EXISTENCE OF MINNESOTA DEALER/FRANCHISE TERMINATION, FRAUD AND NON-RENEWAL LAWS AND FRANCHISE INDUSTRY-SPECIFIC LAWS

In Minnesota, the following Dealer/Franchise Termination and Non-Renewal Laws, Fraud, and Franchise Industry-Specific Laws exist:

– Minnesota Has a Disclosure/Registration Franchise Law
– Minnesota Has a Relationship/Termination Franchise Law
– Minnesota Has a General Business Opportunity Franchise Law
– Minnesota Has an Alcoholic Beverage Wholesaler/Franchise Law
– Minnesota Has an Equipment Dealer/Franchise Law
– Minnesota Has a Gasoline Dealer/Franchise Law
– Minnesota Does Not Have a Marine Dealer/Franchise Law
– Minnesota Has a Motor Vehicle Dealer/Franchise Law
– Minnesota Does Not Have a Motorcycle Dealer/Franchise Law
– Minnesota Does Not Have a Recreational and Power Sports Vehicle Dealer/Franchise Law
– Minnesota Does Not Have a Restaurant Liability Law

The Minnesota Franchise Act (“MFA”) governs franchise terminations and non-renewals. Subdivision 1 of the MFA prohibits any person, whether by means of a term or condition of a franchise or otherwise, from engaging in any unfair or inequitable practice in contravention of such rules as the commissioner may adopt defining as to franchises the words "unfair and inequitable". In turn, for the purpose of rules defining the words "unfair and inequitable", the commissioner may specifically recognize classifications of franchises including but not limited to the classifications of motor vehicle fuel franchises, motor vehicle franchises, hardware franchises, and franchises which require that the franchisee make an initial, unfinanced investment in excess of $200,000. The MFA makes a violation of this section subject to an injunction remedy, and in this regard, assumes irreparable harm to the franchisee.

The Act further makes franchisee litigation a bit easier by stating that a temporary injunction may be granted under this section without requiring the posting of any bond or security. A bond or security is required if a temporary restraining order is granted.

Subdivision 3 of the MFA, deals with Franchise Termination or Cancellation. In this regard, no person may terminate or cancel a franchise unless: (i) that person has given written notice setting forth all the reasons for the termination or cancellation at least 90 days in advance of termination or cancellation, and (ii) the recipient of the notice fails to correct the reasons stated for termination or cancellation in the notice within 60 days of receipt of the notice. However, the Act does create an exception to this where the notice will be deemed to be effective immediately upon receipt where the alleged grounds for termination or cancellation are: (1) voluntary abandonment of the franchise relationship by the franchisee; (2) the conviction of the franchisee of an offense directly related to the business conducted pursuant to the franchise; or (3) failure to cure a default under the franchise agreement which materially impairs the good will associated with the franchisor's trade name, trademark, service mark, logotype or other commercial symbol after the franchisee has received written notice to cure of at least 24 hours in advance thereof.

The MFA further directs that no person may terminate or cancel a franchise except for good cause. "Good cause" is defined explicitly as the failure by the franchisee to substantially comply with the material and reasonable franchise requirements imposed by the franchisor including, but not limited to: (1) the bankruptcy or insolvency of the franchisee; (2) assignment for the benefit of creditors or similar disposition of the assets of the franchise business; (3) voluntary abandonment of the franchise business; (4) conviction or a plea of guilty or no contest to a charge of violating any law relating to the franchise business; or (5) any act by or conduct of the franchisee which materially impairs the goodwill associated with the franchisor's trademark, trade name, service mark, logotype or other commercial symbol.

Subdivision 4 of the MFA regulates failures to renew a franchise relationship. Under this provision, unless the failure to renew a franchise is for good cause as defined in subdivision 3, paragraph (b), and the franchisee has failed to correct reasons for termination as required by subdivison 3, no person may fail to renew a franchise unless (1) the franchisee has been given written notice of the intention not to renew at least 180 days in advance of the expiration of the franchise; and (2) the franchisee has been given an opportunity to operate the franchise over a sufficient period of time to enable the franchisee to recover the fair market value of the franchise as a going concern, as determined and measured from the date of the failure to renew. The MFA issues a blanket admonition when it states that no franchisor may refuse to renew a franchise if the refusal is for the purpose of converting the franchisee's business premises to an operation that will be owned by the franchisor for its own account.

Subdivision 5 of the MFA declares that it is unfair and inequitable for a person to unreasonably withhold consent to an assignment, transfer, or sale of the franchise whenever the franchisee to be substituted meets the present qualifications and standards required of the franchisees of the particular franchisor.

In Minnesota, the following Dealer/Franchise Termination, Fraud and Non-Renewal Laws, and Franchise Industry-Specific Laws, are identified as follows:
State Disclosure/Registration Laws
Minnesota Franchises Law
Minnesota Statutes, Chap. 80C, Sec. 80C.01 through 80C.22

State Relationship/Termination Laws
Minnesota Franchises Law (portion of)
Minnesota Statutes, Chap. 80C, Sec. 80C.14

State Business Opportunity Laws
No Minnesota statute of this type; however, business opportunity sellers must comply with the FTC business opportunity rule

Minnesota Alcoholic Beverage Franchise/Wholesaler Laws
Minnesota beer law; Minnesota beer manufacturers and wholesalers licensing law
Minn. Stat. Chap. 325B, Minn. Stat. §340A.301

Minnesota Equipment Franchise/Dealer Laws
Minnesota agricultural implement Franchise/Dealer law; Minnesota heavy equipment Franchise/Dealer law
Minn. Stat. §325E.05 to §325E.67, Minn. Stat. §325E.068 to §325E.0684

Minnesota Gasoline Franchise/Dealer Laws
Minnesota Franchises Law (it is a component of)
Minn. Stat. §80C.144 to §80C.147

Minnesota Marine Franchise/Dealer Laws
There is no Minnesota franchise law in this market niche

Minnesota Motor Vehicle Franchise/Dealer Laws
Minnesota motor vehicle Franchise/Dealer law
Minn. Stat. Chap. 80E

Minnesota Motorcycle Franchise/Dealer Laws
There is no Minnesota franchise law in this market niche

Minnesota Recreational and Powersports Vehicle Franchise/Dealer Laws
There is no Minnesota franchise law in this market niche

Minnesota Restaurants
There is no Minnesota franchise law in this market niche

Culligan Intern. Co. v. Culligan Water Conditioning of Carver County, Inc., United States District Court, D. Minnesota, Fourth Division, May 17, 1983, 563 F.Supp. 1265 (“1. Probability of Success on the Merits -- The third Dataphase factor—the probability that the movant will succeed on the merits—is the central issue in this case. To prevail on its injunction motion, the plaintiff does not have to prove a greater than 50 percent chance of success. Id. In assessing the plaintiff's likelihood of success on the merits, the Court must examine two issues: (a) whether the 1972 Franchise Agreement was properly terminated; and (b) whether the defendants waived their rights even if the 1972 Franchise Agreement was not properly terminated. a. Termination of 1972 Franchise Agreement -- 1 The defendants claim that the notice of March 11, 1981, which stated that CIC would terminate the franchise, was inadequate because it failed to provide sufficient information to allow the defendants to cure their default. The defendants claim that this improper termination was a violation of the Minnesota Franchise Act (Act), Minn.Stat. § 80C.14, subd. 2(a)–(c). The plaintiff, on the other hand, claims the March 11, 1981 notice was sufficient and that the franchise was properly terminated for good cause. No cases have been decided that clearly set out the notice requirements. The Act itself provides that the following actions, among others, are unfair practices: (a) Terminate or cancel a franchise without first giving written notice setting forth all the reasons for the termination or cancellation to the franchisee at least 60 days in advance of termination or cancellation .... (b) Terminate or cancel a franchise except for good cause. “Good cause” shall be failure by the franchisee substantially *1270 to comply with reasonable requirements imposed upon him by the franchise .... (c) Fail to renew a franchise unless the franchisee has been given written notice of the intention not to renew at least 90 days in advance thereof and has been given a sufficient opportunity to recover his investment unless the failure to renew is for good cause as defined in clause (b). Minn.Stat. § 80C.14, subd. 2. The Court finds that the Act requires a franchisor to give a franchisee specific notice of its delinquencies so that the franchisee can have a meaningful opportunity to cure them. Specific notice furthers the Act's remedial and protective purposes. Martin Investors, Inc. v. Vander Bie, 269 N.W.2d 868, 872 (Minn.1978). Such notice is particularly necessary in cases involving a claim that the franchisee owes money.3 In cases like the present one which involve ongoing charges on a monthly account as well as credits for returned merchandise, the franchisor may be the only one that knows precisely how much the franchisee owes at a given time. In addition, such notice gives the franchisee an opportunity to challenge any amounts it believes are inaccurate. The Court finds that the plaintiff failed to give adequate notice to the defendants of their alleged delinquencies. The March 11, 1981 letter purporting to terminate Carver Culligan's franchise does not state with particularity what the defendants had to do to correct their deficiencies. The letter merely states that the franchise will be terminated within 60 days unless the defendants pay the money they owed CIC. The letter makes no mention of the exact amount owed. The Court has concluded that a fair and reasonable interpretation of the Franchise Act requires that a franchisee be informed in the notice of termination what dollar amount must be paid to the franchisor in order to comply with the franchise agreement and to prevent its cancellation. Since that was not done in the instant case, the termination notice was fatally defective. The plaintiff argues that prior correspondence adequately informed the defendants of the amount due. The Court finds this argument unpersuasive. Jackson's letter of January 14, 1981, stated that the defendants owed $14,548.35 as of December 31, 1980, but neither the March 11, 1981 termination letter nor Jackson's February 17, 1981 letter updated the amounts the defendants owed nor itemized the amounts due on the open account and the amounts due on the note. Mayer repeatedly requested this information, but it was not furnished to him until May 22, 1981, when R.O. Schlosser, CIC's credit manager, wrote a letter to Mayer including both an itemization and the supporting documents for the claimed amounts. However, Jackson informed Mayer in a letter dated May 21, 1981, that the franchise had been terminated on May 15, 1981—one week before the requested information was sent. Therefore, the Court concludes that because the plaintiff failed to give valid notice of termination under the Act, the 1972 Franchise Agreement has not been terminated.”)

S. Surgical Corp. v. Oregon Medical & Surgical Specialties, Inc., United States District Court, S. D. New York.March 11, 1980497 F.Supp. 68 (“The Minnesota dealers argue that, by operation of the Franchise Act and Regulation 1714(e) and (f), the provisions of the U. S. Surgical Dealership Agreements permitting termination without cause are unenforceable. Consequently, the defendants conclude that the Dealership Agreements grant these dealers a U. S. Surgical “franchise” in perpetuity terminable only upon “good cause” as that term is defined by the Franchise Act. However, even assuming that the enactment of the Minnesota Franchise Act nullified the termination provisions of the agreements, the defendants are not thereby granted a U. S. Surgical dealership in perpetuity.6 Under established principles of contract law, courts are loathe to find that the absence of a terminal point indicates an intention to contract for the indefinite future, and a perpetual obligation will not usually be inferred from the absence of a terminating date . . .. If the parties intend that the obligation be perpetual they must expressly say so. Warner-Lambert Pharmaceutical Co. v. John J. Reynolds, Inc., 178 F.Supp. 655, 661 (S.D.N.Y.1959), affirmed on the opinion below, 280 F.2d 197 (2d Cir. 1960); Boyle v. Readers' Subscription Inc., 481 F.Supp. 156 (S.D.N.Y.1979). Here, as evidenced by paragraph 17C of the Agreements, which provide for terminations without cause, there is no question that the parties did not intend to create a contract for a perpetual term. In the absence of any controlling contract provision fixing the duration of a contract, the law will deem the contract to be terminable within a “reasonable” period of time. See Warner-Lambert Pharmaceutical Co. v. John J. Reynolds, Inc., supra ; Boyle v. Readers' Subscription Inc., supra. See generally McGinnis Piano and Organ Co. v. Yamaha International Corp., 480 F.2d 474 (8th Cir. 1973); 10 N.Y.Jur. Contracts s 412 (1960 & Supp. 1978). Thus, for the *72 purposes of these motions, the Agreements between U. S. Surgical and the Minnesota dealers will be construed so as to be terminable within a “reasonable” time. 34 In fixing a “reasonable” contract term, the court will be guided by “the actual though unexpressed intention of the parties . . ..” Warner-Lambert Pharmaceutical Co. v. John J. Reynolds, Inc., supra. Each of the Minnesota dealers entered into their U. S. Surgical Dealership Agreements between 1973 and 1975. See note 5 supra. On or about February 25, 1980, the proposed termination date of the defendants' U. S. Surgical Dealerships, these contracts will have been in effect for five to seven years. The question presented, therefore, is whether the defendants' dealership agreements have terminated at the end of a reasonable term. An examination of the Agreements suggests that a four to five year term would be reasonable. For example, paragraph 17C of the Agreement, governing the notice required upon the termination of the dealership, provides as follows: 17. This Agreement may be terminated as follows: C. By either party, for any other cause, or without cause, as follows: During the first six months of dealership, upon fifteen days prior written notice; during the next six months of dealership, upon thirty days prior written notice; during the second, third and fourth years of dealership, respectively, upon sixty, ninety and one hundred twenty days prior written notice, respectively; and after the expiration of the fourth year of dealership, upon six months prior written notice. This provision refers only to the second, third and fourth years of the dealership. It is consistent with the express language of the contracts to conclude that terms of five to seven years are reasonable. Thus, I find that the proposed February 25, 1980 terminations by U. S. Surgical occurred at a point when the contracts had been in existence for a reasonable period of time. The Minnesota Franchise Act permits the termination or non-renewal of a franchise agreement when the contract has expired. The Franchise Act clearly contemplates that franchises may have fixed terms, and may come to an end at the conclusion of such a term. The Franchise Act regulations provide that: (I)t shall be ‘unfair and inequitable’ for any person to: (m) Fail to renew a franchise unless the franchisee has been given written notice of the intention not to renew at least 90 days in advance thereof and has been given a sufficient opportunity to recover his investment or unless for good cause as defined in clause (f). Minn.Reg. SDiv. 1714(m). Therefore, at the end of the contract term, the franchisor may simply fail or refuse to renew a franchise as long as the franchisee is given the required notice and an opportunity to recoup his investment. In sharp contrast to the “good cause” required to terminate a franchise during the term of the franchise agreement, Minn.Reg. SDiv. 1714(e), (f), non-renewal or termination without cause incident to the end of the contract term are sanctioned by the Minnesota Franchise Act and the regulations promulgated thereunder.7 There appears to be no dispute over the fact that, as required by Minn.Reg. SDiv. 1714(m), the Minnesota dealers have been given the requisite notice of termination and are being given a sufficient opportunity to recoup their investments. Given the fact that U. S. Surgical has complied with the terms of the Act, the court need not decide the question of the applicability of the Minnesota Franchise Act to the U. S. Surgical dealerships. Accordingly, U. S. Surgical's motion for summary judgment with respect to the alleged violations of the Minnesota Franchise Act is granted, and the Minnesota dealers' motion for a preliminary *73 injunction and/or summary judgment is denied.”)

AAMCO Industries, Inc. v. DeWolf, Supreme Court of Minnesota, January 27, 1977312 Minn. 95250 N.W.2d 835 (“It is admitted by AAMCO, and clearly evident from the termination notice, that DeWolf was not afforded a 24-hour notice prior to termination of his franchise. Failure to comply with Minn.Reg.S Div 1714(e)(3), argues DeWolf, amounted to an unfair franchise practice by AAMCO and therefore his franchise should be reinstated. *103 The trial court did not agree with this argument. As a finding of fact, the court determined: “A twenty-four hour notice affording an opportunity to the Defendant to remedy the conduct complained of herein or to cure any damage as described in Franchise Regulation, S Div 1714(e), promulgated pursuant to Minn.Stat. s 80C.14 and .18 dated January 13, 1975, would have been a futile and fruitless act for the Plaintiffs.” Also as a conclusion of law, the trial court held: “The Plaintiffs are entitled to an Order immediately and permanently prohibiting the Defendant from operating under the Plaintiffs' name and trade marks. Plaintiffs have substantially complied with Franchise Regulation S Div. 1714(e) as: “A. A twenty-four hour notice to cure the breaches of the Franchise Agreement would have been futile under the circumstances of this case. “B. Defendant's only remedy for violation of S Div. 1714(e) is, as a matter of law, under the provisions of Minn.Stat. 80C.14 injunctive relief to half the termination of the franchise agreement, which relief could in effect be granted in this action, as Plaintiffs' right to terminate the franchise agreement is at issue herein.” Thus, although recognizing the requirement of affording a franchisee 24-hour notice prior to termination of a franchise, the trial court felt, based on the facts in this case, that it would be a futile gesture. A thorough examination of the record shows that the trial court's determination of this issue is amply supported by the evidence and not clearly erroneous. Rule 52.01, Rules of Civil Procedure. 4 3. We find no merit in DeWolf's contention that the evidence does not sustain the trial court's determination to terminate his franchise.”)

OT Industries, Inc. v. OT-tehdas Oy Santasalo-Sohlberg Ab, Court of Appeals of Minnesota, February 29, 1984, 346 N.W.2d 162 (“Good Cause to Terminate Agreement The trial judge further concluded that even if the Franchise Act governed the relationship between the parties, OT-tehdas may well have had good cause to terminate within the meaning of Minn.Stat. § 80C.14, subd. 2(b). “ ‘Good cause’ shall be failure by the franchisee substantially to comply with reasonable requirements imposed upon him by the franchise * * *.” Id. OTI failed to comply with reasonable terms of payment imposed by the contract. This failure to pay occurred over an extended period of time and despite inquiries and reminders. When representatives of OT-tehdas demanded an explanation, the president of OTI said the payment was in the mail. When OT—tehdas determined the payment was not in the mail, they sent the notice of termination. OTI argues that at the time they were notified of the termination, OT-tehdas was actually indebted to OTI in an amount greater than that which OTI owed to OT-tehdas. This claimed debt arose from an agreement to assist OTI with advertising and promotional expenses which provided that payment would be made after complete documentation by OTI. OTI did not itemize the claimed debt until June 3, 1983. Furthermore, there was no agreement that the contributions for advertising expenses could be used as an offset for payments owed. OTI also claims that even if grounds for termination existed, OTI cured its indebtedness. No applicable right to cure exists in the Franchise Act or in the agreement between the parties. The notice of termination to OTI clearly stated that there was a termination and gave the reasons. OT-tehdas appeals from the denial of its motion for a change of venue and a motion to dismiss for lack of jurisdiction. In its brief to this court, OT-tehdas rests its arguments solely on the contractual provisions on choice of law and choice of forum contained in the October 1980 agreement between OT-tehdas and OTI. This clause reads: In the event of any dispute between the parties relating to or arising out of this agreement, each party will use its best effort to settle such dispute in a friendly manner. In the absence of such settlement the dispute shall be settled by a court in Helsinki, Finland according to the laws of Finland. OT-tehdas maintains that the trial court's denial of its demand for removal was contrary to Minnesota law because contractual provisions for choice of forum and choice of law are enforceable. We agree that such contractual provisions may be enforceable; however, OT-tehdas did not properly raise the forum selection issue and did not maintain a consistent position on the choice of law issue in the trial court. Its own actions prevented the issues from being properly addressed and decided.”)

 

Wave Form Systems, Inc. v. AMS Sales Corp., United States District Court, D. Minnesota, December 22, 2014--- F.Supp.3d ----2014 WL 7338790 (“Finally, if Wave Form is able to demonstrate that the MFA applies and that the Service Plans constitute a franchise fee, it will likely be able to show that AMS did not comply with the statutory requirements for not renewing the MPA beyond December 31, 2014. See Minn.Stat. 80C.14, subd. 4. AMS does not contest that it did not notify Wave Form of its intent not to renew the MPA at least 180 days in advance of the December 31, 2014 termination date. 3. Balance of Harms The next Dataphase factor is the balance between the irreparable harm to the movant, if any, and the injury granting an injunction will cause to the other interested parties. Dataphase, 640 F.2d at 113. Wave Form argues that AMS faces little, if any, harm if the MPA is extended beyond its stated termination date. AMS responds by arguing that forcing two parties to “remain married” in an unsatisfactory business relationship constitutes harm.“)

 

Newpaper, LLC v. Party City Corp., United States District Court, D. Minnesota, .July 1, 2014, Slip Copy 2014 WL 2986653 (“ D. Minnesota Franchise Act Claims   In addition to its contractual and common law claims, Newpaper alleges several violations of the Minnesota Franchise Act (“MFA”). In relevant part, the MFA prohibits franchisors from engaging in “any unfair or inequitable practice,” as those terms are defined in rules promulgated by the Minnesota Commissioner of Commerce. Minn.Stat. § 80C.14, subd. 1. The Commissioner, in turn, has set forth rules prohibiting specific types of conduct as “unfair and inequitable.” See Minn. R. 2860.4400. The MFA also has an “anti-waiver” provision that voids any contractual term attempting to circumvent compliance with the Act. Minn.Stat. § 80C.21. Discrimination -- For its first MFA claim, Newpaper alleges Defendants violated Minn. Rule § 2860.4400(B) by discriminating against Newpaper stores in favor of Excepted Stores. Compl. ¶ 84(1). Newpaper alleges that instead of forming or continuing franchise agreements with the Excepted Stores, Defendants terminated the Excepted Stores' Party America franchises. Defendants then offered “supply agreements” by which the Excepted Stores gained the benefits of operating Party City stores without having to pay the related Ad Fund, advertising, or royalty fees. Id. Defendants concede that they terminated the Excepted Stores' franchise agreements and executed new supply agreements with the stores. As a result, Defendants argue the Excepted Stores are no longer franchises, and do not fall under the purview of the MFA. Newpaper has sufficiently alleged a violation of the MFA in connection with the Excepted Stores. Regardless of its label, an agreement may establish a franchise relationship under the MFA, provided the relationship satisfies the statutory elements. See Minn.Stat. § 80C.01, subd. 4(a); see Pac. Equip. & Irrigation., Inc. v. Toro Co., 519 N.W.2d 911, 918 (Minn.Ct.App.1994) (declining to grant injunction where “parties legitimately dispute whether a product distributor is actually a franchisee under the Minnesota Franchise Act”); Chase Manhattan Bank, N.A. v. Clusiau Sales & Rental, Inc., 308 N.W.2d 480, 492–93 (Minn.1981) (finding dealership agreement was a franchise within meaning of MFA). Newpaper has plausibly alleged that the supply agreements have allowed the Excepted Stores to continue a franchise relationship with Defendants by another name. Taking those allegations as true, Newpaper has also plausibly alleged that the Excepted Stores receive more favorable treatment as compared to Newpaper.4 Thus, Newpaper has alleged a viable claim for discrimination under the MFA. Defendants argue that even if the Excepted Stores constitute franchises, these stores belong to a different system altogether: the “Party America” system. This argument may have merit, but is premature at this stage of litigation. The evidence may later demonstrate that the Excepted Stores do not have franchise relationships with Defendants, or that the Excepted Stores operate under a separate “Party America” franchise system. In either case, Newpaper's MFA discrimination claim would necessarily fail. At this stage, however, Newpaper plausibly alleges that despite the “Party America” name, Defendants have deliberately advertised the Excepted Stores using “Party City” trademarks. See, e.g., Compl. ¶¶ 44–45. Newpaper also alleges Defendants have offered precisely the same products, store designs, and other benefits to the Excepted Stores as they have to Party City franchisees. Id. ¶¶ 41, 43. The gravamen of Newpaper's claim is that Defendants have circumvented the MFA's protections by operating Party City stores under a different name, using agreements designed to avoid the word “franchise.” Taken as true, these allegations support a claim for discrimination. 2. Unlawful Competition For its second MFA theory of liability, Newpaper claims Defendants engaged in unlawful competition. Minn. Rule 2860.4400(C) states it shall be unfair and inequitable for any person to compete with a franchisee in an exclusive territory “if the terms of the franchise agreement provide that an exclusive territory has been specifically granted to a franchisee.” Newpaper argues that Defendants have violated this rule in four ways: (1) by selling products online; (2) by allowing the Excepted Stores to continue operating in the Territory; (3) by requiring Newpaper to install e-commerce kiosks in its stores, which facilitate online sales; and (4) by offering “web-only” items. Compl. ¶ 84(2). None of these alleged violations state a claim upon which relief may be granted. The first two alleged violations fail for the reasons already discussed. The Agreement conferred an exclusive territory to Newpaper subject to specific exceptions. Defendants' sale of products online, as well as the operation of the Excepted Stores, fall under these exceptions. The third alleged violation, regarding in-store kiosks, also does not state a claim. In the Franchise Agreement, Defendants reserved the right to control what equipment and fixtures Newpaper would have in its stores. Franchise Agreement § 6.2(A). The Internet Addendum broadly allowed Defendants to begin selling goods online “in any manner whatsoever,” and expressly contemplated sharing the revenue of goods sold “through in-store ordering.” Internet Addendum § 2. Newpaper does not allege Defendants have failed to share profits in the manner outlined by the Internet Addendum, nor does Newpaper demonstrate how the use of in-store kiosks constitutes a violation of the Territory, as that term was defined by the parties. Newpaper's fourth alleged theory of unlawful competition, regarding “web-only” products sold on the internet, fails to state a claim. Newpaper identifies no contractual provision prohibiting Defendants' sale of products online, even when some of those products are not offered to Newpaper. On the contrary, the Agreement states Defendants may offer or sell “any products” to customers “by or through the Internet.” Agreement § E.2. Given this language, the sale of products online falls under an agreed-upon exception to the exclusive territory granted to Newpaper. As a related consideration, although the MFA prohibits “unfair or inequitable conduct” it does so only as such conduct is defined by the Commissioner of Commerce: No person, whether by means of a term or condition of a franchise or otherwise, shall engage in any unfair or inequitable practice in contravention of such rules as the commissioner may adopt defining as to franchises the words “unfair and inequitable .” Minn.Stat. § 80C.14, subd. 1 (emphasis added). Newpaper may be frustrated with Defendants' sale of exclusive products online, and may even legitimately view such sales as unfair. But the MFA does not prohibit conduct according to general notions of fairness, and Rule 2860.4400(C) only enforces territorial exclusivity to the extent defined by the parties. In this case, Newpaper expressly agreed to allow Defendants to sell products over the internet. 3. Unreasonable Standards of Conduct Newpaper alleges Defendants violated Minn. Rule 2860.4400(G), which states a person engages in unfair and inequitable conduct when they “impose on a franchisee by contract or rule, whether written or oral, any standard of conduct that is unreasonable.” Guidance regarding the “standard of conduct” provision in Rule 2840.4400(G) is limited. See, e.g., Klosek v. Am. Express Co., No. 08–426, 2008 WL 4057534, at *22 (D.Minn. Aug. 26, 2008) (noting a “dearth of authority on the meaning of Minn. R. [2]860.4400, subp. G.”). Consistent with its approach to this litigation, Newpaper has alleged nine separate violations of subsection (G). Many of these allegations restate previous theories of liability. Six of the alleged violations fail to identify any standard of conduct whatsoever, let alone identify how the alleged standard is unreasonable. See Compl. ¶¶ 84(3)(c) (failing to provide adequate compensation for internet sales); 84(3)(d) (directing Ad Fund monies to promotion of “www.partycity.com”; 84(3)(e) (alleged misrepresentation regarding share of internet sales profits); 84(3)(f) (alleged misrepresentation of expected profitability of internet sales); 84(3)(i) (ceasing to develop Party City franchise); 84(3)(j) (underpricing Newpaper through internet sales). These theories are dismissed. The remaining three allegations concern the availability of products: (1) Defendants required Newpaper to advertise products and then failed to make these products available; (2) Defendants directed Newpaper to purchase products through Amscan Bypass; and (3) Defendants limited the products available or otherwise made it difficult for Newpaper to sell non-Amscan products. Compl. ¶¶ 84(3)(a), (b), (h). These allegations do not concern “standards of conduct” imposed on Newpaper so much as they accuse Defendants of frustrating Newpaper's ability to perform the Franchise Agreement. Thus, these claims have already been addressed under Newpaper's good faith and fair dealing count, and are dismissed here.”)

 

Pooniwala v. Wyndham Worldwide, Corp., United States District Court, D. Minnesota, May 2, 2014 Slip Copy 2014 WL 1772323 (“ III. Likelihood of Success -- This factor requires that the movant establish a substantial probability of success on the merits of its claims. See Dataphase, 640 F.2d at 114. This factor does not require a plaintiff to demonstrate a “greater than 50% likelihood that he will prevail on the merits.” Id. at 113. The primary focus of Plaintiffs' request for injunctive relief relates to violations of the Minnesota Franchise Act. Under the Minnesota Franchise Act, a franchisor can terminate a relationship, but a termination must be proper, and must conform to the requirements of the Minnesota Franchise Act. Specifically, termination must be for good cause. Minn.Stat. § 80C.14, subd. 3(b) (2013). “Good cause” is defined as: failure by the franchisee to substantially comply with the material and reasonable franchise requirements imposed by the franchisor including, but not limited to: (3) voluntary abandonment of the franchise business; ... or (5) any act by or conduct of the franchisee which materially impairs the good will associated with the franchisor's trademark, trade name, service mark, logotype or other commercial symbol. Id. Defendants argue that because a franchisor has the power to properly terminate the relationship when the terms of a franchise agreement are violated, and they have shown that their terminations were proper and for “good cause,” Plaintiffs cannot demonstrate a likelihood of success on the merits. The Court agrees with Defendants. It is not disputed that Defendants had a right to terminate under the franchise agreements for failure to meet quality standards. (See Fenimore Aff. ¶¶ 33, 64, Exs. B, N.) At this stage of the litigation, Plaintiffs cannot show a likelihood of success on the merits sufficient to tip the balance in favor of granting an injunction. Though Plaintiffs present evidence that they repeatedly and strenuously contested the QA inspection evaluations and determinations as failing to meet the requirements under the agreement and as not constituting good cause, Defendants present even more evidence supporting their claims of good cause for the terminations. Defendants point to a long history of QA inspection failures-six failures for the Super 8 Roseville and eight failures for the Travelodge Burnsville-in support of their claim that the terminations were supported by good cause. Specifically, Defendants present documents showing that the Super 8 Roseville failures date back to January 2012 and continued up to the final failure in December 2013, and that the Travelodge Burnsville failures date back to November 2010 and also continued up to the final failure in December 2013. (See, e.g., Fenimore ¶ 41, Ex. C.) In addition to the QA reports, Defendants also present a number of letters and notices relating to these inspections. (See, e.g., id. ¶ 42, Ex. D.) Defendants also present allegations to rebut Plaintiffs' arguments that Defendants' failure to follow proper QA processes and Defendants' improper terminations amount to purposeful retaliation. Defendants allege that Plaintiffs continue to run the Days Inn Burnsville, and continue to be allowed to remedy QA failures at that facility. Plaintiffs also appear to currently continue to operate an entirely different site without QA concerns. Defendants also present evidence that they terminated the relevant agreements with sufficient notice. Defendants point to the termination notices, which gave Plaintiffs 90–day periods to cure defaults, and additionally present evidence that they allowed and performed re-inspections during those 90 days, but Plaintiffs still failed to cure the alleged defaults. This too undermines the likelihood of success on the merits for Plaintiffs and Plaintiffs' claims that Defendants lack any “good cause” and instead are retaliating against Plaintiffs for the New Jersey litigation. As to the transfer of the Days Inn Roseville, and failure to grant a franchise license to Plaintiffs for that location, the evidence detailed above sufficiently addresses Plaintiffs' retaliation claim such that it tips the likelihood of success on the merits in Defendants' favor. At this juncture, Plaintiffs have also not shown a likelihood of success on the merits with respect to the Days Inn Roseville. Accordingly, the Court concludes that Plaintiffs have failed to sufficiently demonstrate a likelihood of success on the merits and therefore this factor weighs against granting the “extraordinary remedy” of a preliminary injunction. “)

 

Diesel Machinery, Inc. v. Manitowoc Crane Group, United States District Court, D. South Dakota, Southern Division, March 31, 2011, 777 F.Supp.2d 1198 (“ Franchise statutes in other states within this region confirm that a “notice of cancellation” does not constitute a “cancellation” and that a notice of cancellation may be voided prior to the effective date. Under the Wisconsin Fair Dealership Law (“WFDL”), a franchisor must provide a dealer with at least 90 days written notice of cancellation stating the reasons for cancellation. Wis. Stat. § 135.04. Such notice triggers a 60–day period in which the dealer may rectify the claimed deficiencies, thereby voiding the notice and avoiding cancellation. Id. Similarly, under the Minnesota Franchise Act, cancellation of a franchise may not occur until the franchisee: i) receives “written notice setting forth all the reasons for the termination or cancellation at least 90 days in advance of termination or cancellation, and ii) the recipient of the notice fails to correct the reasons stated for termination or cancellation in the notice within 60 days of receipt of the notice.” Minn.Stat. § 80C.14. Iowa law expressly permits withdrawal of a notice of franchise termination for up to 90 days following the notice. The Iowa Franchise Act requires that: *1208 Prior to termination of a franchise for good cause, a franchisor shall provide a franchisee with written notice stating the basis for the proposed termination. After service of the written notice, the franchisee shall have a reasonable period of time to cure the default, which in no event shall be less than thirty days or more than ninety days. Iowa Code § 523H.7. By requiring withdrawal of notices of cancellation in certain circumstances prior to the effective date of cancellation, the above-referenced provisions of the Wisconsin, Minnesota, and Iowa franchise statutes provide more extensive protections to dealers than the SDDPA. The SDDPA neither requires voidance of a notice of cancellation under certain circumstance nor prohibits withdrawal of a notice of cancellation prior to the effective date. In short, dealer protection statutes from surrounding states recognize the distinction between a notice of cancellation and a cancellation itself.“)

 

Green v. SuperShuttle Intern., Inc., United States District Court, D. Minnesota, September 13, 2010 WL 3702592, 160 Lab.Cas. P 10, 313 (“ Having decided that this matter should be referred to arbitration, the issue remaining is whether the Court should direct the arbitrator to adjudicate this dispute as a class action or on an individual basis. Defendants argue that the Court is not authorized to order a class action arbitration, as the arbitration agreement specifically precludes class treatment. Plaintiffs respond that class treatment is appropriate because the class-action waiver contained in the arbitration agreement violates Minn.Stat. § 80C.14 which makes it an “unfair and inequitable practice” to “restrict or inhibit, directly or indirectly, the free association among franchisees for any lawful purpose” or to “require a franchisee to waive his or her rights to a jury trial or to waive rights to any procedure, forum or remedies provided for by laws of the jurisdiction.” Minn. R. 2860.4400(A), (J). Twin Cities Galleries, LLC v. Media Arts Group, Inc., the lone case cited by Plaintiffs, interprets rule 2860.4400 as prohibiting choice of law provisions in franchise agreements. 415 F.Supp.2d 967, 975 (D.Minn.2006). Plaintiffs cite to no legal authority that rule 2860.4400 also prohibits class action waiver provisions. In fact, the Eighth Circuit has twice upheld the proposition that class waivers in arbitration agreements are enforceable. See Cicle v. Chase Bank, USA, 583 F.3d 549, 556 (8th Cir.2009); Pleasants v. American Exp. Co., 541 F.3d 853, 858–59 (8th Cir.2008). Furthermore, the plain language of the arbitration agreement expressly precludes Plaintiffs from bringing class claims and requires the resolution of disputes “on an individual basis only and not on a class-wide, multiple plaintiff, consolidated or similar basis.” This abundantly clear waiver provision was printed in the same sized text as the other provisions of the agreement. Although the waiver prevents Plaintiffs from pursuing a class action, it does not waive Plaintiffs' right to pursue their claims against Defendants. Plaintiffs are free to do so, but, in accordance with the parties' agreement, must submit their claims to arbitration on an individual basis. Plaintiffs have not shown that their substantive rights will be hindered by bringing their claims to arbitration individually nor have they provided any legal authority that Minnesota law views class action litigation as a non-waivable right. Thus, the Court declines to vitiate the agreement's explicit provisions and is obligated to enforce its terms. Stolt–Nielsen S.A. v. AnimalFeeds Int'l Corp., ––– U.S. ––––, 130 S.Ct. 1758, 1773–74 (2010) (concluding that “arbitration is a matter of consent” and determining that “courts and arbitrators must ‘give effect to the contractual rights and expectations of the parties.’ ... In this endeavor, as with any other contract, the parties' intentions control.”) (quoting Volt Info. Scis. v. Bd. of Trustees of Leland Stanford Junior Univ., 489 U.S. 468, 479 (1989)) (other internal quotation marks omitted); Livingston v. Assocs. Fin., Inc., 339 F.3d 553, 559 (7th Cir.2003) (citing Champ v. Siegel Trading Co., Inc., 55 F.3d 269, 274 (7th Cir.1995)).   Finally, 9 U.S.C. § 3 provides that when a suit pending in federal court is subject to arbitration, the court “shall ... stay ... the action until such arbitration has been had.” Despite this statutory language, the majority of courts in this district have held that a stay serves no clear purpose and the action should be dismissed “where the entire controversy between the parties is subject to and will be resolved by arbitration.” Jann v. Interplastic Corp., 631 F.Supp.2d 1161, 1167 (D.Minn.2009) (collecting cases). Because the entire dispute is subject to arbitration, the Court will compel arbitration of Plaintiffs' claims and dismiss the Complaint without prejudice. “)

 

Coyne's & Co., Inc. v. Enesco, LLC, United States District Court, D. Minnesota, August 16, 2010, 2010 WL 3269977 (“Unfair or Inequitable Practice -- Coyne's asserts that Enesco violated Minn.Stat. § 80C.14 which makes it an “unfair and inequitable practice” for “any person” to “compete with the franchisee in an exclusive territory.” Minn. R. 2860.4400(C). Coyne's asserts that it is an exclusive distributor of CA. Coyne's alleges that Enesco, with knowledge of Coyne's exclusive rights, notified customers and the relevant market segment that it would be immediately selling CA products in Coyne's exclusive territory. Because the Court holds that there is a genuine question of material fact regarding whether Coyne's is a franchisee, it denies summary judgment on Count 11.”)

 

Midwest Theatres Corp. v. IMAX Corp., United States District Court, D. Minnesota, March 11, 2009, 2009 WL 649701 (“ C. Minnesota Franchise Act -- Finally, in addition to the fraud claim discussed above, the complaint alleges that IMAX “dealt inequitably with CineMagic [in violation of the Minnesota Franchise Act] by failing to offer a joint venture agreement.” (Compl.¶ 124.) The Minnesota Franchise Act protects franchisees from “unfair contracts and other abuses” by prohibiting certain unfair practices. Banbury v. Omnitrition Int'l, Inc., 533 N.W.2d 876, 882 (Minn.Ct.App.1995) (citing Martin Investors, Inc. v. Vander Bie, 269 N.W.2d 868, 872 (Minn.1978)); see also Minn.Stat. § 80C.14. The Act extends liability to officers, directors and employees of a corporation “who materially aid [ ] in the act or transaction constituting the violation ... unless the person who would otherwise be liable hereunder had no knowledge of or reasonable grounds to know of the existence of the facts by reason of which the liability is alleged to exist.” Minn.Stat. § 80C.17, subdiv. 2; see also Avery v. Solargizer Int'l, Inc., 427 N.W.2d 675, 680 (Minn.Ct.App.1988). CineMagic alleges that “IMAX corporate officers and other employees” are personally liable for its damages under the Minnesota Franchise Act. (Compl.¶ 127.) Assuming that a failure to offer CineMagic the joint venture agreement would violate the Minnesota Franchise Act, the allegations in the complaint indicate only that Atkins told Sieves that a joint venture agreement would be less lucrative. (Id. ¶ 16.) The complaint does not allege that Atkins or Campbell failed to offer CineMagic the joint venture agreement or that they materially aided such a failure. Therefore, CineMagic has not stated a claim of inequitable conduct under the Minnesota Franchise Act against the individual officers. Accordingly, the court dismisses this claim against Atkins and Campbell.”)

 

Klosek v. American Express Co., United States District Court, D. Minnesota, August 26, 2008, 2008 WL 4057534 (“ 1. Standing to Sue -- At the outset, Ameriprise argues that the plaintiffs lack standing to sue under the MFA. It cites Minn.Stat. § 80C.21. This statute is titled “waivers void,” and it provides, Any condition, stipulation or provision, including any choice of law provision, purporting to bind any person who, at the time of acquiring a franchise is a resident of this state ... or purporting to bind a person acquiring a franchise to be operated in this state to waive compliance or which has the effect of waiving compliance with any provision of [the MFA] or any rule or order thereunder is void. This statute supplies a rule for the interpretation of certain franchise agreements, those where the franchisee either is a resident of Minnesota or operates a franchise there. But the statute does not place any express limits on who may sue under the MFA. In their amended complaint, the plaintiffs advance two potential theories for action under the MFA. One is that Ameriprise committed certain unfair practices in violation of Minn.Stat. § 80C.14. This theory does not depend on whether the plaintiffs' franchise agreements fall under the ambit of Minn.Stat. § 80C.21. Because Minn.Stat. § 80C.21 does not inhibit the plaintiffs' standing to sue under Minn.Stat. § 80C.14, Ameriprise's argument is unavailing here. The plaintiffs' other theory is that the franchise agreements include a waiver that violates Minn.Stat. § 80C.21. Assuming that this statute supplies a separate basis for a claim under the MFA, the plaintiffs do not meet the statutory requirements for the non-waiver rule. The record shows that the plaintiffs reside in California and South Carolina, and they do business in those states. This means that the plaintiffs cannot invoke Minn.Stat. § 80C.21, but consistent with the preceding analysis, it does not prejudice their ability to assert other remedies under the MFA. To support its position that the plaintiffs lack standing, Ameriprise cites a decision from this District, Healy v. Carlson Travel Network Associates, Inc. 227 F.Supp.2d 1080 (D.Minn.2002). Quoting Minn.Stat. § 80C.19, subd. 1, the court ruled the MFA “applies to a franchise relationship ‘when a sale or offer to sell is made in this state; when an offer to purchase is made and accepted in this state; or when the franchise is to be located in this state.’ “ See id. at 1087. Because the franchise sale occurred in Florida, the court reasoned, the franchisee had no claim under the MFA. Id. at 1088.   The Healy decision does not closely examine the language in the MFA. It omits a critical part of Minn.Stat. § 80C.19, subd. 1, which provides in full, The provisions of [the MFA] concerning sales and offers to sell shall apply when a sale or offer to sell is made in this state; when an offer to purchase is made and accepted in this state; or when the franchise is to be located in this state. As the statute indicates, the geographic limits do not apply to the entire MFA, but only to “[t]he provisions ... concerning sales and offers to sell [.]” And though Ameriprise urges otherwise, it appears that Healy chiefly involved misrepresentations in the sale of a franchise, and not other complaints under the MFA. See id. at 1083-84. Because the current litigation does not involve a sale or offer to sell, it is distinguishable from Healy. 2. Unfair Practices Ameriprise also challenges the plaintiffs' MFA claim on the pleadings, contending that the plaintiffs do not meaningfully explain the basis for this claim in the amended complaint. The plaintiffs respond by citing Minn.Stat. § 80C.14, which forbids unfair practices by franchisors, and suggesting various ways that Ameriprise engaged in unfair practices. Ameriprise counters that the plaintiffs have not alleged those unfair practices in the amended complaint. a. Regulatory Violations The plaintiffs partly base their assertion of unfair practices on Minn.Stat. § 80C.14, subd. 1, which provides in relevant part, No person, whether by means of a term or condition of a franchise or otherwise, shall engage in any unfair or inequitable practice in contravention of such rules as the [state commissioner of commerce] may adopt defining as to the words “unfair and inequitable.”

This subdivision does not, therefore, supply any substantive standard for determining whether a franchisor has engaged in unfair practices. The plaintiffs accordingly cite two regulations that are promulgated pursuant to the subdivision. One is Minn. R. 3860.4400, subp. G, which states, It shall be unfair and inequitable for any person to ... impose on a franchisee by contract or rule, whether written or oral, any standard of conduct that is unreasonable; the other is subp. I of the same rule, which makes it unfair and inequitable to enforce any unreasonable covenant not to compete after the franchise ceases to exist. To establish violations of these rules, the plaintiffs turn to two provisions in the franchise agreements. The first is the noncompete, which the plaintiffs claim is unreasonable and unduly restrictive. The other provision controls assignments of the franchise. The plaintiffs correctly note that, under the franchise agreements, Ameriprise has unrestrained discretion to assign its interests as franchisor. The plaintiffs, by comparison, must receive consent from Ameriprise before they assign their interests as franchisees. Because of this disparity, the plaintiffs argue, the franchise agreements impose inequitable standards of conduct. *22 This Court agrees with Ameriprise that, in the amended complaint, the plaintiffs do not offer any allegations to support either of these theories. For this reason, they do not state a claim under Minn.Stat. § 80C.14, subd. 1. But a few additional comments are appropriate. As this Court previously observed in discussion of the declaratory judgment claim, the amended complaint suggests only a hypothetical dispute about the noncompete. The plaintiffs do not explain how they may compete against Ameriprise, what efforts Ameriprise may take to enforce the noncompete, or how the noncompete is unreasonable. Just as these defects indicated the absence of a controversy, they likewise show a failure to allege how the noncompete violates the MFA. Regarding the assignability provision, the underlying question is whether the provision imposes a “standard of conduct that is unreasonable[.]” The parties do not offer much argument on this question, which is understandable, given the dearth of authority on the meaning of Minn. R. 3860.4400, subp. G. With this caveat, this Court thinks the phrase “standard of conduct” is likely to refer the conduct of the franchisee when operating the franchise, rather than any rights that the franchisee has under the franchise agreement. Cf. McCabe v. Air-serv Group, LLC, No. 07-4553, 2007 WL 4591932 at *5 (D.Minn. Dec.28, 2007). And regarding what is “unreasonable,” this Court notes that a franchise agreement often favors the franchisor, as that party ordinarily has greater bargaining power. A disparity between the rights of the parties, therefore, does not seem to be enough to render a franchise agreement unreasonable. This court doubts that any purported disparity in assignability provisions, standing alone, is enough to establish a violation of the rule. b. De Facto Termination The plaintiffs also cite Minn.Stat. § 80C.14, subd. 3(a). That subdivision provides that it is an unfair practice for a franchisor to terminate a franchise without giving proper notice to the franchisee. As Ameriprise did not formally terminate the plaintiffs' franchises, the plaintiffs rely on a theory of “de facto termination,” claiming termination occurred when American Express executed the spin-off of Ameriprise. The parties do not dispute that de facto termination has yet to be recognized under the MFA. See Healy v. Carlson Travel Network Assocs., Inc., 227 F.Supp.2d 1080, 1090 (D.Minn.2002). This Court otherwise agrees with Ameriprise's contention that the plaintiffs have not offered allegations addressing de facto termination in their amended complaint. The plaintiffs thus do not state a claim under the MFA on this theory. Being mindful of these deficiencies in the pleadings, however, some informed analysis is possible. In the few jurisdictions that recognize constructive or de facto termination of a franchise agreement, some suggest that the franchisee must show that the franchisor actually intended or threatened to put the franchisee out of business. See JPM, Inc. v. John Deere Indus. Equip. Co., 94 F.3d 270, 272-73 (7th Cir.1996) (considering circumstances where franchisor threatened to put the franchisee out of business); American Business Interiors, Inc. v. Haworth, Inc., 798 F.2d 1135, 1141 (8th Cir.1986) (concluding that termination occurred when franchisor refused to continue doing business with franchisee); see also Conrad's Sentry, Inc. v. Supervalu, Inc., 357 F.Supp.2d 1086, 1099 (W.D.Wis.2005) (finding no constructive termination where franchisor had difficulty distributing products to franchisees). At least one jurisdiction proposes a more lenient rule, that constructive termination occurs where the conduct of a franchisor causes a substantial decline in the value of the franchise. See Petereit v. S.B. Thomas, Inc., 63 F.3d 1169, 1182-83 (2d Cir.1995).   Even if these theories of constructive termination were to find favor under the MFA, the plaintiffs do not substantiate them in their amended complaint. They do not allege, for instance, that Ameriprise intended to put them out of business. Nor do the plaintiffs allege a substantial decline in the value of their franchises. Due to these deficiencies, the plaintiffs cannot support their MFA claims under a theory of de facto or constructive termination. To the extent the plaintiffs argue de facto termination in their papers, they contend that it occurred when the spin-off transaction was executed. But this theory is not consistent with any of the recognized theories of constructive termination. This novel argument does not alter the outcome here. In conclusion, the plaintiffs have not adequately pleaded that Ameriprise engaged in any unfair practices under the MFA. They have not shown regulatory violations, under Minn.Stat. § 80C.14, subd. 1; or improper termination, under Minn.Stat. § 80C.14, subd. 3(a). Because no unfair practices are alleged, the plaintiffs fail to state any claims under the MFA, and the fourth count of their amended complaint is appropriately dismissed in its entirety.“)

 

Dunn v. National Beverage Corp., Supreme Court of Minnesota, March 6, 2008745 N.W.2d 549 (“ After reviewing the record, we conclude that the jury's special verdict answers can be reconciled because the jury could have found that the breach of contract and the statutory violation, that is, the improper termination of the franchise, were separate events. For example, the jury could have found that National Beverage breached the contract when it began selling products to DTM in August 2002, in violation of the exclusivity provision in the franchise agreement. At the same time, the jury could have found that the franchise was not actually terminated, in violation of the franchise act, until National Beverage refused to sell any more product to Twin City sometime in September of 2002. Having made those two findings, the jury could then reasonably have found that Twin City's damages were attributable to the breach of contract and not the franchise act violation. The jury's award of $288,000 for breach of contract equaled the guaranteed minimum price that Service Distributing had agreed to pay for Twin City's assets, which purchase agreement Service Distributing rescinded. That is, the jury reasonably could have found that the damages attributable to National Beverage's breach of the franchise agreement were the $288,000 that Twin City was guaranteed to receive under the sale to Service Distributing. In contrast, National Beverage's accounting expert testified that the damages attributable to National Beverage's refusal to do business with Twin City were zero because Twin City, which lost money throughout 2002, was no longer a financially viable business. There was no evidence contradicting that expert opinion. In addition, the expert opined *556 that the agreement between Twin City and Tri-County was not bona fide. Nor does it appear that the jury's differing damage awards were either inadvertent or a mistake. As noted previously, in his closing argument, counsel for Twin City expressly told the jurors that each of the individual claims had legal significance and that, “even though [they] might conclude that the damages are the same for the first cause of action and the second cause of action, don't skip one or not do it full justice.” On this record, we must conclude that the jury took counsel at his word. Accordingly, we will not disturb the jury's findings as to the amount of damages awarded for National Beverage's breach of contract and its franchise act violation. Because we conclude that the jury's special verdict form answers can be reconciled, we agree with the court of appeals that Twin City did not receive relief under the Minnesota Franchise Act and is, therefore, not entitled to recover attorney fees under the Act. Affirmed.”)

 

McCabe v. AIR-serv Group, LLC, United States District Court, D. Minnesota, December 28, 2007 WL 4591932 (“ First, McCabe argues that AIR-serv has violated the MFA's prohibition on non-renewal for the “purpose of converting the franchisee's business premises to an operation that will be owned by the franchisor for its own account.” Minn.Stat. § 80C.14, subd. 4. Yet, the record shows that AIR-serv's decision not to renew was for legitimate business reasons and not for the purpose of taking over McCabe's business. McCabe was fully aware that AIR-serv was changing its business model and would not be continuing its distributor system. Additionally, AIR-serv indicated in its notice of non-renewal that it would no longer be manufacturing compressed air and vacuum vending equipment and consequently would no longer have products to distribute through distributors. Indeed, the record shows that AIR-serv went from having over 130 distributors to just 4 distributors in 2006 and that McCabe was aware of this fact. This is not evidence of a discriminatory intent to take over McCabe's business, but rather is evidence of AIR-serv's intent to execute a change in its business model. Thus, McCabe is unlikely to show that AIR-serv's decision of non-renewal was for the purpose of taking over his business, in violation of the MFA. Next, McCabe argues that AIR-serv has not given him sufficient time to operate the chain accounts to recover their fair-market value and that he still has significant debt directly related to equipment purchases he made for the chain accounts. The MFA allows a franchise agreement to expire as long as the franchisee receives at least 180-days' notice of non-renewal and an opportunity to operate over a sufficient period of time to enable the franchisee to recover the fair-market value of the business as a going concern. Minn.Stat. § 80C.14, subd. 4. Here, AIR-serv provided McCabe with almost nine months of notice of its intent not to renew the Distributor Agreements. Thus, AIR-serv has complied with the 180-day notice requirement for non-renewal under the MFA. Moreover, the Distributor Agreements each had two-year initial terms, with the New York agreement starting in January 1991 and the Connecticut agreement starting in January 2001. Both of these agreements have been renewed annually since then. Although McCabe continued to make more investments during the terms of the agreements, it is unlikely that he will be able to show that this was an insufficient amount of time to recover the fair-market value of his business. The MFA requires only that AIR-serv provide McCabe with sufficient time to operate the business, not that he be debt-free at the time of non-renewal.10 McCabe's contention that he has not had sufficient time to operate his business to recoup the fair-market value of his investments is undermined by the fact that AIR-serv and McCabe have had a long-term business relationship.11 The Court concludes that McCabe is unlikely to succeed on the merits of this claim. Next, McCabe asserts that it is unfair and inequitable for a franchisor to “impose on a franchisee by contract or rule, whether written or oral, any standard of conduct that is unreasonable.” Minn. R. 2860.4400(G). McCabe argues that is true here because AIR-serv imposed a five-year, straight-line depreciation schedule that would allow it to acquire McCabe's equipment without paying fair value. The Court determines that McCabe is unlikely to show that AIR-serv violated the MFA here because there is no evidence that AIR-serv “imposed” this depreciation schedule on McCabe. Indeed, McCabe was free to decline participation in the servicing of the chain accounts. Furthermore, AIR-serv is not enforcing the provision because it is allowing McCabe to remove the machines. Thus, it is unlikely McCabe will succeed on the merits of this claim. McCabe also asserts that AIR-serv violated the MFA by discriminating between him and other distributors. In particular, McCabe argues that AIR-serv discriminated against him by refusing to turn over newly-acquired locations within his exclusive territory even though it turned over new locations to other distributors. (McCabe Aff. ¶ 100.) In response, AIR-serv argues that even if that were true, such discrimination would not impact AIR-serv's right not to renew his agreement, but would merely give him a right to damages. The Court agrees. The appropriate remedy for such a violation would be money damages rather than injunctive relief that would force AIR-serv to renew the Distributor Agreements. Finally, McCabe asserts that AIR-serv violated the MFA by failing to register its franchise, Minn.Stat. § 80C.02, and by failing to make required disclosures in the mandatory public offering statement, Minn.Stat. § 80C.18, subd. 1. There is no dispute that AIR-serv failed to comply with the MFA in this regard. The remedy for such failure, however, is rescission or damages. Minn.Stat. § 80C.17. The Court assumes McCabe does not wish to rescind his Distributor Agreements based on the fact that he is seeking a preliminary injunction compelling AIR-serv to renew the agreements. And, if McCabe is merely seeking damages for this violation, then this is not an appropriate basis for an injunction that would force the parties to continue their relationship. Indeed, any concession that damages are a sufficient remedy would negate his assertion of irreparable harm.12 Accordingly, the Court finds that McCabe is unlikely to succeed on the merits of his claims.”)

Bray v. QFA Royalties LLC, United States District Court, D. Colorado, May 3, 2007486 F.Supp.2d 1237 (“Plaintiff Hakim Abid has an additional claim for relief under Minnesota's statute governing franchise relationships. Minnesota Statutes § 80C.14 severely limits the grounds for immediate termination of a franchise and would not allow Quiznos to terminate his franchise rights, absent reasonable notice and reasonable opportunity to cure, even upon the exercise of the “judgment” described above. In Minnesota, the only grounds for termination effective immediately upon notice are the voluntary abandonment of a franchise, the conviction of a franchisee for an offense directly related to the business, or the failure to cure a default under the agreement after proper notice and opportunity. See id. § 80C. 14(3)(a)(2) and (3)(b)(5). Quiznos invoked none of these circumstances or categories in its December 8, 2006 termination notices.13As previously noted, the Abids had a history of inspections problems and default notices, up to and including notices of termination (which Quiznos revoked after the Abids retained counsel), that are evidenced in the record. See Def.'s Exs. A1—A8. I do not, in making my findings on the availability of preliminary injunctive relief in this case, intend to suggest that the Abids (or the Fixes, who also had inspection problems) are not subject to termination under the Franchise Agreement or, in the Abids' case, under Minnesota franchise law, on the basis of these compliance problems. My decision is based entirely on the determination that it is substantially likely that Quiznos's actions in terminating these franchisees on December 8, 2006, for the reasons and in the manner it did, ran afoul of proper procedures and violated both the terms of the Franchise Agreement and Minnesota law.”)

 

Kieland v. Rocky Mountain Chocolate Factory Inc., United States District Court, D. Minnesota, October 18, 2006, 2006 WL 2990336 (“ C. Discrimination The MFA also provides in part, “[n]o person, whether by means of a term or condition of a franchise or otherwise, shall engage in any unfair or inequitable practice in contravention of such rules as the commissioner may adopt defining as to franchises the words ‘unfair and inequitable.’ “ Minn.Stat. § 80C.14 (2004). The commissioner has created a list of practices that are considered “unfair and inequitable.” Minn. R. 2860.4400(B) (2004). In particular, it is an “unfair and inequitable” practice for any person to “discriminate between franchisees in the charges offered or made for royalties, goods, services ... or in any business dealing, unless any classification of or discrimination between franchisees is based on franchises granted at different times, geographic, market, volume or size differences, costs incurred by the franchisor, or other reasonable grounds considering the purposes of [the Act].” Id.   Plaintiffs contend that Rocky Mountain discriminated against them by: (1) requiring them to pay franchise fees when Rocky Mountain was excusing others from paying them and (2) requiring them to purchase the AIM system while excusing others.2 In response, Rocky Mountain asserts that there are no allegations in the Complaint and no evidence in the record that Plaintiffs are similarly situated to these other franchisees. Accordingly, Rocky Mountain asserts that there is no evidence that Rocky Mountain engaged in less favorable treatment towards Plaintiffs than towards other franchisees. Alternatively, Rocky Mountain asserts that it had “reasonable grounds” under Minn. R. 2860.4400(B) (2004) for not requiring existing franchisees to convert the POS systems they had already purchased to the AIM system and for waiving certain franchisees' royalty fees. Plaintiffs have not cited any cases, and the Court has not found any, that directly interpret this section of Rule 2860.4400. The Seventh Circuit, however, has interpreted nearly identical language in the Indiana franchise laws in Wright-Moore Corp. v. Ricoh Corp., 908 F.2d 128, 139 (7th Cir.1990). In Wright-Moore, the Seventh Circuit held that “[d]iscrimination among franchises means that as between two or more similar franchisees, and under similar financial and marketing conditions, a franchisor engaged in less favorable treatment towards the discriminatee than towards other franchisees.” 908 F.2d at 139. Finding this reasoning persuasive, the Court finds that Plaintiffs' discrimination claims fail as a matter of law. Here, Plaintiffs do not allege and there is no evidence in the record that Plaintiffs are similarly situated to the franchises whose fees were waived. In fact, Mr. Kieland testified that his franchise's performance never dropped to the level where Rocky Mountain would typically consider waiving royalty fees. Furthermore, the Court finds that Rocky Mountain had “reasonable grounds” under Minn. R. 2860.4400(B) (2004) for not requiring existing franchisees to convert the POS systems they had already purchased to the AIM system. Although the UFOC reserved Rocky Mountain's right to require that existing franchisees upgrade or update their POS systems, Rocky Mountain was not required to require franchisees to upgrade. Here, Merryman explained that when Rocky Mountain adopts a major initiative, it generally implements that initiative on a prospective basis due to the capital outlay involved. Merryman also explained that Rocky Mountain has consistently required new franchisees to use the AIM system. On this record, the Court finds that Rocky Mountain did not wrongfully discriminate by requiring prospective franchisees to purchase the AIM system while allowing older franchisees to continue using the Casio system. Additionally, the Court finds that Rocky Mountain had “reasonable grounds” under Minn. R. 2860.4400(B) (2004) for waiving certain franchisees' royalty fees. The record reveals that Rocky Mountain agreed in certain limited circumstances to waive a franchisee's royalty obligations for a fixed period of time, generally not to exceed six months. Rocky Mountain has agreed to such a waiver when a franchisee is encountering unforeseen and difficult operational challenges. Pope testified that Rocky Mountain is presently waiving five of Rocky Mountain's more than 300 franchisees due to their unique financial situations. On this record, the Court finds that Rocky Mountain has “reasonable grounds” for granting royalty waivers in extremely limited situations based on franchisees' financial distress. Accordingly, Rocky Mountain is entitled to summary judgment on Plaintiffs' discrimination claims and the Court therefore dismisses Count 1 of the Complaint.”)

 

S&G Janitschke, Inc. v. Cottman Transmission Systems, LLC, United States District Court, D. Minnesota, June 8, 2006, 2006 WL 1662892 (“ The Minnesota plaintiffs' license agreement provides: “Minnesota Statute Sec. 80C.21 and Minn. Rule 2860.4400J prohibit us from requiring litigation to be conducted outside Minnesota.” ((McPeak Aff. Ex. 11 ¶ 29.) Minnesota law provides that “[n]o person, whether by means of a term or condition of a franchise or otherwise, shall engage in any unfair or inequitable practice in contravention of such rules as the [Minnesota Commissioner of Commerce] may adopt defining as to franchises the words ‘unfair and inequitable.” ’ Minn.Stat. § 80C.14(1) (2005). The Minnesota Commissioner of Commerce has determined that it is “unfair and inequitable” to “require a franchisee to waive his or her rights to a jury trial or to waive rights to any procedure, forum, or remedies provided for by the laws of the jurisdiction, or to consent to liquidated damages, termination penalties, or judgment notes; provided that this part shall not bar an exclusive arbitration clause.” Minn. R. 2860.4400J. Defendants argue that there is an “apparent conflict between the legislature's conscious decision not to include in the Minnesota Franchise Act (Minn.Stat. §§ 80C.21) a prohibition on venue selection provisions and the contradictory decision reached by the Commerce Department in interpreting that Act” and the Court should favor the statute's plain meaning. (Defs.' Mem. at 14-15.) The Court finds that the text of § 80C.21 expressly authorizes the Commissioner of Commerce to promulgate rules interpreting “unfair and inequitable” practices. The Commissioner has, in turn, prohibited forum selection clauses like the one in the Cottman license agreement. Therefore, the Court finds that the Cottman forum selection clause is void as applied to the three Minnesota plaintiffs.”)

 

McLaughlin Equipment Co., Inc. v. Servaas, United States District Court, S.D. Indiana, Indianapolis Division, February 18, 2004, 2004 WL 1629603 (“ 2. Minnesota Franchise Act McLaughlin brings claims under three provisions of the Minnesota Franchise Act (the “Franchise Act”), namely, Minnesota Statute §§ 80C.14, subds. 1, 3(a), 3(b). Newcourt contends that the Franchise Act is inapplicable in the absence of a franchise fee paid by the franchisee. See Martin Invs., Inc. v. Vander Bie, 269 N.W.2d 868, 874 (Minn.1978); OT Indus., Inc. v. OT-tehdas Oy Santasalo–Sohlberg Ab, 346 N.W.2d 162, 165–66 (Minn.App.1984). McLaughlin has admitted that it did not make any payments to Carpenter other than for goods it purchased, and McLaughlin is unaware of any fees paid to Carpenter. (Newcourt's App. Evid. Materials, vol. I, Ex. 9, T. McLaughlin Dep. 11/29/00 at 43–44.) McLaughlin's expert, Dr. McCutcheon, also testified that McLaughlin paid no franchising fee and was not in a franchising relationship. (Newcourt's App. Evid. Materials, vol. I, Ex. 12, McCutcheon Dep. 2/6/01 at 84–85.) However, McLaughlin argues that franchise fees can include fees hidden in the franchisor's charges for good and services. Minimum volume sales requirements can constitute an indirect “franchise fee” under the Franchise Act if “the prices exceeded bona fide wholesale prices or if the distributors were required to purchase amounts or items that they would not purchase otherwise.” Upper Midwest Sales Co. v. Ecolab, Inc., 577 N.W.2d 236, 242 (Minn.Ct.App.1998); see also Banbury v. Omnitrition Int'l, Inc., 533 N.W .2d 876, 882 (Minn.Ct.App.1995); OT Indus., Inc., 346 N.W.2d at 166. The requirements must have been unreasonable. Ecolab, 577 N.W.2d at 242; Am. Parts Sys., Inc. v. T & T Auto., Inc., 358 N.W.2d 674, 677 (Minn.Ct.App.1984). McLaughlin maintains that its sales quotas constituted an indirect franchise fee because it would not have purchased the bodies and parts necessary to meet the quotas had it not contemplated an ongoing franchise relationship with Carpenter. (Goldsmith Aff., Exs. 24 & 20.) McLaughlin's evidence, however, does not raise a reasonable inference that it was required to purchase unreasonable amounts of bodies and parts that it would not otherwise have purchased. Even if McLaughlin's evidence suffices to raise a reasonable inference that it was required by Carpenter to purchase amounts or items which it would not have purchased otherwise, its evidence fails to raise a reasonable inference that the sales quotas in the distributorship agreement were unreasonable. Furthermore, McLaughlin has not claimed that any bodies or parts were not purchased at the ordinary, bona fide wholesale price. Therefore, the court concludes that the sales quotas do not constitute an indirect franchise fee. *53 McLaughlin next argues that it paid a hidden franchise fee when it provided the warranty work Carpenter required as a condition of its distributorship agreement and then was not reimbursed for its work. Neither Bryant Corp. v. Outboard Marine Corp., No. C93–1365R, 1994 WL 745159 (W.D.Wash. Sep. 29, 1994), aff'd 77 F .3d 488 (9th Cir.1996), nor Implement Service, Inc. v. Tecumseh Products Co., 726 F.Supp. 1171 (S.D.Ind.1989), supports McLaughlin's position. In Bryant the plaintiff argued that it paid a franchise fee on the basis of providing warranty administration work for OMC boat motors which it did not generally sell. In order to constitute a “franchise fee,” however, the work not only must have been performed at a discount, but also must have been rendered to the franchisor, here Carpenter. See Bryant, 1994 WL 745159, at *3; Implement Serv., 726 F.Supp. at 1178–79. Even assuming that McLaughlin's warranty work was performed at a discount, the work was performed not for Carpenter but for the benefit of McLaughlin's own customers. Thus, the court concludes that McLaughlin's performance of warranty work without reimbursement does not constitute a “franchise fee.” See Implement Serv., 726 F.Supp. at 1179. McLaughlin also suggests that its advertising costs were a hidden franchise fee. This suggestion is rejected because McLaughlin cites to no evidence which raises a genuine issue regarding whether the payments for advertising were made to Carpenter rather than to a third party. See OT Indus., 346 N.W.2d at 167; Implement Serv., 726 F.Supp. at 1178–79. The court holds that McLaughlin has not offered evidence which raises a reasonable inference that it paid a “franchise fee” within the meaning of the Franchise Act. Therefore, the Act is inapplicable. See Martin Invs., 269 N.W.2d at 874; OT Indus., 346 N.W.2d at 165–66. Newcourt accordingly will be GRANTED summary judgment on all claims under the Franchise Act. In addition, the statute of limitations for a claim under the Franchise Act is three years. Minn.Stat. § 80C.17, subd. 5. Thus, Newcourt argues that to the extent McLaughlin seeks recovery for any claims under the Franchise Act which arose before November 22, 1995, such claims are time barred. McLaughlin does not dispute that the applicable limitations period is three years, or that claims under the Act arising before the date identified by Newcourt are barred. It merely argues that claims accruing after that date are not barred by the statute of limitations. Thus, the court concludes that the limitations bar is another reason why summary judgment should be GRANTED on any claims under the Minnesota Franchise Act which accrued prior to November 22, 1995. “)

 

Video Update, Inc. v. Malaske, Court of Appeals of Minnesota, September 27, 1994, N.W.2d1994 , WL 523837 (“ We disagree with appellant's contention that respondent failed to comply with statutory requirements for franchise termination set out in Minn.Stat. § 80C.14, subd. 3 (1992). That statute contains an exception that allows notice of termination to be effective immediately when a franchisee's default under the agreement “materially impairs the good will associated with the franchisor's trade name.” Id. Respondent's president submitted to the district court an affidavit containing evidence that appellant's mismanagement of funds and failure to pay taxes and debts had impaired Video Update's good will. Appellant presented no evidence to create an issue over this material fact. Based upon this record, the district court did not err in concluding that no issue of material fact exists over the method of termination. The district court properly awarded summary judgment to respondent. “)

 

Novus Franchising, Inc. v. Taylor, United States District Court, M.D. Pennsylvania, February 14, 1992, 795 F.Supp. 122 (“Defendant then floats out the argument that it is possible that the fourth franchise agreement was not properly terminated, as defendant's letter may have violated the specificity provisions of Minnesota's franchise law, Minn.Stat.Ann. § 80C.14. The court has reviewed the statutory section in question, as well as the letter of termination and the events surrounding termination. The court concludes that it was clear not only what the dispute was that led to the termination, i.e., the non-payment of the 2% fee, but also the amount owed. Defendant's citation of Culligan Int'l Co. v. Culligan Water Conditioning of Carver Co., 563 F.Supp. 1265 (D.Minn.1983) is, as pointed out by plaintiff in its reply brief, inapposite. The defendant *130 in Culligan disputed the amount due and repeatedly requested an itemized statement. The court found that a franchisee had a right to specific notice of its delinquencies so that it could, if possible, cure them. Here, there is no such confusion over the reason for termination or the amount involved: defendant was well aware of the reason for termination. Defendant also argues that a provision from Minnesota's antitrust law, which makes illegal a “contract ... in unreasonable restraint of trade or commerce ...,” Minn.Stat.Ann. § 325D.51, or Pennsylvania's law on unreasonable restraints of trade, invalidates enforcement of the restrictive covenant at issue here. As restrictive covenants are routinely enforced under both Pennsylvania and Minnesota case law in circumstance similar to those here, the court believes that the cited antitrust and trade laws have no applicability here.”)

 

Modern Computer Systems, Inc. v. Modern Banking Systems, Inc., United States Court of Appeals, Eighth Circuit, October 14, 1988, 858 F.2d 1339 (“ Assuming application of the Minnesota Franchise Act,9 plaintiff will very likely succeed in proving the Act has been violated. Defendant has not, at the very least, provided the written notice of termination required under the Act, see Minn.Stat. § 80C.14(3) (Supp.1987), nor has it complied with the contract notice and opportunity to cure provisions. See Paul *1345 Reilly Co. v. Dynaforce Corp., 449 F.Supp. 1033, 1036 (E.D.Wis.1978) (injunctive relief granted for failure to comply with notice provisions under Wisconsin Fair Dealership law). The public policies embodied in the Franchise Act and discussed above support the award of preliminary relief in this case. See Culligan International Co. v. Culligan Water Conditioning, 563 F.Supp. 1265, 1272 (D.Minn.1983); Al Bishop Agency, Inc. v. Lithonia–Division of National Service Industries, Inc., 474 F.Supp. 828, 835 (E.D.Wis.1979).”)

Carlock v. Pillsbury Co., United States District Court, D. Minnesota, Fourth Division, October 13, 1988, 1988 WL 404839, 1993-1 Trade Cases P 70, 282 (“ VIII. Minnesota Franchise Act -- In Count XI of the Dwyer complaint, plaintiffs allege that defendants are engaging in unfair practices and are terminating their franchises without cause in violation of the Minnesota Franchise Act, and specifically Minn.Stat. § 80C.14. Plaintiffs claim that the harmful practices engaged in by defendants are damaging the value of their franchises and are effectively “terminating” those franchises in contravention of Minn.Stat. § 80C.14. Defendants contend that actual termination or nonrenewal of a franchise is necessary to trigger relief under Minn.Stat. § 80C.14. Defendants thus assert that plaintiffs' claim of “termination in process” is not cognizable under the statute and defendants seek dismissal of Count XI of the Dwyer complaint for failure to state a claim. Minn.Stat. § 80C.14 provides in part: No person, whether by means of a term or condition of a franchise or otherwise, shall engage in any unfair or inequitable practice in contravention of such rules as the commissioner may adopt defining as to franchises the words “unfair and inequitable.” Minnesota Rules § 2860.4400 lists a number of practices which the commissioner has determined to be unfair and inequitable. These include: discriminating between franchisees, competing with a franchisee, terminating a franchise without proper notice or for reasons other than good cause, and unreasonably withholding consent to any transfer of the franchise whenever the franchisee to be substituted meets the present qualifications and standards required of the franchisees of the particular franchisor. Minnesota Rules § 2860.4400, subd. B, C, E, F and H. While the rules do not prohibit only improper termination of franchises, it is apparent that those parts of rule 2860.4400 which set forth the restrictions on termination relate to actual termination and do not recognize “termination in process” as an unfair practice prohibited by Minn.Stat. § 80C.14. Subdivisions E and F relating to termination provide that notice is required prior to termination and prohibit termination without good cause. A plain reading of those subdivisions indicates that actual termination is required in order for plaintiffs to recover for unfair termination. Accordingly, plaintiffs may not recover on Count XI under a theory of “termination in process.”   However, plaintiffs do not limit their allegations in Count XI to improper termination. Plaintiffs specifically incorporate paragraphs 23 and 24 of their complaint and allege that the acts outlined in those paragraphs constitute unfair practices which violate Minn.Stat. § 80C.14. The acts complained of in paragraphs 23 and 24 include, inter alia, competition with franchisees, which is an act specifically addressed by Minnesota Rules § 2860.4400, subd. C. Plaintiffs thus have properly stated a claim for relief under Minn.Stat. § 80C.14 and the Court will not dismiss Count XI of the Dwyer complaint. “)

 


Hughes v. Sinclair Marketing, Inc., Supreme Court of Minnesota, June 13, 1986389 N.W.2d 194 (“ The act also provides a cause of action for improper non-renewal of a franchise. Where the supplier and the dealer have been parties to one or more franchise agreements extending for 3 consecutive years, the supplier shall automatically renew the existing franchise agreement or, in good faith, offer another franchise. Minn.Rules 2860.5600, subp. B (promulgated pursuant to Minn.Stat. § 80C.14, subd. 2). The supplier may, however, cancel its relationship by mutual agreement or good faith voluntary or involuntary decision by the franchisor to discontinue doing business at the site. Minn.Rules 2860.5500, subp. A(1), (4). 123 This court will sustain a jury verdict if it is possible to do so on any reasonable theory of the evidence. Bergemann v. Mutual Service Insurance Co., 270 N.W.2d 107, 109 (Minn.1978). It will set aside a jury verdict only if manifestly contrary to the evidence when viewed in the light most favorable to the verdict. Lesmeister v. Dilly, 330 N.W.2d 95, 100 (Minn.1983); Lamke v. Louden, 269 N.W.2d 53, 56 (Minn.1978). Under the applicable standard of review, it appears that the verdict could be sustained on all three bases of liability: misrepresentation under the act, common law fraud, and improper nonrenewal of a franchise. The court correctly instructed the jury on the elements of each cause of action, including statements of present intent and good faith termination. II. Appellant further argues that the court of appeals erred by allowing lost future profits as actual damages for misrepresentation under the franchise act and that the district court was limited to injunctive relief for improper nonrenewal. If the court allows lost future profits on either basis, appellant also disputes the amount awarded. Respondents maintain that “actual damages” awarded for misrepresentation under the act include lost future profits. They also claim that the actual damages provision applies to improper non-renewal. Finally, they argue that any objection appellant has to the amount awarded is not properly preserved for appeal and that there is, nonetheless, a clear, reasonable basis established by the evidence for the jury's award. The traditional recovery for common law misrepresentation in Minnesota is limited to out-of-pocket loss. Strouth v. Wilkison, 302 Minn. 297, 300, 224 N.W.2d 511, 514 (1974). The district court instructed the jury that, on either theory of misrepresentation, damages would not include benefit of the bargain. The court of appeals, however, found that the language of the franchise act indicates that damages for misrepresentation under the act are not to be limited to out-of-pocket losses. Minn.Stat. § 80C.17, subds. 1, 3 provide: Subdivision 1. A person who violates any provision of sections 80C.01 to 80C.13 and 80C.15 to 80C.22 or any rule or order thereunder shall be liable to the franchisee or subfranchisor who may sue for damages caused thereby, for rescission, or other relief as the court may deem appropriate. Subd. 3. Any suit authorized under this section may be brought to recover the actual damages sustained by the plaintiff together with costs and disbursements plus reasonable attorney's fees. The court of appeals reasoned that the term “actual damages” expanded the available remedies beyond out-of-pocket losses to include any damages caused by the violation. Since the damages included the loss of a business, the court found that future profits were properly awarded. The meaning of the term “actual damages” as used in section 80C.17, subdivision 3 has not been resolved by this court. The purpose behind limiting damages for common law misrepresentation to out-of-pocket loss is to avoid speculative damages and assure that the award is measured by the natural and proximate loss sustained by the defrauded party. See Hollerman v. F.H. Peavey & Co., 269 Minn. 221, 130 N.W.2d 534 (1964). The court has recognized an exception to the general rule when out-of-pocket damages fail to return a party to the status quo. See Lewis v. Citizens Agency of Madelia, Inc., 306 Minn. 194, 235 N.W.2d 831 (1975) (return of premiums paid inadequately compensated an insured whose policy has been wrongfully terminated). This court has also ruled that the proper measure of damages for interruption of an established business includes lost future profits. See Hendrickson v. Grengs, 237 Minn. 196, 54 N.W.2d 105 (1952). In the present case, Sinclair's misrepresentations induced the respondents to forego their renewal rights under the franchise act and thereby lose their business. Since the district court found that the record did not sustain a finding of out-of-pocket loss, application of the common law rule would fail to return Hughes and Anderson to their condition before Sinclair's misrepresentations. We hold that, under the circumstances of this case, lost future profits may be recovered by the respondents as “actual damages” for misrepresentation under the act. 6 The district court based its judgment on improper non-renewal. Finding that improper non-renewal of a motor vehicle service station franchise is governed by Minn.Rules 2860.5500, promulgated under the statutory authority of Minn.Stat. § 80C.18, the court held that section 80C.17 allowing suit for actual damages governed the remedies available.4 Sinclair, however, maintains that improper non-renewal is actually governed by section 80C.14 and, therefore, the civil liability provisions of section 80C.17 are not available and only injunctive relief under section 80C.14, subdivision 1 would apply. Since Minn.Rule 2860.5500 was explicitly promulgated under section 80C.18, the actual damages provision of section 80C.17, subdivision 3 applies and the respondents were not limited to injunctive relief in their suit for improper non-renewal.”)

 

OT Industries, Inc. v. OT-tehdas Oy Santasalo-Sohlberg , Court of Appeals of Minnesota, February 29, 1984346 N.W.2d 162 (“Good Cause to Terminate Agreement -- 10 The trial judge further concluded that even if the Franchise Act governed the relationship between the parties, OT-tehdas may well have had good cause to terminate within the meaning of Minn.Stat. § 80C.14, subd. 2(b). “ ‘Good cause’ shall be failure by the franchisee substantially to comply with reasonable requirements imposed upon him by the franchise * * *.” Id. OTI failed to comply with reasonable terms of payment imposed by the contract. This failure to pay occurred over an extended period of time and despite inquiries and reminders. When representatives of OT-tehdas demanded an explanation, the president of OTI said the payment was in the mail. When OT—tehdas determined the payment was not in the mail, they sent the notice of termination. OTI argues that at the time they were notified of the termination, OT-tehdas was actually indebted to OTI in an amount greater than that which OTI owed to OT-tehdas. This claimed debt arose from an agreement to assist OTI with advertising and promotional expenses which provided that payment would be made after complete documentation by OTI. OTI did not itemize the claimed debt until June 3, 1983. Furthermore, there was no agreement that the contributions for advertising expenses could be used as an offset for payments owed. OTI also claims that even if grounds for termination existed, OTI cured its indebtedness. No applicable right to cure exists in the Franchise Act or in the agreement between the parties. The notice of termination to OTI clearly stated that there was a termination and gave the reasons. 11 2. OT-tehdas appeals from the denial of its motion for a change of venue and a motion to dismiss for lack of jurisdiction. In its brief to this court, OT-tehdas rests its arguments solely on the contractual provisions on choice of law and choice of forum contained in the October 1980 agreement between OT-tehdas and OTI. This clause reads: In the event of any dispute between the parties relating to or arising out of this agreement, each party will use its best effort to settle such dispute in a friendly manner. In the absence of such settlement the dispute shall be settled by a court in Helsinki, Finland according to the laws of Finland. OT-tehdas maintains that the trial court's denial of its demand for removal was contrary to Minnesota law because contractual provisions for choice of forum and choice of law are enforceable. We agree that such contractual provisions may be enforceable; however, OT-tehdas did not properly raise the forum selection issue and did not maintain a consistent position on the choice of law issue in the trial court. Its own actions prevented the issues from being properly addressed and decided. “)

 

Culligan Intern. Co. v. Culligan Water Conditioning of Carver County, Inc., United States District Court, D. Minnesota, Fourth Division, May 17, 1983, 563 F.Supp. 1265 (“ a. Termination of 1972 Franchise Agreement -- The defendants claim that the notice of March 11, 1981, which stated that CIC would terminate the franchise, was inadequate because it failed to provide sufficient information to allow the defendants to cure their default. The defendants claim that this improper termination was a violation of the Minnesota Franchise Act (Act), Minn.Stat. § 80C.14, subd. 2(a)–(c). The plaintiff, on the other hand, claims the March 11, 1981 notice was sufficient and that the franchise was properly terminated for good cause. No cases have been decided that clearly set out the notice requirements. The Act itself provides that the following actions, among others, are unfair practices: (a) Terminate or cancel a franchise without first giving written notice setting forth all the reasons for the termination or cancellation to the franchisee at least 60 days in advance of termination or cancellation .... (b) Terminate or cancel a franchise except for good cause. “Good cause” shall be failure by the franchisee substantially *1270 to comply with reasonable requirements imposed upon him by the franchise .... (c) Fail to renew a franchise unless the franchisee has been given written notice of the intention not to renew at least 90 days in advance thereof and has been given a sufficient opportunity to recover his investment unless the failure to renew is for good cause as defined in clause (b). Minn.Stat. § 80C.14, subd. 2. The Court finds that the Act requires a franchisor to give a franchisee specific notice of its delinquencies so that the franchisee can have a meaningful opportunity to cure them. Specific notice furthers the Act's remedial and protective purposes. Martin Investors, Inc. v. Vander Bie, 269 N.W.2d 868, 872 (Minn.1978). Such notice is particularly necessary in cases involving a claim that the franchisee owes money.3 In cases like the present one which involve ongoing charges on a monthly account as well as credits for returned merchandise, the franchisor may be the only one that knows precisely how much the franchisee owes at a given time. In addition, such notice gives the franchisee an opportunity to challenge any amounts it believes are inaccurate. The Court finds that the plaintiff failed to give adequate notice to the defendants of their alleged delinquencies. The March 11, 1981 letter purporting to terminate Carver Culligan's franchise does not state with particularity what the defendants had to do to correct their deficiencies. The letter merely states that the franchise will be terminated within 60 days unless the defendants pay the money they owed CIC. The letter makes no mention of the exact amount owed. The Court has concluded that a fair and reasonable interpretation of the Franchise Act requires that a franchisee be informed in the notice of termination what dollar amount must be paid to the franchisor in order to comply with the franchise agreement and to prevent its cancellation. Since that was not done in the instant case, the termination notice was fatally defective. The plaintiff argues that prior correspondence adequately informed the defendants of the amount due. The Court finds this argument unpersuasive. Jackson's letter of January 14, 1981, stated that the defendants owed $14,548.35 as of December 31, 1980, but neither the March 11, 1981 termination letter nor Jackson's February 17, 1981 letter updated the amounts the defendants owed nor itemized the amounts due on the open account and the amounts due on the note. Mayer repeatedly requested this information, but it was not furnished to him until May 22, 1981, when R.O. Schlosser, CIC's credit manager, wrote a letter to Mayer including both an itemization and the supporting documents for the claimed amounts. However, Jackson informed Mayer in a letter dated May 21, 1981, that the franchise had been terminated on May 15, 1981—one week before the requested information was sent. Therefore, the Court concludes that because the plaintiff failed to give valid notice of termination under the Act, the 1972 Franchise Agreement has not been terminated.”)

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