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The Franchise Memorandum

Wholesaler Liable for Violation of Arkansas Farm Equipment Retailer Law

An Arkansas state appellate court upheld a motion for default judgment against a wholesale distributor for failing to adhere to the Arkansas Farm Equipment Retailer Franchise Protection Act. R.W. Distributors, Inc. v. Texarkana Tractor Co., 2018 Ark. App. 345 (June 6, 2018). R.W. supplied riding lawnmowers that Texarkana Tractor sold in stores. Texarkana was unable to sell the tractors and demanded that R.W. take them back and repay Texarkana in accordance with the statute. After originally defaulting, R.W. unsuccessfully opposed the claim and then appealed.

The appellate court agreed with the lower court that Texarkana had stated a claim. First, the court held that R.W. was incorrect in stating Texarkana was required to return the inventory before it could request repayment. Texarkana had relied on a different statute that required the wholesaler to repurchase the inventory on the date it terminated the contract. The court further found that Texarkana’s statement that it obtained the mowers from the wholesaler and requested that R.W. “take the items back” constituted a sufficient pleading showing the establishment and termination of the contract. Therefore, since the county court had not erred granting default judgment—because R.W. had failed to answer and Texarkana had, indeed, stated a claim—the appellate court did not overturn the decision.

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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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