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The Franchise Memorandum

Posts from April 2011 - Issue 141.
Posted in Terminations

In another Ohio case brought under the same statute as referenced immediately above, the court granted summary judgment on the plaintiff beer distributors’ claims that they were terminated improperly by a successor manufacturer. The Bellas Company v. Pabst Brewing Co., 2011 U.S. Dist. LEXIS 24781 (S.D. Ohio Mar. 11, 2011). After a new entity acquired all of the stock of Pabst Brewing Co. under a Stock Purchase Agreement, the new entity terminated the plaintiff distributors without providing sixty days notice prior to termination as required under the existing distribution ...

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In Kamco Industrial Sales, Inc. v. Lovejoy, Inc., 2011 U.S. Dist. LEXIS 25240 (E.D. Pa. Mar. 10, 2011), a commissioned sales representative sued the manufacturer for whom it sold products, alleging breach of contract and breach of the implied covenant of good faith and fair dealing. The sales representative agreement at issue required the plaintiff to sell the defendant’s power transmission products on an exclusive basis. The agreement term automatically renewed on a year to year basis, unless either party gave 60 days’ notice of nonrenewal. The agreement also contained a ...

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Posted in Terminations

In Progressive Septic, Inc. v. SeptiTech, LLC, 2011 U.S. Dist. LEXIS 27381 (D. Md. Mar. 15, 2011), a financially distressed manufacturer of septic systems sold the bulk of its assets to a new investor group. In the asset purchase agreement, the buyer explicitly declined to assume both the seller’s liabilities and its existing product distribution agreements. The buyer’s newly formed entity did adopt the trade name of the seller, however, and it hired several of the same management-level employees and continued to manufacture and distribute septic systems. The plaintiff was a ...

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Posted in Contracts

A Colorado federal district court recently held that the Colorado Uniform Commercial Code governed a dealership agreement in Precision Fitness Equip., Inc. v. Nautilus, Inc., 2011 U.S. Dist. LEXIS 13576 (D. Colo. Feb. 2, 2011). This case required the court to consider the admissibility of extrinsic evidence to interpret a contract provision, an issue that may be decided differently depending on whether the UCC or the common law applies. To make this determination, Colorado courts look to whether the primary purpose of the contract is the sale of goods or services. Since the Colorado ...

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Posted in Terminations

The dispute in Kaeser Compressors, Inc. v. Compressor & Pump Repair Services, 2011 U.S. Dist. LEXIS 15111 (E.D. Wis. Feb. 14, 2011), developed because Compressor & Pump Repair Services (“CPR”) refused to sign the current form of dealership agreement offered by its supplier, Kaeser. CPR had been Kaeser’s exclusive dealer in the territory for over 20 years, but when Kaeser requested that CPR sign its current form of dealership agreement, which provided for a non-exclusive territory, CPR refused. Consequently, Kaeser brought a declaratory judgment action asking the court to ...

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Posted in Contracts

In Boon Rawd Trading International Co., Ltd. v. Paleewong Trading Co., 2011 U.S. Dist. LEXIS 24963 (N.D. Cal. Mar. 8, 2011), a California federal district court recently granted a supplier’s motion for summary judgment on all claims in a contract dispute with a long-time United States importer and distributor of its Singha Beer products. Although it was undisputed that the parties never had a written contract or even an oral agreement, the distributor claimed that an implied contract under California Civil Code § 1621 had manifested over the course of the parties’ 30-year ...

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Posted in Antitrust

The United States Court of Appeals for the Fourth Circuit recently reversed the dismissal of a claim brought by a competing manufacturer that alleged DuPont attempted to wield, and did wield, monopoly power over the U.S. para-aramid fiber market in violation of Section 2 of the Sherman Act.  E.I. du Pont de Nemours and Co. v. Kolon Industries, Inc., 2011 U.S. App. LEXIS 4752 (4th Cir. March 11, 2011). DuPont had brought a trade secrets suit against Kolon, a relative newcomer to para-aramid production. Kolon counterclaimed that DuPont had monopolized and had attempted to monopolize the ...

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In Echo, Inc. v. Timberland Machines & Irrigation, Inc., et al., 2011  U.S. Dist. LEXIS 4574 (N.D. Ill. Jan. 18, 2011), the United States District Court for the Northern District of Illinois granted  a supplier’s motion for summary judgment against its former distributor, finding that the Connecticut Franchise Act did not offer the distributor its protections because the parties were not in a franchise relationship. Echo, an Illinois-based supplier of power equipment products, terminated its distributor agreement with Timberland, a Connecticut-based distributor, and filed ...

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Posted in Damages

The Iowa Court of Appeals has overturned a trial court’s decision and allowed a dealer to recover monetary damages under the Iowa Farm Implements Dealer Law. The case is FECO, Ltd. v. Highway Equip. Co., Inc., Bus. Franchise Guide (CCH) ¶ 14,522 (Iowa Ct. App. Dec. 22, 2010). The manufacturer had admitted that it did not have good cause to terminate the dealership agreement. At issue then was the interpretation of various provisions of the statute, including its Section 322F.7, which sets forth a list of violations. Section 322F.8 in turn states that monetary damages are allowed for a ...

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Posted in Damages

A recent decision in Warren Distributing Co. et al. v. Inbev USA and Anheuser-Busch, Inc., 2011 U.S. Dist. LEXIS 19721 (D.N.J. Feb. 28, 2011), demonstrated the significant limitations that courts may impose on the award of attorneys’ fees to prevailing parties. In this case  under New Jersey law, after more than three years of litigation and a 13-day jury trial, the plaintiffs, who are former beer distributors for Anheuser-Busch, were awarded  damages of $390,000 for Anheuser-Busch’s violations of New Jersey’s Malt Alcoholic Beverage Practices Act. However, Anheuser-Busch ...

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Posted in Antitrust

The United States Supreme Court in its 2007 Leegin decision ruled that resale price controls by manufacturers and others would be judged under the more lenient standard of the rule of reason, at least under federal antitrust law. Since then, other than in the post-remand developments in Leegin itself, most of the legal activity has been at the state level. Two states recently reached different results in their enforcement efforts, however, and the Supreme Court refused to grant further review of the final judgment in Leegin.

First, on January 11, California entered into a consent ...

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Posted in Terminations

The Ohio Alcoholic Beverages Franchise Act (“ABFA”) precludes a manufacturer from terminating a distributor of alcoholic beverages without consent or just cause. The statute specifies that “a manufacturer’s sale, assignment, or other transfer of the manufacturer’s product or brand to another manufacturer over which it exercises control” does not constitute just cause to terminate a distributor, but that just cause is not required for termination that occurs within 90 days of  “a successor manufacturer[’s] acqui[sition of] all or substantially all of the ...

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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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