In Connecticut, the following Dealer/Franchise Termination and Non-Renewal Laws, Fraud, and Franchise Industry-Specific Laws, exist:
- Connecticut Does Not Have a Disclosure/Registration Franchise Law
- Connecticut Has a Relationship/Termination Franchise Law
- Connecticut Has a General Business Opportunity Franchise Law
- Connecticut Has an Alcoholic Beverage Wholesaler/Franchise Law
- Connecticut Has an Equipment Dealer/Franchise Law
- Connecticut Has a Gasoline Dealer/Franchise Law
- Connecticut Does Not Have a Marine Dealer/Franchise Law
- Connecticut Has a Motor Vehicle Dealer/Franchise Law
- Connecticut Does Not Have a Motorcycle Dealer/Franchise Law
- Connecticut Does Not Have a Recreational and Power Sports Vehicle Dealer/Franchise Law
- Connecticut Does Not Have a Restaurant Liability Law
Connecticut’s franchise relationship legislation is known as the Connecticut Franchise Act (“CFA”). Section 42-133f., entitled “Termination, or Cancellation of, or Failure to Renew a Franchise” governs the relationship between franchisors and franchisees upon termination or renewal.
Subsection (a) of Section 42-133f of the CFA prohibits a franchisor from terminating, canceling or failing to renew a franchise except for “good cause.” In turn, the CFA defines good cause to “include, but not be limited to the franchisee's refusal or failure to comply substantially with any material and reasonable obligation of the franchise agreement .” The CFA further defines in the alternative “good cause” to include “ the reasons stated in subsection (e) of this section which in general covers non-renewals based on a determination not to continue to lease to the franchisee real property underlying the franchise.
With regard to procedures, the CFA requires written notice of any term termination, cancellation or intent not to renew, at least sixty days in advance to such termination, cancellation or failure to renew with the cause stated thereon. An exception to this general procedural notice provision is that, in the event the franchisor elects not to renew a franchise pursuant to subsection (e) of this section, the franchisor must give the franchisee written notice of such intent not to renew at least six months prior to the expiration of the current franchise agreement.
The provisions above regarding terminations and non-renewals do not apply (1) where the alleged grounds are voluntary abandonment by the franchisee of the franchise relationship, in which event, such notice may be given thirty days in advance of such termination, cancellation or failure to renew, or (2) where the alleged grounds are the conviction of the franchisee in a court of competent jurisdiction of an offense punishable by a term of imprisonment in excess of one year and directly related to the business conducted pursuant to the franchise, in which event, such notice may be given at any time following such conviction and shall be effective upon delivery and written receipt of such notice.
Subsection (b) of Section 42-133f of the CFA focuses on the situation where the franchise which is the subject of a notice of termination, cancellation or failure to renew is operated on premises leased by the franchisor to the franchisee under a lease which terminates upon termination of the franchise; if the franchisor seeks to terminate the lease, the notice must be served upon the franchisee by a state marshal or indifferent person and must: (1) expressly state that said lease shall terminate upon termination of the franchise, and (2) further state that the franchisee may have certain rights under Sections 42-133f and 42-133g of the CFA, which sections shall be reproduced and attached to the notice.
Subsection (c) of Section 42-133f of the CFA directs that upon termination of any franchise the franchisee shall be allowed fair and reasonable compensation by the franchisor for the franchisee's inventory, supplies, equipment and furnishings purchased by the franchisee from the franchisor or its approved sources under the terms of the franchise or any ancillary or collateral agreement; provided no compensation shall be allowed for personalized items which have no value to the franchisor.
Subsection (d) of Section 42-133f of the CFA sets out an unusual provision that no franchise, oral or written, shall be for a term of less than three years and for successive terms of not less than three years thereafter unless cancelled, terminated or not renewed pursuant to subsections (a) and (d) of Section 42-133f of the CFA
Subsection (e) of Section 42-133f of the CFA concerns specifically franchises in which the franchisor is the lessor or owner of the land upon which the franchise operates. Specifically, the CFA provides that a franchisor may elect not to renew a franchise which involves the lease by the franchisor to the franchisee of real property and improvement, in the event the franchisor (1) sells or leases such real property and improvements to other than a subsidiary or affiliate of the franchisor for any use; or (2) sells or leases such real property to a subsidiary or affiliate of the franchisor, except such subsidiary or affiliate shall not use such real property for the operation of the same business of the franchisee; or (3) converts such real property and improvements to a use not covered by the franchise agreement; or (4) has leased such real property from a person not the franchisee and such lease from such person is terminated or not renewed.
Section 42-133g of the CFA, entitled “Action for Violation”, in subsection (a), provides for a private right of action for violations of the CFA, when it states that any franchisee may bring an action for violation of sections 42-133e to 42-133g, inclusive, in the superior court to recover damages sustained by reason of such violation, and may also apply for injunctive relief. Further, if the franchisee is successful in such a suit, it will be entitled to costs, including, but not limited to, reasonable attorneys' fees.
Subsection (b) of Section 42-133g of the CFA resolves the normal potential dispute over possession of the franchise’s physical location upon termination by directing that a franchisee who leases real property under a franchise agreement, which lease expires upon termination of the franchise, and who receives notice of termination from the franchisor in accordance with the provisions of subsections (a) and (b) of Section 42-133f, will have no right or privilege to occupy the premises which are the subject of the franchise lease, as of the date specified in such notice for the termination of such franchise, unless the franchisee has been granted a temporary injunction.
Subsection (c) of Section 42-133g of the CFA provides further regulation of the possession of property associated with a franchise termination. Specifically, a franchisor that applies to a court to obtain possession of premises leased by the franchisor to the franchisee upon termination of the franchise, which premises the franchisee has no right or privilege to occupy under subsection (b) of Section 42-133g, must file with the court from which it seeks the order or possession: (1) an affidavit under oath from the clerk of such court, which affidavit shall state that the court records indicate that no temporary injunction has been granted to the franchisee, (2) the return of service of the notice required pursuant to subsection (b) of this Section, (3) a copy of the notice served pursuant to subsection (b) of this Section, and (4) an affidavit under oath, which affidavit shall state that the notice required by subsections (a) and (b) of Section 42-133f has been served, that the notice period required by said Section has expired, and that no injunction to restrain termination has been issued.
In Connecticut, the following Dealer/Franchise Termination, Fraud and Non-Renewal Laws, and Franchise Industry-Specific Laws, are identified as follows:
Connecticut State Franchise Disclosure/Registration Laws
No statute of general applicability
See the FTC franchise disclosure rule
Connecticut State Franchise Relationship/Termination Laws
Connecticut General Statutes, Title 42, Chap. 739, Sec. 42-133e through 42-133h
Connecticut State Business Opportunity Laws
Business Opportunity Investment Act.
Connecticut General Statutes, Title 36b, Chapter 672c, Sections 36b-60 through 36b-80
Connecticut Alcoholic Beverage Franchise/Wholesaler Laws
Connecticut .Connecticut liquor wholesaler law
Connecticut Special Industry Laws (¶4075).Conn. Gen. Stat. Title 30, Chap. 545, §30-17
Connecticut Equipment Franchise/Dealer Laws
Connecticut .Connecticut farm, forestry, and garden equipment dealer law
Conn. Gen. Stat. Title 42, Chap. 743r
Connecticut Gasoline Franchise/Dealer Laws
Connecticut .Connecticut gasoline dealer law
Conn. Gen. Stat. Title 42, Chap. 739, §42-133j to §42-133n,and §42-133mm
Connecticut Marine Franchise/Dealer Laws
No Industry-Specific Connecticut Franchise Law in this Niche
Connecticut Motor Vehicle Franchise/Dealer Laws
Connecticut .Connecticut motor vehicle dealer law
Conn. Gen. Stat. Title 42, Chap. 739, §42-133r to §42-133ee,Conn. Gen. Stat. Title 42, Chap. 743b, §42-179(d)
Connecticut Motorcycle Franchise/Dealer Laws
No Industry-Specific Connecticut Franchise Law in this Niche
Connecticut Recreational and Powersports Vehicle Franchise/Dealer Laws
No Industry-Specific Connecticut Franchise Law in this Niche
No Industry-Specific Connecticut Franchise Law in this Niche
Sherman Street Associates, LLC v. JTH Tax, Inc., United States District Court, D. Connecticut, August 30, 2011 (“Connecticut Franchise Act -- 1. The Connecticut Franchise Act (“CFA”) provides in pertinent part that a franchisor shall not terminate a franchise “except for good cause, which shall include, but not be limited to the franchisee's refusal or failure to comply substantially with any material and reasonable obligation of the franchise agreement.” Conn. Gen.Stat. § 42–133f(a). 2. The trial court must apply an “objective standard” when determining whether or not the franchisor had good cause. Hartford Elec. Supply Co. v. Allen–Bradley Co., Inc., 736 A.2d 824, 839 (Conn.1999). The franchisor bears the burden of proving “good cause.” Id. 3. The Court finds that Sherman Street's failure to pay the receivables (including the royalties and expenses) and the note it owed constitutes a material breach of the agreement, and good cause for termination. Section 4 of each franchise agreement (and special stipulation Paragraph 11) required Sherman Street to pay royalties to Liberty. The evidence is clear that Sherman Street never made a payment to Liberty from the time Knight signed the franchise agreements in September 2002 until the time Sherman Street was terminated in 2003.9 Whatever confusion Sherman Street may have had about the precise amounts owed, or whatever discrepancies may have appeared in Liberty's billing, did not excuse Sherman Street from its obligations to pay. See E.Z. Save, Inc. v. Getty Petroleum Corp., 46 F. App'x 55, 56 (2d Cir.2002) (interpreting the CFA and holding that “we agree with the district court that [the plaintiff's] non-payments breached the agreements and that [the defendant] had good cause for termination”). Even in the time period from May through July 2003 when Liberty indicated it would consider extending the due date of the original note and perhaps agreeing to a second note for the receivables, no payments were made on the receivables and note, and Sherman Street indicated to Liberty it did not have funds to make payments on the overdue receivables and overdue note. 4. Sherman Street argued that Liberty lacked good cause because Mike Trainor's decision to terminate Sherman Street was based merely on a rumor that Ryan Sheppard had made negative comments about Liberty to another franchise “prospect.” This argument fails. First, Trainor's email stated that he wanted to look into terminating Knight “based on his failure to pay his AR balance.” The evidence shows Sherman Street's outstanding debts to Liberty were part of Trainor's decision. Second, “the standard for evaluating the reasons advanced [for termination] is not subjective, but objective, not what the franchisor sincerely believes justifies termination but what is ‘reasonable from the perspective of the disinterested observer.’ “ Hartford Elec. Supply Co. v. Allen Bradley Co., Inc., No. CV 96562061 S, 1997 WL 297256, at * 11 (Conn.Super.Ct. May 28, 1997) (citing Darling v. Mobil Oil Corp., 864 F.2d 981, 989 (2d Cir.1989)). Therefore, regardless of whether Liberty executives were in part motivated to terminate Sherman Street because of Ryan Sheppard's negative comments, or because of Sherman Street's failure to make payments, the Court's task is to decide whether Liberty's stated reasons objectively satisfy the “good cause” standard. As discussed above, under Connecticut law, Sherman Street's failure to make its payments to Liberty constitutes good cause for termination. 5. Sherman Street also argues that even if Liberty had good cause to terminate it, the termination was procedurally defective in violation of the CFA. The CFA provides that “the franchisor shall give the franchisee written notice of such termination ... at least sixty days in advance to such termination.” Conn. Gen.Stat. § 42–133f(a). Liberty sent Sherman Street Notices to Cure on April 7, 2003, April 23, 2003 and August 28, 2003.10 The Notices stated that Sherman Street was “in violation of your promissory agreement in that you owe us monies which are more than 30 days past due.”11 The Notices to Cure also said, “Failure to pay amounts owing pursuant to your franchise agreement is a violation of that agreement. Such a violation could result in the termination of your franchise agreement in addition to other remedies available to us.” On September 30, 2003, Liberty sent Sherman Street a letter notifying it of the termination of its franchise agreements “effective immediately.” The Court finds that neither the Notices to Cure nor the September 30 termination letter satisfy the CFA's sixty day notice requirement. The CFA requires written notice of termination sixty days before such termination. Liberty terminated Sherman Street “effective immediately,” and cut off Sherman Street's access to ZeeNet and tax return processing. The Notice to Cure letters did not provide notice of termination, but merely provided notice of possible termination in the event that Sherman Street failed to pay its past due amounts. Termination notices that have been upheld by Connecticut courts as complying with the sixty day notice requirement of the CFA state unequivocally that the franchisee will be terminated, and then state a day (more than 60 days in the future) when that termination will become effective. See, e.g., Hartford Elec. Supply Co., 736 A.2d at 830 (upholding as a proper termination a letter dated June 27, 1996 informing the plaintiff that the defendant intended to terminate the agreement as of September 30, 1996); Getty Petroleum Marketing, Inc. v. Tuli, No. CV 2110191, 200 WL 893447, at * 3 (Conn.Super. Ct. June 21, 2000) (“At the conclusion of the August 3 letter, the termination date of October 8, 1999 is set out in bold-faced type with instructions on vacating the premises. Because the termination date was notice greater than sixty days, this court finds such notice to be sufficient under the General Franchise Act.”). Because Liberty notified Sherman Street that its franchise agreements were terminated on September 30, 2003, to comply with the CFA the termination should have become effective sixty days after September 30. Instead, Liberty stated that the termination was “effective immediately,” and cut off Sherman Street's access to ZeeNet and its processing passwords. 6. As remedy for Liberty's violation of the CFA, Sherman Street is entitled only to recover lost profits for the sixty days the termination was in effect without the requisite notice. See McKeown Distribs., Inc. v. Gyp–Crete Corp., 618 F.Supp. 632, 643 (D.Conn.1985) (holding that a violation of the advance notice provision of the CFA “at most would entitle [the plaintiff] to recover lost profits for the ... [sixty] additional days it would have been in operation prior to the date that termination would be permitted under the ... Act”); Peterit v. S.B. Thomas, Inc., 63 F.3d 1169, 1186–87 (2d Cir.1995) (stating “plaintiffs not given the requisite 60–days notice are entitled to damages for lost profits during the time the ... [termination] was in effect without the requisite notice”). Sherman Street has failed to show it would have made any profit during October and November 2003, the period it would have still been in operation prior to a valid termination notice. First, the tax season runs from January until April. Few if any customers would have visited Sherman Street's franchises in October and November. Second, Sherman Street's profit and loss statement for fiscal year 2002–2003 showed a net loss of $181,334. Therefore, Sherman Street is not entitled to any damages for Liberty's violation of the Connecticut Franchise Act for failure to provide adequate notice. The Court finds for the plaintiff on Count One of the Amended Complaint, but does not award any damages.”)( Plaintiffs also contend that the franchise agreements were unlawfully terminated by Liberty in late 2002 by Liberty's conduct concerning the ZeeNet, the failure to provide an adequate number of “processing centers,” and related activity. Plaintiffs also contend that these actions compelled them to relinquish the five franchises in January 2003. The Court concludes that this activity by Liberty did not constitute breach of the franchise agreements, violations of the Act, or unlawful duress or compulsion which resulted in the January modifications.)
Charts v. Nationwide Mut. Ins. Co.Eyeglasses , United States District Court, D. Connecticut, October 25, 2005 (“Finally, Nationwide argues that, even if Charts was a franchise, it had “good cause” to terminate that franchise. See Conn. Gen.Stat. 42–133f(a). Specifically, Nationwide contends that Charts violated the Connecticut Insurance Code by paying for the policies of at least two individuals, and, therefore, they had “good cause” to terminate him. As Charts notes in response, however, at no time during the trial did Nationwide introduce the appropriate provisions of the Insurance Code into evidence, or elicit testimony from any witness stating that the reasons underlying the termination of the franchise were violations of state law. Indeed, in the opening statement made by Nationwide's counsel, the jury was told that Nationwide “investigated the allegations that the Charts had engaged in [rebating]” and “conclud[ed] that he had violated company policy and practice.” In conformance with this opening statement, Nationwide failed to present any evidence to the jury that Charts had violated the provisions of the Insurance Code, and that this was the reason for his termination. It was not until after the evidence was concluded and when Nationwide filed a proposed supplemental jury instruction on the Insurance Code and rebating that this issue was raised before the Court. For that reason, the Court denied the supplemental request, and the provisions of the Insurance Code were never presented to the jury. Moreover, the jury could have found that the evidence submitted by Nationwide on this ground was not persuasive. Nationwide's argument essentially is that because Alex Charts paid the premiums on policies for the policy holder, he engaged in illegal “rebating,” and, therefore, it had “good cause” to terminate his franchise. There appear to be three incidents in which Alex Charts initially paid the premiums for the policy holder. In the first incident, Charts paid the $54 premium for the first year of a policy issued to Anne Elizabeth Turoczi, the niece of Missy Brayton, a woman who worked for CIAI. Although Brayton testified at trial that Charts had paid the premium on her niece's policy, she admitted on cross-examination that she was unaware that her niece's parents had reimbursed Charts the full premium amount a short time thereafter, and a copy of the Turoczis' check to *370 Charts was submitted into evidence. (Trans. 12/2/04, pg. 137–38, and Plaintiffs' Ex. 81). Charts also testified that he was reimbursed for this advance of the Turoczi premium. (Trans.12/01/04, pg.48). In the second incident, it appears that Charts paid some premiums on a $1,000,000 life insurance policy issued to Mario Boccarossa, his Nationwide Agency Manager at the time. At trial, Alex Charts testified that: “[W]hen [Boccarossa] came to me, I reminded him that I didn't want to get involved in paying any premiums. Okay. He was responsible for all the premiums. Okay. Like even when we started the policy, and he assured me that would be the case.” (Trans.12/01/04, pg.61). Charts further testified that, although Boccarossa had paid some of the premiums a “few months” later, he was then replaced by Kapatoes as Agency Manager. Boccarossa asked Charts to pay some of the outstanding premiums, in the amount of $6,000, and “he would make it up as soon as he could.” (Id). Although Boccarossa failed to pay that money back, Charts testified that he did not sue for the money because he didn't think he was at the “stage” to sue “his manager,” and, moreover, “[it] wasn't enough money for me to bother pay[ing] a lawyer and going after.” (Id. at 62). In the third incident, Charts paid the first year premiums for two policies issued for the twin sons of Linda Mello, soon after Mello's husband had died. Mello was a secretary in Nationwide's district office, and she worked for both Kapatoes and Boccarossa when those individuals served as the Agency Manager for the Charts franchise. The total amount advanced by Charts' for those policies totaled $250. Although Mello never repaid that amount, she has kept those policies active and has paid all of the remaining premiums herself. Charts testified that he expected to receive the advanced premium back from Mello, but that he did not “see any reason to chase her for it” and that he considered it a “charitable gift.” (Trans.12/1/04, pg.45–46). Nationwide may be correct in arguing that the evidence concerning these three incidents could provide the jury with enough evidentiary support for a finding that Nationwide had “good cause” terminate the franchise. However, the jury also had enough evidentiary support to find that there was not “good cause” for termination. For example, the termination letter sent by Nationwide to Charts, which was entered into evidence, fails to mention the “rebating” incidents as a ground for the termination. (Plaintiffs Ex. 49). In addition, other Nationwide employees testified that they had engaged in similar actions when selling Nationwide policies. Because a court “cannot assess the weight of conflicting evidence” at this stage of the litigation, Samuels, 992 F.2d at 16, the motion for judgment as a matter of law on this ground must be denied. In sum, Nationwide's post-verdict Rule 50 motion for judgment as a matter of law on the Franchise Act count is denied.”)
United States District Court, D. Connecticut, March 30, 2001 (“Third, the defendants contend that the Notice of Termination was given in violation of Conn. Gen.Stat. § 42–133f, which requires a sixty-day notice prior to termination of a franchise. However, paragraph 19(a) of the License Agreement provided: “The Company may terminate this [License] Agreement at any time, effective upon the date specified in the termination notice (or the earliest date permitted by applicable law).” Id. ¶ 19(a) (emphasis added). Days Inns asserts that it recognized that the effective date of termination was sixty days after the January 23, 1997 notice, as required by Conn. Gen.Stat. § 42–133f, and that as a result, it took no action to prevent the defendants from running the Facility as a Days Inn prior to the expiration of the sixty-day period. The defendants have not produced any evidence to contradict the plaintiff's assertions. Accordingly, the court concludes there is no genuine issue as to whether the Notice of Termination was given in violation of Conn. Gen.Stat. § 42–133f.”)
Getty Petroleum Marketing, Inc. v. Tuli, Superior Court of Connecticut, June 21, 2000 (“B. DID TULI RECEIVE PROPER NOTICE UNDER CONNECTICUT'S GENERAL FRANCHISE ACT OF GETTY'S INTENT TO TERMINATE THE LEASE? A franchiser must give a franchisee written notice of termination of the franchise at least sixty days in advance of the termination with the cause stated thereon. General Statutes Section 42-133f(a). In the August 3, 1999 letter to TULI from GETTY's counsel, TULI was put on notice of both GETTY's intent to terminate as well as the reasons for such termination. While defense counsel argues in his Memorandum of Law dated May 30, 2000 that less than the statutorily mandated sixty days notice was given due to a September 9 date mentioned at the beginning of the notice, this court is not persuaded. As GETTY's counsel points out in his Objection and Response dated June 8, 2000, this claim was never made at trial nor was it asserted as a special defense. Further, a Notice to Quit was not served on TULI until October 15, 1999. At the conclusion of the August 3 letter, the termination date of October 8, 1999 is set out in bold-faced type with instructions on vacating the premises. Because the termination date was notice greater than sixty days, this court finds such notice to be sufficient under the General Franchise Act.”)
Getty Petroleum Marketing, Inc. v. Tuli, Superior Court of Connecticut, June 21, 2000 (“C. DID GETTY HAVE GOOD CAUSE TO TERMINATE THE FRANCHISE? To terminate a franchise, a franchiser must have good cause. This includes the franchisee's “refusal or failure to comply substantially with any material and reasonable obligation of the franchise agreement.” Id. On May 19, 2000, during the Summary Process trial for the present matter, Donna Lee Stewart, Regional Marketing Manager for GETTY, testified, and the Court credits her testimony, that TULI had breached various paragraphs of the Lease and Supply Contract. Each paragraph pertains to payments that TULI had agreed to make at the inception of the contractual relationship. Repeated failure to make payments constitutes good cause as defined in Section 42-133f(a). “Clearly, payment is both a material and reasonable obligation of an agreement. Therefore, GETTY had good cause to terminate the franchise relationship with TULI. D. DID GETTY WAIVE ITS RIGHT TO TERMINATE THE FRANCHISE? TULI contends that GETTY waived its right to terminate the franchise when it sent TULI a letter dated February 26, 1999 indicating GETTY's intent to renew the contractual relationship with TULI. TULI maintains that by offering the new lease, GETTY waived any right to terminate on grounds of prior default because the offer actuated a relinquishment of its rights regarding TULI's default. “Waiver is the intentional abandonment of a known right ... waiver is the voluntary relinquishment of a known right. It involves the idea of assent, and assent is an act of understanding ... Intention to relinquish must appear, but acts and conduct inconsistent with intention to [relinquish] ... are sufficient.” Soares v. Max Services, Inc., 42 Conn.App. 147, 175, 679 A.2d 37, cert. denied, 239 Conn. 915; 682 A.2d 1005 (1996). While defense counsel argues that the offer of a new lease constituted a waiver, he has failed to show a voluntary relinquishment of a known right. Citing Lee v. Wright, 485 N.Y.S.2d 543, counsel states, “... knowing acceptance of rent without any efforts to terminate the lease justified inference that the landlord has chosen to hold the tenant as lessee and, therefore, waived any violation.” Even if this court were bound by that decision, it is irrelevant here. GETTY merely offered a new lease and did not accept any rent under it. GETTY continued to make demand for TULI to cure the default as is evidenced by the April 12, 1999 letter to cure as well as by a July 19, 1999 letter. GETTY manifested no intention whatsoever to relinquish its rights under the Lease or Supply Contract. Even if it could be successfully argued that GETTY's course of conduct constituted a waiver under the Soares standard, both the Lease and Supply Contract contain “no waiver” provisions; “no waiver ... shall be valid, unless such waiver ... is in writing, and signed by the party against whom enforcement is sought.” Both the Lease and Supply Contract state, “Company's right to require strict performance shall not be affected by any ... course of dealing.” “While inconsistent conduct may, under certain circumstances, be deemed a waiver of a right to acceleration, the insertion of a nonwaiver clause is designed to avoid exactly such an inference.” Christensen v. Curaia, 211 Conn. 613; 560 A.2d 456 (1989). Therefore, even if GETTY's course of conduct in offering a new lease might otherwise constitute a waiver, the insertion of the nonwaiver clauses prevents such conduct from constituting a valid waiver. Because GETTY did not manifest an intention to relinquish its rights, because TULI has failed to provide a written waiver signed by GETTY, and because of the nonwaiver clauses, no waiver exists.”)
Hartford Elec. Supply Co. v. Allen-Bradley Co., Inc., Supreme Court of Connecticut, August 24, 1999, 250 Conn. 334736 A.2d 824 (“We now must determine whether the trial court properly concluded that the defendant failed to prove that it had “good cause,” pursuant to § 42–133f (a), to terminate its agreement with the plaintiff. Again, we conclude that the trial court's finding is supported by the evidence. The franchisor has the burden of proving “good cause” to terminate the franchise, even if the franchisee is the plaintiff, as in the present action. Petereit v. S.B. Thomas, Inc., supra, 63 F.3d at 1185; see generally Kealey Pharmacy v. Walgreen Co., 761 F.2d 345, 350 (7th Cir.1985) (applying Wisconsin statute). Furthermore, a trial court, as it did in the present case, must apply an objective standard when determining whether the defendant had good cause to terminate an agreement, pursuant to § 42–133f (a). See Darling v. Mobil Oil Corp., 864 F.2d 981, 991 (2d Cir.1989) (employing objective standard when determining whether franchisee complied with “reasonable” franchise provision); accord **840 McKee v. Harris, 649 F.2d 927, 932 (2d Cir.1981), cert. denied, 456 U.S. 917, 102 S.Ct. 1773, 72 L.Ed.2d 177 (1982); Slifkin v. Condec Corp., 13 Conn.App. 538, 549, 538 A.2d 231 (1988). Therefore, we must determine whether the trial court properly concluded that the defendant objectively failed to prove “good cause,” pursuant to § 42–133f (a). On appeal, the defendant claims that the trial court's finding that the plaintiff complied substantially with essential provisions of the agreement is clearly erroneous. More specifically, the defendant claims that the trial court should have examined: (1) the plaintiff's experience on the program; and (2) the plaintiff's failure to comply substantially with the agreement's requirement to satisfy “the written marketing commitments established in the annual business plan as well as mutually established sales goals established annually.” First, we look to the relevant language of the statute. Section 42–133f (a) provides in relevant part that no franchisor shall terminate or fail to renew a franchisee “except for good cause which shall include, but not be limited to the franchisee's refusal or failure to comply substantially with any material and reasonable obligation of the franchise agreement....” (Emphasis added.) It is a well established principle of statutory construction that “general terms will be construed to embrace things of the same general kind or character as those specifically enumerated.” (Internal quotation *363 marks omitted.) Paige v. Town Plan & Zoning Commission, 235 Conn. 448, 457–58, 668 A.2d 340 (1995). Consequently, in order to prove “good cause,” a franchisor would have to show that the franchisee either failed to or refused to comply substantially with a material and reasonable term of the franchise agreement, or that the franchisor had an equivalent business reason of a similar nature. The legislative history of the franchise act supports our reading. As explained earlier, the legislature originally passed the franchise act in order to address a particular problem that had arisen with local gasoline dealerships. When adopted in 1972, the franchise act simply provided that a franchise could not be terminated without giving the franchisee sixty days written notice. Public Acts 1972, No. 287, § 1. According to the debates in the House of Representatives, in order to protect against arbitrary and abusive terminations, in 1973 the legislature amended § 42–133f (a) to add a good cause termination requirement, without the qualifying phrase presently in the statute, “which shall include, but not be limited to....” Public Acts 1973, No. 73–500. Representative Daniel W. Brunski described the harm the 1973 amendment was designed to prevent: “The franchise garage operators in our state live in constant jeopardy. They live in fear of being put out of business on merely the whim of the large oil companies.” 16 H.R. Proc., Pt. 14, 1973 Sess., p. 6974. Once the 1973 amendment was adopted, however, many oil and gasoline franchisors threatened to leave the state because they felt that the amendment made § 42–133f too favorable to franchisees. Conn. Joint Standing Committee Hearings, General Law, 1973–74 Sess., pp. 270–75. The franchisors specifically addressed two concerns regarding § 42–133f (a) after the 1973 amendment: (1) that it unreasonably curtailed their freedom to manage their real estate investments; *364 and (2) that it unduly limited their ability to terminate franchisees whose performance was substandard or unprofitable. Consequently, in 1974, the legislature once again amended § 42–133f (a),28 adding the present language “shall include, but not be limited to the franchisee's refusal or failure to comply substantially with any material and **841 reasonable obligation of the franchise agreement....” Public Acts 1974, No. 74–292, § 1. According to Representative Howard A. Newman, the legislature's objective in adding “shall include, but not be limited to” was “to protect our Connecticut dealers from franchise cancellations and at the same time not drive the oil companies out of our state.” 17 H.R. Proc., Pt. 10, 1974 Sess., p. 4926. We agree with the defendant that the court in Petereit v. S.B. Thomas, Inc., supra, 63 F.3d at 1184, was correct when it observed: “If the Connecticut legislature intended good cause to result only from franchisee breach, it failed to use language expressing such a policy decision.... In effect, the amendments were the Connecticut legislature's acknowledgment that franchisors' economic interests must be accounted for in striking a balance between franchisee protection and attracting and retaining franchisors to do business in the state.” In Petereit, the United States Court of Appeals for the Second Circuit held that the franchisor's good faith, legitimate business decision, based upon grounds independent from the actions of the franchisees, constituted “good cause” pursuant to § 42–133f (a). Id., at 1185. The defendant in that case wanted to terminate its franchise agreements so that it could reallocate the exclusive territories of its franchisees and thereby increase its profits. Id. We do not agree with the defendant, however, that, according to the Petereit *365 decision, the trial court in the present case incorrectly found that the defendant failed to prove that it had good cause to terminate the agreement with the plaintiff. In the present case, the defendant listed six reasons to support its termination of the agreement, all of which were based on the plaintiff's performance, unlike the situation in Petereit. The defendant's June 27, 1996 letter listed the following grounds for its intent to terminate: (1) the defendant's disappointing four year experience with the plaintiff under the program; (2) the plaintiff's lack of a stable, knowledgeable and experienced management team to market and sell the defendant's products; (3) the plaintiff's failure to train adequately its employees regarding the defendant's products and procedures, and its lack of committed product specialists; (4) the plaintiff's poor market share and sales of the defendant's products; (5) an inadequate commitment to and participation in the defendant's product promotion programs; and (6) a lack of a cooperative working relationship that had developed into the “ ‘recalcitrant and sometimes belligerent attitude’ ” of the plaintiff. Notwithstanding the defendant's list of reasons for termination, we conclude that, based on the trial court's findings, the trial court properly found that the defendant did not prove “good cause” pursuant to § 42–133f (a). To begin, contrary to the assertions of the defendant, the trial court did analyze the plaintiff's sales performance during the time periods in which it was participating in the program. For example, the court properly found that the plaintiff complied with the agreement's requirement to “vigorously and aggressively promote and develop the market for the sale of *366 [the defendant's] [p]roducts....” Between 1990 and 1995, the plaintiff's sales of the defendant's products produced a zero net growth when the rise of the prices that the defendant charged the plaintiff are taken into account. The trial court found, however, that the evidence demonstrated that from 1990 to 1993, the Connecticut economy was depressed and that the defendant failed to show adequately how the plaintiff's performance compared to similar distributors or to the defendant's regional or national growth **842 during the same time period. Evidence at trial also demonstrated a 20.6 percent growth in the plaintiff's sales of the defendant's products in the 1994 fiscal year and another 22.5 percent growth the next fiscal year, thereby exceeding the defendant's national growth in the 1995 fiscal year by 3.5 percent. Moreover, the defendant, by letter dated February 10, 1997, commended the plaintiff because it was one of twenty-one distributors to buy more than $10 million worth of the defendant's products during the 1996 fiscal year. Even though the plaintiff's sales declined 13.5 percent from October, 1995, to April, 1996, the trial court reasonably found that this constituted too short of a time period from which the plaintiff's overall sales performance could be evaluated. In addition, the trial court properly found that the plaintiff complied with the agreement's requirement to maintain a staff of competent sales and marketing personnel trained to describe, demonstrate and quote the defendant's product lines. According to the trial court, the plaintiff both hired the required specialists and replaced those who left as promptly as it could. For example, virtually as soon as Fadden and Lusk left the plaintiff's employ, the plaintiff undertook sustained efforts to refill those positions. Finally, we disagree with the defendant's argument that the judgment of the trial court should be reversed because the plaintiff failed to comply substantially with *367 the agreement's requirement to satisfy “the written marketing commitments established in the annual business plan as well as mutually established sales goals established annually.” The February 10, 1997 letter, which congratulated the plaintiff for its high level of purchases of the defendant's products in the 1996 fiscal year, belies the defendant's claim. On the basis of this letter and the factual findings regarding the plaintiff's recent history of successful sales of the defendant's products, we conclude that there was substantial evidence to support the trial court's finding that the defendant did not prove it had good cause to terminate the parties' agreement.”)
Petereit v. S.B. Thomas, Inc., United States Court of Appeals, Second Circuit, August 18, 1995, 63 F.3d 1169 (“B. Constructive Termination. We now address the second question, that is, whether realignment of the franchisees' territories constituted a termination of the franchises under the Act. Section 42–133f(a) provides a franchise may be terminated only for good cause and in accordance with certain notice requirements. The district court noted that total abrogation of a franchise is not required to find a termination. It rejected Thomas' assertion that plaintiffs' loss of revenues would be offset by the introduction of a new product since income from this new product would have accrued to plaintiffs even in the absence of the *1182 realignment. Concluding realignment would cause plaintiffs a loss of revenue, the trial judge held the franchises had all been constructively terminated. See 853 F.Supp. at 62–63. We agree that total abrogation of a franchise is not required to trigger the Act's protections, but cannot agree that any negative impact on franchise income resulting from the franchisor's realignment of territories is alone sufficient to be deemed a termination. We note initially that while some plaintiffs are parties to written agreements allowing alterations to their territories, such agreements do not preclude a finding of constructive termination. The Act contains a non-waiver provision that prevents parties from contracting out of its protections. Conn.Gen.Stat. § 42–133f(f). Where a realignment of territories has such a substantial effect as to be a constructive termination, a contractual reservation of the power to realign territories cannot displace the statutory scheme. Connecticut courts have not yet held that the Act's ban on terminations—a term which the Act does not define—extends to constructive terminations. The district court relied on Carlos v. Philips Business Systems, Inc., 556 F.Supp. 769 (E.D.N.Y.1983), the only case to find a constructive termination under the Act. In Carlos, plaintiff had been an exclusive distributor of Norelco dictation equipment for parts of New Jersey, Connecticut and Ohio. In addition to the freedom from competition from other sellers of the same brand, plaintiff's status as an exclusive distributor entitled him to more favorable prices and repayment terms. The defendant notified Carlos that all exclusive distributors were to be converted to dealers, losing their freedom from competition and the other economic advantages. The district court ruled that such a change in status would cause Carlos to suffer a “substantial decline” in revenue and effectively terminate his franchise under the franchise laws of both Connecticut and New Jersey. See id. at 773, 776–77. Although, as noted, Connecticut's courts have not spoken on whether a cause of action exists for constructive termination of a franchise, the remedial nature of the Act supports the view that such a claim lies. If the protections 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 Act's protection cover constructive as well as formal termination. To hold otherwise would allow franchisors to accomplish indirectly that which they are prohibited from doing directly. Given that a claim for constructive termination may be brought under the Act, the remaining question is under what circumstances franchisor action reaches the level of constructive termination. This question should be decided in the trial court in the first instance, since the ultimate issue may turn on factually disputed matters. Because we cannot adopt the district court's view that any reduction of income resulting from a franchisor's action is sufficient for constructive termination, we must remand for reconsideration of this issue. The following discussion offers guidance as to when a constructive termination occurs. Thomas seizes on language in Carlos stating the change in plaintiff's status “represent[ed] nothing less than the gravest threat to the viability of the business,” 556 F.Supp. at 774, and the court's conclusion that Carlos' business was threatened with destruction (a finding necessary in that case to satisfy the irreparable injury prong of the test for a preliminary injunction), to suggest that constructive termination should be found only when a business is effectively destroyed. We believe a “near-destruction” requirement is too narrow. Such a restrictive test would ill-serve the purposes of the Act. A franchisor may take action that results in less than the complete destruction of a franchisee's business, but yet so greatly reduces the value of the franchise as to epitomize the very abuse of disparity in economic power that the Act seeks to prevent. Also attempting to fit within Carlos, plaintiffs point to its language holding that the loss of exclusive distributorship status effectively *1183 terminates a franchise. In Carlos the loss of exclusive status meant plaintiff would now be competing with all other sellers of Norelco dictation equipment, including the franchisor. The court accordingly found Carlos would be subject to “ruinous competition.” Id. at 774. But here, unlike in Carlos, the distributors still have exclusive territories—they are the only distributors of Thomas baked goods to the stores they serve. Plaintiffs' claim is that they have lost the exclusive distribution rights over their original territories, but this is a change of territory not of status. Although the composition of their customer base may have changed, plaintiffs have not lost their status as exclusive suppliers of Thomas goods within their territories. A constructive termination may be easy to discern where, for instance, a franchisor attempts to drive its franchisee out of business, see Remus v. Amoco Oil Co., 794 F.2d 1238, 1240–41 (7th Cir.), cert. dismissed, 479 U.S. 925, 107 S.Ct. 333, 93 L.Ed.2d 345 (1986), or refuses to continue doing business with its franchisee, see American Business Interiors, Inc. v. Haworth, Inc., 798 F.2d 1135, 1141 (8th Cir.1986). At the other end of the spectrum, were every minor alteration of the franchise that resulted in a decrease in income deemed a constructive termination, the franchise form of doing business would lose its usefulness to franchisors. It is certainly not the will of the Connecticut legislature to afford such a high level of protection to franchisees as to drive franchisors from the state. See Grand Light & Supply Co., 771 F.2d at 677 (declining an interpretation of the Act that would result in “legislative overkill” and “unjustifiably interfere with the normal functioning of the marketplace”). As a consequence, 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 non-financial 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. The parties' briefs refer to competing trial exhibits and to affidavits submitted in opposition to post-trial motions (which were not before the district court when it concluded that a constructive termination occurred) to show variously that the distributors' business has increased as a result of the realignment, or decreased only slightly, or decreased significantly. The final determination as to whose figures are the most accurate requires factual and credibility findings and should be dealt with by the district court on remand. Without expressing any view on the accuracy of their calculations, we note the Ahlquist plaintiffs' estimate that on the low end the realignment will cause, in one case, an annual loss of 12 percent of income, and in another case an annual loss of about $6,000. In light of the above discussion, such amounts do not in our estimation meet the test of a substantial decline in income, in either absolute terms or as a percent of income, so as to justify a finding of constructive termination. We agree with the trial court that absent the realignment the plaintiffs would still have been able to sell Sandwich Size English Muffins (the new product), and therefore that the necessary comparison should account for this change in product mix. Plaintiffs are additionally entitled to show, if such is the case, that promotions of all Thomas products, done as part of the introduction of the new product, caused sales of these other products to increase in the short term and that such increase has not been sustained. On the other hand, as is the case where expenses not incurred due to a breach of contract are offset from lost profits, see generally Indu Craft, Inc. v. Bank of Baroda, 47 F.3d 490, 495 (2d Cir.1995), to the extent that the realignment has resulted in increased sales due to the increased service frequency or decreased costs to distributors due to the shorter distances they must travel, these effects should be accounted for in Thomas' favor.”)
Petereit v. S.B. Thomas, Inc., United States Court of Appeals, Second Circuit, August 18, 1995, 63 F.3d 1169 (“C. “Good Cause” -- Having found that plaintiffs hold franchises protected by the Act, and that *1184 some plaintiffs may be entitled, on remand, to prove that they were constructively terminated by Thomas, we reach defendant's contention that any termination was for “good cause.” Thomas avers its legitimate business reasons can constitute good cause for termination under the Act. The plaintiffs, on the other hand, contend, and the district court so held, that good cause can only be found in non-performance by the franchisee. See 853 F.Supp. at 63. Because this reading of the statute is at odds with its plain language and history, we hold that good cause is not limited to proving contractual breaches of the franchise agreement, but may be based on a franchisor's legitimate business reasons. Statutory construction seeks to carry out the legislature's purpose as expressed in the language it used in the statute. See Negonsott v. Samuels, 507 U.S. 99, ––––, 113 S.Ct. 1119, 1122–23, 122 L.Ed.2d 457 (1993); Norfolk & Western Ry. v. American Train Dispatchers Ass'n, 499 U.S. 117, 128, 111 S.Ct. 1156, 1163, 113 L.Ed.2d 95 (1991). The Act states in relevant part, “[n]o franchisor shall ... terminate, cancel or fail to renew a franchise, except for good cause which shall include, but not be limited to the franchisee's refusal or failure to comply substantially with any material and reasonable obligation of the franchise agreement....” § 42–133f(a) (emphasis added). The language of the Act leaves no doubt that good cause exists when the franchisee materially breaches the agreement. Equally clear is the legislature's plan that the meaning of good cause is broader than franchisee breach. The district court read the “shall include, but not be limited to” language as setting forth an illustration limiting good cause to those events that stem from franchisee malfeasance. But such an interpretation cannot be derived from the language of the Act. If the Connecticut legislature intended good cause to result only from franchisee breach, it failed to use language expressing such a policy decision. The legislative history supports a broader view of the phrase “good cause.” The original Act prohibited termination, except for good cause, without defining or otherwise illustrating the concept. See Conn.Public Act 73–500. The uncertainty over good cause gave great concern to franchisors, especially oil companies concerned about the high value of the real estate leased to franchisees. See Conn. Joint Standing Comm. 1973–1974 Sess., 270–75. This concern resulted in the Act being amended in a number of ways, including adding the current language showing that good cause encompasses more than franchisee breach. In effect, the amendments were the Connecticut legislature's acknowledgment that franchisors' economic interests must be accounted for in striking a balance between franchisee protection and attracting and retaining franchisors to do business in the state. In addition to the Act's language and history, it is helpful to examine whether similar statutory schemes have been construed as we read the Act. See State Distributors, Inc. v. Glenmore Distilleries Co., 738 F.2d 405, 413 (10th Cir.1984) (federal courts interpreting state franchise laws where state courts have not spoken looked to construction of similar language in federal Automobile Dealers' Day in Court Act, protecting automobile dealers, and franchise protection laws in other states). These other statutory schemes take into account the economic decisions of the franchisor in the “good cause” calculus. For instance, the federal Automobile Dealers' Day in Court Act, 15 U.S.C. § 1221 et seq., does not “ ‘curtail the manufacturer's right to cancel or not to renew an inefficient or undesirable dealer's franchise.’ ” Woodard v. General Motors Corp., 298 F.2d 121, 128 (5th Cir.) (quoting H.R.Rep. No. 2850, 84th Cong., 2d Sess. 9, reprinted in 1956 U.S.C.C.A.N. 4596, 4603), cert. denied, 369 U.S. 887, 82 S.Ct. 1161, 8 L.Ed.2d 288 (1962). Similarly, the Supreme Judicial Court of Massachusetts rejected an argument that the Massachusetts franchise law prohibiting termination without “due cause” was limited to dealer breaches and did not include suppliers' good faith business decisions. See Amoco Oil Co. v. Dickson, 378 Mass. 44, 389 N.E.2d 406, 407–08, 410 (1979) (to require suppliers to continue unprofitable marketing agreements with dealers imposes substantial hardship on suppliers); accord *1185 General Aviation, Inc. v. Cessna Aircraft Co., 13 F.3d 178, 183 (6th Cir.1993) (although Michigan franchise law protects franchisees, it does not “ ‘impose an eternal and unqualified duty of self-sacrifice upon every grantor that enters into a distributor-dealership agreement’ or to ‘insulate dealers from all economic reality at the expense of grantors' ” (quoting Ziegler Co. v. Rexnord, Inc., 147 Wis.2d 308, 433 N.W.2d 8, 11, 12 (1988))); State Distributors, Inc., 738 F.2d at 413 (“The [New Mexico] Franchise Act is not to be read as forcing a particular supplier and distributor to deal with one another despite irreconcilable conflicts in marketing philosophies, nor can it be read so as to require the court to second-guess the business judgment of the supplier in terminating such a franchise.”). Our reading of the Franchise Act is further supported by comparing it to an example of a franchise law of a state taking a narrower view of those circumstances justifying termination. For instance, in New Jersey “good cause ... shall be limited to failure by the franchisee to substantially comply with those requirements imposed upon him by the franchise.” N.J.Stat.Ann. § 56:10–5 (West 1989); see Westfield Centre Serv. Inc. v. Cities Serv. Oil Co., 86 N.J. 453, 432 A.2d 48, 55 (1981). This statute reflects a legislative decision to protect franchises even at the cost of limiting the legitimate business decision-making of franchisors. The Connecticut Act does not contain a like limitation. Allowing the legitimate business concerns of a franchisor to be a part of the “good cause” equation does not require a showing of unprofitability. Such a requirement would make the balance between franchisor and franchisee fanciful. A seller of goods in the marketplace is justified in identifying untapped opportunities or unutilized potential and adjusting its distribution network to realize greater profits. When the franchisor demonstrates that its business decision is legitimate and made in good faith—even if shown by hindsight to be made in error—a court should not replace the grantor's decision with its own. See State Distributors, Inc., 738 F.2d at 413. In the case at hand Thomas determined it could increase sales by increasing service frequency. This result it thought best accomplished by rationalizing its distributors' haphazard routes. The Act protects franchisees from the arbitrary exercise of the franchisor's greater economic strength. But this case does not concern such arbitrary action. Here we are faced with a legitimate business need to increase sales and the steps taken to further that goal. Thomas' goal of increasing sales constitutes “good cause” within the meaning of the Franchise Act. Thus, the Act does not prevent defendant from realigning plaintiffs' territories.”)
Spear-Newman, Inc. v. E.I. du Pont de Nemours & Co., United States District Court, D. Conn., January 17, 1991 (“Further, if one accepts plaintiff's argument that it is a franchisee, then arguably there was not “good cause” for the termination of either the 1991 agreement or the 1985 agreement. Spear–Newman's “obligation” to make “passover payments” arises out of the 1991 contract. If that agreement is void, Conn.Gen.Stat. § 42–133f(f), then plaintiff's delinquency in making those payments cannot constitute “good cause” for a termination. “Good cause” cannot be established by showing that a franchisee failed to make payments which it was not validly obligated to make.”)
Aurigemma v. Arco Petroleum Products Co., United States District Court, D. Connecticut, February 1, 1989 (“Section 42–133f(a), which sets forth the standards for termination of non-petroleum franchises, provides that no franchisor shall terminate a franchise “except for good cause which shall include, but not be limited to, the franchisee's refusal or failure to comply” with the franchise agreement. Defendants concede that case law to date construing this provision has consistently involved some alleged breach or default by the franchisee. See Carlos v. Philips Business Systems, 556 F.Supp. 769, 776 (E.D.N.Y.), aff'd mem., 742 F.2d 1432 (2d Cir.1983); McKeown Dist., Inc. v. Gyp–Crete Corp., 618 F.Supp. 632, 643 (D.Conn.1985); Southland Corp. v. Vernon, 1 Conn.App. 439, 444 (1984). However, they argue that good cause under § 42–133f(a) includes something more than a breach or a default by the ranchisee. Thus, they assert that the plain and ordinary meaning of good cause requires only that a franchisor establish a “good or adequate reason” for termination. See Robinson v. Unemployment Security Bd. of Review, 181 Conn. 1, 7 (1980). Good cause is not limited to cases involving a breach or default by the franchisee. However, the statutory definition of good cause is not clear. In determining whether the reasons asserted by defendants for the termination constitute good cause, it is necessary to examine those reasons in light of the concerns and purposes behind the Connecticut Fair Conduct in Franchising Act (“CFCFA”), Conn.Gen.Stat. § 42–133e—133h. The CFCFA was enacted to limit “the franchisor's right to cancel or fail to renew a covered franchise to those instances involving good cause.” See Carlos, 556 F.Supp. at 776. The purpose of the enactment was to provide the Connecticut franchisee with certain protections to remedy the lack of equal bargaining power between the franchisor and the franchisee. Defendants contend that the decision to terminate the AM/PM Mini–Market Agreements was part of a withdrawal of all marketing activities east of the Mississippi River. Deposition of Morrison at 10. Morrison testified that this market withdrawal was a small part of a restructuring plan that also included such measures as writing down the book value of the Houston refinery, writing off and disposition of a metals and minerals business, implementing an early retirement plan, implementing a stock repurchase plan, and re-incorporating in the State of Delaware. Id. at 11. This plan was undertaken to strengthen Arco against the prospect of take over attempts and the threat of a serious decline in crude oil prices. Id. at 10. In addition, Morrison testified that Arco's East Coast operations had only been marginally profitable since 1981. Id. at 8. Thus, defendants argue that their decision to terminate the AM/PM franchises as part of a large scale market withdrawal was based on good cause, namely the continued existence and profitability of Arco. In this case, defendants entered into AM/PM Mini–Market Agreements for a term of three years. See AM/PM Mini–Market Agreement, ¶ 5.01. Plaintiffs were required to pay an initial franchise fee as well as a monthly royalty fee for the right to operate an AM/PM franchise. Id., ¶¶ 7.01, 7.02. In addition, plaintiffs were obligated to pay a transfer fee in the event they transferred or assigned the franchise to another party. Id., ¶ 17.01. Plaintiffs entered these agreements with the expectation that their franchise relationship would continue as long as they complied with the terms and conditions of the agreement or until the agreement expired or was terminated. Further, plaintiffs were protected by the CFCFA's requirement that any termination be based on “good cause.” Defendants' proffered reason of corporate restructure is not good cause to terminate plaintiffs' convenience store franchises. Defendants' decision to restructure their operation to increase profitability and avoid take over is not related to any action of plaintiffs or deficiencies in the operations of the convenience stores. In fact, the AM/PM operations were a success. Deposition of Morrison at 56. Although defendants may have had sound business reasons from their point of view for their decision, what was in the franchisor's best interests was not good cause to terminate the AM/PM agreements as would be consistent with the purposes of the CFCFA. That law was enacted to protect plaintiffs from the effects of unilateral business decisions made by a franchisor with substantially greater bargaining power. Further, the CFCFA does not absolutely prohibit a franchisor from withdrawing from the relevant market and terminating its franchise agreements. The CFCFA merely requires a franchisor to compensate the franchisee for any damages resulting from a termination for other than good cause. Conn.Gen.Stat. § 42–133g(a). Defendants based their decision to withdraw on concerns for their own profitability regardless of the effect on their franchisees. Defendants entered into a franchise relationship with plaintiffs and now argue that the “marginal” profitability of their eastern operations which resulted in a market withdrawal is good cause to terminate that relationship. That may be sound and reasonable considering defendants' financial well-being. If permitted, franchisees could be terminated with a total loss of the value of the franchise resulting from their efforts. Such a result is inconsistent with the protections afforded franchisees in the CFCFA and is not “good cause” under § 42–133f(a). Defendants terminated the AM/PM Mini–Market Agreements to protect their own profitability. If “good cause” included that interest, it would permit franchise terminations with no protection of the interests of franchisees. Only if good cause is construed to protect franchisees' investments from terminations which are solely to suit the purposes of franchisors will the protection of franchisees as intended by the CFCFA be preserved. Franchisors should, as intended by the CFCFA, be responsible for the damages sustained by franchisees as a result of terminations decided upon by franchisors to suit only their economic purposes. As defendants have terminated the AM/PM agreement for undisputed reasons which violate the CFCFA, the granting of plaintiffs' motion for summary judgment on Count Three for breach of the AM/PM Mini–Market Agreement will stand.”)
, United States District Court, S.D. New York.March 11, 1988 (“The second prong of LOF's motion, as noted above, requires a finding that PDN was terminated for “good cause” under the Connecticut statute. Here it bears emphasis that LOF's exclusive dealing rule was not part of the LOF–PDN agreement. Rather, LOF would have the Court find on the strength of Brattleboro Auto Sales, Inc. v. Subaru of New England, Inc., 633 F.2d 649, 652 (2d Cir.1980), construing “just cause” for termination under the Vermont franchise statute to include carrying competing lines, that as a matter of law PDN was terminated for “good cause.” Even assuming arguendo that what is “just” in Vermont is also what is “good” in Connecticut, the record contains no facts to show the extent to which PDN violated LOF's rule, or the extent to which LOF generally enforced the rule, both of which would bear on whether PDN's violation was material. Although materiality is a concept the Act applies to violation of a franchise agreement, and the exclusive dealing rule at issue here was not part of the agreement, LOF has offered no reason why materiality should not also be included within the definition of “good cause” when no contractual term is at issue. Indeed it would be surprising if a statute enacted to protect franchisees made termination easier for reasons that are not stated in the franchise agreement than for reasons that are so stated. PDN argues, with some justification, that here LOF is seeking partial summary judgment and should be required to meet the standards of Rule 56, Fed.R.Civ.P. It would seem that any motion in limine is, to the extent it excludes factual issues from a trial, a summary judgment motion, but that does not diminish the force of PDN's argument. When the record does not show clearly that there is no factual issue to be tried, a party opposing summary judgment should be allowed to present proof at trial. See, e.g., Equal Employment Opportunity Comm'n v. Home Ins. Co. 672 F.2d 252, 256–57 (2d Cir.1982). There is no reason to reach a different result merely because LOF has styled this a motion in limine. The second prong of LOF's motion is denied.)”
Carlos v. Philips Business Systems, Inc., United States District Court, E.D. New York, February 16, 1983 (“A franchisee seeking the protection of the New Jersey Act must next demonstrate that its franchisor violated the Act. This requires the franchisee to prove that the franchisor terminated, cancelled or failed to renew the franchise without complying with the statutory requirements. See N.J.Stat.Ann. § 56:10–5 (West Supp.1982–83). PBSI has taken the position that the plaintiff cannot satisfy these statutory elements because PBSI has not terminated, cancelled or failed to renew the plaintiff's Norelco franchise. Rather, the defendant maintains that its intention with respect to the plaintiff is to “change” the nature of the relationship between D & S and PBSI to counter the defendant's financial misfortunes (Finding of Fact 21). The court does not agree. The clear intent behind PBSI's new dealer arrangement is to streamline its marketing system by eliminating exclusive distributors such as D & S in order to more profitably exist in a changing marketplace. Any argument that the new agreement merely works a “change” is, in the court's opinion, nothing more than a poorly disguised euphemism for what is essentially a termination or failure to renew this distributorship agreement. 6 Section 56:10–5 of the New Jersey Act provides that such termination or failure to renew a protected franchise is permissible only for good cause and then only upon 60 days written notice of such cause to the franchisee. Id. Good cause is defined to include a failure to substantially comply with the terms of the franchise agreement. Here the court finds PBSI to have run afoul of the law in both regards. On or about May 1, 1981 all fifty-five of PBSI's exclusive distributors, including Carlos, received a memo from Arthur L. Hanrahan of defendant advising them of a forthcoming new agreement designed “... to address the market place as it exists today.” (Pl.Ex. 8). Nowhere in that memo did defendant advise Carlos of any default or failure to substantially comply with the terms of the July 1978 agreement. In fact, Carlos was never advised during the life of this agreement that he was in any way not substantially complying with it. It was not until June 29, 1981 that plaintiff actually received the proposed agreement (Pl.Ex. 9) which purported to strip him of his exclusive distributor status. Under these circumstances it is abundantly clear that plaintiff enjoys a substantial likelihood of success on his claim of violation of the New Jersey Act. … With respect the issues of a good cause cancellation preceded by adequate written notice for D & S Business Systems of Hartford the court finds that PBSI, for the same reasons it was in violation in New Jersey, is in violation of the substantially identical provision of the Connecticut Act. In sum then, it is clear that plaintiff enjoys a substantial likelihood of prevailing under the Connecticut Act as well.”)