The Franchise Memorandum

A federal court in New Jersey granted summary judgment to a car manufacturer, holding that a retailer coalition cannot state a claim on behalf of its members under the New Jersey Franchise Practices Act (NJFPA). N.J. Coal. of Auto. Retailers v. Mazda Motor of Am., 2023 WL 2263741 (D.N.J. Feb. 28, 2023). The Coalition, a group of New Jersey new car dealerships, alleged that a Mazda program violates the NJFPA by creating unfair competitive advantages through its dealer incentives. The program’s tiered system provides vehicle discounts and rebates to dealers who make certain capital investments or sell Mazda vehicles exclusively. Mazda moved to dismiss the complaint, arguing that the Coalition lacked standing to sue on behalf of its dealer members. As reported previously, the Third Circuit reversed the district court’s dismissal. Following remand, the Coalition amended its complaint and Mazda again moved to dismiss, arguing that the Coalition could not invoke the NJFPA because it is not a “franchisee.”

In an extremely brief analysis, the court agreed. Noting precedent drawing narrow boundaries for the scope of the NJFPA, the court observed that both “prospective franchisees” and “proposed transferees” have been unsuccessful in their attempts to state claims under the NJFPA. Accordingly, the court held that a franchisee association such as the Coalition is likewise excluded from stating a claim as a “franchisee” under the NJFPA.