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The Franchise Memorandum

Second Circuit Affirms Denial of Preliminary Injunction Under PMPA to Party Terminated for Failure to Pay Fees
Posted in Terminations

The United States Court of Appeals for the Second Circuit affirmed a district court's denial of a franchisee's request for preliminary injunctive relief under the Petroleum Marketing Practice Act (PMPA), finding that the franchisor's termination based on the franchisee's failure to timely pay fees was proper under the PMPA. Yonker Cent. Ave. Snack Mart, Inc. v. NY Fuel Distribs., LLC, Case No. 13-3841-cv (2nd Cir. Oct. 31, 2014). Under the PMPA, a franchisee is entitled to a preliminary injunction if it shows: (1) the franchise has been terminated; (2) serious questions going to the merits of the termination exist; and (3) the balance of hardships, if a preliminary injunction is not granted, weigh in favor of the franchisee.

The Second Circuit concluded that the district court did not abuse its discretion in denying the injunction because the franchisee's undisputed failure to pay fees in a timely manner is an enumerated ground for termination under the PMPA. As such, termination for nonpayment is "conclusively presumed to be reasonable as a matter of law," and the district court was not required to first make a determination about reasonableness before permitting the franchisor to terminate the contract.

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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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