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The Franchise Memorandum

Posts from December 2016 - Issue 212.

A California court of appeal recently affirmed a trial court’s award of more than $800,000 in attorneys’ fees under the state’s Unfair Competition Law (“UCL”) and the issuance of a permanent injunction against U-Haul prohibiting the company from enforcing a covenant against competition in its standard form contract with dealers in the state. Robinson v. U-Haul Co. of Cal., 209 Cal. Rptr. 3d 81 (Cal. Ct. App. 2016). After Robinson terminated the parties’ dealer contract and began renting trucks from a competitor, U-Haul sued for breach of the contract’s covenant ...

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The United States District Court for the Eastern District of New York concluded that an automobile dealer stated a plausible claim for breach of the implied covenant of good faith and fair dealing against its distributor in Valley Stream Foreign Cars, Inc. v. American Honda Motor Co., 2016 WL 5239645 (E.D.N.Y. Sept. 22, 2016). Valley Stream alleged that American Honda’s failure to enforce its wholesaling policy prevented Valley Stream from exercising its right to earn profits from the sale of Honda vehicles. Valley Stream further alleged that American Honda received reports of ...

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Posted in Antitrust

A federal court in Iowa last week dismissed with prejudice a dealer’s price discrimination claim made under the Robinson Patman Act (“RPA”). Sioux City Truck & Trailer, Inc. v. Ziegler, Inc., No. 16-cv-4106 (N.D. Iowa Dec. 5, 2016). Gray Plant Mooty represented the supplier in this case. The dealer had been party to an engine parts and service agreement, which was terminated by the supplier, Ziegler, earlier this year. Ziegler tendered a new contract that would have allowed Sioux City Truck & Trailer (“SCTT”) to buy parts, but not to be a “full service” dealer. SCTT ...

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The United States Court of Appeals for the First Circuit partially affirmed a lower court’s decision that a product distributor’s claims based on an allegedly exclusive distribution agreement were barred by the three-year statute of limitations under Puerto Rico’s Dealers Act (“Law 75”). Medina & Medina Inc. v. Hormel Foods Corp., 840 F.3d 26 (1st Cir. 2016). Medina, the distributor, entered into a verbal distribution arrangement with Hormel in 1988, which Medina alleged gave it the exclusive right to distribute Hormel’s retail refrigerated products in Puerto ...

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Posted in Antitrust

Another federal court in Ohio dismissed price discrimination claims brought against a motor vehicle manufacturer after ruling that the “functional availability” defense barred the claims. Brentlinger Enters. v. Volvo Cars of N. Am., 2016 WL 4480343 (S.D. Ohio, Aug. 25, 2016). Brentlinger, a Volvo dealer, sued Volvo over a tier-based incentive program that provided dealerships that only carried Volvo products and met Volvo’s
design standards with higher bonuses per vehicle sold and a larger allocation of high demand vehicles than it did to stores that did not meet both ...

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Posted in Antitrust

A manufacturer can sell its largest packs of products only to discount club chains without engaging in illegal price discrimination, according to the United States Court of Appeals for the Seventh Circuit in Woodman’s Food Market, Inc. v. Clorox Co., 833 F.3d 743 (7th Cir. 2016). The case concerned Clorox’s practice of selling its largest-sized containers of products only to discount warehouses such as Sam’s Club or Costco. Woodman’s, a small grocery chain based in Wisconsin and Illinois, sued Clorox seeking injunctive relief for unlawful price discrimination under ...

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Posted in Antitrust

The United States Court of Appeals for the Ninth Circuit has affirmed a district court holding that Aerotec International failed to establish federal antitrust claims against Honeywell International, one of the largest manufacturers of auxiliary power units for aircraft. Aerotec Int’l v. Honeywell Int’l, 836 F.3d 1171 (9th Cir. 2016). Aerotec, a small company that provides repair services for Honeywell’s products, alleged that during a worldwide parts shortage, it was unable to purchase from Honeywell the parts necessary to service its clients because Honeywell’s ...

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Posted in Antitrust

Meanwhile, the United States District Court for the Northern District of Ohio denied a car distributor’s motion to dismiss a claim under the RPA. Bedford Nissan, Inc. v. Nissan N. Am., Inc., 2016 WL 6395799 (N.D. Ohio Oct. 28, 2016). After discovering that Nissan North America had given Bernie Moreno, a dealer, cash and sales incentives not offered to all dealers in the area, four other Nissan dealers in the same market sued Nissan, claiming, among other things, that the incentive payments allowed Moreno to purchase and sell Nissan vehicles at substantially lower prices than the ...

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Posted in Antitrust

The United States Court of Appeals for the Third Circuit recently reversed a large antitrust jury verdict that had been entered against telecom equipment manufacturer Avaya. Avaya Inc. v. Telecom Labs, Inc., 838 F.3d 354 (3d Cir. Sept. 30, 2016). After a lengthy and contentious trial, a jury had awarded a $20 million general verdict in favor of Telecom Labs, a former Avaya dealer and maintenance provider, finding that Avaya had attempted to monopolize the aftermarket for maintenance of its specialized telephone switchboard for business organizations and had unlawfully tied ...

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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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