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The Franchise Memorandum

Posts from November 2009 - Issue 125.

A trial court preliminarily enjoined termination of a distributor based on the Connecticut Unfair Trade Practices Act in Walker Indus. Prods. v. Intelligent Motion Sys., Inc., 2009 WL 3417438 (Conn. Super. Ct. Oct. 1, 2009). The distributor-plaintiff brought wrongful termination claims under both the Connecticut Franchise Act and CUTPA. The court held that the plaintiff failed to show a likelihood of success on the merits of its claim under the Connecticut Franchise Act because its business was not “substantially associated” with the manufacturer’s trademarks, as ...

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Posted in Antitrust

A Maine federal court recently denied Amazon’s motion to dismiss an antitrust tying claim brought by a putative class of print on demand (“POD”) publishers.  Booklocker.com, Inc. v. Amazon.com, Inc., 2009 WL 2709396 (D. Me. Aug. 26, 2009). The court held that Booklocker.com sufficiently pled that Amazon’s policy of refusing to allow POD books to be sold through its Direct Amazon Sales Channel unless those books were printed by a wholly owned subsidiary of Amazon constituted a per se tying violation under Section 1 of the Sherman Act.   

After Amazon acquired BookSurge, a company ...

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Posted in Terminations

In Tolle Furn. Group, LLC v. La-Z-Boy Inc., 2009 WL 2160981 (W.D. Wash. July 17, 2009), a Washington federal court denied a motion for a temporary restraining order and refused to stop the termination of a furniture retailer who alleged that La-Z-Boy had violated the Washington Franchise Investment Protection Act (“FIPA”). The court rejected the plaintiff’s contention that La-Z-Boy did not have good cause to terminate the retailer agreement under the FIPA. The court noted that even if it were to consider La-Z-Boy a franchisor under the FIPA, the plaintiff did not dispute that ...

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Posted in Antitrust

A Pennsylvania federal court certified a class—and five subclasses—in an antitrust lawsuit against Babies “R” Us (“BRU”) in McDonough v. Toys “R” Us, et al., 2009 U.S. Dist. LEXIS 60684 (E.D. Penn. July 15, 2009). The case was decided on the heels of the Supreme Court’s antitrust decision in Leegin Creative Leather Products, Inc. v. PSKS, Inc., as well as the Third Circuit’s ruling in In re Hydrogen Peroxide Antitrust Litigation that district courts must engage in a rigorous analysis under Federal Rule of Civil Procedure 23 before certifying any class action.

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In Saccucci Auto Group, Inc. v. Am. Honda Motor Co., Inc., 2009 WL 2175762 (D.R.I. July 21, 2009), the court granted Honda’s motion for summary judgment, finding that Honda did not violate a Rhode Island dealer law by banning internet sales of Honda vehicle service contracts (“VSCs”). After dealers and customers complained about price differences between VSCs sold online and at dealerships, Honda enacted a policy temporarily banning dealers from selling VSCs over the internet. 

The plaintiff, a Honda dealer who had set up a web site of its own to sell VSCs, alleged that the policy ...

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Posted in Trademarks

After an oil change shop’s contract to purchase Valvoline products ended, the shop no longer can display the brand’s signs and other trademarked items, the United States District Court for the Eastern District of Michigan ruled last week. Valvoline Co. v. Magic Quick Lube, 2009 WL 3497805 (E.D. Mich. Oct. 29, 2009). The ruling was based on federal trademark law, which prohibits the use of trademarks without permission in such circumstances.

In enjoining the former dealer, the court found that the trademark use became “unauthorized” when the shop’s contract to buy the ...

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A New Jersey appeals court has held that the constructive termination of a dealer agreement violates the New Jersey Franchise Practices Act.  Maintainco, Inc. v. Mitsubishi Caterpillar Forklift Am., Inc., 2009 WL 2365960 (N.J. Super. A.D., July 30, 2009). Plaintiff Maintainco signed an agreement that, it believed, made it the exclusive Mitsubishi dealer in a designated territory in New Jersey. Mitsubishi subsequently appointed Mid-Atlantic as a dealer in the plaintiff’s territory, under terms that gave Mid-Atlantic a competitive advantage over the plaintiff.

The New Jersey ...

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In Gabana Gulf Dist., Ltd. v. Gap Int’l Sales, Inc., 2009 WL 2585678 (9th Cir. Aug. 24, 2009), Gap prevailed over Gabana, a United Kingdom distributor. Gap had terminated Gabana’s distribution agreement for the Middle East.  Gabana sued, claiming that its arrangement with Gap constituted a franchise under the California Franchise Relations Act and, therefore, that Gap needed good cause to terminate the distribution agreement. The Ninth Circuit disagreed, finding that the trademark element of a franchise under California law was not present. While Gabana was a distributor or ...

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Posted in Terminations

An Illinois federal court denied a motion to dismiss a tortious interference claim, finding that the facts as alleged could sustain such a claim. In Echo, Inc v. Timberland Machines and Irrigation, Inc., 2009 WL 2746725 (N.D. Ill. Aug. 26, 2009), a Timberland dealership agreement was terminated by an outdoor power equipment manufacturer, Echo. In addition to claims against Echo for wrongful termination, Timberland asserted a claim of tortious interference with contract against a neighboring dealer (LEPCO) that took over Timberland’s former sales territory on the effective ...

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Posted in Identity Theft

As discussed in Issue No. 115 of The GPMemorandum (Jan. 21, 2009), the new federal “Red Flags Rule” requires certain businesses to establish written programs to detect, identify, and respond to signs of possible identity theft. The rule is aimed at reducing identity theft by making it more difficult for thieves to use stolen identity information to purchase goods or services. Enforcement by the Federal Trade Commission was set to begin November 1, 2009, but has now been delayed (again) until June 1, 2010. http://www.ftc.gov/opa/2009/10/redflags.shtm

Application of the Red ...

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Posted in Transfers

In Pasqualetti v. Kia Motors Am., 2009 WL 3245439 (N.D. Ohio Sept. 30, 2009), the court rejected Pasqualetti’s claim that Kia Motors’ refusal to approve the transfer of a dealership to him constituted tortious interference. The court stated that a tortious interference claim will not lie “where the defendant was the source of the business opportunity allegedly interfered with” and that “[a]s a matter of public policy . . . franchisors should not fear potential tort liability for simply deciding not to contract with a prospective franchisee.” Citing decisions from ...

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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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