The Franchise Memorandum

A federal court in California recently granted summary judgment against a distributor that alleged that her agreement with Ralph Lauren permitted her to resell Ralph Lauren furniture in perpetuity. Card v. Ralph Lauren Corp., 2021 WL 4427433 (N.D. Cal. Sept. 27, 2021). Victoria Card entered into a resale agreement with Ralph Lauren whereby she would submit purchase orders to Ralph Lauren and resell the furniture to consumers. After a number of years, Ralph Lauren informed Card that her online sales violated the resale agreement. The two parties engaged in an extensive effort to create a website for Card that complied with Ralph Lauren’s standards, but Ralph Lauren decided to terminate the agreement. Card brought multiple claims against Ralph Lauren for improper termination; the only claims that survived Ralph Lauren’s motion to dismiss were breach of contract, breach of the implied covenant of good faith and fair dealing, and a Robinson-Patman Act violation.

The court granted summary judgment on these remaining claims. The court began by rejecting Card’s contract theory. Card contended that, as part of modifying her website, she was entitled to resell Ralph Lauren products for as long as she wanted. She was unable, however, to cite to any evidence supporting her contention that modifying her website was consideration for a right to resell Ralph Lauren furniture indefinitely. The court analogized the resale agreement to an at-will employment agreement from which either party could walk away at any time, holding that such an agreement would not guarantee perpetual employment to the employee. While the court could infer that the parties intended to continue their prior commercial relationship after Card modified her website, it could not conclude that the parties intended to modify the terms of the prior agreement. Because an implied covenant claim must be based on actual contractual terms, and because the court held that no perpetual resale right existed, Card lacked sufficient evidence to withstand summary judgment on the implied covenant claim. The court also held that Card failed to show a violation of the Robinson-Patman Act because there was no evidence that a similarly situated dealer was given preferential pricing nor that Card was actually in competition with a dealer who benefited from price discrimination.