ABSTRACT

This case involves a franchise dispute between Home Instead, Inc. (franchisor) and twenty franchisees who alleged breach of a settlement agreement. The franchisees claimed they were entitled to early renewal of their franchise agreements under a March 2024 settlement, but Home Instead refused, arguing the settlement only applied to franchisees whose agreements expired before March 17, 2027. The United States District Court for the District of Nebraska granted Home Instead’s motion to dismiss in part, finding the settlement agreement’s plain language did not create early renewal rights for franchisees whose agreements expired after the three-year settlement period. The court rejected the franchisees’ arguments that the agreement was ambiguous and dismissed both breach of contract and breach of implied covenant claims. This decision reinforces the principle that courts will enforce unambiguous contract terms as written and will not create obligations beyond what the parties expressly agreed to in settlement agreements.

CASE CAPTION AND COURT

WJM Home Care, LLC v. Home Instead, Inc., 2026 U.S. Dist. LEXIS 72263, was decided on April 2, 2026, by the United States District Court for the District of Nebraska. Chief United States District Judge Robert F. Rossiter, Jr. presided over the case.

The plaintiffs were twenty franchisees: WJM Home Care, LLC; EM Home Care, Inc.; Uzoma Care Corp.; Sanders Senior Care, Inc.; Diercks Senior Care, LLC; Weber Home Care Services, LLC; Solicitude, Inc.; Revere Care, Inc.; Buckskin 903 Ventures, LLC; GMW Solutions, LLC; RSGR, LLC; River Phoenix Health, LLC; Geocare, Inc.; Tailored Home Care, LLC; Meck, LLC; DITP Business Ventures, Inc.; Aubby, Inc.; Home Care for Seniors Massachusetts, Inc.; Commonwealth Senior Care, LLC; and Essex County Senior Care, LLC. The defendant and franchisor was Home Instead, Inc., a Nebraska corporation with its principal place of business in Omaha. The plaintiffs were represented by Alec R. Shelowitz, Himanshu M. Patel, and Roberto Zarco of Zarco, Einhorn Law Firm in Miami, Florida, along with James Polack of Omaha, Nebraska. Home Instead was represented by Jessica K. Robinson of Cline, Williams Law Firm in Lincoln, Nebraska, and Theresa D. Koller of Cline, Williams Law Firm in Omaha, Nebraska.

FACTUAL BACKGROUND

Home Instead operated as a franchisor providing non-medical companionship and athome health care assistance to seniors through its network of franchisees. Each of the twenty plaintiff franchisees operated in different service territories across the country under franchise agreements that were set to expire sometime after March 17, 2027. In August 2021, Honor Technology, Inc. acquired a controlling interest in Home Instead from its founders.

Honor utilized a different business model called the Care Platform, which differed significantly from the traditional model that franchisees had been using. The traditional model provided franchisees with more autonomy and control over their businesses compared to the Care Platform. Concerned about these changes to their business operations, the franchisees formed the Franchisee Association in early 2022 as a means to defend their rights against the new ownership and business model.

Over time, tensions escalated between Home Instead and the association members. In an effort to resolve the growing dispute, a large subgroup of association members known as the Zarco Group Members participated in mediation with Home Instead on March 18, 2024. The mediation session lasted almost fourteen hours and resulted in a term sheet. However, it took an additional six weeks to convert the mediation term sheet into the final Settlement Agreement and Release. The plaintiffs blamed Home Instead for this delay, arguing that the franchisor attempted to rewrite the language regarding the franchisees’ right to a five-year auto-renewal of their franchise agreements in a manner inconsistent with the negotiated language agreed upon during mediation and memorialized in the binding material term sheet.

The Settlement Agreement became effective as of March 18, 2024. Section 5.0 of the Settlement Agreement, titled Existing Franchisees’ Right to Renew, provided that Home Instead agreed franchise agreements executed within three years of the effective date would not include language granting Home Instead discretion over renewals, and that franchisees would have a five-year auto-renewal as long as the franchisee was in good standing and met other material conditions set forth in the franchise agreement. Section 6.0 addressed the Care Platform, stating that for a three-year period from the effective date, Home Instead would not require any franchisee not operating on the Care Platform to begin operating on it.

The plaintiffs asserted they were authorized to secure the benefits of the Settlement Agreement within a confined three-year period from the effective date, or by no later than March 17, 2027. Despite these provisions, the plaintiffs alleged that Home Instead actively denied them the right to renew their existing franchise agreements early, before their current agreements expired after March 17, 2027. Home Instead took the position that only franchisees with agreements expiring before March 17, 2027, had renewal rights under the Settlement Agreement.

PROCEDURAL HISTORY AND HOLDINGS

The franchisees filed their initial complaint on November 10, 2025, alleging breach of the Settlement Agreement and breach of the covenant of good faith and fair dealing. Home Instead moved to dismiss on both jurisdictional grounds under Federal Rule of Civil Procedure 12(b)(1) and for failure to state a claim under Rule 12(b)(6). In response to Home Instead’s motion, the franchisees amended their complaint as a matter of course under Federal Rule of Civil Procedure 15(a)(1)(B), attempting to address some of the issues Home Instead had raised.

The court denied Home Instead’s original motion to dismiss without prejudice as moot given the amended complaint. Home Instead then filed a renewed motion to dismiss the amended complaint, arguing it did not cure any jurisdictional or pleading defects. The court addressed two primary challenges: first, whether it had subject-matter jurisdiction under the diversity statute, and second, whether the franchisees stated a plausible claim for relief.

On the jurisdictional issue, the court denied Home Instead’s motion to dismiss for lack of subject-matter jurisdiction, finding that the franchisees had adequately alleged the amount in controversy exceeded $75,000 as required by the diversity statute. However, on the merits, the court granted Home Instead’s motion to dismiss for failure to state a claim. The court held that the plain and unambiguous language of the Settlement Agreement did not create early renewal rights for franchisees whose existing franchise agreements expired after March 17, 2027. The court found the franchisees were attempting to create contract rights and duties where none existed and failed to state a plausible claim for breach of the covenant of good faith and fair dealing under Nebraska law. The case was dismissed with prejudice, and judgment was entered in favor of Home Instead.

PARTIES’ POSITIONS ON THE ISSUES

Home Instead argued that the court lacked subject-matter jurisdiction because the franchisees failed to adequately allege the amount in controversy exceeded $75,000, despite the franchisees’ specific allegations to that effect. On the merits, Home Instead contended that the plain and unambiguous language of the Settlement Agreement did not provide the franchisees with early renewal rights.

Home Instead maintained that the Settlement Agreement only applied to franchise agreements executed within three years of the effective date, meaning franchisees could only obtain new agreements with the favorable renewal terms if their existing agreements expired before March 17, 2027. Home Instead argued that the fact some franchisees were not eligible to renew before that date under their existing franchise agreements did not create a breach of the Settlement Agreement. Regarding the implied covenant claim, Home Instead asserted the covenant cannot be used to modify express contract terms and that the franchisees were impermissibly seeking to impose duties not arising from the Settlement Agreement itself.

The franchisees, in contrast, argued that Section 5.0 constituted a promise from Home Instead that franchise agreements executed by existing franchisees on or before March 17, 2027, would not grant Home Instead discretion over renewals and that franchisees would have a fiveyear auto-renewal. The franchisees maintained there was no language in the Settlement Agreement conditioning their right to renew by March 17, 2027, only if their existing franchise agreements expired prior to that date. They contended Home Instead’s interpretation was absurd and deprived them of the benefit of their bargain reached during mediation.

Alternatively, the franchisees argued that the parties’ conflicting interpretations created an ambiguity requiring parol evidence to resolve, including evidence of discussions during mediation. They asserted that Section 5.0’s failure to expressly account for varying expiration dates created a latent ambiguity that could be resolved with extrinsic evidence. On the implied covenant claim, the franchisees argued Home Instead’s refusal to exercise discretion to extend the Settlement Agreement’s benefits to them violated the covenant of good faith and fair dealing, as it defied logic that they entered into a binding agreement from which they were now precluded from securing any benefits.

SETTLEMENT AGREEMENT PROVISIONS IN DISPUTE

The central provision in dispute was Section 5.0 of the Settlement Agreement, titled Existing Franchisees’ Right to Renew. This section stated: ‘Home Instead agrees that franchise agreements executed within three (3) years of the Effective Date shall not include language granting Home Instead discretion over renewals. Home Instead further agrees that franchisees shall have a five (5) year auto-renewal as long as the franchisee is in good standing and meets the other material conditions set forth in the franchise agreement.’ The Settlement Agreement became effective as of March 18, 2024.

The franchisees interpreted this provision to mean they had the right to execute new franchise agreements with favorable renewal terms at any time within the three-year period ending March 17, 2027, regardless of when their existing franchise agreements expired. Home Instead interpreted the same provision to mean that only franchisees whose existing franchise agreements expired within the three-year period could execute new agreements with the favorable renewal terms.

The dispute centered on whether ‘franchise agreements executed within three (3) years of the Effective Date’ referred to new agreements that could be executed at the franchisees’ option during that period, or only to agreements executed to replace existing agreements that naturally expired during that period. Section 6.0, titled Care Platform, was also relevant to the dispute. It provided that ‘for a three (3) year[] period from the Effective Date, it would not require any franchisee that was not operating on the Care Platform to begin operating on the Care Platform.’ The franchisees argued this provision, combined with Section 5.0, demonstrated their right to obtain early renewals that would protect them from being forced onto the Care Platform. Section 12.3 of the Settlement Agreement contained a choice-of-law provision stating that

Nebraska substantive law applied to all questions pertaining to the validity, interpretation, or administration of the agreement. Both parties relied on Nebraska law in their briefs, and the court applied Nebraska law to resolve the dispute.

COURT’S ANALYSIS AND RESOLUTION OF JURISDICTIONAL ISSUE

The court first addressed Home Instead’s challenge to subject-matter jurisdiction under the diversity statute. Under Federal Rule of Civil Procedure 12(b)(1), a defendant can make either a facial or factual challenge to jurisdiction. In a facial challenge, the court restricts itself to the face of the pleadings and presumes all factual allegations concerning jurisdiction to be true, dismissing only if the plaintiff fails to allege an element necessary for subject-matter jurisdiction. In a factual challenge, the defendant attacks the veracity of the facts underpinning jurisdiction, and the court can consider matters outside the pleadings. The court found Home Instead’s challenge was more facial than factual, as it focused on the franchisees’ factual allegations rather than presenting affidavits, documents, or other evidence.

Under the applicable legal standard, a plaintiff’s good-faith allegation that the jurisdictional amount is met will ordinarily suffice to confer jurisdiction. It must appear to a legal certainty that the claim is really for less than the jurisdictional amount to justify dismissal. If the defendant challenges the plaintiff’s allegations, the plaintiff must establish jurisdiction by a preponderance of the evidence.

The Eighth Circuit has determined that a district court has subject-matter jurisdiction in a diversity case when a fact finder could legally conclude from the pleadings and proof adduced before trial that damages exceeded $75,000. The franchisees specifically alleged twice in their amended complaint that the amount in controversy exceeded $75,000. Home Instead neither alleged bad faith, nor argued legal certainty, nor offered probative evidence to challenge the jurisdictional allegations.

The court found that while the franchisees’ specific allegations may have been thin, they had adequately alleged the amount in controversy. The court emphasized it would not lightly dismiss for lack of subject-matter jurisdiction and cautioned against prejudging the monetary value of an unliquidated claim. Accordingly, the court denied Home Instead’s motion to dismiss for lack of subject-matter jurisdiction.

COURT’S ANALYSIS AND RESOLUTION OF BREACH OF CONTRACT CLAIM

On the merits, the court applied Nebraska contract law principles to resolve the breach of contract claim. Under Nebraska law, a contract written in clear and unambiguous language is not subject to interpretation or construction and must be enforced according to its terms. The court found that the franchisees’ breach-of-contract claims depended on early-renewal rights that the plain and unambiguous language of the Settlement Agreement did not provide. The court agreed with Home Instead that the Settlement Agreement’s language referred to franchise agreements that would naturally be executed within the three-year period because existing agreements expired during that time, not to early renewals of agreements that had not yet expired. The court applied the principle that non-occurrence of a condition is not a breach by a party unless that party is under a duty that the condition occur.

Here, the fact that some franchisees were not eligible to renew before March 17, 2027, under the express terms of their existing franchise agreements with varying renewal dates did not create a breach by Home Instead. The court rejected the franchisees’ argument that Section 5.0 was ambiguous. Under Nebraska law, a contract is ambiguous when a word, phrase, or provision has at least two reasonable but conflicting interpretations or meanings.

The franchisees argued that the parties’ conflicting interpretations created an ambiguity requiring parol evidence, including evidence of mediation discussions. They contended that Section 5.0’s failure to expressly account for varying expiration dates created a latent ambiguity. A latent ambiguity exists when collateral facts make the meaning of a contract uncertain even though the language appears clear and unambiguous.

The court rejected this argument, finding that the franchisees were attempting to create an ambiguity where none existed. The court concluded that the plain language of Section 5.0 unambiguously referred to franchise agreements executed within three years because they naturally came due for renewal during that period, not because franchisees could demand early renewal regardless of their existing agreement terms.

COURT’S ANALYSIS AND RESOLUTION OF IMPLIED COVENANT CLAIM

The court also rejected the franchisees’ claim for breach of the implied covenant of good faith and fair dealing. Under Nebraska law, the scope of conduct prohibited by the covenant of good faith is circumscribed by the purposes and express terms of the contract. The covenant cannot be used to modify the express terms of a contract. A violation of the covenant occurs only when a party violates, nullifies, or significantly impairs any benefit of the contract.

The franchisees argued that Home Instead’s refusal to exercise discretion to extend the Settlement Agreement’s benefits to them violated the implied covenant because it defied logic that they entered into a binding agreement from which they were precluded from securing any benefits. The court found this argument unpersuasive. Home Instead was not refusing to exercise discretion or denying benefits that the Settlement Agreement actually provided. Rather, the franchisees were seeking to impose duties that did not arise from the Settlement Agreement itself.

The court agreed with Home Instead that the franchisees were impermissibly attempting to use the implied covenant to create obligations beyond what the parties expressly agreed to in the Settlement Agreement. Because the Settlement Agreement’s plain language did not provide early renewal rights to franchisees whose existing agreements expired after March 17, 2027, Home Instead’s refusal to provide such renewals did not violate any benefit the franchisees were entitled to under the contract. The court concluded the franchisees failed to state a plausible claim for breach of the implied covenant of good faith and fair dealing under Nebraska law.

WHY THE COURT ACCEPTED HOME INSTEAD’S POSITION

The court accepted Home Instead’s interpretation of the Settlement Agreement for several interconnected reasons grounded in fundamental contract law principles. First, the court found the plain language of Section 5.0 supported Home Instead’s reading. The provision stated that ‘franchise agreements executed within three (3) years of the Effective Date’ would have certain favorable terms. The natural reading of this language referred to agreements that would be executed during that period in the ordinary course—that is, when existing agreements expired and needed renewal—not to early renewals demanded by franchisees whose agreements had not yet expired.

Second, the court applied Nebraska’s rule that unambiguous contracts must be enforced according to their terms without interpretation or construction. The franchisees could not point to any language in the Settlement Agreement that explicitly granted them the right to early renewal or that conditioned renewal rights on anything other than the natural expiration of existing agreements.

Third, the court rejected the franchisees’ attempt to create an ambiguity through conflicting interpretations. The mere fact that parties disagree about a contract’s meaning does not make it ambiguous under Nebraska law; there must be at least two reasonable interpretations. The court implicitly found that only Home Instead’s interpretation was reasonable given the contract’s plain language.

Fourth, the court refused to allow the franchisees to use parol evidence of mediation discussions to contradict or supplement the Settlement Agreement’s clear terms. While latent ambiguities can sometimes be resolved with extrinsic evidence, the court found no latent ambiguity existed here.

Fifth, regarding the implied covenant claim, the court emphasized that the covenant cannot be used to modify express contract terms or impose duties not arising from the contract itself. The franchisees were essentially asking the court to rewrite the Settlement Agreement to provide benefits they claimed to have negotiated but failed to include in the final written agreement. The court declined to do so, adhering to the principle that parties are bound by the agreements they sign, not by what they claim they intended to agree to.

POTENTIAL SIGNIFICANCE FOR FRANCHISEES AND FRANCHISORS

This decision may have significant implications for both franchisees and franchisors in future settlement negotiations and franchise agreement disputes. For franchisees, the case can serve as a cautionary tale about the critical importance of ensuring that settlement agreements contain explicit, unambiguous language granting the specific rights they believe they negotiated.

The franchisees here claimed they negotiated early renewal rights during mediation, but the final Settlement Agreement did not clearly provide those rights. The court’s refusal to consider parol evidence of the mediation discussions or to find an ambiguity may demonstrate that franchisees cannot rely on what they believe was discussed or intended; they must ensure the final written agreement clearly states their rights. This is particularly important in franchise contexts where agreements often involve complex renewal provisions, territorial rights, and operational requirements.

For franchisors, the decision may reinforce that courts could enforce settlement agreements according to their plain terms and may not impose additional obligations based on one party’s subjective understanding. It may also suggest that both franchisors and franchisees engage in more detailed and potentially contentious negotiations over settlement language, as parties seek to avoid ambiguity and ensure their expectations are clearly reflected in the agreement.

The decision could also highlight the importance of the choice-of-law provision in settlement agreements. Nebraska law’s strict approach to contract interpretation—enforcing unambiguous terms without construction and limiting the implied covenant’s scope—was favorable to the franchisor here. In jurisdictions with different contract interpretation principles, the outcome might have differed. Both franchisees and franchisors should carefully consider which state’s law will govern their settlement agreements and how that choice might affect interpretation of key provisions.

COMPARISON TO CASES IN OTHER JURISDICTIONS

This case’s outcome reflects Nebraska’s relatively strict approach to contract interpretation, which may differ from approaches in other jurisdictions. Nebraska follows the traditional rule that unambiguous contracts must be enforced according to their terms without interpretation or construction. Some jurisdictions take a more flexible approach, allowing courts to consider context, purpose, and the parties’ course of dealing even when contract language appears clear on its face.

For example, California courts sometimes apply a contextual approach to contract interpretation, considering the circumstances under which the agreement was made and the parties’ subsequent conduct. Under such an approach, the franchisees’ evidence of mediation discussions and their understanding of what was negotiated might have received more consideration. Similarly, some jurisdictions have broader views of when parol evidence is admissible to resolve ambiguities or explain contract terms.

The Eighth Circuit, applying Nebraska law, could be viewed to have taken a narrow view here, refusing to find an ambiguity based solely on the parties’ conflicting interpretations. Other circuits applying different state laws might be more receptive to arguments that varying franchise agreement expiration dates created a latent ambiguity requiring extrinsic evidence to resolve. Regarding the implied covenant of good faith and fair dealing, Nebraska’s approach—limiting the covenant to conduct that violates, nullifies, or significantly impairs contract benefits and prohibiting use of the covenant to modify express terms—appears relatively restrictive.

Some jurisdictions recognize broader implied covenant obligations, particularly in franchise relationships characterized by significant power imbalances. For instance, some courts have found that franchisors violate the implied covenant when they exercise contractual discretion in ways that undermine the franchise relationship’s fundamental purpose, even if not explicitly prohibited by contract terms. However, the outcome could be argued to be consistent with the general trend in franchise litigation across most jurisdictions: courts appear reluctant to rewrite settlement agreements or impose obligations beyond what the parties expressly agreed to, particularly when sophisticated parties negotiated the agreement with legal counsel.

LAW AND ECONOMICS PERSPECTIVE

From a law and economics perspective, this decision can be viewed to promote efficiency in contracting by enforcing the parties’ written agreement and reducing uncertainty about contract interpretation. The court’s strict adherence to the Settlement Agreement’s plain language creates incentives for parties to invest in careful drafting and to ensure that final written agreements accurately reflect their intentions. This approach reduces transaction costs in the long run by minimizing post-agreement disputes about what the parties meant to agree to, even if it may increase upfront negotiation costs as parties work to ensure precise language.

The decision could also be viewed to address the moral hazard problem that can arise if courts routinely allowed parties to escape unfavorable settlement terms by claiming the written agreement did not reflect what was discussed during negotiations. If franchisees could successfully argue that mediation discussions trumped the final written agreement, it could create incentives for parties to be less careful in reviewing and finalizing settlement documents, knowing they could later seek judicial modification based on claimed prior understandings.

However, the decision may create some inefficiency by potentially discouraging settlement in future franchise disputes. If franchisees believe courts will strictly enforce settlement language without considering negotiation context, they may be less willing to settle and more likely to litigate to final judgment, increasing overall dispute resolution costs.

The decision may also raise questions about information asymmetry and bargaining power in franchise relationships. If the franchisor had superior legal resources or negotiating leverage that allowed it to draft settlement language favorable to its interpretation despite different understandings reached during mediation, the strict enforcement approach may produce outcomes that do not reflect the parties’ true agreement or maximize joint surplus. From an economic standpoint, the optimal rule would balance the benefits of clear enforcement against the costs of potential strategic behavior by the party controlling the drafting process.

FINAL DISPOSITION

The court denied the franchisees’ request for a hearing on Home Instead’s motion to dismiss. The court granted in part and denied in part Home Instead’s motion to dismiss the amended complaint. Specifically, the court denied the motion to dismiss for lack of subjectmatter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), finding the franchisees had adequately alleged the amount in controversy exceeded $75,000. However, the court granted the motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), finding the franchisees failed to state plausible claims for breach of contract or breach of the implied covenant of good faith and fair dealing.

The case was dismissed with prejudice, meaning the franchisees cannot refile their claims. The court entered a separate judgment in favor of Home Instead and against all twenty franchisee plaintiffs.