Description
GRAY
PLANT
MOOTY
The GPMemorandum
TO:
OUR FRANCHISE AND DISTRIBUTION CLIENTS AND FRIENDS
CLIENTS AND FRIENDS
FRANCHISE AND
FROM:
FROM: GRAY PLANT MOOTY'S FRANCHISE AND DISTRIBUTION
GRAY PLANT MOOTY’S FRANCHISE AND DISTRIBUTION
PRACTICE GROUP
PRACTICE
Quentin R. Wittrock, Editor of The GPMemorandum
Editor of
Maisa Jean Frank, Assistant Editor
Jean
Assistant Editor
DATE:
192 (Distribution Issue)
April 2, 2015—No. 192 (Distribution Issue)
This issue
focuses on topics primarily of interest
This issue of The GPMemorandum focuses on topics primarily of interest to
companies that use distributors and dealers rather than manage a business
use
and dealers
than manage a business
companies
franchise system. The distribution-related topics this
format franchise system.
The distribution-related topics this quarter include antitrust, terminations, and class antitrust, terminations, and class actions. ANTITRUST MANUFACTURER MANUFACTURER WINS JURY VERDICT DEFEATING ANTITRUST AND JURY VERDICT DEFEATING ANTITRUST AND OTHER CLAIMS BY TERMINATED DISTRIBUTOR DISTRIBUTOR OTHER BY Following a nine-day jury trial the United States District Court for Following a nine-day jury trial in the United States District Court for the Minnesota, a fireplaces and related products District of Minnesota, a manufacturer of fireplaces and related products won distribution and antitrust case a jury verdict defeating all counts in a product distribution and antitrust case tried earlier this year. J&M Distrib., Inc. v.
Hearth & Home Techs., Inc., No. 13earlier Distrib., Inc. v.
Hearth & Home Techs., cv-00072-SRN-TNL (D. Minn. Jan.
23, 2015). The lawsuit, in which Gray cv-00072-SRN-TNL (D. Minn.
Jan. 23, 2015). The lawsuit, in Gray Plant represented manufacturer, & Home Technologies, Plant Mooty represented the manufacturer, Hearth & Home Technologies, followed the decision followed the decision of Hearth & Home to terminate its wholesale, two-step & Home to terminate its wholesale, distributor in Pennsylvania, Ohio, Maryland, and West Virginia, and to sell in Pennsylvania, Ohio, Maryland, and West Virginia, and sell direct to several dozen dealers in those areas.
The terminated distributor, to several dozen dealers those areas. The terminated J&M, alleged antitrust, contract, and tort claims, naming a large J&M, alleged antitrust, contract, and tort claims, naming a large Pennsylvania dealer as co-defendant on the antitrust and tort conspiracy Pennsylvaniadealer as aaco-defendant on the antitrust and tort conspiracy counts. Following termination, J&M went out of business after thirty years as termination, J&M went out of business after thirty years as and it claimed at trial to have lost its entire business value a distributor, and it claimed at trial to have lost its entire business value of $3.5 million, plus other “lost profits." All told, with potential damages tripled "lost profits.” All told, with potential damages under antitrust law, J&M was seeking more than $10 million plus attorneys' J&M was seeking more than plus attorneys’ fees.
After eight hours of deliberation, the antitrust conspiracy, fees. After eight hours of deliberation, the jury found no antitrust conspiracy, breach of contract, or tortious interference. This provided a complete trial tortious interference.
This provided a complete breach for Hearth & Home. (Price discrimination claims had been dismissed victory for Hearth & Home. (Price discrimination claims had been dismissed by the judge earlier in the case.) judge earlier in the case.) 1 .
GRAY PLANT MOOTY The case was of great importance to to avoiding an adverse The case was of great importance to all concerned. In addition to avoiding an adverse concerned. judgment, Hearth & Home achieved confirmation of its right to terminate wholesale Hearth Home achieved confirmation right to terminate wholesale distributors and other intermediaries when itit wants to sell directly to dealers or to distributors and other intermediaries when wants to sell directly to dealers or others down the product distribution chain. Many manufacturing companies struggle product distribution chain. Many manufacturing companies struggle others with this same desire to competitiveness and profitability with this same desire to improve their competitiveness and profitability by eliminating wholesalers who longer add sufficient value.
Key fact issues this case long-time wholesalers who no longer add sufficient value. Key fact issues in this case statements and documents created an "implied" included whether statements and documents created an “implied” contract precluding termination except with good cause, and whether Hearth & Home had "conspired" good cause, and whether Hearth & Home had “conspired” termination except the large Pittsburgh dealer to eliminate as competitors J&M and some other with the large Pittsburgh dealer to eliminate as competitors J&M and some other Pittsburgh-area dealers J&M had supplied. dealers J&M had As reported Issue 162 same time Hearth As reported in Issue 162 of The GPMemorandum, at the same time Hearth & Home sent its termination notice, commenced declaratory judgment action so that any its termination notice, it commenced a declaratory judgment action so that any would be venued in its headquarters state, Minnesota. That earlier venue litigation would be venued in its headquarters state, Minnesota.
That earlier venue battle was won by Hearth & Home, which resulted in the trial being held in Minnesota was won Hearth Home, resulted held in Minnesota as opposed to federal court in West Virginia, where J&M filed its own lawsuit. as opposed to federal court West Virginia, where J&M filed its own FEDERAL COURT IN TEXAS ALLOWS PLAINTIFF TO PROCEED WITH FEDERAL COURT IN TEXAS ALLOWS PLAINTIFF TO PROCEED WITH PRICE DISCRIMINATION CLAIM AGAINST NIKE PRICE DISCRIMINATION federal A federal court recently allowed a price discrimination claim against Nike to proceed to a price against Nike to proceed discovery. Games People Play, Inc. v.
Nike, Inc., 2015 U.S. Dist. LEXIS 33217 (E.D.
Tex. Games People Play, Inc. v. U.S. Dist.
LEXIS 33217 Feb. 2015). Games Play (GPP) is golf retailer in Texas that Feb. 12, 2015).
Games People Play (GPP) is aagolf retailer in Texas that had been selling Nike apparel and equipment since 1986. In 2010, GPP discovered what it considered to In 2010, GPP discovered what it considered to equipment since be a significant price disparity between what it was paying for specialty Nike golf clubs was for specialty clubs disparity between and what its competitors were paying for the same clubs. GPPalleged that in the two its competitors were for the same GPP alleged that in the years after it complained about this price disparity, Nike refused on years after it complained to Nike about this price disparity, Nike refused on multiple occasions to sell to GPP merchandise that was being offered to GPP's competitors.
GPP GPP merchandise that was offered to GPP’s competitors. GPP occasions to sell suit in 2014 alleging various violations state federal law, price filed suit in 2014 alleging various violations of state and federal law, including price discrimination claims under the Robinson-Patman Act. discrimination claims under the Robinson-Patman Nike moved to dismiss GPP's Robinson-Patman Act claims, arguing that GPP had failed moved to dismiss GPP’s Robinson-Patman Act claims, arguing that GPP to allege a sufficient injury to competition to maintain a price discrimination claim allege sufficient injury competition to maintain a price discrimination claim under section 2(a) of Act. Nike argued GPP could not show a under section 2(a) of the Act.
Nike argued that GPP could not show a direct injury based on sales diverted from GPP to a favored purchaser, nor could GPP show that the GPP show that based sales diverted from GPP to a favored purchaser, nor isolated disparity in club prices created a significant price differential over a isolated disparity in golf club prices created a significant price differential over a substantial period such that GPP could substantial period of time such that GPP could rely on a judicial inference of harm. The court acknowledged that Nike’s argument may ultimately prove meritorious, but it court acknowledged that Nike's argument may ultimately prove meritorious, but declined to dismiss the claim before discovery had been commenced. The court did, dismiss the discovery had been commenced.
The court declined dismiss GPP's claims under sections 2(d) and 2(e) of the Act, which prohibit however, dismiss GPP’s claims under sections 2(d) and 2(e) of the Act, which prohibit a seller from promotional favors, such seller from discriminating against certain buyers with regard to promotional favors, such buyers with 2 . GRAY PLANT MOOTY as advertising and merchandising. The court concluded that GPP's allegations about concluded that GPP’s allegations as advertising and merchandising. The discrimination in promotional opportunities were limited to examples of Nike refusing opportunities were to examples Nike refusing discrimination to sell specific products to GPP, but it is well settled that a refusal to deal does not sell specific products to GPP, but it is settled a refusal does constitute a violation of the Robinson-Patman Act. violation of the Robinson-Patman WISCONSIN DISTRICT COURT HOLDS DISCRIMINATORY OFFERING OF PACKAGE WISCONSIN DISTRICT COURT HOLDS DISCRIMINATORY OFFERING OF PACKAGE SIZES FOR RESALE MAY VIOLATE ROBINSON-PATMAN ACT SIZES FOR RESALE MAY VIOLATE ROBINSON-PATMAN The States District Court Western Wisconsin denied a motion The United States District Court for the Western District of Wisconsin denied a motion to dismiss a lawsuit alleging violations of the Robinson-Patman Act based on the dismiss lawsuit alleging violations of the Robinson-Patman Act based on discriminatory offering of different product sizes to sellers for resale. Woodman's Food different product sizes to sellers for resale.
Woodman’s Food discriminatory Mkt., Inc. v. Clorox Sales Co., 2015 U.S Dist.
LEXIS 11656 (W.D. Wis. Feb.
2, 2015). Mkt., Inc. v. Clorox Sales Co., 2015 U.S Dist.
LEXIS 11656 (W.D. Wis. Feb.
2, 2015). After Clorox Woodman’s that would no longer offer Woodman’s the large pack Clorox informed Woodman's that it would no longer offer Woodman's the large pack products that it offered to bulk retailers like Sam's Club and Costco, Woodman's products that it offered to bulk retailers like Sam’s Club and Costco, Woodman’s brought suit against Clorox under the Robinson-Patman Act's price discrimination suit against Clorox under the Robinson-Patman Act’s price discrimination provisions. The provisions upon which Woodman's relied prohibit product sellers provisions.
The provisions upon which Woodman’s relied prohibit product sellers from providing promotional services to aid some buyers but not others in the resale of the promotional services to aid some buyers but not others resale products. Woodman's argued that the offering of larger packages to only some retailers Woodman’s that the offering of larger packages to only some retailers constituted a discriminatory provision of promotional service, because the larger promotional service, because the larger constituted a discriminatory provision package sizes aided the bulk retailers in their resale of the products. sizes aided the bulk retailers in their resale of the products. Clorox moved dismiss Woodman's claims, arguing that the offering different Clorox moved to dismiss Woodman’s claims, arguing that the offering of different package sizes to resellers does not constitute a promotional service but rather the package sizes to resellers does not constitute a promotional service but rather offering of different products, and that the Robinson-Patman Act does not prohibit a different products, and that the Robinson-Patman Act does not a seller from selling different products retailers its choosing. Relying dated seller from selling different products to retailers at its choosing.
Relying on dated administrative decisions and more recent FTC guidelines, the court denied Clorox's administrative decisions and more recent FTC guidelines, the court denied Clorox’s motion to dismiss, holding that the discriminatory use of "special packaging" and to dismiss, that the discriminatory use of “special packaging” and “package sizes” may amount to an unlawful provision of promotional services, in "package sizes" may amount to an unlawful provision of promotional services, violation of the Robinson-Patman violation of the Robinson-Patman Act. TERMINATIONS SECOND CIRCUIT OPINION HIGHLIGHTS DIFFERENCE BETWEEN “EXPIRATION” OPINION HIGHLIGHTS DIFFERENCE BETWEEN "EXPIRATION" AND "TERMINATION" OF DISTRIBUTION AGREEMENT “TERMINATION” OF DISTRIBUTION AGREEMENT Sleepy’s LLC v. Select Comfort States Appeals In Sleepy's LLC v. Select Comfort Wholesale Corp., the United States Court of Appeals for the Second Circuit reversed the dismissal of a distributor’s breach of contract claims, Second reversed the dismissal of a distributor's breach contract claims, that the terms of the parties’ distribution agreement may have remained holding that the terms of the parties' distribution agreement may have remained in place after its expiration date.
779 F.3d 191 (2d Cir. 2015). The distributor, Sleepy's, (2d Cir.
2015). The distributor, Sleepy’s, place after its expiration date. claimed that the manufacturer, Select Comfort, had breached the nondisparagement the manufacturer, Select had breached the nondisparagement claimed provision in the parties' distribution agreement. The trial court found that the provision in the parties’ distribution agreement.
The trial court found that the distribution agreement ceased to operate after its stated expiration date, and the court agreement ceased to operate after its stated expiration date, and the 3 . GRAY PLANT MOOTY refused to consider evidence of Select Comfort's alleged disparaging conduct refused to consider evidence of Select Comfort’s alleged disparaging conduct occurring after that date. In holding that the agreement ceased to operate, the court reasoned date. In holding that the agreement ceased to operate, the court reasoned after that the agreement expressly required a signed waiver in order to extend its terms the agreement expressly required a signed waiver in order to its terms “after termination," and no party executed such a waiver after the expiration date. "after termination,” and no party executed such a waiver after the expiration date. Because Sleepy’s did not present evidence of disparagement occurring prior to the Because Sleepy's did not present evidence of disparagement occurring prior to distribution agreement's expiration date, the court dismissed Sleepy's breach of distribution agreement’s expiration date, the court dismissed Sleepy’s breach contract claim. Drawing a distinction between "expiration" and "termination" the distribution Drawing a distinction between “expiration” and “termination” of the distribution agreement, the Second Circuit reversed and remanded. The appellate court noted that Second Circuit reversed and remanded.
The appellate court noted that the distribution agreement did not expressly require a signed waiver in order to extend distribution agreement did not expressly signed waiver in order as opposed to Therefore, it directed its terms where it merely expired as opposed to terminated. Therefore, it directed the where merely trial court to examine whether the distribution agreement (and its nondisparagement to examine whether the distribution agreement (and its nondisparagement provision) continued to operate, even after the agreement's expiration date. to operate, even agreement’s FEDERAL COURT UPHOLDS MANUFACTURER’S RIGHT TO TERMINATE FEDERAL COURT UPHOLDS MANUFACTURER'S RIGHT TO Washington federal court granted Volvo’s motion partial summary judgment, A Washington federal court granted Volvo's motion for partial summary judgment, that the implied covenant of good faith and fair dealing finding that the implied covenant of good faith and fair dealing had no bearing on the exercise of Volvo’s unrestricted contractual right to terminate a dealership agreement. terminate a dealership agreement. exercise of Volvo's unrestricted contractual right Volvo Constr. Equip.
N. Am., LLC v. Clyde/West., Inc., 2014 U.S.
Dist. LEXIS168264 (W.D. LLC U.S. LEXIS 168264 (W.D. Wash. Dec.
3, 2014). dealership agreement Clyde, Wash. Dec. 3, 2014).
Volvo terminated its dealership agreement with Clyde, a dealer of Volvo’s heavy construction equipment, Volvo's heavy construction equipment, under a provision of the agreement that allowed either party to terminate the relationship for any reason after providing 180 days either party to terminate the relationship for any reason after providing 180 days advance written notice. A different section of the dealership agreement specified that, A different section of the dealership agreement specified advance written in the event of a breach, either party “may” give the breaching party written notice and breach, either party "may" sixty days to cure. If the breach was not timely cured, the nonbreaching party was days to cure. the breach was timely cured, the nonbreaching party was sixty allowed to terminate the dealership agreement.
After the termination, Clyde alleged terminate the dealership agreement. After termination, Clyde alleged allowed that Volvo had ended the relationship because it believed that Clyde had breached the Volvo ended the relationship because believed agreement by underperforming in the marketplace. Clyde contended that the covenant the marketplace.
Clyde contended of good faith and fair dealing required Volvo to provide it with sixty days to cure the faith and fair dealing required Volvo to provide with sixty days breach before termination. before termination. The court refused to apply the implied covenant of good faith and fair dealing because refused to covenant good faith and fair dealing because the parties had expressly agreed that either of them could terminate the agreement for expressly agreed that either of them could any reason after providing 180 days written notice. Volvo's reason for termination was reason after providing days notice. Volvo’s reason was irrelevant, the held, because its to terminate was unrestrained.
The irrelevant, the court held, because its right to terminate was unrestrained. The court also held that a claim Clyde brought under the Federal Dealer Act failed as a matter of brought under the Federal Dealer as a matter also held because the parties did not manufacture or deal in "automobiles" as law because the parties did not manufacture or deal in “automobiles” as contemplated by the Act. 4 . GRAY PLANT MOOTY STATE FRANCHISE LAWS STATE DISTRIBUTION AGREEMENT NOT A "FRANCHISE" A “FRANCHISE” DISTRIBUTION AGREEMENT MINNESOTA FRANCHISE UNDER MINNESOTA FRANCHISE ACT A federal court in Minnesota has found that the parties’ exclusive distribution A federal court in Minnesota has found that the parties' exclusive distribution agreement did not meet the definition of aafranchise under the Minnesota Franchise Act not meet the definition of franchise under the Minnesota Franchise (MFA). Rogovsky Enter., Inc. v. MasterBrand Cabinets, Inc., 2015 U.S.
Dist. LEXIS 24834 Rogovsky Enter., Inc. U.S. Dist.
LEXIS Minn. Feb. 13, 2015).
The agreement provided for Rogovsky franchisor (D. Minn. Feb.
13, 2015). The agreement provided for Rogovsky (the franchisor of the “Kitchen and Home Interiors" system of kitchen and bath remodeling businesses) to Home Interiors” system kitchen and bath remodeling businesses) "Kitchen source cabinetry products for its franchisees exclusively through MasterBrand. source cabinetry products for its franchisees exclusively through MasterBrand. MasterBrand terminated the agreement approximately two years into its seven-year years into its seven-year MasterBrand terminated the agreement approximately term. Rogovsky sued for breach of contract and also alleged (among other things) that Rogovsky sued for breach of contract and also alleged (among other things) MasterBrand had violated the MFA and the franchise relationship laws of several other MFA the franchise relationship laws several MasterBrand had violated states.
Although resident had a principal place of business states. Although neither party was a resident of or had a principal place of business in Minnesota, Rogovsky filed suit there. MasterBrand moved to transfer venue to Indiana Rogovsky filed suit there.
MasterBrand moved to transfer venue Indiana based on a forum selection clause. The court’s venue analysis turned in large part on selection clause. The court's venue analysis turned in large part based on the public interest of Minnesota, embodied by the MFA, should be considered. whether the public interest of Minnesota, embodied by the MFA, should be considered. Thus, the court had to first determine whether the agreement was a franchise contract to first determine whether the agreement was a franchise Thus, the or an area franchise contract under the MFA. area franchise contract Without reaching the other two definitional elements (the right to engage in business Without reaching the other two definitional elements (the right to engage in aabusiness using franchisor’s trademark and community of interest), the court found the using franchisor'strademark and community of interest), the court found the agreement not to be aafranchise because Rogovsky was not required to pay a franchise not to be franchise because Rogovsky was not pay a franchise Rogovsky alleged that it had made improvements to its MasterBrand fee.
Rogovskyalleged that it had made $300,000 in improvements to its MasterBrand training facility and had discontinued sales of competing cabinetry product. The competing cabinetry product. The training facility and had discontinued sales combination of these two factors, Rogovsky argued, constituted payment of a franchise payment of a franchise combination of these two factors, Rogovsky fee.
The disagreed. First, the plain language of the agreement did require a fee. The court disagreed.
First, the plain language of the agreement did not require a fee, and the MFA specifically provides that the purchase at "fair market value" fee, and the MFA specifically provides that the purchase at “fair market value” of supplies necessary to enter business does not a franchise supplies or fixtures necessaryto enter into business does not constitute a franchise fee. Second, Rogovsky's discontinued sales competitor products simply did not, in Second, Rogovsky’s discontinued sales ofof competitor products simply didnot, in the court’s view, constitute a fee, either. The agreement also was not an "area" franchise constitute a fee, either. The agreement also was “area” franchise court's contract because it did not give Rogovsky the right to sell franchises in the name of or because it did give Rogovsky the to sell franchises in the name of on behalf of MasterBrand.
The court noted Rogovsky's disclosure document for the behalf of MasterBrand. The court noted Rogovsky’s disclosure document for “Kitchen and Home Interiors" franchise offering "does not even mention MasterBrand, let Interiors” franchise “does not even mention MasterBrand, "Kitchen alone describe the franchise as a MasterBrand cabinet franchise." Because Rogovsky was the franchise as cabinet franchise.” Because Rogovsky was covered by the MFA, the court was not required to unable to show the relationship was covered by the MFA, the court was not required to consider public interest considerationsarticulated under the MFA and there was interest considerations articulated under the MFA and there was consider public therefore no compelling reason to ignore the agreement's forum selection clause. ignore the agreement’s forum selection clause. therefore no compelling reason MasterBrand’s motion to transfer venue was granted. was granted. MasterBrand's motion to transfer 5 . GRAY PLANT MOOTY COURT FINDS ISSUE OF MATERIAL FACT WITH RESPECT TO DISTRIBUTOR’S CLAIM ISSUE RESPECT TO DISTRIBUTOR'S CLAIM FACT WISCONSIN FAIR DEALERSHIP UNDER THE WISCONSIN FAIR DEALERSHIP LAW In DeTemple v. Leica Geosystems Inc., Bus. Franchise Guide (CCH) 9115,460 (N.D. Ga. Leica Geosystems Bus.
Franchise Guide (CCH) ¶ 15,460 (N.D. Feb. 9, 2015), United States District Court the Northern District of Georgia Feb. 9, 2015), the United States District Court for the Northern District of Georgia determined that a genuine issue of material fact existed as to whether a manufacturer a genuine issue as to a manufacturer and its distributor shared a community of interest within the meaning of the Wisconsin shared a community within the meaning of the Wisconsin Fair Dealership Law (WFDL).
The dispute arose Fair Dealership Law (WFDL). The dispute arose when Leica Geosystems, a manufacturer Geosystems, a manufacturer of surveying and construction products, terminated DeTemple d/b/a TPSG, one of its surveying DeTemple d/b/a TPSG, one Wisconsin-based distributors, after TPSG failed to meet performance targets. TPSG Wisconsin-baseddistributors, after TPSG failed to meet performance targets.
TPSG brought suit under the WFDL and alleged that Leica lacked good cause to terminate the alleged that Leica lacked good cause to terminate brought suit under the WFDL relationship. Leica then moved for summary judgment on the WFDL claim, arguing that Leica then moved for summary judgment WFDL claim, arguing that the parties' distribution agreement did not fall within the definition of a "dealership" parties’ distribution agreement did not fall definition of a “dealership” under the WFDL. the WFDL. Based on the facts in the record and legislative directives to construe the WFDL broadly, WFDL broadly, Based on the facts in the directives the court held that it could not determine the existence of aadealership on summary held that it could not determine the existence of dealership on summary judgment. The court focused its analysis on the community of interest prong of the focused its analysis on the community of interest prong of judgment.
The WFDL and considered whether the of the business WFDL and considered whether the termination of the business relationship between the parties would have a significant impact on TPSG's financial interests. In finding that a on TPSG’s financial interests. In finding a parties question of fact existed, the court was persuaded by the following key factors: (1) the existed, was persuaded by the factors: question percentage of revenue that TPSG derived from the sale of Leica's products; (2) TPSG's revenue that TPSG from the sale of Leica’s products; (2) TPSG’s to hire new personnel to devote to its alleged dealership; (3) TPSG’s purchase need to hire new personnel to devote to its alleged dealership; (3) TPSG's purchase of a building to house a dedicated showroom; (4) cooperation between the parties in cooperation between the parties building to house a dedicated showroom; setting sales targets; TPSG’s advertising expenditures setting sales targets; and (5) TPSG'sadvertising expenditures for Leica’s products. Leica's products. CLASS ACTIONS CLASS CERTIFICATION DENIED FOR INDEPENDENT APPLE SPECIALISTS CLASS CERTIFICATION DENIED FOR INDEPENDENT APPLE SPECIALISTS California state appellate court affirmed the denial motion for class A California state appellate court affirmed the denial of a motion for class certification a group of independent Apple dealers (known as Specialists) Siechert & for a group of independent Apple dealers (known as Specialists) in Siechert & Synn v. WL (Cal. Feb. Apple, Inc., 2015 WL 513645 (Cal.
Ct. App. Feb.
6, 2015). The plaintiffs failed to show failed that common questions predominated over individual issues or that a class action common questions predominated over individual issues or a class action be superior individual suits. The court also found facts related to would be superior to individual suits.
The court also found that facts related to the limitations, causation, alleged statute of limitations, causation, and alleged misrepresentation should all be determined on an individual basis. individual basis. of the plaintiffs were in the business of selling Apple products claimed All of the plaintiffs were in the business of selling Apple products and claimed that Apple’s decision to own retail stores was scheme Apple's decision to open its own retail stores was part of a fraudulent scheme to drive independent Apple Specialists out of business. Some of the plaintiffs published independent Apple Specialistsout of business.Some of the plaintiffs published their opinions on this issue on an Apple Specialist listsery as early as 2001. This led the court on this issue on an Apple Specialist listserv as early as 2001.
This led the court 6 . GRAY PLANT MOOTY to conclude that each plaintiff would be required to individually prove delayed conclude that each plaintiff would be required to individually prove delayed discovery in order to overcome Apple's statute of limitations defense. The plaintiffs discovery in order to overcome Apple’s statute of limitations defense. The plaintiffs argued that class-wide reliance on Apple's representations should be presumed because that class-wide Apple’s representations should be presumed because Apple made similar statements to each of the Specialists. However, plaintiffs’ Apple made similar statements to each of the Specialists.
However, the plaintiffs' deposition testimony indicated that they recalled different representations, thereby deposition testimony indicated that they recalled different representations, thereby distinguishing this case from others in which there was evidence that uniform distinguishing this case from others in which there was evidence that uniform representations were made to each putative class member. The court also found representationswere made to each putative class member. The court also found that each plaintiff would need to separately prove that the alleged fraud caused their losses would need to separately prove that the alleged fraud caused their losses each as opposed to other variable factors such as the individual store’s market, location, local as opposed to such as the individual store's market, economy, level of service, and management expertise.
Finally, the court held that there service, and management expertise. Finally, the court held that was commonality among the high-demand products the retailers claimed were was no commonality among the high-demand products the retailers claimed were withheld from their stores. Instead, a “Specialist-by-Specialist and product-by-product" withheld from their stores.
Instead, a "Specialist-by-Specialistand product-by-product” would be required for each plaintiff to prove actual damages. inquiry would be required for each plaintiff to prove actual damages. ENCROACHMENT APPOINTMENT OF A NEW DEALER IN EXISTING DEALER'S MARKET DOES NOT APPOINTMENT OF A NEW DEALER IN EXISTING DEALER’S MARKET DOES NOT BOARD OF VEHICLES VIOLATE PENNSYLVANIA BOARD OF VEHICLES ACT The Court of Pennsylvania recently reversed a decision by State The Commonwealth Court of Pennsylvania recently reversed a decision by the State Board of Vehicle Manufacturers, Dealers and Salespersons thatprohibited Arctic Cat Vehicle Manufacturers, Dealers and Salespersons that prohibited Arctic Board from appointing a new dealer to sell ATVs within an existing dealer’s from appointing a new dealer to sell ATVs within an existing dealer's market. Arctic Cat Sales, Inc. Mfrs., Dealers, and Salespersons, 2015 Pa. Commw.
LEXIS Sales, Inc. v. State Bd.
of Vehicle Mfrs., Dealers, and Salespersons, 2015 Pa. Commw. LEXIS 78 (Pa.
Commw. Ct. Feb.
23, 2015). The existing dealer, Nieman, filed a protest before (Pa. Commw. Feb. the board alleging that the addition of a new ATV dealership in its market would result that the addition of a new ATV dealership result a price war that would cause one both dealers withdraw from the market, in a price war that would cause one or both dealers to withdraw from the market, thereby eliminating competition.
This, Nieman claimed, provided good cause under the competition. This, Nieman claimed, provided good cause Board of Vehicles Act, which required the board to consider whether the addition of a Board of Vehicles Act, which required the board to consider whether the that benefits consumers, new vehicle dealer would increase competition in a manner that benefits consumers, for dealer would increase competition the board to disallow the entry of the new dealer. The board found in favor of Neiman, to disallow the new dealer.
The board and Arctic Cat sought review by the Commonwealth Court of Pennsylvania. Commonwealth Court of Pennsylvania. The court under Act, the protesting dealer had The court found that, under the Act, the protesting dealer had the burden of proving burden that there was good cause to prohibit aamanufacturer from establishing additional there was good cause to prohibit manufacturer from establishing additional dealerships within its market. In reviewing Nieman’s claim dealerships within its market. In reviewing Nieman's claim that the new dealership the new dealership decreased competition, the court noted that Nieman did offer any would lead to decreasedcompetition, the court noted that Nieman did not offer any market analysis or statistical studies to support its allegations.
It instead relied on market analysis or statistical studies to support its allegations. It instead relied on the testimony of its principals and evidence that a prior dealer had discontinued selling its principals evidence a prior dealer had discontinued selling testimony ATVs in Nieman's market due to competition with Nieman and the entry of a big ATVsin Nieman’s market due to competition with Nieman and the entry of a big box competitor into a nearby market. Because Neiman did not present any evidence to a nearby market.
Because Neiman did present any evidence competitor allegation would be suppressed by the addition support its allegation that competition would be suppressed by the addition of a new dealer, the court reversed the board’s decision. reversed board's 7 . GRAY PLANT MOOTY Minneapolis, MN Office Minneapolis, MN John W. Fitzgerald, co-chair (612.632.3064) Kirk W. Reilly, co-chair (612.632.3305) Kirk W. Reilly, co-chair (612.632.3305) John W.
Fitzgerald, co-chair (612.632.3064) * Craig P. Miller (612.632.3258) P. Miller (612.632.3258) Megan L.
Anderson (612.632.3004) Anderson (612.632.3004) Sandy Y. Bodeau (612.632.3211) Holly Miller (612.632.3479) * Sandy Y. Bodeau (612.632.3211) Phillip W.
Bohl (612.632.3019) Bohl (612.632.3019) Bruce W. Mooty Bruce W. Mooty (612.632.3333) Jennifer C.
Debrow (612.632.3357) John W. Mooty Jennifer C. Debrow (612.632.3357) John W.
Mooty (612.632.3200) Danell Olson Caron (612.632.3383) Dane!! Olson Caron (612.632.3383) * Kevin J. Moran (612.632.3269) J. Moran (612.632.3269) Elizabeth S.
Dillon (612.632.3284) Elizabeth S. Dillon (612.632.3284) Kate G. Nilan (612.632.3419) Kate G.
Nilan (612.632.3419) Ashley Bennett Ewald (612.632.3449) Ashley Bennett Ewald (612.632.3449) Karli B. Peterson (612.632.3278) B. Peterson (612.632.3278) * Daniel J.
Ringquist (612.632.3299) * Michael R. Gray (612.632.3078) R. Gray (612.632.3078) J.
Ringquist (612.632.3299) J. Schott II (612.632.3327) Kelly W. Hoversten (612.632.3203) Hoversten (612.632.3203) * Max J.
Schott II (612.632.3327) Jesse, Jr. (612.632.3205) Franklin C. Jesse,Jr.
(612.632.3205) Michael P. Sullivan, Jr. (612.632.3350) Sullivan, Jr.
(612.632.3350) * Richard C. Landon (612.632.3429) Richard C. Landon (612.632.3429) Lori L.
Wiese-Parks (612.632.3375) Wiese-Parks (612.632.3375) R. Wittrock (612.632.3382) Gaylen L. Knack (612.632.3217) L.
Knack (612.632.3217) * Quentin R. Wittrock (612.632.3382) * * * * * Washington , DC Office Washington, Janaki J. Parmar (202.295.2235) Robert L.
Zisk, co-chair (202.295.2202) Zisk, co-chair (202.295.2202) * Janaki J. Parmar (202.295.2235) Julia C. Colarusso (202.295.2217) Iris F.
Rosario (202.295.2204) F. Rosario (202.295.2204) Julia C. Colarusso (202.295.2217) Justin L.
Sallis (202.295.2223) Maisa Jean Frank (202.295.2209) Jean Frank (202.295.2209) * Justin L. Sallis (202.295.2223) Jan S. Gilbert (202.295.2230) Erica L.
Tokar (202.295.2239) * Erica L. Tokar (202.295.2239) Jan S. Gilbert (202.295.2230) Virginia D.
Horton (202.295.2237) * Stephen J. Vaughan (202.295.2208) J. Vaughan (202.295.2208) Mark A.
Kirsch (202.295.2229) Kirsch (202.295.2229) David E. Worthen (202.295.2203) E. Worthen (202.295.2203) Peter J.
Klarfeld (202.295.2226) Eric L. Yaffe (202.295.2222) Eric L. Yaffe (202.295.2222) J.
Klarfeld (202.295.2226) Sheldon H. Klein (202.295.2215) Sheldon H. Klein (202.295.2215) Carl E.
Zwisler (202.295.2225) E. Zwisler (202.295.2225) Wrote or edited articles for this issue. * Wrote or edited articles for this issue. For more information on our Franchise and Distribution practice and for recent back on our Franchise and practice recent back For more issues of this publication, visit the Franchise and Distribution Practice Group at issues of this publication, visit Franchise and Distribution Practice Group http://www.gpmlaw.com/Practices/Franchise-Distribution. GRAY PLANT MOOTY GRAY PLANT MOOTY Suite 700, The Watergate 500 IDS Center Suite The 80 South Eighth Street New Hampshire Avenue, N.W. 600 New Hampshire Avenue, N.W. Minneapolis, MN 55402-3796 Washington, DC 20037-1905 Minneapolis, MN Phone: 612.632.3000 Phone: 202.295.2200 Phone: 612.632.3000 Phone: 202.295.2200 franchise@gpmlaw.com GPMemorandum a periodic The GPMemorandum is a periodic publication of Gray, Plant, Mooty, Mooty & Bennett, P.A., and should Plant, Mooty, Mooty & Bennett, P.A., and should not be construed as opinion on any specific facts or circumstances. not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are general information purposes consult your own franchise intended for general information purposes only, and you are urged to consult your own franchise lawyer your own situation and any specific legal questions concerning your own situation and any specific legal questions you may have. GP:3954386 vl GP:3954386 v1 8 .
The distribution-related topics this quarter include antitrust, terminations, and class antitrust, terminations, and class actions. ANTITRUST MANUFACTURER MANUFACTURER WINS JURY VERDICT DEFEATING ANTITRUST AND JURY VERDICT DEFEATING ANTITRUST AND OTHER CLAIMS BY TERMINATED DISTRIBUTOR DISTRIBUTOR OTHER BY Following a nine-day jury trial the United States District Court for Following a nine-day jury trial in the United States District Court for the Minnesota, a fireplaces and related products District of Minnesota, a manufacturer of fireplaces and related products won distribution and antitrust case a jury verdict defeating all counts in a product distribution and antitrust case tried earlier this year. J&M Distrib., Inc. v.
Hearth & Home Techs., Inc., No. 13earlier Distrib., Inc. v.
Hearth & Home Techs., cv-00072-SRN-TNL (D. Minn. Jan.
23, 2015). The lawsuit, in which Gray cv-00072-SRN-TNL (D. Minn.
Jan. 23, 2015). The lawsuit, in Gray Plant represented manufacturer, & Home Technologies, Plant Mooty represented the manufacturer, Hearth & Home Technologies, followed the decision followed the decision of Hearth & Home to terminate its wholesale, two-step & Home to terminate its wholesale, distributor in Pennsylvania, Ohio, Maryland, and West Virginia, and to sell in Pennsylvania, Ohio, Maryland, and West Virginia, and sell direct to several dozen dealers in those areas.
The terminated distributor, to several dozen dealers those areas. The terminated J&M, alleged antitrust, contract, and tort claims, naming a large J&M, alleged antitrust, contract, and tort claims, naming a large Pennsylvania dealer as co-defendant on the antitrust and tort conspiracy Pennsylvaniadealer as aaco-defendant on the antitrust and tort conspiracy counts. Following termination, J&M went out of business after thirty years as termination, J&M went out of business after thirty years as and it claimed at trial to have lost its entire business value a distributor, and it claimed at trial to have lost its entire business value of $3.5 million, plus other “lost profits." All told, with potential damages tripled "lost profits.” All told, with potential damages under antitrust law, J&M was seeking more than $10 million plus attorneys' J&M was seeking more than plus attorneys’ fees.
After eight hours of deliberation, the antitrust conspiracy, fees. After eight hours of deliberation, the jury found no antitrust conspiracy, breach of contract, or tortious interference. This provided a complete trial tortious interference.
This provided a complete breach for Hearth & Home. (Price discrimination claims had been dismissed victory for Hearth & Home. (Price discrimination claims had been dismissed by the judge earlier in the case.) judge earlier in the case.) 1 .
GRAY PLANT MOOTY The case was of great importance to to avoiding an adverse The case was of great importance to all concerned. In addition to avoiding an adverse concerned. judgment, Hearth & Home achieved confirmation of its right to terminate wholesale Hearth Home achieved confirmation right to terminate wholesale distributors and other intermediaries when itit wants to sell directly to dealers or to distributors and other intermediaries when wants to sell directly to dealers or others down the product distribution chain. Many manufacturing companies struggle product distribution chain. Many manufacturing companies struggle others with this same desire to competitiveness and profitability with this same desire to improve their competitiveness and profitability by eliminating wholesalers who longer add sufficient value.
Key fact issues this case long-time wholesalers who no longer add sufficient value. Key fact issues in this case statements and documents created an "implied" included whether statements and documents created an “implied” contract precluding termination except with good cause, and whether Hearth & Home had "conspired" good cause, and whether Hearth & Home had “conspired” termination except the large Pittsburgh dealer to eliminate as competitors J&M and some other with the large Pittsburgh dealer to eliminate as competitors J&M and some other Pittsburgh-area dealers J&M had supplied. dealers J&M had As reported Issue 162 same time Hearth As reported in Issue 162 of The GPMemorandum, at the same time Hearth & Home sent its termination notice, commenced declaratory judgment action so that any its termination notice, it commenced a declaratory judgment action so that any would be venued in its headquarters state, Minnesota. That earlier venue litigation would be venued in its headquarters state, Minnesota.
That earlier venue battle was won by Hearth & Home, which resulted in the trial being held in Minnesota was won Hearth Home, resulted held in Minnesota as opposed to federal court in West Virginia, where J&M filed its own lawsuit. as opposed to federal court West Virginia, where J&M filed its own FEDERAL COURT IN TEXAS ALLOWS PLAINTIFF TO PROCEED WITH FEDERAL COURT IN TEXAS ALLOWS PLAINTIFF TO PROCEED WITH PRICE DISCRIMINATION CLAIM AGAINST NIKE PRICE DISCRIMINATION federal A federal court recently allowed a price discrimination claim against Nike to proceed to a price against Nike to proceed discovery. Games People Play, Inc. v.
Nike, Inc., 2015 U.S. Dist. LEXIS 33217 (E.D.
Tex. Games People Play, Inc. v. U.S. Dist.
LEXIS 33217 Feb. 2015). Games Play (GPP) is golf retailer in Texas that Feb. 12, 2015).
Games People Play (GPP) is aagolf retailer in Texas that had been selling Nike apparel and equipment since 1986. In 2010, GPP discovered what it considered to In 2010, GPP discovered what it considered to equipment since be a significant price disparity between what it was paying for specialty Nike golf clubs was for specialty clubs disparity between and what its competitors were paying for the same clubs. GPPalleged that in the two its competitors were for the same GPP alleged that in the years after it complained about this price disparity, Nike refused on years after it complained to Nike about this price disparity, Nike refused on multiple occasions to sell to GPP merchandise that was being offered to GPP's competitors.
GPP GPP merchandise that was offered to GPP’s competitors. GPP occasions to sell suit in 2014 alleging various violations state federal law, price filed suit in 2014 alleging various violations of state and federal law, including price discrimination claims under the Robinson-Patman Act. discrimination claims under the Robinson-Patman Nike moved to dismiss GPP's Robinson-Patman Act claims, arguing that GPP had failed moved to dismiss GPP’s Robinson-Patman Act claims, arguing that GPP to allege a sufficient injury to competition to maintain a price discrimination claim allege sufficient injury competition to maintain a price discrimination claim under section 2(a) of Act. Nike argued GPP could not show a under section 2(a) of the Act.
Nike argued that GPP could not show a direct injury based on sales diverted from GPP to a favored purchaser, nor could GPP show that the GPP show that based sales diverted from GPP to a favored purchaser, nor isolated disparity in club prices created a significant price differential over a isolated disparity in golf club prices created a significant price differential over a substantial period such that GPP could substantial period of time such that GPP could rely on a judicial inference of harm. The court acknowledged that Nike’s argument may ultimately prove meritorious, but it court acknowledged that Nike's argument may ultimately prove meritorious, but declined to dismiss the claim before discovery had been commenced. The court did, dismiss the discovery had been commenced.
The court declined dismiss GPP's claims under sections 2(d) and 2(e) of the Act, which prohibit however, dismiss GPP’s claims under sections 2(d) and 2(e) of the Act, which prohibit a seller from promotional favors, such seller from discriminating against certain buyers with regard to promotional favors, such buyers with 2 . GRAY PLANT MOOTY as advertising and merchandising. The court concluded that GPP's allegations about concluded that GPP’s allegations as advertising and merchandising. The discrimination in promotional opportunities were limited to examples of Nike refusing opportunities were to examples Nike refusing discrimination to sell specific products to GPP, but it is well settled that a refusal to deal does not sell specific products to GPP, but it is settled a refusal does constitute a violation of the Robinson-Patman Act. violation of the Robinson-Patman WISCONSIN DISTRICT COURT HOLDS DISCRIMINATORY OFFERING OF PACKAGE WISCONSIN DISTRICT COURT HOLDS DISCRIMINATORY OFFERING OF PACKAGE SIZES FOR RESALE MAY VIOLATE ROBINSON-PATMAN ACT SIZES FOR RESALE MAY VIOLATE ROBINSON-PATMAN The States District Court Western Wisconsin denied a motion The United States District Court for the Western District of Wisconsin denied a motion to dismiss a lawsuit alleging violations of the Robinson-Patman Act based on the dismiss lawsuit alleging violations of the Robinson-Patman Act based on discriminatory offering of different product sizes to sellers for resale. Woodman's Food different product sizes to sellers for resale.
Woodman’s Food discriminatory Mkt., Inc. v. Clorox Sales Co., 2015 U.S Dist.
LEXIS 11656 (W.D. Wis. Feb.
2, 2015). Mkt., Inc. v. Clorox Sales Co., 2015 U.S Dist.
LEXIS 11656 (W.D. Wis. Feb.
2, 2015). After Clorox Woodman’s that would no longer offer Woodman’s the large pack Clorox informed Woodman's that it would no longer offer Woodman's the large pack products that it offered to bulk retailers like Sam's Club and Costco, Woodman's products that it offered to bulk retailers like Sam’s Club and Costco, Woodman’s brought suit against Clorox under the Robinson-Patman Act's price discrimination suit against Clorox under the Robinson-Patman Act’s price discrimination provisions. The provisions upon which Woodman's relied prohibit product sellers provisions.
The provisions upon which Woodman’s relied prohibit product sellers from providing promotional services to aid some buyers but not others in the resale of the promotional services to aid some buyers but not others resale products. Woodman's argued that the offering of larger packages to only some retailers Woodman’s that the offering of larger packages to only some retailers constituted a discriminatory provision of promotional service, because the larger promotional service, because the larger constituted a discriminatory provision package sizes aided the bulk retailers in their resale of the products. sizes aided the bulk retailers in their resale of the products. Clorox moved dismiss Woodman's claims, arguing that the offering different Clorox moved to dismiss Woodman’s claims, arguing that the offering of different package sizes to resellers does not constitute a promotional service but rather the package sizes to resellers does not constitute a promotional service but rather offering of different products, and that the Robinson-Patman Act does not prohibit a different products, and that the Robinson-Patman Act does not a seller from selling different products retailers its choosing. Relying dated seller from selling different products to retailers at its choosing.
Relying on dated administrative decisions and more recent FTC guidelines, the court denied Clorox's administrative decisions and more recent FTC guidelines, the court denied Clorox’s motion to dismiss, holding that the discriminatory use of "special packaging" and to dismiss, that the discriminatory use of “special packaging” and “package sizes” may amount to an unlawful provision of promotional services, in "package sizes" may amount to an unlawful provision of promotional services, violation of the Robinson-Patman violation of the Robinson-Patman Act. TERMINATIONS SECOND CIRCUIT OPINION HIGHLIGHTS DIFFERENCE BETWEEN “EXPIRATION” OPINION HIGHLIGHTS DIFFERENCE BETWEEN "EXPIRATION" AND "TERMINATION" OF DISTRIBUTION AGREEMENT “TERMINATION” OF DISTRIBUTION AGREEMENT Sleepy’s LLC v. Select Comfort States Appeals In Sleepy's LLC v. Select Comfort Wholesale Corp., the United States Court of Appeals for the Second Circuit reversed the dismissal of a distributor’s breach of contract claims, Second reversed the dismissal of a distributor's breach contract claims, that the terms of the parties’ distribution agreement may have remained holding that the terms of the parties' distribution agreement may have remained in place after its expiration date.
779 F.3d 191 (2d Cir. 2015). The distributor, Sleepy's, (2d Cir.
2015). The distributor, Sleepy’s, place after its expiration date. claimed that the manufacturer, Select Comfort, had breached the nondisparagement the manufacturer, Select had breached the nondisparagement claimed provision in the parties' distribution agreement. The trial court found that the provision in the parties’ distribution agreement.
The trial court found that the distribution agreement ceased to operate after its stated expiration date, and the court agreement ceased to operate after its stated expiration date, and the 3 . GRAY PLANT MOOTY refused to consider evidence of Select Comfort's alleged disparaging conduct refused to consider evidence of Select Comfort’s alleged disparaging conduct occurring after that date. In holding that the agreement ceased to operate, the court reasoned date. In holding that the agreement ceased to operate, the court reasoned after that the agreement expressly required a signed waiver in order to extend its terms the agreement expressly required a signed waiver in order to its terms “after termination," and no party executed such a waiver after the expiration date. "after termination,” and no party executed such a waiver after the expiration date. Because Sleepy’s did not present evidence of disparagement occurring prior to the Because Sleepy's did not present evidence of disparagement occurring prior to distribution agreement's expiration date, the court dismissed Sleepy's breach of distribution agreement’s expiration date, the court dismissed Sleepy’s breach contract claim. Drawing a distinction between "expiration" and "termination" the distribution Drawing a distinction between “expiration” and “termination” of the distribution agreement, the Second Circuit reversed and remanded. The appellate court noted that Second Circuit reversed and remanded.
The appellate court noted that the distribution agreement did not expressly require a signed waiver in order to extend distribution agreement did not expressly signed waiver in order as opposed to Therefore, it directed its terms where it merely expired as opposed to terminated. Therefore, it directed the where merely trial court to examine whether the distribution agreement (and its nondisparagement to examine whether the distribution agreement (and its nondisparagement provision) continued to operate, even after the agreement's expiration date. to operate, even agreement’s FEDERAL COURT UPHOLDS MANUFACTURER’S RIGHT TO TERMINATE FEDERAL COURT UPHOLDS MANUFACTURER'S RIGHT TO Washington federal court granted Volvo’s motion partial summary judgment, A Washington federal court granted Volvo's motion for partial summary judgment, that the implied covenant of good faith and fair dealing finding that the implied covenant of good faith and fair dealing had no bearing on the exercise of Volvo’s unrestricted contractual right to terminate a dealership agreement. terminate a dealership agreement. exercise of Volvo's unrestricted contractual right Volvo Constr. Equip.
N. Am., LLC v. Clyde/West., Inc., 2014 U.S.
Dist. LEXIS168264 (W.D. LLC U.S. LEXIS 168264 (W.D. Wash. Dec.
3, 2014). dealership agreement Clyde, Wash. Dec. 3, 2014).
Volvo terminated its dealership agreement with Clyde, a dealer of Volvo’s heavy construction equipment, Volvo's heavy construction equipment, under a provision of the agreement that allowed either party to terminate the relationship for any reason after providing 180 days either party to terminate the relationship for any reason after providing 180 days advance written notice. A different section of the dealership agreement specified that, A different section of the dealership agreement specified advance written in the event of a breach, either party “may” give the breaching party written notice and breach, either party "may" sixty days to cure. If the breach was not timely cured, the nonbreaching party was days to cure. the breach was timely cured, the nonbreaching party was sixty allowed to terminate the dealership agreement.
After the termination, Clyde alleged terminate the dealership agreement. After termination, Clyde alleged allowed that Volvo had ended the relationship because it believed that Clyde had breached the Volvo ended the relationship because believed agreement by underperforming in the marketplace. Clyde contended that the covenant the marketplace.
Clyde contended of good faith and fair dealing required Volvo to provide it with sixty days to cure the faith and fair dealing required Volvo to provide with sixty days breach before termination. before termination. The court refused to apply the implied covenant of good faith and fair dealing because refused to covenant good faith and fair dealing because the parties had expressly agreed that either of them could terminate the agreement for expressly agreed that either of them could any reason after providing 180 days written notice. Volvo's reason for termination was reason after providing days notice. Volvo’s reason was irrelevant, the held, because its to terminate was unrestrained.
The irrelevant, the court held, because its right to terminate was unrestrained. The court also held that a claim Clyde brought under the Federal Dealer Act failed as a matter of brought under the Federal Dealer as a matter also held because the parties did not manufacture or deal in "automobiles" as law because the parties did not manufacture or deal in “automobiles” as contemplated by the Act. 4 . GRAY PLANT MOOTY STATE FRANCHISE LAWS STATE DISTRIBUTION AGREEMENT NOT A "FRANCHISE" A “FRANCHISE” DISTRIBUTION AGREEMENT MINNESOTA FRANCHISE UNDER MINNESOTA FRANCHISE ACT A federal court in Minnesota has found that the parties’ exclusive distribution A federal court in Minnesota has found that the parties' exclusive distribution agreement did not meet the definition of aafranchise under the Minnesota Franchise Act not meet the definition of franchise under the Minnesota Franchise (MFA). Rogovsky Enter., Inc. v. MasterBrand Cabinets, Inc., 2015 U.S.
Dist. LEXIS 24834 Rogovsky Enter., Inc. U.S. Dist.
LEXIS Minn. Feb. 13, 2015).
The agreement provided for Rogovsky franchisor (D. Minn. Feb.
13, 2015). The agreement provided for Rogovsky (the franchisor of the “Kitchen and Home Interiors" system of kitchen and bath remodeling businesses) to Home Interiors” system kitchen and bath remodeling businesses) "Kitchen source cabinetry products for its franchisees exclusively through MasterBrand. source cabinetry products for its franchisees exclusively through MasterBrand. MasterBrand terminated the agreement approximately two years into its seven-year years into its seven-year MasterBrand terminated the agreement approximately term. Rogovsky sued for breach of contract and also alleged (among other things) that Rogovsky sued for breach of contract and also alleged (among other things) MasterBrand had violated the MFA and the franchise relationship laws of several other MFA the franchise relationship laws several MasterBrand had violated states.
Although resident had a principal place of business states. Although neither party was a resident of or had a principal place of business in Minnesota, Rogovsky filed suit there. MasterBrand moved to transfer venue to Indiana Rogovsky filed suit there.
MasterBrand moved to transfer venue Indiana based on a forum selection clause. The court’s venue analysis turned in large part on selection clause. The court's venue analysis turned in large part based on the public interest of Minnesota, embodied by the MFA, should be considered. whether the public interest of Minnesota, embodied by the MFA, should be considered. Thus, the court had to first determine whether the agreement was a franchise contract to first determine whether the agreement was a franchise Thus, the or an area franchise contract under the MFA. area franchise contract Without reaching the other two definitional elements (the right to engage in business Without reaching the other two definitional elements (the right to engage in aabusiness using franchisor’s trademark and community of interest), the court found the using franchisor'strademark and community of interest), the court found the agreement not to be aafranchise because Rogovsky was not required to pay a franchise not to be franchise because Rogovsky was not pay a franchise Rogovsky alleged that it had made improvements to its MasterBrand fee.
Rogovskyalleged that it had made $300,000 in improvements to its MasterBrand training facility and had discontinued sales of competing cabinetry product. The competing cabinetry product. The training facility and had discontinued sales combination of these two factors, Rogovsky argued, constituted payment of a franchise payment of a franchise combination of these two factors, Rogovsky fee.
The disagreed. First, the plain language of the agreement did require a fee. The court disagreed.
First, the plain language of the agreement did not require a fee, and the MFA specifically provides that the purchase at "fair market value" fee, and the MFA specifically provides that the purchase at “fair market value” of supplies necessary to enter business does not a franchise supplies or fixtures necessaryto enter into business does not constitute a franchise fee. Second, Rogovsky's discontinued sales competitor products simply did not, in Second, Rogovsky’s discontinued sales ofof competitor products simply didnot, in the court’s view, constitute a fee, either. The agreement also was not an "area" franchise constitute a fee, either. The agreement also was “area” franchise court's contract because it did not give Rogovsky the right to sell franchises in the name of or because it did give Rogovsky the to sell franchises in the name of on behalf of MasterBrand.
The court noted Rogovsky's disclosure document for the behalf of MasterBrand. The court noted Rogovsky’s disclosure document for “Kitchen and Home Interiors" franchise offering "does not even mention MasterBrand, let Interiors” franchise “does not even mention MasterBrand, "Kitchen alone describe the franchise as a MasterBrand cabinet franchise." Because Rogovsky was the franchise as cabinet franchise.” Because Rogovsky was covered by the MFA, the court was not required to unable to show the relationship was covered by the MFA, the court was not required to consider public interest considerationsarticulated under the MFA and there was interest considerations articulated under the MFA and there was consider public therefore no compelling reason to ignore the agreement's forum selection clause. ignore the agreement’s forum selection clause. therefore no compelling reason MasterBrand’s motion to transfer venue was granted. was granted. MasterBrand's motion to transfer 5 . GRAY PLANT MOOTY COURT FINDS ISSUE OF MATERIAL FACT WITH RESPECT TO DISTRIBUTOR’S CLAIM ISSUE RESPECT TO DISTRIBUTOR'S CLAIM FACT WISCONSIN FAIR DEALERSHIP UNDER THE WISCONSIN FAIR DEALERSHIP LAW In DeTemple v. Leica Geosystems Inc., Bus. Franchise Guide (CCH) 9115,460 (N.D. Ga. Leica Geosystems Bus.
Franchise Guide (CCH) ¶ 15,460 (N.D. Feb. 9, 2015), United States District Court the Northern District of Georgia Feb. 9, 2015), the United States District Court for the Northern District of Georgia determined that a genuine issue of material fact existed as to whether a manufacturer a genuine issue as to a manufacturer and its distributor shared a community of interest within the meaning of the Wisconsin shared a community within the meaning of the Wisconsin Fair Dealership Law (WFDL).
The dispute arose Fair Dealership Law (WFDL). The dispute arose when Leica Geosystems, a manufacturer Geosystems, a manufacturer of surveying and construction products, terminated DeTemple d/b/a TPSG, one of its surveying DeTemple d/b/a TPSG, one Wisconsin-based distributors, after TPSG failed to meet performance targets. TPSG Wisconsin-baseddistributors, after TPSG failed to meet performance targets.
TPSG brought suit under the WFDL and alleged that Leica lacked good cause to terminate the alleged that Leica lacked good cause to terminate brought suit under the WFDL relationship. Leica then moved for summary judgment on the WFDL claim, arguing that Leica then moved for summary judgment WFDL claim, arguing that the parties' distribution agreement did not fall within the definition of a "dealership" parties’ distribution agreement did not fall definition of a “dealership” under the WFDL. the WFDL. Based on the facts in the record and legislative directives to construe the WFDL broadly, WFDL broadly, Based on the facts in the directives the court held that it could not determine the existence of aadealership on summary held that it could not determine the existence of dealership on summary judgment. The court focused its analysis on the community of interest prong of the focused its analysis on the community of interest prong of judgment.
The WFDL and considered whether the of the business WFDL and considered whether the termination of the business relationship between the parties would have a significant impact on TPSG's financial interests. In finding that a on TPSG’s financial interests. In finding a parties question of fact existed, the court was persuaded by the following key factors: (1) the existed, was persuaded by the factors: question percentage of revenue that TPSG derived from the sale of Leica's products; (2) TPSG's revenue that TPSG from the sale of Leica’s products; (2) TPSG’s to hire new personnel to devote to its alleged dealership; (3) TPSG’s purchase need to hire new personnel to devote to its alleged dealership; (3) TPSG's purchase of a building to house a dedicated showroom; (4) cooperation between the parties in cooperation between the parties building to house a dedicated showroom; setting sales targets; TPSG’s advertising expenditures setting sales targets; and (5) TPSG'sadvertising expenditures for Leica’s products. Leica's products. CLASS ACTIONS CLASS CERTIFICATION DENIED FOR INDEPENDENT APPLE SPECIALISTS CLASS CERTIFICATION DENIED FOR INDEPENDENT APPLE SPECIALISTS California state appellate court affirmed the denial motion for class A California state appellate court affirmed the denial of a motion for class certification a group of independent Apple dealers (known as Specialists) Siechert & for a group of independent Apple dealers (known as Specialists) in Siechert & Synn v. WL (Cal. Feb. Apple, Inc., 2015 WL 513645 (Cal.
Ct. App. Feb.
6, 2015). The plaintiffs failed to show failed that common questions predominated over individual issues or that a class action common questions predominated over individual issues or a class action be superior individual suits. The court also found facts related to would be superior to individual suits.
The court also found that facts related to the limitations, causation, alleged statute of limitations, causation, and alleged misrepresentation should all be determined on an individual basis. individual basis. of the plaintiffs were in the business of selling Apple products claimed All of the plaintiffs were in the business of selling Apple products and claimed that Apple’s decision to own retail stores was scheme Apple's decision to open its own retail stores was part of a fraudulent scheme to drive independent Apple Specialists out of business. Some of the plaintiffs published independent Apple Specialistsout of business.Some of the plaintiffs published their opinions on this issue on an Apple Specialist listsery as early as 2001. This led the court on this issue on an Apple Specialist listserv as early as 2001.
This led the court 6 . GRAY PLANT MOOTY to conclude that each plaintiff would be required to individually prove delayed conclude that each plaintiff would be required to individually prove delayed discovery in order to overcome Apple's statute of limitations defense. The plaintiffs discovery in order to overcome Apple’s statute of limitations defense. The plaintiffs argued that class-wide reliance on Apple's representations should be presumed because that class-wide Apple’s representations should be presumed because Apple made similar statements to each of the Specialists. However, plaintiffs’ Apple made similar statements to each of the Specialists.
However, the plaintiffs' deposition testimony indicated that they recalled different representations, thereby deposition testimony indicated that they recalled different representations, thereby distinguishing this case from others in which there was evidence that uniform distinguishing this case from others in which there was evidence that uniform representations were made to each putative class member. The court also found representationswere made to each putative class member. The court also found that each plaintiff would need to separately prove that the alleged fraud caused their losses would need to separately prove that the alleged fraud caused their losses each as opposed to other variable factors such as the individual store’s market, location, local as opposed to such as the individual store's market, economy, level of service, and management expertise.
Finally, the court held that there service, and management expertise. Finally, the court held that was commonality among the high-demand products the retailers claimed were was no commonality among the high-demand products the retailers claimed were withheld from their stores. Instead, a “Specialist-by-Specialist and product-by-product" withheld from their stores.
Instead, a "Specialist-by-Specialistand product-by-product” would be required for each plaintiff to prove actual damages. inquiry would be required for each plaintiff to prove actual damages. ENCROACHMENT APPOINTMENT OF A NEW DEALER IN EXISTING DEALER'S MARKET DOES NOT APPOINTMENT OF A NEW DEALER IN EXISTING DEALER’S MARKET DOES NOT BOARD OF VEHICLES VIOLATE PENNSYLVANIA BOARD OF VEHICLES ACT The Court of Pennsylvania recently reversed a decision by State The Commonwealth Court of Pennsylvania recently reversed a decision by the State Board of Vehicle Manufacturers, Dealers and Salespersons thatprohibited Arctic Cat Vehicle Manufacturers, Dealers and Salespersons that prohibited Arctic Board from appointing a new dealer to sell ATVs within an existing dealer’s from appointing a new dealer to sell ATVs within an existing dealer's market. Arctic Cat Sales, Inc. Mfrs., Dealers, and Salespersons, 2015 Pa. Commw.
LEXIS Sales, Inc. v. State Bd.
of Vehicle Mfrs., Dealers, and Salespersons, 2015 Pa. Commw. LEXIS 78 (Pa.
Commw. Ct. Feb.
23, 2015). The existing dealer, Nieman, filed a protest before (Pa. Commw. Feb. the board alleging that the addition of a new ATV dealership in its market would result that the addition of a new ATV dealership result a price war that would cause one both dealers withdraw from the market, in a price war that would cause one or both dealers to withdraw from the market, thereby eliminating competition.
This, Nieman claimed, provided good cause under the competition. This, Nieman claimed, provided good cause Board of Vehicles Act, which required the board to consider whether the addition of a Board of Vehicles Act, which required the board to consider whether the that benefits consumers, new vehicle dealer would increase competition in a manner that benefits consumers, for dealer would increase competition the board to disallow the entry of the new dealer. The board found in favor of Neiman, to disallow the new dealer.
The board and Arctic Cat sought review by the Commonwealth Court of Pennsylvania. Commonwealth Court of Pennsylvania. The court under Act, the protesting dealer had The court found that, under the Act, the protesting dealer had the burden of proving burden that there was good cause to prohibit aamanufacturer from establishing additional there was good cause to prohibit manufacturer from establishing additional dealerships within its market. In reviewing Nieman’s claim dealerships within its market. In reviewing Nieman's claim that the new dealership the new dealership decreased competition, the court noted that Nieman did offer any would lead to decreasedcompetition, the court noted that Nieman did not offer any market analysis or statistical studies to support its allegations.
It instead relied on market analysis or statistical studies to support its allegations. It instead relied on the testimony of its principals and evidence that a prior dealer had discontinued selling its principals evidence a prior dealer had discontinued selling testimony ATVs in Nieman's market due to competition with Nieman and the entry of a big ATVsin Nieman’s market due to competition with Nieman and the entry of a big box competitor into a nearby market. Because Neiman did not present any evidence to a nearby market.
Because Neiman did present any evidence competitor allegation would be suppressed by the addition support its allegation that competition would be suppressed by the addition of a new dealer, the court reversed the board’s decision. reversed board's 7 . GRAY PLANT MOOTY Minneapolis, MN Office Minneapolis, MN John W. Fitzgerald, co-chair (612.632.3064) Kirk W. Reilly, co-chair (612.632.3305) Kirk W. Reilly, co-chair (612.632.3305) John W.
Fitzgerald, co-chair (612.632.3064) * Craig P. Miller (612.632.3258) P. Miller (612.632.3258) Megan L.
Anderson (612.632.3004) Anderson (612.632.3004) Sandy Y. Bodeau (612.632.3211) Holly Miller (612.632.3479) * Sandy Y. Bodeau (612.632.3211) Phillip W.
Bohl (612.632.3019) Bohl (612.632.3019) Bruce W. Mooty Bruce W. Mooty (612.632.3333) Jennifer C.
Debrow (612.632.3357) John W. Mooty Jennifer C. Debrow (612.632.3357) John W.
Mooty (612.632.3200) Danell Olson Caron (612.632.3383) Dane!! Olson Caron (612.632.3383) * Kevin J. Moran (612.632.3269) J. Moran (612.632.3269) Elizabeth S.
Dillon (612.632.3284) Elizabeth S. Dillon (612.632.3284) Kate G. Nilan (612.632.3419) Kate G.
Nilan (612.632.3419) Ashley Bennett Ewald (612.632.3449) Ashley Bennett Ewald (612.632.3449) Karli B. Peterson (612.632.3278) B. Peterson (612.632.3278) * Daniel J.
Ringquist (612.632.3299) * Michael R. Gray (612.632.3078) R. Gray (612.632.3078) J.
Ringquist (612.632.3299) J. Schott II (612.632.3327) Kelly W. Hoversten (612.632.3203) Hoversten (612.632.3203) * Max J.
Schott II (612.632.3327) Jesse, Jr. (612.632.3205) Franklin C. Jesse,Jr.
(612.632.3205) Michael P. Sullivan, Jr. (612.632.3350) Sullivan, Jr.
(612.632.3350) * Richard C. Landon (612.632.3429) Richard C. Landon (612.632.3429) Lori L.
Wiese-Parks (612.632.3375) Wiese-Parks (612.632.3375) R. Wittrock (612.632.3382) Gaylen L. Knack (612.632.3217) L.
Knack (612.632.3217) * Quentin R. Wittrock (612.632.3382) * * * * * Washington , DC Office Washington, Janaki J. Parmar (202.295.2235) Robert L.
Zisk, co-chair (202.295.2202) Zisk, co-chair (202.295.2202) * Janaki J. Parmar (202.295.2235) Julia C. Colarusso (202.295.2217) Iris F.
Rosario (202.295.2204) F. Rosario (202.295.2204) Julia C. Colarusso (202.295.2217) Justin L.
Sallis (202.295.2223) Maisa Jean Frank (202.295.2209) Jean Frank (202.295.2209) * Justin L. Sallis (202.295.2223) Jan S. Gilbert (202.295.2230) Erica L.
Tokar (202.295.2239) * Erica L. Tokar (202.295.2239) Jan S. Gilbert (202.295.2230) Virginia D.
Horton (202.295.2237) * Stephen J. Vaughan (202.295.2208) J. Vaughan (202.295.2208) Mark A.
Kirsch (202.295.2229) Kirsch (202.295.2229) David E. Worthen (202.295.2203) E. Worthen (202.295.2203) Peter J.
Klarfeld (202.295.2226) Eric L. Yaffe (202.295.2222) Eric L. Yaffe (202.295.2222) J.
Klarfeld (202.295.2226) Sheldon H. Klein (202.295.2215) Sheldon H. Klein (202.295.2215) Carl E.
Zwisler (202.295.2225) E. Zwisler (202.295.2225) Wrote or edited articles for this issue. * Wrote or edited articles for this issue. For more information on our Franchise and Distribution practice and for recent back on our Franchise and practice recent back For more issues of this publication, visit the Franchise and Distribution Practice Group at issues of this publication, visit Franchise and Distribution Practice Group http://www.gpmlaw.com/Practices/Franchise-Distribution. GRAY PLANT MOOTY GRAY PLANT MOOTY Suite 700, The Watergate 500 IDS Center Suite The 80 South Eighth Street New Hampshire Avenue, N.W. 600 New Hampshire Avenue, N.W. Minneapolis, MN 55402-3796 Washington, DC 20037-1905 Minneapolis, MN Phone: 612.632.3000 Phone: 202.295.2200 Phone: 612.632.3000 Phone: 202.295.2200 franchise@gpmlaw.com GPMemorandum a periodic The GPMemorandum is a periodic publication of Gray, Plant, Mooty, Mooty & Bennett, P.A., and should Plant, Mooty, Mooty & Bennett, P.A., and should not be construed as opinion on any specific facts or circumstances. not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are general information purposes consult your own franchise intended for general information purposes only, and you are urged to consult your own franchise lawyer your own situation and any specific legal questions concerning your own situation and any specific legal questions you may have. GP:3954386 vl GP:3954386 v1 8 .
