The Franchise Memorandum

In LightStyles, Ltd. v. Marvin Lumber & Cedar Co., 2015 U.S. Dist. LEXIS 86954 (M.D. Pa. July 6, 2015), a federal court granted summary judgment in favor of manufacturer Marvin against a distributor, LightStyles, after Marvin terminated the parties' oral distribution agreement of sixteen years. LightStyles brought claims for (1) breach of contract, (2) breach of the covenant of good faith and fair dealing, (3) breach of a franchise agreement; (4) breach of fiduciary duty, (5) unjust enrichment, (6) promissory estoppel, and (7) intentional interference with business and contractual relationships. Marvin moved for summary judgment on all claims, arguing, in part, that the statute of frauds barred LightStyles's claims and that LightStyles was not a franchise.

The court agreed with Marvin, holding that none of the recognized exceptions to the requirement of the statute of frauds that the distribution agreement be in writing applied. Specifically, the court observed that LightStyles had failed to establish Marvin had admitted to the existence of the contract terms that the distributor sought to enforce; that Marvin had demonstrated the existence of those terms through its performance under the agreement; or that the terms that LightStyles sought to enforce were customarily incorporated in oral agreements as a matter of trade practice. The court also held that even if the statute of frauds did not bar LightStyles's contract-based claims, LightStyles could not assert a claim for breach of franchise agreement because it failed to show that Marvin exerted sufficient control over LightStyles to create a franchise relationship. The court noted, among other things, that LightStyles did not operate under the Marvin name; that, while LightStyles could not sell windows that competed with Marvin windows or sell Marvin windows outside of its assigned territory, LightStyles could and did sell nonMarvin products; and that LightStyles did not have to pay a franchise fee.