Badger Daylighting Corp. v. Dig Alert Done Right, LLC, 2026 WL 457141 (E.D. Cal. Feb. 18, 2026)

Factual Background

This case arises from a contractual dispute between a franchisor and its franchisee. Plaintiff and Counter-Defendant Badger Daylighting Corp. (“Badger”) owns and operates a system for providing hydro-excavation and related services using its proprietary Badger trucks. Defendant and Counter-Plaintiff Dig Alert Done Right, LLC (“DADR”) is Badger’s franchisee owned and operated by Everett Jackson (“Jackson”).

In 2021, Badger sought to expand its business operations. As part of its growth strategy, it identified a market segment consisting of contract set aside for certified disadvantaged, veteran-owned, women owned, minority owned and LBGTQ certified businesses on projects using public funds. To access these opportunities, Badger sought to partner with qualifying diverse businesses capable of bidding on and performing such contracts.

To fulfill this goal, Badger began discussions with Jackson, who possessed the qualifications necessary to pursue these projects. Jackson had previously been employed by Badger and had had experience managing underground service alert ticket. After departing from Badger, he formed DADR to pursue opportunities within the hydro-excavation industry. Importantly, DADR qualified as a diverse business under the relevant certification criteria.

In May 2022, the parties executed a franchise agreement, which granted DADR the right to solicit and sell hydro-excavation services in fourteen (14) California counties (the “Franchise Agreement”). The franchise was specifically limited to projects affiliated with International Brotherhood of Electrical Workers (“IBEW”) that involved minority-business requirements.

On November 22, 2023, after more than a year of operating under the agreement, Badger issued a notice of default to DADR. Badger alleged that DADR had breached the Franchise Agreement by pursuing work outside the permitted scope of the franchise territory and failing to pay the required fees.

Procedural History

In June 2024, Badger filed suit against DADR asserting breach of the Franchise Agreement. DADR answered and asserted counterclaims, alleging that Badger had first breached the agreement.

DADR later moved to amend its answer to add seven additional affirmative defenses after the deadline for amendments had passed. It also moved for summary judgment on Badger’s breach of contract claim.

Court’s Opinion

DADR argued that Badger’s breach of contract claim must fail because the Franchise Agreement itself was invalid. Specifically, DADR contended that the agreement was void due to violations of the California Franchise Investment Law (“CFIL”), including Section 31101, 31125 and 31201.[1]

The Court rejected each of DADR’s arguments.   

Section 31101

Ordinarily, a franchise must register its franchise offering with the state before offering or selling franchises. However, Section 31101 provides an exemption from registration if the franchisor satisfies certain financial and disclosure requirements.

To qualify for the exemption, the franchisor must demonstrate that it has a net worth exceeding $1 million, that its parent company has a net worth exceeding $5 million, and that the parent provides an unconditional guarantee of the franchisor’s obligations under the franchise agreement. The franchisor must also provide financial documentation substantiating these requirements.

DADR argued that Badger failed to comply with this provision because it allegedly never provided the required financial statements or the unconditional guaranty. Badger, however, submitted evidence showing that Jackson had acknowledged receiving these documents.

Because the evidence created a genuine dispute of material fact regarding whether the required disclosures were provided, the Court denied DADR’s motion for summary judgment on this ground.

Section 31125

DADR next argued that Badger violated Section 31125 by making material modifications to the proposed franchise agreement without complying with the statute’s disclosure requirements.

Section 31125 governs situations in which a franchisor proposes a material modification to an existing franchise agreement and requires the franchisor to provide specified disclosures before soliciting the franchisee’s agreement to the modification.  

The Court rejected this argument. At the time the alleged modification occurred, the parties had not yet executed the Franchise Agreement. Because the statute applies only to material modifications of existing franchises, it was inapplicable to negotiations that occurred prior to the formation of the franchise relationship. As a result, the Court found no violation of Section 31125.  

Section 31201

DADR further contended that Badger violated Section 31201 by making misleading statements or omitting material facts in the Franchise Disclosure Documents (“FDD”). DADR identified three alleged misrepresentations:

1. Badger misstated that there were no restrictions on the customers to whom DADR could sell services.
2. Badger misrepresented its experience performing IBEW-affiliated or diversity set-aside work.
3. Badger misrepresented that it would provide assistance to DADR.

At the outset, the Court clarified that Section 31201 governs oral or written communications other than those addressed in Section 31200, while Section 31200 prohibits the willful inclusion of untrue statements of material fact in filings made with the Commissioner. Because the alleged misrepresentations occurred within the FDD itself, the Court determined that the claims were properly analyzed under Section 31200, notwithstanding DADR’s reliance on Section 31201.

With respect to the first alleged misrepresentation, DADR argued that the FDD stated there were no limitations on customers, even though the franchise was restricted to IBEW-affiliated projects with minority-business requirements. Although the Court acknowledged some internal inconsistencies in the disclosure documents, it rejected DADR’s claim because Jackson was fully aware of the limitations. Badger had specifically informed Jackson that DADR would be utilized because of its status as a diverse business, and the parties had jointly identified the counties in which DADR would pursue IBEW-related projects.

Second, DADR argued that Badger’s FDD emphasized its decades of experience in hydro-excavation work but failed to disclose that it had no prior experience performing IBEW-affiliated projects involving minority-business requirements. The Court again rejected the claim, finding that DADR failed to explain why such disclosure was legally required or to demonstrate that the omission was willful. Moreover, the record showed that Jackson already knew Badger lacked experience with these types of projects before entering the Franchise Agreement.

Finally, DADR argued that the FDD misrepresented that Badger would provide robust pre-opening and post-opening support and allow DADR to use Badger’s trademarks and logos. Under California law, however, a contractual promise constitutes a misrepresentation only if the party had no intention of performing the promise at the time it was made. DADR’s evidence addressed only Badger’s alleged nonperformance; not Badger’s intent at the time of contracting. Because DADR failed to produce evidence of fraudulent intent, its claim could not succeed.

Conclusion

Having rejected each of DADR’s arguments under the California Franchise Investment Law, the Court denied DADR’s motion for summary judgment in its entirety, allowing Badger’s breach of contract claim to proceed.

This Case Report was prepared by Shan Wen, an associate in the Franchise and Distribution Practice Group of Mortenson Taggart Adams LLP. Shan can be reached at swen@mortensontaggart.com