The Franchise Memorandum

A Wisconsin federal court declined to reach a distributor’s claims that it had entered into an accidental franchisor-franchisee relationship with a manufacturer, instead dismissing the case by applying the limitations period dictated by the parties’ contract. Faxon Sales, Inc. v. U-Line Corp., 2017 WL 4990617 (E.D. Wis. Oct. 31, 2017). The case arose when manufacturer U-Line unilaterally terminated its contract with distributor Faxon, ending a twenty-five-year relationship. The contract disavowed the formation of a franchise, permitted termination without cause, and required that claims arising from the agreement be brought within a year of the date the claim “arose.” U-Line notified Faxon by letter dated May 30, 2016 that it was electing to terminate the parties’ relationship effective June 25, 2016. Faxon brought its action against U-Line on June 22, 2017, claiming breach of its rights under various franchise, dealership, and consumer protection laws of Connecticut, Rhode Island, New York, Massachusetts, and New Hampshire.

The court first turned to Wisconsin’s “borrowing statute” (Wis. Stat. § 893.07), which seeks to reduce forum shopping by requiring that in a case involving a foreign cause of action, the shortest statute of limitations, whether from Wisconsin or the foreign state, must apply. Given that the parties’ contract provided for a one-year limitations period, and because it was well-settled under Wisconsin law that parties can agree upon limitations periods that are shorter than those provided by statute, the court compared the contractual limitations period to the three- and four-year limitations periods available under the statutes cited by Faxon, and determined that the one-year period contemplated by the parties’ contract should apply. The court also noted that this one-year limitations period was the same as the limitations period afforded by the Wisconsin Fair Dealership Law. The court then determined that, under Wisconsin law, a claim for wrongful termination accrues upon the sending of a notice of termination, rather than on the effective date of termination. Because Faxon filed its claims more than one year after U-Line’s notice of termination, the court dismissed the lawsuit as untimely filed. Faxon has now appealed the decision to the Seventh Circuit Court of Appeals.