The Franchise Memorandum

In C.V. Sullivan Co., Inc. v. Graham Web International, Inc., 2008 WL 249060 (D.N.H. Jan. 28, 2008), a federal court in New Hampshire granted a manufacturer’s motion to dismiss state-law claims that the court found to be subject to arbitration. Sullivan was terminated as a distributor of beauty supply products manufactured by GWI pursuant to a “Sullivan Distribution Agreement.” Sullivan filed suit, alleging that GWI breached its implied contractual obligation to act fairly and in good faith, engaged in unfair and deceptive trade practices, and tortiously interfered with Sullivan’s contractual relations with its customers.

In moving to dismiss Sullivan’s state-law claims, GWI argued that each claim related to or arose under or out of the Sullivan Distribution Agreement or other agreements that contained arbitration provisions. Although the Sullivan Distribution Agreement expired in 2003, Sullivan remained bound by its arbitration provisions because the parties’ course of dealing demonstrated they were continuing to operate under that agreement’s terms. The court rejected Sullivan’s argument that it was not bound by the arbitration provision in the other agreements, which it had obtained via an assignment. The court noted that an assignee accepts rights and obligations of the assignor and is in the same position at which the assignor stood at the time of assignment.