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The Franchise Memorandum

Court Denies Manufacturer’s Motion to Dismiss New Jersey Franchise Practices Act Claim

In Strassle v. Bimbo Foods Bakeries Distribution, Inc., 2013 U.S. Dist. LEXIS 34560 (D.N.J. Mar. 13, 2013), a federal court in New Jersey declined to dismiss a claim under the New Jersey Franchise Practices Act (NJFPA) brought by a group of distributors against Bimbo, a manufacturer of bakery goods. The distributors filed a class action complaint alleging that Bimbo breached their contracts and violated the NJFPA by refusing to allow them to buy and resell various types of bread products in their designated territories.

Bimbo moved to dismiss the NJFPA claim and the distributors’ claim for treble damages and lost profits. It argued that the NJFPA did not apply to the distributors because they did not allege that they maintained a place of business in New Jersey, or that the agreements compelled them to maintain such a business, as required under the NJFPA. In partially denying the motion to dismiss, the court held that the distributors did allege sufficient facts to state a claim under the NJFPA. Specifically, the court observed that the distributors pled in clear terms that they maintained fixed places of business in the state, which allegations the court was obligated to take as true in deciding a motion to dismiss. In addition, the distributors’ complaint alleged that the performance of the contracts contemplated that fixed locations would be established, as the contracts anticipated situations in which the distributors could provide bread products without making deliveries. The court did grant Bimbo’s request to strike the distributors’ demand for treble damages and lost profits, as such relief was barred by the limitation of liability provision in the distributors’ contracts.

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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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