October 23, 2025|Franchise Frontlines
October 23, 2025 | Court of Appeals of Ohio, Eighth District | Published Opinion
Executive Summary
In a published decision, the Court of Appeals of Ohio, Eighth District affirmed in part, reversed in part, and remanded a dispute arising from a $33.5 million settlement involving the sale of fast-food franchise restaurants and related discrimination claims. A law firm sought to recover attorney’s fees from its former client and affiliated entities under theories of fraud, quantum meruit, and breach of contract. The defendants argued that the fee arrangement did not extend to corporate entities and that any recovery should exclude the value of the franchise assets. The court held that the law firm could recover under quantum meruit from the corporate entities that benefited from the representation, but concluded that the jury’s $8.5 million fee award was unsupported by the record and contrary to the parties’ intent. The court ordered a new trial limited to damages.
Relevant Background
The dispute arose from legal representation provided in connection with a discrimination lawsuit against a fast-food franchisor and a parallel effort to negotiate the sale of multiple franchise restaurants. The client, a sophisticated multi-unit operator, owned numerous franchised locations through affiliated corporate entities and retained counsel to pursue claims while also leveraging the litigation to facilitate a potential exit from the system.
The parties executed a contingency fee agreement that applied to the proceeds of the litigation but expressly contemplated that the value of the franchise restaurants would be treated separately. The agreement reflected the parties’ shared understanding that counsel would be compensated based on value created through the litigation itself, not on the underlying value of the franchise assets.
Following a mediated resolution, the client and affiliated entities obtained a $33.5 million settlement that included both compensation for the asserted claims and consideration tied to the transfer or buyout of franchise interests. A dispute then arose over attorney’s fees, particularly after the client challenged the scope and enforceability of the original fee agreement.
The law firm filed suit seeking recovery of fees, asserting that the agreement was either enforceable or, alternatively, that it was entitled to recover the reasonable value of its services under a quantum meruit theory. The litigation focused heavily on whether the corporate entities were bound by the agreement and how to properly value the services rendered in light of the combined litigation and franchise transaction.
Decision
The appellate court affirmed the trial court’s determination that the law firm could recover from the corporate entities under a quantum meruit theory. The court emphasized that, even in the absence of a written agreement with those entities, the undisputed evidence demonstrated that the firm provided services that benefited them and that those services were rendered with the expectation of payment.
At the same time, the court rejected the magnitude of the jury’s damages award. The jury had awarded $8.5 million in fees, a figure that the court found was not supported by competent, credible evidence. Central to the court’s analysis was the distinction between the value generated by the litigation and the preexisting value of the franchise assets.
The court repeatedly emphasized that the parties never intended for attorney’s fees to be calculated based on the full settlement amount where a significant portion of that amount reflected the fair market value of the franchise restaurants. Both the client and counsel had understood that the contingency fee would apply only to the incremental value attributable to the litigation, not to the underlying asset value of the franchises.
The court found that testimony suggesting a higher fee based on the total settlement amount was inconsistent with both the written record and the parties’ course of dealing. In particular, the court noted that expert testimony introduced at trial regarding a substantially higher fee calculation was not grounded in the framework the parties had actually used and conflicted with the expert’s own prior analysis.
Because the record overwhelmingly demonstrated that the franchise value component was to be excluded from any contingency-based calculation, the court concluded that the jury’s award reflected a misunderstanding of the appropriate valuation framework. The court therefore reversed the damages award and remanded for a new trial limited to determining the reasonable value of the services provided.
Looking Forward
This decision highlights a recurring issue in franchise systems where litigation outcomes and franchise asset value intersect. Multi-unit operators often pursue claims while simultaneously negotiating transfers or exits, and those parallel tracks can create significant ambiguity if economic allocations are not precisely defined.
From a franchisor perspective, the case illustrates the importance of clearly distinguishing between operational value and litigation-driven value in any transaction involving franchise assets. Where those concepts are not carefully separated, downstream disputes may arise over how value is allocated among stakeholders, particularly in high-dollar resolutions.
The decision also underscores the role of corporate structure in franchise systems. Where franchise operations are conducted through multiple affiliated entities, the absence of consistent documentation across those entities may create exposure under equitable doctrines, even where formal agreements are limited in scope. Ensuring alignment between ownership structure, contractual obligations, and operational reality remains critical in complex franchise organizations.
More broadly, the court’s analysis reinforces that valuation frameworks in franchise contexts are highly fact-specific and grounded in the parties’ actual intent. Attempts to expand recovery beyond that framework—particularly where tied to preexisting franchise value—may face significant judicial scrutiny. For franchisors navigating disputes involving transfers, buyouts, or system exits, this case serves as a reminder that how value is defined at the outset may ultimately control how it is treated in litigation.
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 Partner at Buchalter LLP 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.
