May 05, 2025|Publications
May 5, 2025 | Texas Court of Appeals, Fifth District (Dallas) | Unpublished Opinion
Executive Summary
In an unpublished opinion, Justice Lee of the Texas Court of Appeals for the Fifth District reversed a multimillion-dollar judgment against Luxottica of America Inc., the Pearle Vision franchisor, and vacated a $1.5 million sanctions order issued by the trial court. The appellate court held that the franchisee, Brave Optical, Inc., could not, as a matter of law, establish the justifiable reliance element necessary for common-law fraud, civil conspiracy, or statutory fraud because the franchise and purchase documents contained explicit non-reliance and “as-is” disclaimers. The court further found that the sanctions and contempt order imposed by the trial court lacked both clarity and evidence of bad faith, rendering it unenforceable. The court remanded for entry of judgment in Luxottica’s favor for unpaid royalties and advertising fees and to determine attorneys’ fees owed as the prevailing party.
Relevant Background
This case arose from the 2016 sale of two Pearle Vision franchise locations to Brave Optical, owned by Jeffrey and Dawn Gray. The stores were previously operated by Alex and Milana Gutman through their entity Gutman Vision, Inc. Luxottica, as franchisor, approved the assignment and entered into a new Franchise Agreement, referred to as a “License Agreement,” with Brave Optical. Following the sale, the relationship between Brave Optical and Luxottica deteriorated, culminating in litigation initiated by the franchisees in 2017.
The plaintiffs alleged that Luxottica, along with EyeMed Vision Care, LLC (a Luxottica subsidiary), engaged in fraud, conspiracy, and negligent misrepresentation arising from the sale. They asserted that Luxottica had assisted the Gutman sellers in misrepresenting the profitability and operational condition of the stores. Luxottica denied all allegations and counterclaimed for breach of contract, asserting that Brave Optical had failed to pay required royalties and advertising contributions under the franchise documents.
The jury returned a verdict for Brave Optical, awarding $1.5 million in actual damages, $3 million in exemplary damages, and more than $598,000 in attorneys’ fees, later supplemented by a $1.5 million sanctions award for alleged contempt. Luxottica appealed.
Decision
The Court of Appeals began by reaffirming that justifiable reliance is an indispensable element of both common-law and statutory fraud in Texas. Citing Grant Thornton LLP v. Prospect High Income Fund, 314 S.W.3d 913, 923 (Tex. 2010), and Schlumberger Technology Corp. v. Swanson, 959 S.W.2d 171, 181–82 (Tex. 1997), the court explained that where a written contract expressly disclaims reliance on any representations not contained within it, a plaintiff cannot later claim to have relied on such representations.
The franchise-related documents at issue were explicit. The Assignment and Assumption of License Agreement, executed in June 2016, stated that Brave Optical “is familiar with all obligations being assumed” under the franchise agreements and “irrevocably and absolutely assumes each and every duty and obligation of [Gutman Vision].” The Franchise Agreement (referred to as a “License Agreement” under Luxottica’s terminology change in 2013) further provided: “No representations or warranties have been made by [Luxottica] regarding Franchisee’s future success relating to the Franchise Business, and Franchisee did not rely on any incidental statements about success made by [Luxottica], its affiliates or employees.” The Purchase Agreement for the stores contained an “as-is” provision stating that the sale was “AS IS, WHERE IS, WITHOUT WARRANTY EXPRESSED OR IMPLIED,” and expressly acknowledged that the seller “has made no representations about the business in order to induce Buyer to buy.” Brave Optical also confirmed that its due diligence had been completed to its satisfaction prior to closing.
On these facts, the court concluded that “the evidence conclusively negates the element of justifiable reliance necessary for Brave Optical to prevail on its claims for common-law fraud, civil conspiracy, and statutory fraud.” Luxottica of Am. Inc. v. Gray, No. 05-23-00020-CV, 2025 WL 1297472, at *5 (Tex. App.—Dallas May 5, 2025). Because the reliance element was dispositive, the court rendered judgment that Brave Optical take nothing on all fraud-related claims and declined to reach the evidentiary sufficiency of lost profits.
The court then turned to the sanctions and contempt order. The trial court had imposed a $1.5 million sanction, finding that Luxottica “knowingly and willfully violated” temporary injunctions entered in March 2022. The injunctions prohibited Luxottica from “interfering in any way” with Brave Optical’s business operations, including “contacting any third party such as Google or Warrantech and informing them that any of [Plaintiff’s] locations are closed.” The appellate court found the injunction fatally ambiguous, noting that “[t]he temporary restraining order’s failure to specify—with reasonable detail and clarity and without reference to other documents—the precise conduct prohibited makes the order too uncertain when measured against Rule 683 and therefore too uncertain to enforce by contempt.” Id. at 9 (quoting In re Luther, 620 S.W.3d 715, 723 (Tex. 2021)).
In analyzing whether the sanction could stand independently as an exercise of inherent authority, the court found no evidence of bad faith. Citing Brewer v. Lennox Hearth Products, LLC, 601 S.W.3d 704, 718–19 (Tex. 2020), the court emphasized that bad faith requires “intent to engage in conduct for an impermissible reason, willful noncompliance, or willful ignorance of the facts.” The record, it observed, “does not give rise to a reasonable inference of bad faith,” as Luxottica’s communications marking a store “closed” occurred before the injunctions were served, and the company subsequently worked to correct the listings. The court therefore reversed the sanctions and contempt order in its entirety, holding that the trial court had abused its discretion by imposing punishment based on a vague order unsupported by evidence of intentional misconduct.
Finally, the court addressed Luxottica’s counterclaim for unpaid royalties and advertising fees. The appellate court remanded for entry of judgment in Luxottica’s favor for $394,277.02 and for a determination of reasonable attorneys’ fees as the prevailing party. It noted that the trial court’s earlier characterization of Luxottica’s recovery as merely a “setoff” was inconsistent with the reversal of the underlying judgment.
Looking Forward
This decision underscores how carefully drafted franchise agreements can provide powerful, though not absolute, defenses against post-sale fraud claims. Texas courts continue to enforce integration clauses, non-reliance provisions, and “as-is” language when such terms are unambiguous and executed by sophisticated parties who have completed due diligence. As the court reiterated, “where a contract between the parties directly contradicts the alleged misrepresentations, there can be no justifiable reliance.” Miller Global Props., LLC v. Marriott Int’l, Inc., 418 S.W.3d 342, 350 (Tex. App.—Dallas 2013, pet. denied).
However, franchisors should note that other jurisdictions do not take the same approach. Several states—such as California, Illinois, and New Jersey—treat reliance disclaimers with skepticism or prohibit them outright under franchise-specific statutes. Courts in those states often view attempts to waive reliance or limit representations as contrary to public policy. The Luxottica decision thus illustrates the potential power of disclaimers in jurisdictions like Texas but does not signal uniform national acceptance.
The opinion also demonstrates the judiciary’s insistence that sanctions and contempt orders rest on precise, unambiguous directives and clear proof of intentional misconduct. The court’s reversal of the $1.5 million sanction highlights how franchisors can defend against overbroad or procedurally defective injunctions, particularly when operational or brand-control issues intersect with litigation.
Ultimately, Luxottica v. Gray reinforces two practical lessons for franchisors: first, that clarity and integration in franchise documents remain essential to limiting exposure in franchise transfers or resales; and second, that careful compliance with procedural rules in injunctive proceedings can prevent sanctions or contempt findings from distorting franchise disputes.
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.
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