The Missouri Supreme Court held that pursuant to RSMo § 508.040 venue in Jackson County was improper because the causes of action accrued in Webster and Taney Counties and because the McDonald's Corporation's Jackson County franchisees were not offices or agents for the transaction of McDonald's Corporation's usual and customary business.
In July 2001, two children, on separate occasions, became seriously ill after consuming food allegedly tainted with E. coli. The food was obtained from McDonald's franchise restaurants in Webster and Taney Counties, Missouri. The Webster County McDonald's was operated by franchisee C & S Marshfield, Inc., and the Taney County McDonald's was operated by franchisee Kris Davison, Inc. On April 20, 2005, the parents of both children filed separate tort claims in the Circuit Court of Jackson County, Missouri, naming both the respective franchisees and the McDonald's Corporation (McDonald's) as defendants.
McDonald's is a Delaware corporation that enters franchise agreements in Missouri, including in Webster, Taney, and Jackson Counties. Franchisee-defendants are Missouri corporations with all of their offices, agents, and operations in Webster and Taney Counties, respectively. Defendants in both cases argued that venue in Jackson County was improper and filed motions to transfer. Defendants' motions were denied. Defendants then sought relief from the Missouri Supreme Court in the form of a writ of prohibition. The Supreme Court granted preliminary relief in each case and then consolidated the cases to determine the identical questions of law.
In the present opinion, the Supreme Court granted Defendants an absolute writ of prohibition and held that pursuant to § 508.040 venue in Jackson County was improper because the causes of action accrued in Webster and Taney Counties and because McDonald's Jackson County franchisees were not offices or agents for the transaction of McDonald's usual and customary business. The Court rejected plaintiffs' argument that McDonald's ownership of the land on which its Jackson County franchisees operated transforms each Jackson County McDonald's restaurant into an "office" for McDonald's. The Court explained that a franchisor's ownership of real estate where a franchisee conducts business does not convert that real estate into an office of the franchisor.
The Supreme Court also rejected plaintiffs' argument that McDonald's Jackson County franchisees operates as "agents" of McDonald's. The Court explained that the franchisees were not agents of McDonald's because they were unable to alter legal relationships between McDonald's and third parties.[2] The Court stated that even if the franchisees were agents of McDonald's they were not such for the transaction of McDonald's usual and customary business as required by § 508.040. The Court explained that McDonald's usual and customary business was to enter into franchise agreements while the franchisees' usual and customary business was to operate restaurants.
II. Legal Background
In Missouri venue is determined by statute.[3] RSMo § 508.040 is the statute governing venue for actions filed against corporate defendants prior to August 28, 2005.[4] Section 508.040 provides that venue is appropriate in a county: (1) where the cause of action accrued; (2) where the corporation had or kept an "office" for the transaction of its usual and customary business; or, (3) where the corporation had or kept an "agent" for the transaction of its usual and customary business.[5]
Before the present case, Missouri's appellate courts had never analyzed whether a franchisee was an "office" of its franchisor, and had only once determined whether a franchisee was a franchisor's "agent." In State ex rel. Domino's Pizza, Inc. v. Dowd,[6] the Missouri Court of Appeals for the Eastern District held that under § 508.040 franchisees of Domino's Pizza, Inc. located in the City of St. Louis were not "agents" of Domino's Pizza.[7] The court held that the franchisees lacked two of the three required elements of an agency relationship.[8]
On August 28, 2005, § 508.040 was repealed and RSMo § 508.010 was amended to govern venue for actions filed against corporate defendants.[9] Section 508.010 distinguishes between tort and non-tort actions, and also distinguishes between tort actions where the plaintiff was initially injured inside of the State of Missouri and tort actions where the plaintiff was initially injured outside of the State.[10] For tort actions where injury occurred inside the State § 508.010 provides that venue is appropriate in the county where the plaintiff was first injured.[11] Alternatively, where injury occurred outside of the State, venue is appropriate in the county where the defendant corporation's registered agent is located, or, if the plaintiff was a resident of Missouri at the time of the injury, the place where the plaintiff's principal place of residence was when the injury first occurred.[12]
III. Commentary
The Supreme Court's opinion in State ex rel. McDonald's Corp. will be of limited effect. This is a result of the above mentioned repeal of § 508.040 and amendment of § 508.010. Section 508.040's "agent" and "office" language was not transferred to the amended § 508.010, making the language obsolete for purposes of venue in actions filed after August 28, 2005. Section 508.010 replaced the "agent" and "office" language with phrases such as "county where plaintiff was first injured," "county where defendant corporation's registered agent is located," and "plaintiff's principal place of residence on the date the plaintiff was first injured." Accordingly, such phrases require a different analysis by the courts.
[1] No. SC87856 and SC87855 (Mo. June 26. 2007) (en banc), available at http://www.courts.mo.gov/file.jsp?id=26517. The West reporter citation is 226 S.W. 3d 119 (Mo. 2007) (en banc).
[2] A party is an agent of another if: (1) the principal has the right to control the conduct of the agent with respect to matters entrusted to the agent; (2) the agent is a fiduciary of the principal; and (3) the agent is able to alter legal relationships between the principal and a third party. Id. at 123.
[3] State ex rel McDonald's Corp., 226 S.W. 3d at 122.
[4] Id. at 122, n3.
[5] Mo. Rev. Stat. § 508.040 (2000) (repealed August 28, 2005).
[6] 941 S.W. 2d 663 (Mo. App. E.D. 1997).
[7] Id. at 665-67.
[8] Id. at 667. The Court held that the franchisees failed to satisfy the required elements of an agency relationship because no fiduciary relationship existed between the franchisees and Domino's Pizza and because the franchisees were unable to alter legal relationships between Domino's Pizza and third parties. Id. at 665-67.
[9] State ex rel. McDonald's Corp., 226 S.W. 3d at n3.
[10] Mo. Rev. Stat. § 508.010 (Supp. 2007).
[11] Id.
[12] Id.
Research Sources on Topic:
- State ex rel. Domino's Pizza, Inc. v. Dowd, 941 S.W. 2d 663 (Mo. App. E.D. 1997) (holding franchisees were not agents of Domino's Pizza, Inc.).
- David Jacks Achtenberg, Venue in Missouri After Tort Reform, 75 UMKCLR 593 (Spring 2007) (discussing venue before and after tort reform).
- 2 Jeffrey A. Burns, Missouri Practice Methods of Practice: Litigation Guide § 3.17 (4th ed. 2002) (discussing venue under RSMo § 508.010 (Supp. 2007)).
