Nichols v. Arthur Murray, Inc.

Nichols (plaintiff) entered into contracts for dancing lessons with Arthur Murray School of Dancing, which Burkin, Inc. (Burkin) operated under a franchise agreement between it and Arthur Murray, Inc. (defendant). The franchise agreement gave Burkin a license to use the Arthur Murray Method and name in connection with a dancing school to be conducted by it in San Diego. The franchise agreement also gave Arthur Murray, Inc., rights related to Burkin’s employees, tuition rates, choice of financial institutions, studio location, operations, advertising, policies, and records. Additionally, the agreement contained provisions requiring Burkin to post in the studio a license certificate stating that it is solely responsible for all obligations of any kind regarding the business of the studio and declaring an understanding between the parties that the license does not permit Burkin to hold itself out as agent for Arthur Murray, Inc., and that all contracts must be in the name of Burkin. Nichols sued regarding prepaid dancing lessons that she never received. The lower court found Arthur Murray, Inc., retained rights to control over Burkin extending beyond those necessary to protect its trade name, held Arthur Murray, Inc., was the undisclosed principal in the transaction between Nichols and the Arthur Murray School of Dancing, and awarded Nichols the amount she prepaid. Arthur Murray, Inc., appealed to the California Court of Appeal, arguing that Burkin was only its licensee, not its agent.