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The Franchise Memorandum

Posts from August 2008 - Issue 110.
Posted in Terminations

In Western Kentucky Coca-Cola Bottling Co. v. Red Bull North America, Inc., 2008 WL 2548095 (W.D. Ky. June 20, 2008), a terminated beverage distributor sued for breach of contract and unjust enrichment, alleging wrongful termination of its distribution agreement. The distributor alleged that the agreement, which had no set term, was to “never be terminated without prior written communication [by the manufacturer] of the grounds [for termination]…and the opportunity to cure those grounds.” Although Kentucky law holds that agreements with no definite term may be ...

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Person Ford v. Ford Motor Company, 2008 WL 2486824 (Cal. Ct. App. June 23, 2008), concerned a dispute that initially arose in 1988 when Ford decided to relocate a California dealership to a site 2.9 miles from Person Ford, an existing dealer. The parties resolved their disagreement through a 1999 settlement agreement that gave Person five years to move to a site in Rancho Cucamonga near a new freeway that was to be completed. The agreement provided that “if an extension [of the relocation agreement] should be needed due to circumstances beyond the control of Person Ford (e.g.

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The United States District Court for the District of Minnesota recently granted summary judgment to a beverage manufacturer, as the court concluded that the manufacturer had not violated the Minnesota Franchise Act by terminating the plaintiffs’ distributorship agreements. In Day Distributing Co. v. Nantucket Allserve, Inc., 2008 WL 2945442 (D. Minn. July 25, 2008), the court granted summary judgment in favor of Cadbury, the manufacturer, on all claims presented by the plaintiffs. The court first determined that the plaintiffs were not franchisees under the “business ...

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Posted in Antitrust

The United States District Court for the Northern District of Ohio has dismissed federal antitrust counterclaims brought by an HVAC systems franchisee against its franchisor. Trane U.S. Inc. v. Meehan, 2008 WL 2219781 (N.D. Ohio May 29, 2008). The events giving rise to the suit began when Trane audited its franchisee, Toledo Trane, and discovered significant noncompliance with the Manual of Policies and Procedures (“MOPP”) Trane issued to its franchisees. The MOPP largely affected “bundled sales,” which are sales of products that combine Trane and non-Trane ...

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Posted in Antitrust

In Toledo Mack Sales & Service, Inc. v. Mack Trucks, Inc., 2008 WL 2420729 (3rd Cir. June 17, 2008), the United States Court of Appeals for the Third Circuit affirmed a district court’s grant of summary judgment in favor of a truck manufacturer on a dealer’s Robinson-Patman claim but reversed an award in favor of the manufacturer on the dealer’s Sherman Act claim. Mack manufactures a variety of heavy-duty trucks that it distributes and services primarily through a nationwide network of authorized dealers. Until its termination, Toledo was an authorized Mack dealer in the ...

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In Luther v. Kia Motors America, Inc., 2008 WL 2397331 (W.D. Pa. June 12, 2008), the court denied Kia’s motion to dismiss a prospective franchisee’s claims of breach of contract and negligent misrepresentation resulting from failed negotiations between the parties for the plaintiff to be awarded a Kia Motor dealership. Kia had argued that a written agreement between the parties precluded Luther from establishing the elements of either a breach of contract claim or a claim for negligent misrepresentation. The plaintiff’s contract claim was based on an alleged oral contract ...

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In July, the United States District Court for the Western District of Kentucky denied a defendant-distributor's motion for a change of venue on a claim brought by a crushing and screening equipment manufacturer that had initiated suit for failure to pay invoices. Powerscreen USA, LLC v. D & L Equipment, Inc., 2008 WL 2944994 (W.D. Ky. July 28, 2008). The court held that where the factors favoring venue in one state or another are basically equal and the forum-selection clauses in the parties' form contracts are conflicting, the plaintiffs' choice of forum was appropriate.

The ...

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Posted in Indemnification

The Minnesota Court of Appeals held last week that a truck trailer manufacturer was not obligated to reimburse its distributor for legal costs incurred in defending warranty claims brought unsuccessfully by a customer. College City Leasing, LLC v. River Valley Truck Centers, Inc., 2008 WL 3290759 (Minn. App. August 12, 2008). The court’s decision was based on its interpretation of Minn. Stat. § 80E.05, which requires a new motor vehicle manufacturer to indemnify its dealers against any “judgment for damages” (plus legal costs) relating to “alleged defective or negligent ...

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Posted in Terminations

The United States District Court for the District of Oregon recently issued two important decisions interpreting Oregon’s Motor Vehicle Dealerships Act—both involving the termination of the same motorcycle dealership, Everything Cycles, Inc. (“ECI”). The ECI terminations arose out of the felony conviction of ECI’s sole owner for purchasing a stolen motorcycle on the internet. The conviction caused ECI to lose its business license in the municipality in which it operated, forcing it to relocate to a different city.

As reported in Issue 102 of The GPMemorandum, Yamaha ...

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Posted in Terminations

The United States District Court for the District of Rhode Island has addressed retroactive application of the Rhode Island Fair Dealership Act, which was passed into law in 2007. In Pascale Service Corp. v. International Truck & Engine Corp., 2008 WL 2340399 (D.R.I. June 9, 2008), the court was presented with a unique set of facts. Under the terms of a 35-year-old distribution agreement, either party was permitted to terminate the parties’ agreement “at any time without cause by giving written notice to the other party, specifying the effective date of termination.” The ...

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In Kehm Oil Company v. Texaco, Inc., 2008 WL 2924954 (3d Cir. July 31, 2008), the Third Circuit held that Texaco, Inc. did not violate the Petroleum Marketing Practices Act because it no longer was in a franchise relationship with the dealers who operated Texaco branded gas stations. This decision is significant because it upholds the notion that a dealer cannot claim a “franchise relationship” exists when no contractual relationship with the franchisor has existed for many years.

In this case, the dealerships, owned by the same individual, entered into numerous franchise ...

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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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