovery. They also argued that Budget had not produced enough evidence to eliminate factual disputes concerning the nature of the franchise relationship or the degree of control exercised over the Jamaican operations.
Decision
The Appellate Division affirmed the denial of Budget’s motion. The court first held that general jurisdiction did not exist. Even though Budget maintained rental locations in New York, the court concluded that such in-state operations, standing alone, did not render Budget “essentially at home” in New York. The court noted that Budget’s incorporation in Delaware and headquarters in New Jersey were dispositive on general jurisdiction, and its nationwide and international presence did not alter that conclusion.
The court reached a different conclusion regarding specific jurisdiction. Budget had purposefully availed itself of the New York market through ongoing rental operations, which satisfied the first prong of New York’s long-arm statute. The remaining question was whether the plaintiffs’ claims were sufficiently related to Budget’s New York activities. While Budget argued there was no connection between the Jamaican accident and any New York-based operations, the appellate court held that it was premature to resolve that question without discovery. The court emphasized that the “articulable nexus” standard under CPLR 302 is relatively permissive and does not require strict causation. Because Budget’s submissions did not conclusively rule out the possibility that relevant corporate conduct, franchisor decisions, or operational oversight occurred in New York, the court permitted the jurisdictional claim to proceed pending factual development.
The court also affirmed the denial of Budget’s summary judgment motion. It explained that, at this early stage, Budget had not eliminated triable issues of fact concerning whether a principal–agent relationship existed between Budget and Tropic or whether Budget exercised a “high degree of control” over the Jamaican rental operations. The plaintiffs pointed to the International Unit Franchise Agreement and the franchisor’s worldwide branding and operational standards, while Budget asserted that Tropic operated independently. Without discovery, the court could not determine whether Budget’s oversight was limited to brand-protection requirements or whether it extended into day-to-day operational control. As New York law requires clear evidence of limited control before a franchisor can be dismissed as a matter of law, the court concluded that summary judgment was inappropriate.
Looking Forward
This decision illustrates how courts analyze jurisdictional and agency questions when a franchisor seeks early dismissal before discovery. The holding reinforces that general jurisdiction will not attach to franchisors merely because they conduct business in a given state; the “at home” test remains narrowly applied. However, franchisors may still face specific jurisdiction where courts believe factual development may uncover an articulable connection between in-state business activities and an out-of-state claim.
The decision also highlights the importance of developing a full evidentiary record before moving for summary judgment on agency or vicarious liability claims. Courts generally require a franchisor to produce contractual provisions, operational policies, and evidence of day-to-day practice that demonstrates limited control over a franchisee’s business. When such evidence is absent or disputed, summary judgment may be postponed until discovery clarifies the relationship. Franchisors operating internationally should take particular note: cross-border disputes can still draw domestic litigation if the franchisor maintains ongoing commercial activity in the forum state and the record on control is not yet fully developed.
Although the outcome in this case turns on the allegations and procedural posture, franchisors may view the decision as a reminder to ensure that franchise agreements clearly delineate operational independence, that brand standards do not inadvertently suggest managerial authority, and that internal documentation reflects the franchisor’s limited role in franchisee operations. These steps can reduce uncertainty when defending against jurisdictional or vicarious liability claims in multi-state or international franchise systems.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
