March 23, 2026|Franchise Frontlines
March 23, 2026 | United States District Court for the District of Idaho
Executive Summary
In a recent decision, Chief Magistrate Judge Patricco of the District of Idaho denied cross-motions for summary judgment in a dispute centered on whether a franchise agreement with Choice Hotels was ever formed. Plaintiffs alleged that no agreement existed and that documents purporting to evidence a franchise relationship were forged, while Choice Hotels argued that the agreement was validly executed and later ratified through the franchisee’s conduct. The court declined to resolve the dispute as a matter of law, concluding that genuine issues of material fact existed regarding assent, authority, and ratification, as well as whether required franchise disclosure documents were provided.
Relevant Background
The dispute arises from the operation of a hotel property in Sandpoint, Idaho, which had historically operated as a Quality Inn affiliated with Choice Hotels. After acquiring the property in 2018, the plaintiff entity allegedly chose to operate independently, while Choice Hotels contended that the parties proceeded through a relicensing process that resulted in a new franchise relationship.
According to Choice Hotels, the plaintiff submitted a relicensing application identifying a principal contact, received franchise agreement documents through an electronic signature platform, and executed those documents in December 2018. Choice Hotels further asserted that the plaintiff paid a franchise deposit, accepted an incentive payment, and subsequently held itself out as operating under the Quality Inn brand.
Plaintiffs disputed each of these assertions. They alleged that no franchise agreement was ever executed, that the purported electronic signature could not have been placed by the identified signatory, and that forensic analysis suggested the documents may have been executed by a third party without authorization. Plaintiffs also contended that the property was never operated as a Choice Hotels franchise and that the franchisor’s records did not reflect a typical franchise relationship, including the absence of operational oversight, system access, or fee activity.
The dispute escalated when Choice Hotels initiated arbitration proceedings seeking damages for alleged breach of the franchise agreement. Plaintiffs responded by filing suit, seeking declaratory and injunctive relief on the basis that no enforceable agreement existed and that arbitration could not be compelled.
Decision
The court denied both parties’ motions for summary judgment, concluding that the existence and enforceability of the alleged franchise agreement could not be resolved without a trial.
The court first addressed the issue of assent, emphasizing that contract formation requires mutual agreement. Choice Hotels relied on electronic signature records and related documentation to establish execution of the franchise agreement, while Plaintiffs presented competing evidence, including expert analysis challenging the authenticity of the electronic signature. The court determined that this conflict created a classic factual dispute that could not be resolved on summary judgment, particularly where credibility determinations and competing interpretations of technical evidence were required.
The court reached a similar conclusion regarding authority. Choice Hotels argued that the individual who allegedly executed the agreement possessed actual or apparent authority to bind the plaintiff entity, pointing to her role in the transaction, her designation as a principal contact, and her involvement in related business activities. Plaintiffs disputed that authority, asserting that no corporate authorization existed and that the individual lacked the ability to enter into a binding franchise agreement on behalf of the entity. Because the record contained competing evidence and inferences on these issues, the court found that authority could not be determined as a matter of law.
The court also declined to resolve Choice Hotels’ ratification argument. Choice Hotels contended that, even if execution or authority were disputed, the plaintiff ratified the agreement through its conduct, including payment of a franchise deposit, acceptance of incentive funds, and alleged operation under the franchisor’s brand. Plaintiffs disputed that any such conduct reflected knowledge or acceptance of a franchise relationship. The court concluded that whether the plaintiff knowingly accepted the benefits of a franchise agreement—and thereby ratified it—presented factual questions for the trier of fact.
Finally, the court rejected Plaintiffs’ attempt to obtain summary judgment based on alleged failures to provide a franchise disclosure document. The court found that whether such disclosures were provided, received, or acknowledged was itself subject to factual dispute and intertwined with the broader issues concerning execution and the parties’ relationship.
In light of these unresolved factual issues, the court held that neither party had met the standard for summary judgment.
Looking Forward
This decision highlights how disputes over franchise agreement formation may turn on fact-intensive inquiries that are not readily resolved at the summary judgment stage. Where parties present competing evidence regarding execution, authority, and subsequent conduct, courts may defer resolution to the trier of fact, particularly when credibility and technical evidence are involved.
The case also underscores the importance of clear and well-documented execution processes, especially where agreements are completed through electronic signature platforms. Allegations challenging the authenticity of electronic signatures—whether ultimately substantiated or not—may complicate enforcement efforts and delay resolution of threshold issues such as arbitrability.
In addition, the decision illustrates how post-execution conduct may be framed by parties as either evidence of ratification or as consistent with an independent business operation. Payments, branding, and communications may take on heightened significance in these disputes, particularly where the existence of an agreement is contested.
The court’s analysis of disclosure-related arguments further reflects that regulatory compliance issues may be difficult to resolve in isolation when they are intertwined with broader disputes regarding contract formation. As a result, parties asserting such defenses may still face fact-intensive proceedings before obtaining a definitive ruling.
More broadly, the case serves as a reminder that disputes over whether a franchise agreement exists at all may carry significant procedural implications, including whether arbitration provisions are enforceable. Where the existence of an agreement is itself in dispute, courts may require a more developed factual record before compelling arbitration or otherwise resolving the parties’ obligations.
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.
