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The Franchise Memorandum

Posts from August 2011 - Issues 145 + 146.
Posted in Arbitration

A federal district court for the Northern District of Illinois recently refused to dismiss, in favor of arbitration, a distributor’s claim for unlawful termination. In Metro Premium Wines v. Bolger Vineyards, Inc., 2011 U.S. Dist. LEXIS 65306 (N.D. Ill. June 14, 2011), a producer of wines terminated a 20-year-old oral distribution relationship with its exclusive distributor in the Chicago area. The distributor’s suit alleged that the winemaker had conspired with another distributor to eliminate the plaintiff and to take over its customer contacts and other confidential ...

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Posted in Antitrust

A recent decision by a federal trial court in San Francisco construed California law in a manner that may have implications for franchisors and suppliers who find themselves in litigation in that state. In Nicolosi Distributing, Inc. v. BMW of North America, 2011 U.S. Dist. LEXIS 44544 (N.D. Cal. Apr. 19, 2011), a distributor of automotive paint entered into an exclusive multi-year supply agreement with German Motors, a San Francisco BMW dealership and repair shop. German Motors is certified by BMW as a “Certified Collision Repair Center” (“CCRC”), which is, in effect, an ...

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Posted in Terminations

After Coca-Cola North America terminated three distributors and filed suit to collect amounts due for products that had been delivered but not paid for, the distributors filed numerous counterclaims. In Coca-Cola North America v. Crawley Juice, Inc. et al.,  2011 U.S. Dist. LEXIS 52813 (E.D.N.Y. May 17, 2011), a federal court in New York dismissed each of those counterclaims. The defendants alleged that former Coca-Cola employees fraudulently induced them to purchase and invest in underdeveloped or vacant territories in exchange for oral promises of marketing and other support ...

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Posted in Terminations

Issue 141 of The GPMemorandum on the April 14, 2011, reported on the dispute that developed because Compressor & Pump Repair Services (CPR) refused to sign Kaeser Compressors, Inc.’s (Kaeser) current form of dealership agreement. 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. Kaeser sought a declaration that it had good cause to terminate the dealership agreement under the Wisconsin Fair Dealership Law (WFDL ...

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Posted in Terminations

In Estes Automotive Group, Inc. v. Hyundai Motor America, 2011 U.S. Dist. LEXIS 32525 (C.D. Cal. Mar. 25, 2011), a California federal district court granted Hyundai’s motion for summary judgment against a dealer who alleged that Hyundai constructively terminated its dealership in violation of the federal Automobile Dealers Day in Court Act (ADDCA). The dealer sued for damages after it defaulted on a construction loan and a floor plan financing agreement with Hyundai’s credit subsidiary, Hyundai Capital America. To succeed under the ADDCA on a claim for termination without ...

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Posted in Terminations

A federal district court in Kentucky recently held that a manufacturer’s provision of three-and-a-half months prior notice of termination if its distributor failed to meet certain performance levels did not serve to extinguish the manufacturer’s underlying right to terminate the relationship at will, as provide for in the parties’ previous written agreement. Although the distribution agreement between the parties in Link-Belt Construction Equipment Co. v. Road Machinery & Supplies Co., 2011 U.S. Dist. LEXIS 41404 (E.D. Ky. Apr. 15, 2011), had expired by its terms, the ...

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Posted in Antitrust

In a June opinion, the Eighth Circuit Court of Appeals affirmed summary judgment for C.R. Bard, Inc. dismissing an antirust action brought against it and several other defendants by a class of direct purchasers of urological catheters. Saint Francis Medical Center v. C.R. Bard, Inc., 2011 U.S. App. LEXIS 11552 (8th Cir. June 15, 2011). The plaintiff Saint Francis, a Missouri hospital and member of a Group Purchase Organization (GPO), alleged on behalf of the class that Bard, a supplier of catheters, abused its dominant position in the United States catheter market in violation of ...

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Posted in Discrimination

In Santiago-Sepulveda v. Esso Standard Oil Co., Inc., 2011 U.S. App. LEXIS 8478 (1st Cir. Apr. 26, 2011), the First Circuit affirmed a lower court’s decision in favor of franchisors Esso and Total Petroleum. Esso withdrew from the Puerto Rico market and sold its assets to Total. Total offered existing Esso franchisees its current form franchise agreements. Unhappy with those agreements, Esso franchisees sued for an injunction to prevent Esso from moving forward with the sale. They also argued that the terms offered by Total were not in good faith and discriminatory under the ...

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Posted in Terminations

In South Shore Imported Cars, Inc. v. Volkswagen of America, Inc., 2011 U.S. App. LEXIS 13715 (1st Cir. July 5, 2011), the First Circuit affirmed a district court’s holding that the termination of an automobile dealer’s franchise agreement following a manufacturer’s refusal to consider the franchisee’s eleventh-hour buyout proposal did not violate Massachusetts law. In December 2008, the franchisee’s bank cancelled its revolving credit agreement for financing inventory purchases from VW. This cancellation was an undisputed breach of the franchise agreement ...

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Posted in Terminations

In Diesel Machinery, Inc. v. The Manitowoc Crane Group, 2011 U.S. Dist. LEXIS 35370 (D. S.D. Mar. 31, 2011), a federal court in South Dakota granted partial summary judgment in favor of a manufacturer, finding that a notice of termination of a distributor agreement does not constitute a termination and that a notice of termination may be withdrawn prior to its effective date. In 2005, the defendant manufacturers of mobile hydraulic cranes entered into an agreement with Diesel Machinery, Inc. (DMI), a dealer/distributor in South Dakota, to grant DMI the right to sell and service ...

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A Girl Scouts organization has successfully sued to enjoin Girl Scouts USA (GUSA) from taking away its territory, convincing the Seventh Circuit that the action violated Wisconsin’s Fair Dealership Law (WFDL). In Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the USA, Inc., 2011 U.S. App. LEXIS 10911 (7th Cir. May 31, 2011), the appeals court reversed a district court and granted summary judgment to the local organization. The Seventh Circuit rejected the lower court’s reasoning that application of the WFDL would violate GUSA’s First Amendment freedom of expression ...

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The Wisconsin Supreme Court recently held that it could not exercise general personal jurisdiction over a foreign parent corporation in Rasmussen v. General Motors Corp. et al., 2011 Wisc. LEXIS 343 (Wisc. July 1, 2011). The plaintiffs argued the court had general personal jurisdiction over one defendant’s parent corporation, Nissan Japan, based on the acts of its wholly owned subsidiary, Nissan North America. In order to exercise personal jurisdiction over an out-of-state defendant, the plaintiff must show that the defendant comes within the ambit of the state’s long-arm ...

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In a surprising decision that conflicts with numerous previous opinions on the same topic, a senior judge in the District of Connecticut declined to dismiss a complaint filed by a franchisee association against Edible Arrangements alleging breach of contract, breach of a duty of good faith and fair dealing, and violation of the Connecticut Unfair Trade Practices Act. EA Independent Franchisee Association v. Edible Arrangements, International, Inc. 2011 U.S. Dist. Lexis 78008 (D. Conn. July 19, 2011). Significantly, the franchisee association brought these claims in the form of ...

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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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