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The Franchise Memorandum

Posts from July 2009 - Issue 121.

A New Jersey federal court recently granted judgment on the pleadings for defendants Getty Petroleum Marketing, Inc. and Lukoil Americas Corp. (Getty) with respect to a claim that they had breached the implied covenant of good faith and fair dealing in setting the price for gasoline under an open pricing term. Akshayraj, Inc. v. Getty Petroleum Mktg., Inc., 2009 WL 961442 (D.N.J. April 8, 2009). The case began with the plaintiffs’ request for a preliminary injunction to prevent the rebranding of their Mobil gasoline stations to Lukoil. The court denied the request for a preliminary ...

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Posted in Terminations

In Haynes Trane Service Agency, Inc. v. American Standard, Inc. (10th Cir., reissued as amended July 6, 2009), the manufacturer (Trane) entered into an “at-will” distributorship agreement with the distributor (Haynes) pursuant to which Haynes purchased heating and air conditioning products from Trane for resale to the public. Eventually, Trane terminated the agreement after Haynes cheated Trane by submitting false invoices under Trane’s rebate program. Haynes filed suit against Trane claiming, among other things, that: (1) Trane had improperly terminated the “at ...

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Posted in Antitrust

A Pennsylvania federal court recently ordered summary dismissal of a discounting garbage truck distributor’s antitrust claims against Mack Trucks, Inc. for violation of Section 1 of the Sherman Act. The court, however, did allow some of the claims of both parties to proceed. RDK Truck Sales and Service, Inc. v. Mack Trucks, Inc., 2009 WL 1441578 (E.D. Pa. May 19, 2009).

Plaintiff RDK is an independent distributor of garbage trucks, including Mack trucks. It markets itself by “aggressively advertising low prices nationwide,” though its only service facility is in Tampa. Mack ...

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Posted in Terminations

Outside the auto industry, a New Jersey federal court recently issued a temporary retraining order prohibiting the termination of a Master Distributor Agreement, finding that the manufacturer likely violated the New Jersey Franchise Practices Act. Emergency Accessories & Installation, Inc. v. Whelen Engineering Co., Inc., 2009 WL 1587888 (D.N.J. June 3, 2009). 

Emergency Accessories & Installation (EAI) sells and installs emergency response vehicle equipment. Over 95 percent of its inventory comes from Whelen Engineering, Inc., a manufacturer of emergency lighting, and ...

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Posted in Terminations

Even before its recent bankruptcy filing and widespread dealer reduction announcements, GM was involved in significant litigation with its dealers concerning distribution issues. Five recent cases, briefly discussed below, are representative.

In Courtesy Oldsmobile, Inc. v. General Motors Corp., 2009 WL 1353762 (9th Cir. May 15, 2009), and C&O Motors, Inc. v. General Motors Corp., 2009 WL 891033 (4th Cir. Apr. 1, 2009), the courts concluded that GM did not violate dealer agreements or state motor vehicle franchise laws when it discontinued its Oldsmobile line. In the Courtesy ...

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Posted in Terminations

The recent bankruptcy filings by General Motors and Chrysler have left the auto industry under siege and led to hundreds of dealership terminations across the country. In June, both the U.S. Senate Commerce Committee and the U.S. House Committee on Energy and Commerce held hearings on the status of dealership closures across the country. James Press, President and CEO of Chrysler, testified that Chrysler would be closing 789 dealerships—representing about 25% of dealerships—as a result of the Chapter 11 bankruptcy filing. General Motors’ CEO, Frederick Henderson ...

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Posted in Gift Cards

On May 22, 2009, President Obama signed into law the Credit Card Accountability Responsibility and Disclosure Act (Credit CARD Act of 2009), Public Law 111-24. Although the bulk of the new law impacts credit card notices, fees, and collections, Title IV of the Act, entitled Gift Cards, creates federal law prohibiting expiration dates of under five years and certain inactivity fees for electronic gift cards and prepaid stored value cards.

The Act amends the Electronic Funds Transfer Act (codified at 12 U.S.C. § 1693 et seq.) to impose new restrictions on dormancy fees, inactivity ...

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Posted in State Taxation

The recently enacted 2009-2010 New York State Education, Labor and Family Assistance Budget Bill (Budget Bill) amends the New York Tax Law to impose unprecedented new reporting requirements on franchisors. The relevant text can be found at in Subpart G, which starts on page 163. These requirements apply to any franchisor with at least one franchisee engaged in taxable sales in New York, although it is not clear how master franchise and area representative relationships will be treated. Under these requirements, a franchisor ...

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In Kenaya Wireless, Inc. v. SSMJ, LLC d/b/a All Star Wireless USA, 2009 WL 763496 (Mich. Ct. App. March 24, 2009), the Michigan Court of Appeals found that non-mandatory service fees do not amount to “franchise fees” under the Michigan Franchise Investment Law (MFIL). The lawsuit was brought by a wireless phone distributor, Kenaya Wireless, against its communication services provider, All Star. Kenaya claimed it should be considered All Star’s franchisee under the MFIL because All Star allegedly charged an indirect franchise fee by selling Kenaya phones in excess of the ...

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Posted in Antitrust

In Feeser’s, Inc. v. Michael Foods, Inc., No. 1:CV-04-0576 (M.D. Pa. April 27, 2009), the United States District Court for the Middle District of Pennsylvania ruled that a food manufacturer’s pricing structure violated the Robinson-Patman Act’s prohibition on price discrimination. The price discrimination claim arose in the arena of the supply of food products to institutional food service providers, such as schools and hospitals. Institutional food service providers generally obtain food products in one of two ways. An institution is either a “self-operator” ...

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Posted in Encroachment

The United States Court of Appeals for the Sixth Circuit has affirmed a Michigan federal court’s grant of summary judgment to defendant ExxonMobil Oil Company, turning aside the appellant-dealer’s encroachment claims because the parol evidence rule barred oral evidence regarding Exxon’s alleged promise to provide the dealer with an exclusive territory. Partner & Partner, Inc. v. ExxonMobil Oil Corp., 2009 WL 1184796 (6th Cir. May 4, 2009). 

In upholding the district court’s decision, the Sixth Circuit noted that neither the original sales agreement between Exxon and ...

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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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