The Franchise Memorandum

The United States Court of Appeals for the Seventh Circuit affirmed summary judgment last month in favor of a supplier and its replacement distributor in an interesting case brought by a terminated distributor under the Connecticut Franchise Act. Echo, Inc. v. Timberland Machines & Irrig., Inc., 2011 U.S. App. LEXIS 21502 (Oct. 25, 2011). After Echo terminated its dealer, Timberland Machines & Irrigation Equipment (TMI), Echo filed suit to collect past amounts due. TMI brought a counterclaim for violation of the Connecticut Franchise Act and brought a third-party complaint ...

In Smith’s Sports Cycles, Inc. v. American Suzuki Motor Corporation, 2011 Ala. LEXIS 181 (Ala. Oct. 14, 2011), the Supreme Court of Alabama denied the franchisee’s claim that franchisor Suzuki wrongfully terminated its franchise agreement. After Suzuki terminated the franchisee for failing to adhere to its standards regarding the neatness and appearance of the dealership facility, the franchisee sued, claiming that Suzuki violated Alabama’s Motor Vehicle Franchise Act. The Alabama statute allows a franchisor to terminate a franchisee for “good cause,” which ...

In Zammer v. Herman Miller, Inc., 2011 U.S. Dist. LEXIS 119900 (E.D. Penn. Oct. 18, 2011), Zammer entered into an agreement with his employer, Herman Miller, under which he could purchase his dealership provided he met certain performance goals. Herman Miller terminated Zammer’s contract on the grounds that he had failed to meet those goals. Despite the presence of a mandatory arbitration clause in the contract, Zammer brought suit against Herman Miller. Herman Miller successfully moved to compel arbitration. The arbitrator found in favor of Herman Miller on all but one of ...

The Second Circuit has affirmed a lower court’s decision finding no agreement between Tiffany and Beautiful Jewellers for the exclusive distributorship of Tiffany goods in India. Beautiful Jewellers Private Limited v. Tiffany & Co., 2011 U.S. App. LEXIS 19147 (2d Cir. Sept. 16, 2011). Beautiful Jewellers, which had been a Tiffany distributor for ten years, contended that it had reached a “verbal” agreement to be an exclusive distributor “as long as Tiffany sold products in India.” This arrangement, however, was not supported by any written agreement. Unsigned draft ...

In Scholl’s 4 Season Motor Sports, Inc. v. Illinois Motor Vehicle Review Board, et al., 2011 Ill. App. LEXIS 979 (Ill. Ct. App. Sep. 8, 2011), an Illinois dealer of ATVs and snowmobiles appealed a ruling by the Illinois Motor Vehicle Review Board that the state’s Motor Vehicle Franchise Act does not apply to off-road vehicles such as ATVs and snowmobiles.  The dealer had sought the protection of the Act in connection with a discount program and an impending termination by snowmobile manufacturer Arctic Cat. The central issue presented by the dealer was whether the Act’s definition ...

In Continental Cars, Inc. v. Mazda Motor of America, Inc., 2011 U.S. Dist. LEXIS 101888 (W.D. Wash. Sept. 9, 2011), a federal court in Washington held that state regulations did not trump contractual terms that were more favorable to a dealer. The case was triggered by the felony conviction of the dealership’s principal owner. Mazda then terminated the dealership pursuant to Washington law regulating relations between auto manufacturers and dealers, which provides for termination of the dealership for “good cause.” The dealership agreement, on the other hand, provided for ...

In James D. Cohen v. Roll-A-Cover, LLC, 2011 Conn. App. LEXIS 473 (Conn. App. Sept. 20, 2011), defendants—manufacturers of a Roll-A-Cover residential pool cover system—appealed the trial court’s holding that they had violated Connecticut’s Business Opportunity Investment Act and Unfair Trade Practices Act (CUTPA) through the sale of New Jersey territories to a distributor. The plaintiff/distributor had signed a distribution agreement for the exclusive rights to distribute the pool cover product in New Jersey. During negotiations, Roll-A-Cover had made certain ...

In Atlantis Petroleum, LLC v. Getty Petroleum Marketing, Inc., et al.,  2011 U.S. Dist. LEXIS 105437 (E.D. Penn. Sept. 15, 2011), the United States District Court for the Eastern District of Pennsylvania reiterated the principle that motive is irrelevant in termination cases, so long as a valid reason exists to terminate a dealership agreement.

The plaintiff, a gasoline distributor that also managed service stations, sued the defendant-owner of service stations for breach of the Petroleum Marketing Practices Act, claiming that the defendant had improperly terminated the ...

In Minnesota Supply Co. v. Mitsubishi Caterpillar Forklift America Inc., et al., 2011 U.S. Dist. LEXIS 113913 (D. Minn. Sep. 30, 2011), a Minnesota-based equipment dealer was a party to three different agreements with three different, but related, suppliers.  The first agreement had an Ohio forum selection clause.  The second had Virginia choice of law and forum selection clauses.  In 2009, those suppliers merged, consolidating the supply of both equipment lines in a single source, but retaining their separate distribution agreements.  In 2010, the dealer entered into an agreement ...

Once again, the Senate Judiciary Committee has taken a step toward the passage of legislation to overturn the effect of Leegin Creative Leather Products, Inc. v. PSKS, Inc. On November 3, 2011, the U. S. Senate Committee reported the passage of the proposed “Discount Pricing Consumer Protection Act,” a bill sponsored by Senator Kohl of Wisconsin. This is the same bill that has been introduced in prior years, as reported in The GPMemorandum. We will continue to monitor the progress (if any) of this legislation. 

In Utility Trailer Sales of Kansas City, Inc. v. MAC Trailer Manufacturing, Inc., et al., 2001 U.S. App. LEXIS (10th Cir. Oct. 5, 2011), MAC and Utility entered into a dealer agreement, which granted Utility the right to “be the only dealer authorized or licensed by MAC in the [Kansas City] area” to sell MAC trailers. The dealer agreement also provided that neither MAC nor any other MAC dealer was prohibited from selling MAC trailers in the Kansas City area. 

Several years after executing the dealer agreement, Utility filed a complaint in federal district court alleging that MAC ...