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Subway Franchisee Sues Utah Town Claiming Anti-Franchise Ordinance Unconstitutional

December 8, 2011

By Shane D. Gosdis – franchise litigation attorney

Back in 2010, Izzy Poco, LLC, a Subway franchisee, filed suit against the Town of Springdale, Utah and various town employees and members of the town council.  The plaintiff filed the suit in the United States District Court for the District of Utah, arguing that a Springdale town ordinance, which banned franchise restaurants, was unconstitutional.  Springdale enacted the ordinance in 2006 banning “formula restaurants.”  The ordinance defines formula restaurants as any “business which is required by contractual or other arrangement to provide any of the following:  substantially identical named menu items, packaging, food preparation methods, employee uniforms, interior decor, signage, exterior design, or name as any other restaurant or delicatessen in any other location.”  According to the Town of Springdale, the ordinance was enacted to preserve the unique character of Springdale, a small, historic town just outside of Zion’s National Park.

In 2009, Izzy Poco had obtained a business license from Springdale to operate a sandwich shop.  After Springdale officials learned that the sandwich shop would be a Subway restaurant, Springdale declined to renew the business license, citing the town ordinance.  The fire marshal also refused to perform a fire inspection.  As a result, Izzy Poco was unable to open its Subway franchise (despite have already spent $500,000 on the venture).  You can see a copy of the First Amended Complaint here.

This lawsuit followed.  The town employees and town council members moved for summary judgment on the issue of qualified immunity.  On October 28, 2011, the District Court granted the motion, holding that “[b]ecause Springdale’s ordinance banning formula restaurants did not violate clearly established law, the Individual Defendants who enforced the ordinance are entitled to qualified immunity for their actions.”  In arriving at its holding the District Court noted that neither the Supreme Court nor the Tenth Circuit had ever addressed the constitutionality of a similar statute.  The fact that one Circuit Court of Appeals (the 11th) suggested that a similar ordinance “could potentially be unconstitutional” was not enough to overcome the individual defendants’ qualified immunity defense.  You can see a copy of the Court’s October 28, 2011 Order here.

Yesterday, on December 8, 2011, the parties filed their Amended Scheduling Order Pursuant to the Stipulation of the Parties.  In their proposed scheduling order, the parties asked the District Court to extend discovery in the case and resolve the constitutionality of the ordinance through cross-motions for summary judgment.  The parties explained that “[i]f the constitutionality of the ordinance prohibiting formula restaurants is decided first, there may be no need for further fact or expert discovery on the issue of damages.”   Alternatively, they advised the District Court that “[i]f the Springdale ordinance is unconstitutional such that plaintiff’s proposed restaurant must be allowed to open, there is a reasonable likelihood that the remainder of the case can be settle through negotiation with minimal additional discovery.”  You can see a copy of the Amended Scheduling Order here.

The parties’ proposed deadline for the cross-motions for summary judgment is March 12, 2012.  Given that it a few months for the response and reply briefs to be filed and another several months for a hearing and decision, we likely won’t see how this one turns out until late summer of 2012.   

For Izzy Poco:  Clay W. Stucki, Jaryl Rencher, and Chrystal Mancuso-Smith of Stuck Steele & Rencher, LLC

For the Town of Springdale:  David Church and Briant Platt of Blaidell & Church

Izzy Poco, LLC v. Town of Springdale, United States District Court for the District of Utah, Case No. 2:10-cv-00559 CW

Posted in Constitutional Issues, Franchise Ordinance, Uncategorized.

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