The Franchise Memorandum

An Illinois federal court recently issued two decisions in a case rejecting a dealer’s claims that it was improperly terminated. In Scholl’s 4 Seasons Sports, Inc. v. Arctic Cat Sales, Inc., 2010 U.S. Dist. LEXIS 110360 (N.D. Ill. Oct. 18, 2010), the court denied the plaintiff’s motion for leave to amend its complaint to allege a violation of the Illinois Equipment Fair Dealership Law (IEFDL). The court found that dealers like the plaintiff who sold only ATVs and snowmobiles were not covered by the law. Although the IEFDL was amended in July 2010 to specifically include ATV dealers, the plaintiff’s dealership was terminated a year earlier, and the law did not apply retroactively.

Just one month later, the court granted defendant Arctic Cat’s motion for summary judgment on all of the plaintiff’s claims. 2010 U.S. Dist. LEXIS 121235 (N.D. Ill. Nov. 16, 2010). Without deciding that plaintiff qualified as a franchisee, the court held that Arctic Cat’s termination did not violate the Illinois Franchise Disclosure Act (IFDA) because the plaintiff’s failure to pay for inventory constituted good cause to terminate. The court also ruled that Arctic Cat did not violate the IFDA by failing to specify in the default notice that the plaintiff would be terminated if it did not cure its breach. “Given that [Arctic Cat] attempted to collect plaintiff’s debt for months,” the ten day notice given by Arctic Cat was reasonable, and therefore it complied with the IFDA.