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The Franchise Memorandum

Posts from April 2008 - Issue 106.

In Gabana Gulf Distrib. v. Gap Int’l Sales Inc., 2007 WL 4145105 (N.D. Cal. Jan. 9, 2008), a federal district court in California confronted the issue of what constitutes a franchise, finding that an International Sales Program Distributor License Agreement (“ISP Agreement”) between distributors and defendants Gap International Sales, The Gap, Banana Republic, and Old Navy (collectively “GAP”) was not subject to the California Franchise Relations Act because the distributors’ operation was not substantially associated with GAP’s trademarks or other ...

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Posted in Procedure

Manufacturers and franchisors who settle cases with their dealers and franchisees often do so in part to stop harm to the supplier’s reputation in the marketplace. In those circumstances, the settlement agreement often includes a non-disparagement clause. The Supreme Court of Connecticut strongly upheld such a clause on March 25 in TES Franchising, LLC v. Feldman, 2008 WL 726293 (Conn. March 25, 2008). The court enjoined Feldman from any further violation of the settlement agreement and remanded to the trial court to determine how much he would have to pay for his past violations ...

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On March 18, 2008, the Federal Trade Commission announced the publication in the Federal Register of a revised notice of public rulemaking (RNPR), seeking comments on a modified version of the Commission’s proposed Business Opportunity Rule.

The NPR is a follow-up to the business opportunity rule portion of the FTC’s April 2006 notice of public rulemaking (NPR). The April 2006 NPR addressed long-awaited revisions to the 1978 Franchise Rule and also proposed adoption of a new and separate rule relating specifically to business opportunities. The definition of the term ...

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Posted in Arbitration

In Volvo Trucks North America, Inc. v. Crescent Ford Truck Sales, Inc., 2008 WL 506099 (E.D. La. Feb. 21, 2008), the court considered questions regarding the arbitrability of a suit between an automobile manufacturer and one of its dealers. After Volvo issued Crescent Ford a notice of non-renewal of the parties’ dealer agreement, Crescent filed a petition with the Louisiana Motor Vehicle Commission (“LMVC”) to preclude the termination, arguing that Volvo failed to properly allege just cause for the termination as required under Louisiana law. As part of the proceedings ...

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Posted in Terminations

Holding last month that the Maine Franchise Act does not create a “new set of standards” for temporary restraining order and injunction requests, the United States District Court for the District of Maine refused to stop the termination of a heavy equipment dealership in Frank Martin Sons, Inc. v. John Deere Construction & Forestry Co., 2008 WL 787680 (D. Me. March 21, 2008). The court instead applied a standard test weighing factors such as the plaintiff’s likelihood of success on the merits and alleged irreparable harm.

The plaintiff’s main argument was one made often – ...

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Posted in Arbitration

The United States District Court for the Eastern District of Michigan recently granted in part McBride Research Laboratories, Inc.’s motion for summary judgment, finding that the parties’ broad contractual agreement to arbitrate in Georgia any disputes arising out of or relating to the distributor agreement required dismissal of the plaintiff’s claim. Prude v. McBride Research Laboratories, Inc. (E.D. Mich. Feb. 8, 2008).

The plaintiff argued that he was not bound by the agreement to arbitrate because the agreement was unenforceable under section 27(f) of Michigan’s ...

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Posted in Arbitration

In C.V. Sullivan Co., Inc. v. Graham Web International, Inc., 2008 WL 249060 (D.N.H. Jan. 28, 2008), a federal court in New Hampshire granted a manufacturer’s motion to dismiss state-law claims that the court found to be subject to arbitration. Sullivan was terminated as a distributor of beauty supply products manufactured by GWI pursuant to a “Sullivan Distribution Agreement.” Sullivan filed suit, alleging that GWI breached its implied contractual obligation to act fairly and in good faith, engaged in unfair and deceptive trade practices, and tortiously interfered with ...

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Posted in Procedure

In Ridge Chrysler Jeep, LLC v. DaimlerChrysler Financial Services Americas LLC, 2008 WL 441758 (7th Cir. Feb. 20, 2008), the United States Court of Appeals for the Seventh Circuit affirmed a district court’s dismissal of two car dealerships’ lawsuit based on the dealerships’ deceit. The lawsuit had been based on the manufacturer’s exercise of its right to require dealerships to pay up front for inventory. After Chrysler exercised its right to the up-front payment, two dealerships responded with a lawsuit under the Automobile Dealers’ Day in Court Act, accusing Chrysler ...

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Posted in Terminations

The United States District Court for the Eastern District of Missouri recently granted a manufacturer’s motion to dismiss several counts of a complaint relating to the termination of a John Deere dealership. In Heisel v. John Deere Const. & Forestry Co., 2008 WL 53232 (E.D. Mo. Jan. 2, 2008), the court found that John Deere’s termination of a long-standing dealership following the death of its principal did not, as a matter of law, violate the Missouri Farm Equipment Act or the Missouri Construction Equipment Act. Both of these statutes prohibit dealership terminations unless ...

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Posted in Terminations

The United States Court of Appeals for the Third Circuit in Maple Shade Motor Corp. v. Kia Motors Am., Inc., 2008 WL 111041 (3d Cir. Jan. 11, 2008), affirmed summary judgment in favor of an automaker on its dealer’s unlawful termination claim. The court found that the dealer’s failure to build a showroom was a material term of the dealership agreement that had been breached. The Third Circuit relied on prior case law – under the New Jersey Franchise Protection Act – that holds that a franchisor has good cause to terminate when a franchisee breaches a material term of a franchise ...

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Posted in Terminations

In Frank Brunckhorst Co., L.L.C. v. Coastal Atlantic, Inc., 2008 WL 276409 (E.D. Va. Jan. 29, 2008), the court granted a national distributor’s motion to dismiss a counterclaim brought by one of its regional distributors who had been terminated. The plaintiff, a national distributor of Boar’s Head deli products, sued the regional distributor for trademark infringement and nonpayment. The defendant regional distributor countersued on numerous grounds, including breach of contract, tortious interference, and fraud.

In dismissing the counterclaims, the Virginia federal ...

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About this Publication

The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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