August 13, 2025|Publications
August 13, 2025 | Supreme Court of New York, Appellate Division, Second Department | Slip Opinion
Executive Summary
In a slip opinion, the Appellate Division, Second Department affirmed the denial of Budget Rent A Car’s motion to dismiss personal injury claims arising from an accident in Jamaica. Budget argued it could not be held vicariously liable for the acts of its international franchisee and that New York courts lacked personal jurisdiction. The court concluded that discovery was necessary on jurisdictional issues and that Budget had not eliminated factual questions regarding whether it exercised sufficient control over its franchisee to warrant liability.
Relevant Background
The plaintiffs suffered injuries while riding in a car that allegedly developed mechanical problems in Clarendon, Jamaica. Tropic Island Trading Company, an international Budget franchisee, owned the vehicle. Plaintiffs sued both Tropic and Budget, pointing to an International Unit Franchise Agreement that had been in effect since 2018.
Before discovery, Budget moved for summary judgment dismissing the complaint as to it and separately moved under CPLR 3211(a)(8) to dismiss for lack of personal jurisdiction. Budget contended that, as a franchisor, it could not face vicarious liability for Tropic’s alleged negligence and that New York courts had no jurisdiction over claims arising from an accident abroad.
To support its position, Budget submitted an affidavit from Jeanne Motosko, Regional Insurance Risk Manager for Avis Budget Car Rental, LLC (Budget’s parent). Motosko declared that Budget is a Delaware corporation with its principal place of business in New Jersey, registered to do business in New York, and that it “maintains rental locations in the State of New York, rental locations in the other 49 states where it is registered to do business, and has international franchises countrywide and worldwide.” Plaintiffs countered that further discovery was necessary to test Budget’s jurisdictional arguments and argued that factual disputes remained regarding whether Budget exercised control over Tropic’s operations.
In March 2023, the Supreme Court, Westchester County (Greenwald, J.), denied Budget’s motion in its entirety. Budget appealed to the Second Department.
Decision
The Appellate Division affirmed. On personal jurisdiction, the court explained that “while the ultimate burden of proof rests with the party asserting jurisdiction … the plaintiff[s] … need only make a prima facie showing that the defendant[s] w[ere] subject to the personal jurisdiction of the Supreme Court.” Qudsi v. Larios, 173 A.D.3d 920, 921, 103 N.Y.S.3d 492 (2d Dep’t 2019). The court further emphasized that “where, as here, a party opposes a CPLR 3211(a)(8) motion to dismiss on the ground that discovery on the issue of personal jurisdiction is necessary, the party need only demonstrate that facts may exist whereby to defeat the motion.” Id. Because Budget registered to do business in New York and operates rental locations in the state, the court held that questions of fact remained as to whether an “articulable nexus” existed between Budget’s New York business and the plaintiffs’ claims. The court therefore held that dismissal for lack of jurisdiction was premature.
On franchisor liability, the court reaffirmed the rule that “absent proof of a principal/agency relationship or proof that a franchisor exercised a high degree of control over its franchisee, there is no basis for holding a franchisor responsible for its franchisee’s misconduct.” Friedler v. Palyompis, 12 A.D.3d 637, 638, 784 N.Y.S.2d 902 (2d Dep’t 2004). The court agreed with the trial judge that Budget’s submissions “failed to eliminate triable issues of fact as to whether a principal/agency relationship existed between Budget and Tropic or whether Budget exercised the requisite amount of control over Tropic’s operations.” See Stern v. Starwood Hotels & Resorts Worldwide, Inc., 149 A.D.3d 496, 497, 52 N.Y.S.3d 58 (1st Dep’t 2017); Fogel v. Hertz Int’l, Ltd., 141 A.D.2d 375, 376–77, 529 N.Y.S.2d 484 (1st Dep’t 1988).
Looking Forward
This decision illustrates how New York courts approach early jurisdiction and vicarious liability challenges in franchise disputes. Franchisors should note that motions to dismiss for lack of jurisdiction may not succeed when plaintiffs can plausibly argue for jurisdictional discovery into a franchisor’s New York contacts. The case also underscores how franchise agreements and operational practices can affect litigation: if they suggest significant franchisor control, courts may allow claims to proceed past the pleading stage.
For franchisees and franchisors alike, Manning highlights a growing nuisance in litigation: plaintiffs can often survive an early dismissal motion and force franchisors into discovery, even when the ultimate outcome may favor the franchisor. Courts prefer to allow factual development on jurisdiction and control rather than resolve close questions upfront, leaving franchisors to bear the cost of litigating issues that should eventually absolve them. At present, there is no clear way around this procedural hurdle. Careful drafting of franchise agreements, consistent documentation of franchisee independence, and strategic use of jurisdictional affidavits may reduce exposure at the margins, but the state of the law largely ensures that franchisors must be prepared to face this type of litigation head-on.
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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