The Franchise Memorandum

By a 4-3 decision with a vigorous dissent, the Court of Appeals of Maryland ruled in John Deere Construction & Forestry Co. v. Reliable Tractor, Inc., 2008 WL 4191153 (Md. Ct. App. Sept. 15, 2008), that the “good cause for termination” provision of the Maryland Equipment Dealers Act applied to open-ended contracts originally executed before that provision of the statute was enacted. The two dealer agreements at issue contained a clause providing that they could be terminated by either party with 120 days’ notice. By continuing to perform their obligations under the contracts ...

Boar’s Head Provisions, a producer of meats and cheeses, terminated its Minnesota distributor, Minnesota Deli Provisions, after a six-year relationship. The parties did not commit their agreement to writing. Minnesota Deli responded to the termination by filing suit, claiming that the parties agreed that Minnesota Deli would only be terminated if it failed to perform adequately. In Minnesota Deli Provisions, Inc. v. Boar’s Head Provisions Co., Inc., 2008 WL 4527770 (D. Minn. Sept. 30, 2008), the court granted summary judgment for Boar’s Head on all of Minnesota Deli’s ...

The United States District Court for the Eastern District of Tennessee has determined that a class of purchasers of retail products manufactured and distributed by Leegin Creative Leather Products, Inc. failed to state claims against Leegin for violations of Sherman Act § 1 and the Tennessee Trade Practices Act, or for common law unjust enrichment.  Spahr v. Leegin Creative Leather Products, Inc., No. 2:07-cv-00187 (E.D. Tenn. August 20, 2008). As  was the subject of a June 2007 decision of the United States Supreme Court, Leegin, the manufacturer of Brighton® women’s ...

In Transport Truck & Trailer, Inc. v. Freightliner LLC, 2008 WL 4239002 (D. Idaho, Sept. 20, 2008), the court granted Freightliner, LLC’s motion for summary judgment dismissing all claims, including a claim for breach of the implied covenant of good faith and fair dealing based on Freightliner’s grant of a competing dealership in the territory of Transport Truck & Trailer, Inc. (“TTT”). 

Although it had a non-exclusive territory, TTT claimed that by granting another dealership in its territory, Freightliner violated its implied covenant of good faith and fair dealing ...

In Perry v. Ice House America, LLC, 2008 WL 4216550 (E.D. Ark. Sept. 12, 2008), the United States District Court for the Eastern District of Arkansas broadly construed an arbitration clause in a distributorship agreement in granting the defendant’s motion to stay the litigation pending a the outcome of arbitration. The plaintiffs had filed suit claiming that Ice House America, a manufacturer of ice production and delivery products, had, among other things, breached the distributorship agreement and the duty of good faith and fair dealing. Ice House America filed a petition to ...

In Santiago-Sepulveda v. Esso Standard Oil Co. (Puerto Rico), Inc., 2008 WL 4684150 (D.P.R. Oct. 18, 2008), a United States District Court considered Esso’s proposed withdrawal from selling gasoline through service stations in Puerto Rico. Esso had announced to its franchisees that it planned to sell its assets, including its franchise agreements, to Total Petroleum. Total then offered franchise agreements to most, but not all, of Esso’s franchisees. Esso’s franchisees brought suit, arguing that Esso’s proposed withdrawal from the market violated the Petroleum ...

In Citgo Petroleum Corporation v. Ranger Enterprises, Inc., 2008 WL 3927470 (W.D. Wis. Aug. 27, 2008), the operator of 39 Citgo gas stations alleged that its franchisor failed to live up to its obligations by providing less fuel to the franchisee’s locations than was contractually required and because demand for Citgo branded fuel allegedly dropped when Venezuelan President Hugo Chavez began making hostile statements in the press about the United States. (Citgo is owned by the Venezuelan government).  When Citgo ultimately announced that it would not renew the franchise ...

In Hubbard Auto Center, Inc. v. General Motors Corporation, 2008 WL 3874642 (N.D. Ind. Aug. 14, 2008), a former Oldsmobile distributor sued GM under the Indiana Deceptive Franchise Practices Act for unlawful termination and unlawful failure to renew a distributorship agreement without good cause. In late 2000, GM announced to its dealers by letter that it would phase out and ultimately discontinue its Oldsmobile line of vehicles. In its letter, GM also stated, however, that the announcement was not a termination of the dealership and that GM would continue to fulfill its ...

The United States District Court in Minnesota late last month dismissed state statutory and federal antitrust claims brought by a Kia automobile dealership against manufacturer Kia Motors. Barnett Chrysler Plymouth Co. v. Kia Motors America, Inc., 2008 U.S. Dist. LEXIS 87216 (D. Minn. Oct. 27, 2008).

Barnett Kia has sold vehicles made by Kia since 1998. In 2006, Barnett discovered that the manufacturer offered discretionary advertising allowances to other Minnesota Kia dealers through the Regional Marketing Fund (“RMF”) program, through which Kia subsidizes fifty ...

In 1-800-Radiator of Wisconsin, LLC v. 1-800-Radiator Franchise, Inc., 2008 WL 4500682 (E.D. Wis. Oct. 1, 2008), the court considered a motion for a temporary restraining order to prevent the termination of its rights. The plaintiff was a distributor that was considered to be a “franchisee” under the 1-800-Radiator system, which took orders for the purchase of radiators made through the franchisor’s proprietary network. The franchisor advised the plaintiff that it planned to acquire one of the franchisor’s competitors, which would result in a large increase in business ...

The United States Court of Appeals for the First Circuit held this month that neither federal law nor Massachusetts state law precluded termination of a Land Rover/Jaguar dealer in Wagner & Wagner Auto Sales, Inc. v. Land Rover North America, Inc., 2008 WL 4823138 (1st Cir. Nov. 7, 2008). In upholding the district court’s finding of “good cause” to terminate, the appeals court focused on the dealer’s failure to meet contractual deadlines for getting approval of plans for a new dealership location. In turn, the First Circuit found no evidence of “bad faith” on the part of the ...

In New England Surfaces v. E.I. DuPont de Nemours and Co., 2008 WL 4307112 (1st Cir. Sept. 23, 2008), DuPont terminated a dealer of its Corian line of products for failure to meet sales goals. In a decision largely devoted to an analysis (or rejection) of the dealer’s lost profits damages claim, the United States Court of Appeals for the First Circuit vacated a district court’s grant of DuPont’s summary judgment motion on the dealer’s claim for wrongful termination under the Connecticut Franchise Act.

DuPont argued (and the district court below had found) that the Connecticut ...

In General Motors Corp. v. Tennessee Motor Vehicle Commission, 2007 WL 4756809 (Tenn. Ct. App. Oct. 30, 2008), the Tennessee Court of Appeals late last month upheld the Tennessee Motor Vehicle Commission’s administrative decision prohibiting GM from allowing a current franchisee to relocate its dealership into another franchisee’s market area. GM claimed that a Tennessee dealership statute—which allows the Commission to deny the proposed granting of an “additional franchise” in a dealer’s market area—applies only where new franchises are granted and not ...

The United States Court of Appeals for the Third Circuit has reversed a New Jersey district court’s certification of a class of approximately 4,000 dealers in an action against Ford Motor Company alleging violations of the Robinson-Patman Act, the federal Automobile Dealer’s Day in Court Act, and numerous state franchise laws, as well as breach of contract and the covenant of good faith and fair dealing. Danvers Motor Co., Inc. v. Ford Motor Company, No. 07-2287, WL 418728 (3rd Cir. Sept. 12, 2008).

Ford had instituted a voluntary dealer certification program called The Blue Oval ...