In Arkansas, the following Dealer/Franchise Termination and Non-Renewal Laws, Fraud, and Franchise Industry-Specific Laws, exist as follows:
- Arkansas Has a Disclosure/Registration Franchise Law
- Arkansas Has a Relationship/Termination Franchise Law
- Arkansas Does Not Have a General Business Opportunity Franchise Law
- Arkansas Has an Alcoholic Beverage Wholesaler/Franchise Law
- Arkansas Has an Equipment Dealer/Franchise Law
- Arkansas Has a Gasoline Dealer/Franchise Law
- Arkansas Does Not Have a Marine Dealer/Franchise Law
- Arkansas Has a Motor Vehicle Dealer/Franchise Law
- Arkansas Does Not Have a Motorcycle Dealer/Franchise Law; covered partially by Motor
- Vehicle Dealer/Franchise Law
- Arkansas Does Not Have a Recreational and Power Sports Vehicle Dealer/Franchise Law; covered partially by Motor Vehicle Dealer/Franchise Law
- Arkansas Does Have a Restaurant Liability Law
The Arkansas Franchise Practices Act” (“AFPA”), Arkansas’ franchise termination law, begins by setting forth the definitions of certain important operative terms that are used throughout the legislation. Most important of these is the definition of “good cause”, which under the AFPA means:
(A) Failure by a franchisee to comply substantially with the requirements imposed upon him by the franchisor, or sought to be imposed by the franchisor, which requirements are not discriminatory as compared with the requirements imposed on other similarly situated franchisees, either by their terms or in the manner of their enforcement; or (B) The failure by the franchisee to act in good faith and in a commercially reasonable manner in carrying out the terms of the franchise; or (C) Voluntary abandonment of the franchise; or (D) Conviction of the franchisee in a court of competent jurisdiction of an offense punishable by a term of imprisonment in excess of one (1) year, substantially related to the business conducted pursuant to the franchise; or (E) Any act by a franchisee which substantially impairs the franchisor's trademark or trade name; or (F) The institution of insolvency or bankruptcy proceedings by or against a franchisee, or any assignment or attempted assignment by a franchisee of the franchise or the assets of the franchise for the benefit of the creditors; or (G) Loss of the franchisor's or franchisee's right to occupy the premises from which the franchise business is operated; or (H) Failure of the franchisee to pay to the franchisor within ten (10) days after receipt of notice of any sums past due the franchisor and relating to the franchise.
The statute thereafter links various and different notice periods to these different situations.
Subsection (A) is notable as one that would draw the most interest in wrongful franchise termination cases: A) Failure by a franchisee to comply substantially with the requirements imposed upon him by the franchisor, or sought to be imposed by the franchisor, which requirements are not discriminatory as compared with the requirements imposed on other similarly situated franchisees, either by their terms or in the manner of their enforcement; or (B) The failure by the franchisee to act in good faith and in a commercially reasonable manner in carrying out the terms of the franchise. Another crucial definition in the AFPA is that of "Good faith" which means honesty in fact in the conduct or transaction concerned.
This concept is not one that ordinarily appears in most pieces of franchise legislation, and it is rare to have it included in a statute that has a “good cause substantial compliance” standard already included in it, which the AFPA does. In turn, the AFPA, Sec. 4-72-204, addresses Termination, Cancellation, or Failure to Renew. Structurally, the AFPA identifies as a violation of the Act for a franchisor to: (1) Terminate or cancel a franchise without good cause; or (2) Fail to renew a franchise except for good cause or except in accordance with the current policies, practices, and standards established by the franchisor which in their establishment, operation, or application are not arbitrary or capricious. That section also includes the procedural notice provisions governing terminations, cancelations or non-renewals, by prohibiting a franchisor from “directly or indirectly” terminating, canceling or failing to renew a franchise without first giving written notice to the franchisee at least ninety (90) days in advance of such action, setting forth the reasons for the termination, cancellation, or intention not to renew, and, in the case of terminations, will provide the franchisee with thirty (30) days in which to rectify any claimed deficiency. However, this section carves out certain exemptions from the need to meet these notice provisions where the reason for termination or cancellation is good cause under §4-72-202(7)(C)-(H).
[See: (C) Voluntary abandonment of the franchise; or (D) Conviction of the franchisee in a court of competent jurisdiction of an offense punishable by a term of imprisonment in excess of one (1) year, substantially related to the business conducted pursuant to the franchise; or (E) Any act by a franchisee which substantially impairs the franchisor's trademark or trade name; or (F) The institution of insolvency or bankruptcy proceedings by or against a franchisee, or any assignment or attempted assignment by a franchisee of the franchise or the assets of the franchise for the benefit of the creditors; or (G) Loss of the franchisor's or franchisee's right to occupy the premises from which the franchise business is operated; or (H) Failure of the franchisee to pay to the franchisor within ten (10) days after receipt of notice of any sums past due the franchisor and relating to the franchise.] In addition, under Section (d) of this Section, if the reason for termination, cancellation, or failure to renew is for repeated deficiencies, within a twelve-month period, giving rise to good cause under §4-72-202(7)(A) or (B) [See: (A) Failure by a franchisee to comply substantially with the requirements imposed upon him by the franchisor, or sought to be imposed by the franchisor, which requirements are not discriminatory as compared with the requirements imposed on other similarly situated franchisees, either by their terms or in the manner of their enforcement; or (B) The failure by the franchisee to act in good faith and in a commercially reasonable manner in carrying out the terms of the franchise], the franchisee will have ten (10) days to rectify the repeated deficiencies and thereby void the notice.
In Sec. 4-72-205, the AFPA addresses Transfers, Assignments, or Sales of Franchise. The Act first focuses on the franchisee, directing that it is a violation for any franchisee to transfer, assign, or sell a franchise or interest therein to another person unless the franchisee first notifies the franchisor of that intention by written notice, setting forth in the notice of intent the prospective transferee's name, address, statement of financial qualification, and business experience during the previous five (5) years. In turn, once the franchisee serves such notice, the franchisor will within sixty (60) days after receipt of the notice either approve in writing to the franchisee the sale to the proposed transferee or by written notice advise the franchisee of the unacceptability of the proposed transferee, setting forth a material reason relating to the character, financial ability, or business experience of the proposed transferee. Thereafter, if the franchisor does not reply within the specified sixty (60) days, his approval is deemed granted. Last, the AFPA states that no transfer, assignment, or sale pursuant to this section will be valid unless the transferee agrees in writing to comply with all of the requirements of the franchise then in effect. Last, the AFPA, takes a more hands-on approach to the franchise relationship by setting out and prohibiting a group of practices that it terms “Unlawful Practices of Franchisors.”
Under Sec. 4-72-206, it is a violation of the AFPA for any franchisor, through any officer, agent, or employee to engage directly or indirectly in any of the following practices: (1) To require a franchisee at time of entering into a franchise arrangement to assent to a release, assignment, novation, waiver, or estoppel which would relieve any person from liability imposed by the Act; (2) To prohibit directly or indirectly the right of free association among franchisees for any lawful purpose; (3) To require or prohibit any change in management of any franchisee unless the requirement or prohibition of change will be for reasonable cause, which cause will be stated in writing by the franchisor; (4) To restrict the partial sale of any equity or debenture issue or the transfer of any security of a franchisee or in any way prevent or attempt to prevent the transfer, sale, or issuance of shares of stock or debentures to employees, personnel of the franchisee, or heirs of the principal owner as long as basic financial requirements of the franchisor are complied with; (5) To provide any term or condition in any lease or other agreement ancillary or collateral to a franchise, which term or condition directly or indirectly violates AFPA; (6) To refuse to deal with a franchise in a commercially reasonable manner and in good faith; (7) To collect a percentage of the franchisee's sales as an advertising fee and not use these funds for the purpose of advertising the business conducted by the franchisee. With regard to the franchisee’s remedies for violations of the AFPA, Sec. 4-72-208, of the Act states that any franchisee who is harmed by a violation or violations of §4-72-207 will be entitled to recover treble damages in a civil action and, where appropriate, obtain injunctive relief in addition to reasonable attorney's fees and costs of litigation. Further defining permissible damages, the Section explains that any franchisee who is harmed by a violation of any other section of the AFPA will be entitled to recover actual damages in a civil action and, where appropriate, obtain injunctive relief in addition to reasonable attorney's fees and costs of litigation.
The Act also allows for other remedies to the State (the Attorney General and the Arkansas Securities Commissioner). Finally, under the AFPA Sec. 4-72-209, the franchisee is granted a right to repurchase upon termination of any franchise by a franchisor without good cause. In such a circumstance, the AFPA requires that the franchisor, at the franchisee's option, repurchase at franchisee's net cost, less a reasonable allowance for depreciation or obsolescence, the franchisee's inventory, supplies, equipment, and furnishings purchased by the franchisee from the franchisor or its approved sources; however, no compensation will be allowed for the personalized items which have no value to the franchisor.
In Arkansas, the following Dealer/Franchise Termination, Fraud and Non-Renewal Laws, and Franchise Industry-Specific Laws, may be identified as follows:
Arkansas Disclosure/Registration Franchise Laws Franchise Practices Act and franchisors must comply with the FTC franchise disclosure rule. Arkansas Code of 1987 Annotated, Title 4, Chap. 72, Sec. 4-72-207, 16 CFR Part 436
Arkansas Relationship/Termination Franchise Laws Arkansas Franchise Practices Act Arkansas Code of 1987 Annotated, Title 4, Chapter 72, Sec. 4-72-201 through 4-72-210
Arkansas Business Opportunity Franchise Laws No statute of general applicability Business opportunity sellers must comply with the FTC business opportunity rule
Arkansas Alcoholic Beverage Wholesaler/Franchise Laws Arkansas beer law; Arkansas beer price discrimination law; Arkansas liquor, wine, and beer distribution law Ark. Code Ann. Title 3, Chap. 5, Subchapter 11 Ark. Code Ann. Title 3, Chap. 2, Subchapter 4
Arkansas Equipment Dealer/Franchise Laws Arkansas farm implements, machinery, utility, and industrial equipment Dealer/Franchise law. Ark. Code Ann. Title 4, Chap. 72, Subchapter 3
Arkansas Gasoline Dealer/Franchise Laws Arkansas .Arkansas gasoline Dealer/Franchise law Ark. Code Ann. Title 4, Chap. 72, Subchapters 4 and 5
Arkansas Marine Dealer/Franchise Laws No Arkansas-specific franchise law in this industry niche.
Arkansas Motor Vehicle Dealer/Franchise Laws Arkansas Motor Vehicle Commission Act Ark. Code Ann. Title 23, Subtitle 4, Chap. 112
Arkansas Motorcycle Dealer/Franchise Laws No Arkansas-specific franchise law in this industry niche Covered in part by motor vehicle Dealer/Franchise law for all-terrain vehicles
Arkansas Recreational and Powersports Vehicle Dealer/Franchise Laws No Arkansas-specific franchise law in this industry niche Covered in part to motor vehicle Dealer/Franchise law for all-terrain vehicles
Arkansas Restaurants Arkansas restaurants liability law Ark. Code Ann. Title 4, Chap. 72, Subchapter 6
Several Arkansas federal and state court decisions addressing dealer and franchise termination and non-renewal issues have been excerpted below. For more information regarding the specific reasoning, ultimate determination, or implications of any franchise termination or non-renewal case listed below, please contact Jeff Goldstein.
Larry Hobbs Farm Equipment, Inc. v. CNH America, United States District Court, E.D. Arkansas, Eastern Division, April 17, 2009 (“Pursuant to Rule 6–8 of the Rules of the Supreme Court of the State of Arkansas, this Court certified to the Arkansas Supreme Court three questions of statutory construction: (1) whether the market withdrawal of a product or of a trademark and trade name for the product constitutes “good cause” to terminate a franchise under Ark.Code Ann. § 4–72–204(a)(1); (2) whether liability under Ark.Code Ann. § 4–72–310(b)(4) is created when a manufacturer terminates, cancels, fails to renew, or substantially changes the competitive circumstances of the dealership agreement based on re-branding of the product or ceasing to use a particular trade name or trademark for a product while selling it under a different trade name or trademark; and (3) whether the sole remedies for a violation of the Arkansas Farm Equipment Retailer Franchise Protection Act are (a) the requirement that the manufacturer repurchase inventory for a termination without good cause and (b) damages, costs, and attorneys' fees resulting from the failure to repurchase as provided in Ark.Code Ann. § 4–72–309, or whether other remedies are also available. The Arkansas Supreme Court answered these questions in a January 22, 2009 opinion. As to the first question, the Arkansas Supreme Court held that the market withdrawal of a product or of a trademark and a trade name for the product does not constitute “good cause” to terminate a franchise under Ark.Code Ann. § 4–72–204(a)(1). As to the second question, the Arkansas Supreme Court held that no liability under Ark.Code Ann. § 4–72–310(b)(4) is created when a manufacturer terminates, cancels, fails to renew, or substantially changes the competitive circumstances of the dealership agreement based on re-branding of the product or ceasing to use a particular trade name or trademark for a product while selling it under a different trade name or trademark. Finally, as to the third question, the Arkansas Supreme Court held that other remedies are available under the Arkansas Farm Equipment Retailer Franchise Protection Act, but that those are limited to remedies other than money damages, such as injunctive relief and declaratory relief.”)
Volvo Trademark Holding Aktiebolaget v. Clark Machinery Co., United States Court of Appeals, Fourth Circuit, December 20, 2007, 510 F.3d 474 (Volvo next contends that the district court erred in granting summary judgment to Clark on the basis of its conclusion that Volvo had terminated Clark's Dealer Agreement without good cause. As a general proposition, we review de novo a district court's award of summary judgment, viewing the facts in the light most favorable to the non-moving party. See Lee v. York County Sch. Div., 484 F.3d 687, 693 (4th Cir.2007). An award of summary judgment may be appropriately made only “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to *482 any material fact and that the moving party is entitled to summary judgment as a matter of law.” Fed.R.Civ.P. 56(c). The Arkansas Act includes a list of eight occurrences that constitute “good cause” for termination or cancellation of a franchise. See Ark.Code Ann. § 4–72–202 (West 2007).5 The district court held, adopting Clark's position, that this list constituted the exclusive means by which a franchisor may terminate a franchise for good cause under the Arkansas Act. Volvo acknowledges that it did not terminate Clark's Dealer Agreement for any of the specific reasons provided for in the Arkansas Act, but contends that those eight occurrences are not an exclusive list of what constitutes good cause for termination of a franchise. Appurtenant to this contention, Volvo maintains that its reasons for termination, i.e., “Volvoization” and “Dealer Rationalization,” also constitute good cause for a franchise termination under the Arkansas Act. 8 As the district court aptly recognized, Volvo's contention presents an issue of statutory construction, and a federal court sitting in diversity is obliged to apply state law principles to resolve such a question, utilizing such principles as enunciated and applied by the state's highest court. See Volvo Trademark, 416 F.Supp.2d at 410 (citing Cooper Distrib. Co., Inc. v. Amana Refrigeration, Inc., 63 F.3d 262, 274 (3d Cir.1995)). The Arkansas Supreme Court has not resolved the statutory issue raised by Volvo, and we are therefore obliged to interpret the Arkansas Act by applying the principles of statutory construction that would guide an Arkansas court in making such a decision. See CTI/DC, Inc. v. Selective Ins. Co. of Am., 392 F.3d 114, 118 (4th Cir.2004). 910 The district court made a thorough explanation of its ruling on this issue. According to the applicable Arkansas legal principles, if a statute is clear, it is to be given its plain meaning, and courts are not to search for any legislative intent. See Volvo Trademark, 416 F.Supp.2d at 411 (citing Hinchey v. Thomasson, 292 Ark. 1, 727 S.W.2d 836 (1987)). Arkansas also subscribes to the legal principle of expressio unius est exclusio alterius, meaning “ ‘that the express designation of one thing may properly be construed to mean the exclusion of another.’ ” Id. (quoting Gazaway v. Greene County Equalization Bd., 314 Ark. 569, 864 S.W.2d 233, 236 (1993)). Applying these controlling principles to the Arkansas Act, the district court concluded that good cause for termination of a franchise under the Act is limited to the eight occurrences specifically enumerated therein. See Volvo Trademark, 416 F.Supp.2d at 412. The court deemed the Arkansas Act to be clear on its face, and determined that the express designation of those eight occurrences precluded any other circumstance from constituting good cause for a franchise termination. Id. at 411. As a result, the court concluded that the Arkansas Supreme Court would have held that the “circumstances constituting ‘good cause’ for termination under the [Arkansas Act] are limited to those expressly designated in” the Act and, because Volvo's actions did not fall under one of the enumerated occurrences, it had terminated Clark's Dealer Agreement in violation of the Arkansas Act. Id. at 412, 416–17.”)
Capital Equipment, Inc. v. CNH America, LLC, United States District Court, E.D. Arkansas, Western Division, April 28, 2006 (“Capital alleges that the following conduct by NHC violated the Arkansas Franchise Practices Act, Ark.Code Ann. § 4-72-201 et seq. (2001)(“AFPA”) in the following ways: (1) by refusing to deal with Capital in a commercially reasonable manner and in good faith; (2) by canceling Capital's dealership without good cause; (3) by perpetrating fraud and misrepresentation upon Capital; and (4) by failing to repurchase Capital's inventory upon termination. NHC urges the Court to find in its favor on each of Capital's theory of recovery under the AFPA. Because Capital has come forward with evidence which, if believed, will permit a jury finding in its favor, the Court denies summary judgment as to AFPA's claims. The Court does find it necessary, however, to discuss two legal issues raised by NHC's theories for recovery. De Facto or Constructive Termination NHC argues that Capital cannot prevail on its theory that it was terminated without good cause in violation of the AFPA because it voluntarily resigned its dealership and was not terminated. Capital urges this Court to reject this theory, to predict that Arkansas courts would recognize constructive or de facto terminations as violating the AFPA's good cause requirement for terminating a franchisor, and to find the evidence sufficient to permit such a finding. It is undisputed that Capital on October 9, 2001, wrote a letter to NHC advising that it had suffered “enormous financial hardships as a result of New Holland Construction” and asserting that the financial difficulties were the result of “being overstocked and unable to move the NHC products.” (Exh. R to Capital's Response). In the same letter, Capital advised that it was resigning the NHC line but wished to continue selling the “skids [skid steer loaders] and TLB's.” NHC contends that Capital abandoned the line.5 Capital contends that NHC's actions caused the financial ruin of its company and should be considered a de facto termination. No Arkansas case addresses the issue of whether a franchisee may pursue an action for termination when the termination is constructive rather than actual. Other jurisdictions, construing similar state franchise protection acts, have recognized de facto or constructive termination claims.6The Second Circuit, in electing to do so, reasoned that “[i]f the protections of the Connecticut legislature afforded to franchisees were brought into play only by a formal termination, those protections would quickly become illusory. We think it reasonable therefore to believe it was the legislature's aim to have the umbrella of the Acts's protection cover constructive as well as formal termination. To hold otherwise would allow franchisors to accomplish *960 indirectly that which they are prohibited from doing directly.” Petereit v. S.B. Thomas, Inc., 63 F.3d 1169, 1182 (2nd Cir.1995). While the Court might predict that Arkansas courts, if confronted with the issue, would conclude that a franchisor may not indirectly bring about the termination of its franchisee, it would first like to consider the issue in terms of the big picture. Under what circumstances would a franchisor's actions rise to the level of constructive or de facto termination? How would such protections be reconciled with the AFPA's other provisions? The Petereit court, in considering how to determine when a franchisee had been constructively terminated, had this to say:... it appears that something greater than a de minimis loss of revenue-and less than the stark scenario of driving a franchisee out of business-must be shown in order to justify a finding of constructive termination. We think such may be found when a franchisor's actions result in a substantial decline in franchisee net income. Such analysis will be strictly financial, except in close cases, where nonfinancial factors may have some bearing. Whether a decline in net income is substantial will necessarily depend on the particular facts and must be determined on a case-by-case basis. Petereit, 63 F.3d at 1183 (emphasis in original). The parties have focused their arguments more on whether Arkansas courts would recognize a constructive or de facto termination. But, even if this Court should conclude that the Arkansas courts would recognize constructive termination, many questions remain-for example, how would such a theory work within the AFPA's framework; what would the contours of such a claim be; what would Capital be required to prove to prevail; and what would additional remedies would arise, if any, by virtue of proving a constructive termination? The Court invites additional briefing from the parties on these issues. In particular, the Court is curious to know whether there is authority for the proposition that before a franchisor may be held liable for a constructive termination it must have committed acts which could be found by the jury to constitute violations of the AFPA independently of the alleged de facto termination. The AFPA permits recovery for actual damages for a franchisor's refusal “to deal with a franchise in a commercially reasonable manner and in good faith.” Ark.Code Ann. § 4-72-206. The Arkansas Supreme Court's most recent discussion of the AFPA suggests that many actions taken by a franchisor-even if such actions are not a violation of a franchisor's contractual obligations-may be found by the jury to be commercially unreasonable and therefore in violation of the AFPA. Miller Brewing Co. v. Roleson, supra. Capital has alleged numerous other acts which it contends violated the AFPA. Given the breadth of the AFPA, should it not be the law to require Capital to prevail on at least one of its non-termination claims under the AFPA before permitting a finding of constructive termination? If this is a correct interpretation of the law, then a constructive termination claim could not arise absent an independent violation of the AFPA. As to what Capital would be required in order to prevail, should we look, by analogy, to constructive discharge claims in the context of employment discrimination? If so, should not Capital be required to prove either that NHC acted with the intent of forcing Capital to resign its dealership or that Capital's resignation was a reasonably *961 foreseeable result of NHC's actions, AND that a reasonable dealer in Capital's situation would have deemed resignation the only reasonable alternative. See, e.g., 8TH CIR. CIVIL JURY INSTRUCTIONS 5.93 (2005). Finally, since Capital is entitled to recover actual damages for any actions deemed by the jury to be commercially unreasonable, if such actions caused Capital's demise and can form the basis for a lost profits recovery as Capital's “actual damages” then what does a claim for constructive termination add to the mix? In other words, under what circumstances, if any, may Capital recover the lost profits measure of damages as “actual damages” under the AFPA, despite the fact that it resigned its NHC dealership? Is it necessary to demonstrate a constructive termination in order to recover lost profits, assuming Capital prevails on its other theories (excluding the fraud based theories) that NHC violated the AFPA? If not, is it not arguably the case that the only claim for relief under the AFPA that appears to be contingent on Capital's ability to prove a constructive termination under the AFPA is the claim for repurchase of its inventory?7 Finally, since Capital only resigned the heavy equipment portion of the line and intended and desired to continue selling skid steer loaders and TLB's (and allegedly was told it could do so as it did prior to taking on the heavy construction line at NHC's suggestion), was it not arguably “terminated” from continuing to carry that line? Capital will apparently argue that NHC's “all-or-none” approach was itself an AFPA violation, independently of the constructive termination issue. As the above discussion shows, whether to recognize a claim for constructive termination is not a decision that can or should be made in a vacuum, i.e., without due consideration given to the AFPA as a whole. The Court requests additional consideration and briefing from the parties on these issues.)
Heating & Air Specialists, Inc. v. Jones, United States Court of Appeals, Eighth Circuit, June 7, 1999, 180 F.3d 923 (“The AFPA explicitly prohibits a franchisor from canceling a franchise without good cause. The provision contained in the parties' dealer agreements that permitted either of them to terminate their relationship “without cause” is therefore invalid under the AFPA. Nevertheless, under the particular facts of this case the district court's error was harmless. We find that Lennox had good cause to cancel the franchise, and therefore, the AFPA affords A/C no protection. The AFPA enumerates several specific examples of “good cause,” including, “Failure of the franchisee to pay to the franchisor within ten (10) days after receipt of notice of any sums past due the franchisor and relating to the franchise.”Ark.Code Ann. § 4–72–202(7)(H). In canceling A/C's franchise, Lennox provided A/C with a notice stating that $198,627 was past due on A/C's account, and that A/C had “ten days in which to rectify the deficiency” in order to prevent termination. Although the parties disputed the precise amount of the deficiency, the uncontroverted evidence adduced at trial shows that on the date of the termination notice A/C's account was past due. A/C further admits that it did not repay any part of the amount owed within the ten-day grace period provided. Lennox therefore had good cause to terminate the franchise, and A/C's claims under the AFPA fail as a matter of law. A/C attempts to divert attention from its failure to pay Lennox in a timely fashion by arguing that Lennox's breach of their agreements artificially threw A/C into default. A/C specifically contends that because Lennox reneged on its promise to provide A/C with start-up costs, co-op payments and fall stocking terms, it was unable to keep its account current. These arguments are unpersuasive. The evidence shows that the amount past due on A/C's account far exceeds the amount of any start-up or co-op payments it was entitled to receive,6 and therefore, any failure on the part of Lennox to honor these promises cannot account for the deficiency. Furthermore, even if Lennox had provided A/C with fall stocking terms, those terms would have required repayment in May, June and July 1996. Lennox did not terminate A/C's franchise until August 9, 1996, after A/C's payments would have been due in any event. Lennox's failure to provide promised deferred payment terms thus could not have caused the default that existed on the date of termination. For these reasons, Lennox's breach of its agreements with A/C has no effect on the Court's determination that Lennox had good cause to terminate the franchise.”)
Heating & Air Specialists, Inc. v. Jones, United States Court of Appeals, Eighth Circuit, June 7, 1999, 180 F.3d 923 (“Lennox's Counterclaim -- A/C and Jones appeal the district court's charge to the jury regarding Lennox's counterclaim, which stated, “In connection with Lennox's claim against A/C, there is a dispute as to the amount of the purchase price owed to Lennox and unpaid by A/C. The burden is on Lennox to prove the amount of the purchase price unpaid.” A/C argues that the district court additionally should have instructed the jury that, “A party is relieved of the duty to perform a contract if the other party to the contract prevented him from performing.” The crux of A/C's complaint is that in failing to so instruct the jury, the district court deprived A/C of its ability to argue that Lennox's failure to provide A/C with promised start-up funds, co-op payments and deferred payment terms caused A/C to breach its obligation to pay Lennox for the goods it received. As argued above, Lennox's failure to perform its obligations under the agreement logically could not have prevented A/C from paying the entire amount past due on its account. The theory upon which A/C predicated its jury instruction request is thus inherently flawed. Furthermore, A/C's requested instruction misstates the law applicable to the parties' transaction. A/C argues that the Restatement (Second) of Contracts supports its request. The relevant provision states: [I]t is a condition of each party's remaining duties to render performances to be exchanged under an exchange of promises that there be no uncured material failure by the other party to render any such performance due at an earlier time. Restatement (Second) of Contracts § 237 (1979). Based on this provision, A/C contends that Lennox's failure to fulfill its obligations relieved A/C of its duty to pay for the Lennox products that it received and accepted. A/C's assumption that the common law of contracts applies to Lennox's counterclaim is in error. Although the parties' franchise agreement is a mixed contract for the sale of goods and services, the transaction at issue is fundamentally an exchange of goods. The Uniform Commercial Code (U.C.C.), which both Arkansas and Texas have adopted in relevant part, governs such transactions. See U.C.C. § 2–102;Ark.Code Ann. § 4–2–102; Tex.Bus. & Com.Code Ann. § 2.102. Under the U.C.C., A/C became obligated to pay for the goods when it accepted them. See U.C.C. §§ 2–607(a); Ark.Code Ann. § 4–2–607(a); Tex.Bus. & Com.Code Ann. § 2.607(a) (“The buyer must pay at the contract rate for any goods accepted.”). The U.C.C. contains no provision relieving a buyer of this obligation because of a breach that is unrelated to the goods or to their shipment. Plaintiff's theory is thus wholly unsupported by the law governing the parties' exchange of goods. The district court's decision to deny the requested jury instruction is accordingly affirmed.”)
Heating & Air Specialists, Inc. v. Jones, United States Court of Appeals, Eighth Circuit, June 7, 1999, 180 F.3d 923 (“Tulsa Breach of Contract -- Lennox cross-appeals from the district court's denial of its motion for judgment as a matter of law with regard to A/C's breach of contract claim concerning the Tulsa operation. Lennox argues that A/C's claim fails as a matter of law because its overdue account gave Lennox a statutory right to cancel their agreement. When we review the denial of a motion for judgment as a matter of law, we must: (1) resolve direct factual conflicts in favor of the nonmovant, (2) assume as true all facts supporting the nonmovant which the evidence tended to prove, (3) give the nonmovant the benefit of all reasonable inferences, and (4) affirm the denial of the motion if the evidence so viewed would allow reasonable jurors to differ as to the conclusions that could be drawn. See Hastings v. Boston Mutual Life Ins. Co., 975 F.2d 506, 509 (8th Cir.1992). Nevertheless, we must not give the nonmoving party “the benefit of unreasonable inferences, or those at war with the undisputed facts.” Larson v. Miller, 76 F.3d 1446, 1452 (8th Cir.1996) (citing City of Omaha Employees Betterment Ass'n v. City of Omaha, 883 F.2d 650, 651 (8th Cir.1989)). “A mere scintilla of evidence is inadequate to support a verdict, and judgment as a matter of law is proper when the record contains *933 no proof beyond speculation to support the verdict.” Id. (citation omitted). We conclude from the overwhelming evidence offered at trial that A/C's account with Lennox had fallen seriously behind on July 3, 1996, the date upon which Lennox first notified Jones that it would no longer sell products to him for marketing in the Tulsa territory. Lennox submitted letters, invoices, and business records demonstrating that A/C's account was more than $200,000 in arrears from February 1996 through June 1996. On June 20, 1996, Lennox's records showed an amount past due of $211,389. Although the parties disputed the amount that A/C owed Lennox at trial, A/C's own exhibit shows an amount past due in July 1996 of over $114,000. A/C does not contest this evidence, and thus, no reasonable jury could find that A/C's account was current on the date that Lennox withdrew permission for the sale of its products in Tulsa. 11Under the U.C.C. as enacted under the laws of both Arkansas and Texas, “Where the buyer wrongfully ... fails to make payment due on or before delivery ... and, if the breach is of the whole contract ... then also with respect to the whole undelivered balance, the aggrieved seller may ... cancel.” Ark.Code Ann. § 4–2–703(f); Texas Bus. & Com.Code Ann. § 2.703. In Frigiking, Inc. v. Century Tire & Sales Co., 452 F.Supp. 935, 938 (N.D.Tex.1978), the court found under the Texas version of this provision that a corporation was justified in canceling the distributorship agreements with its dealer because of its “chronic large overdue balances.” The court concluded that the dealer had breached the agreements so as to impair the whole contract. See id. In Camfield Tires, Inc. v. Michelin Tire Corp., 719 F.2d 1361, 1366–67 (8th Cir.1983), we cited Frigikingwith approval and held that a tire company justifiably canceled its dealership agreement because of the dealer's chronic failure to make timely payments. We accordingly affirmed the district court's summary judgment dismissal of the dealer's claim for wrongful termination of the agreement. Both Frigiking and Camfield Tires are analogous to the case at bar, and therefore, Lennox had a statutory right to cancel any contract with A/C to deliver goods for resale in Tulsa. A/C and Jones attempt to distinguish Frigiking and Camfield Tires on the ground that Lennox failed to notify A/C that its past due account was a reason for its decision to terminate the Tulsa operation. Instead, Lennox stated verbally that A/C was not a part of the “core dealership” in Tulsa, and further stated in writing that Tulsa did not appear as an authorized location on the parties' dealership agreement. A/C's argument appears to rest on the assumption that Lennox had an obligation to provide notice to A/C along with an explanation of all of its reasons for cancellation. A/C cites no authority for this proposition, and it is not supported by the U.C.C. The U.C.C. draws a distinction between “termination” of a contract for the sale of goods and “cancellation” of the contract. See U.C.C. § 2.106. Although the U.C.C. requires a party to give reasonable notice upon termination of a contract, see U.C.C. § 2.309, no such notice is required in order to cancel it for failure to pay, see U.C.C. § 2.703. InInternational Therapeutics, Inc. v. McGraw–Edison Co., 721 F.2d 488, 492 (5th Cir.1983), the court explained this distinction: “The reason is obvious; an aggrieved seller dealing with a buyer who is in breach of their contract should not normally be obliged to put the delinquent buyer on notice before terminating future relations.” Lennox therefore had no obligation to provide A/C with notification of its reasons for canceling the agreement permitting A/C to purchase products for resale in Tulsa. Thus, even assuming that Lennox agreed that the Tulsa operation could continue for a period of years, Lennox's cancellation of that agreement was proper and A/C's breach of contract claim with regard to Tulsa fails as a matter of law.”)
Dr. Pepper Bottling Co. of Paragould v. Frantz, Supreme Court of Arkansas, November 23, 1992, 311 Ark. 136, 842 S.W.2d 37 (“The Arkansas Franchise Practices Act [Act 355 of 1977, Ark.Code Ann. §§ 4–72–201—210 (1987) provides remedies for persons whose rights as franchisees have been terminated without good cause. A franchise is defined by the act as a written or oral agreement for a definite or indefinite period, in which a person grants to another person a license to use a trade name, trademark, service mark, or related characteristic within an exclusive or nonexclusive territory, or to sell or distribute goods or services within an exclusive or nonexclusive territory, at wholesale, retail, by lease agreement, or otherwise. Ark.Code Ann. § 4–72–202(1) … The Circuit Court Erred In Finding That There Was A Legally Sufficient Evidentiary Basis For The Jury's Finding That Frantz Was Terminated Without Good Cause, Without Statutory Notice, And Without An Opportunity To Cure His Deficiencies -- Dr. Pepper contends there is no substantial evidence that Dr. Pepper terminated Frantz without good cause. “Good cause” is defined under the Franchise Act as including the failure by the franchisee to comply substantially with the requirements imposed under the agreement. Dr. Pepper submits it produced overwhelming evidence of good cause to terminate. But that issue was clearly one for the jury, considering there was evidence from which the jury could readily find that termination was attributable to Dr. Pepper having acquired 7–Up Bottling Company rather than from the actions of Don Frantz.”)
Miller Brewing Co. v. Ed Roleson, Jr., Inc., Supreme Court of Arkansas, January 19, 2006, 365 Ark. 382, 23 S.W.3d 806 (“I. Violation of Franchise Practices Act -- We first consider Miller's point on appeal involving the jury's finding that Miller violated the Arkansas Franchise Practices Act (“Franchise Act” or “Act”).3 Miller asserts that the trial court erred in submitting this claim to the jury for two reasons: (1) Roleson had no express or implied right under the Franchise Act or the franchise agreement to acquire additional brands or territories; and (2) Roleson's claim under the Franchise Act is preempted by the Arkansas Beer Wholesaler Statute, specifically, Ark.Code Ann. § 3–5–1108(a) (Repl.1996). The statutory provision of the Franchise Act at issue is set forth in Ark.Code Ann. § 4–72–206 (Repl.2001), which states in relevant part as follows: It shall be a violation of this subchapter for any franchisor, through any officer, agent, or employee to engage directly or indirectly in any of the following practices: ... (6) To refuse to deal with a franchise in a commercially reasonable manner and in good faith[.] Ark.Code Ann. § 4–72–206 (Repl.2001). “Franchise” is defined by the Act as a written or oral agreement for a definite or indefinite period in which a person grants to another person a license to use a trade name, trademark, service mark, or related characteristic within an exclusive or nonexclusive territory or to sell or distribute goods or services within an exclusive or nonexclusive territory at wholesale or retail, by lease agreement, or otherwise. Ark.Code Ann. § 4–72–202(1)(A) (Repl.2001). “Good faith” means “ honesty in fact in the conduct or transaction concerned.” Ark.Code Ann. § 4–72–202(8) (Repl.2001). The Franchise Act does not define “commercially reasonable manner.” Whether Miller dealt with the franchise in a commercially reasonable manner and in good faith is a fact question for the jury. SeeMercantile Bank v. B & H Associated, Inc., 330 Ark. 315, 320, 954 S.W.2d 226, 229 (1997). The question before us is whether, examining the evidence and all reasonable inferences arising therefrom in the light most favorable to Roleson, there was substantial evidence to support the jury's verdict that Miller did not deal with the franchise in a commercially reasonable manner and in good faith. Id. We hold that there was substantial evidence to support the jury's finding that Miller refused to deal with its franchise with Roleson in a commercially reasonable manner and in good faith. Miller argues that there was no evidence to support this claim because the claim is not based on Roleson's rights under his existing contract with Miller, but on rights Roleson might have to enter into a future contract to purchase Campbell's business. Relying on the definition of franchise as “a written or oral agreement,” Miller argues that, because the Distributor Agreement between Miller and Roleson conferred no rights upon Roleson to enter into new contracts for other franchises covering other brands, there was no “franchise” with regard to these other brands. Miller claims that, because Roleson had no franchise agreement with Miller with respect to Roleson's ownership of other brands and territories not specifically listed in the Distributor Agreement, Roleson could not make a claim of a violation of the Franchise Act with regard to such brands. We disagree. Roleson is not claiming that Miller violated some non-existent franchise agreement between Miller and Roleson regarding other brands, but that Miller refused to deal with the existing franchise between Miller and Roleson in a commercially reasonable manner and in good faith. According to Roleson, Miller adopted and executed a plan to eliminate Roleson as a distributor and applied pressure to other distributors—including Campbell, White River, and Mountain Home—in furtherance of that plan. While Miller's actions may not have caused Roleson to lose the brands and territories listed in the existing Distributor Agreement, Roleson claims that Miller's actions prevented it from growing its business and increasing its revenues, which was critical to its ability to remain competitive in the changing beer market. While we have not had an opportunity to interpret this provision of the Franchise Act, an opinion by the Eighth Circuit Court of Appeals offers some guidance. In Southern Implement, Inc. v. Deere & Co., 122 F.3d 503 (8th Cir.1997), a franchisee of John Deere equipment sued its franchisor, alleging that the franchisor permitted an unauthorized dealer to sell within the franchisee's assigned territory. Because the contract did not give the franchisee an exclusive right to sell Deere products in its “area of responsibility [AOR]” and because the contract did not require the franchisor to police a franchisee's AOR or prevent other dealers from establishing facilities in the AOR, the trial court granted summary judgment in favor of the franchisor on the Franchise Act claim. Id. The Eighth Circuit reversed, holding that—in spite of the lack of a specific contractual obligation—a jury could have found that the franchisor had an obligation to investigate and prevent others from operating an unauthorized facility. The court held that the failure to do so in that case could constitute bad faith. Id. While the Distributor Agreement between Miller and Roleson did not specifically address Roleson's acquisition of additional brands and territories, the law requires the parties to deal with the franchise in a commercially reasonable manner. Ark.Code Ann. § 4–72–202(7) and 206(6). Without enumerating all of a franchisor's acts which might constitute a failure to deal with a franchise in a “commercially reasonable manner,” we hold that a franchisor's attempt to force a franchisee out of business may constitute a refusal to deal with a franchise in a commercially reasonable manner and in good faith under Ark.Code Ann. § 4–72–206(6). We now review whether there is substantial evidence to support the jury's verdict that Miller violated this provision of the Franchise Act. Roleson presented evidence at trial of the White Paper, which set forth Miller's plan to eliminate Roleson as a distributor. Testimony at trial indicated that this plan was not disclosed to Roleson. Larry Holcomb, Roleson's general manager, testified that he and Mr. Roleson found out from a Miller representative at a national sales meeting that Miller had thwarted Roleson's efforts to purchase Campbell in furtherance of that plan. The Miller representative stated that Miller simply “wanted to grow the size of [certain] Miller distributors” and that Roleson was not one of those distributors. The Miller representative said that Roleson was not “in Miller Brewing Company's long term plans.” Furthermore, in a courtesy call to Mr. Roleson to let him know *47 that White River had made a deal to purchase Campbell and to make an offer to purchase Roleson, Mr. O'Conner testified that he told Roleson he should sell before he died of a heart attack fighting Miller. The jury could have inferred from this testimony that Mr. O'Conner knew of Miller's plan to force Roleson out of business. There was also evidence in the testimony of Jim Young, Miller's representative, Jan Bratcher, White River's president, and Ed Roleson from which the jury could have found that the sale of Campbell to White River was executed in furtherance of Miller's overall plan to eliminate Roleson as a distributor. Mr. Bratcher stated that the plan to buy Campbell's business came unexpectedly from Mr. O'Conner, and that he advised Mr. O'Conner that it was a bad deal. Mr. O'Conner's decision to buy Campbell and his subsequent meeting with Mr. Campbell occurred within days of Mr. O'Conner's meeting with Mr. Young. Considering the evidence and all reasonable inferences arising therefrom in the light most favorable to Roleson, as we must under our standard of review, we hold that there was substantial evidence to support the jury's verdict that Miller “refuse[d] to deal with a franchise in a commercially reasonable manner and in good faith” in violation of Ark.Code Ann. § 4–72–206(6)”)