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

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

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

Nebraska has a franchise relationship act known as the Franchise Practices Act (“NFPA”), which consists of sections 87-401 to 87-410.

Section 87-404 expansively covers franchise terminations, cancellations, non-renewals, notices, and the definition of “good cause.” The NFPA prohibits any franchisor from directly or indirectly terminating, cancelling or failing to renew a franchise without having first given written notice setting forth all the reasons for such termination, cancellation, or intent not to renew to the franchisee at least sixty days in advance of such termination, cancellation, or failure to renew. The section does provide explicit exceptions to the above requirements when: (1) the alleged grounds are voluntary abandonment by the franchisee of the franchise relationship in which event the written notice may be given fifteen days in advance of such termination, cancellation, or failure to renew; and (2) the alleged grounds are (a) the conviction of the franchisee in a court of competent jurisdiction of an indictable offense directly related to the business conducted pursuant to the franchise, (b) insolvency, the institution of bankruptcy or receivership proceedings, (c) default in payment of an obligation or failure to account for the proceeds of a sale of goods by the franchisee to the franchisor or a subsidiary of the franchisor, (d) falsification of records or reports required by the franchisor, (e) the existence of an imminent danger to public health or safety, or (f) loss of the right to occupy the premises from which the franchise is operated by either the franchisee or the franchisor, in which event such termination, cancellation or failure to renew may be effective immediately upon the delivery and receipt of written notice of the same.

The termination section of the NFPA then generally declares that it is unlawful for a franchisor to terminate, cancel or fail to renew a franchise without “good cause.” The Act also importantly provides that the provisions regarding termination, non-renewal and cancellation, do not prohibit a franchisor from providing that the franchise is not renewable or that the franchise is only renewable if the franchisor or franchisee meets certain reasonable conditions.

Section 87-405 makes it unlawful for a franchisee to transfer, assign or sell a franchise or interest therein to another person unless the franchisee shall first notify the franchisor of such intention by written notice by certified mail setting forth in the notice of intent the prospective transferee's name, address, statement of financial qualification and business experience during the previous five years. Where such notice is provided by the franchisee, the NFPA then directs the franchisor to within sixty days after receipt of such notice either approve in writing to the franchisee such sale to the proposed transferee, or by written notice advise the franchisee of the unacceptability of the proposed transferee setting forth material reasons relating to the character, financial ability or business experience of the proposed transferee. Under the Act, if the franchisor does not reply within the specified sixty days, its approval is deemed granted. Last, the Act declares that unless the transferee agrees in writing to comply with all the requirements of the franchise then in effect, no such transfer, assignment or sale will be valid.

The NFPA also enumerates a list of prohibited practices in Section 87-406. In this regard, the Act directs that it shall be a violation of the NFPA for any franchisor, directly or indirectly, through any officer, agent or employee, to engage in any of the following practices: (1) To require a franchisee at the time of entering into a franchise arrangement to assent to a release, assignment, novation, waiver or estoppel which would relieve any person from liability under 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 such requirement or prohibition of change shall be for good cause, which cause shall be stated in writing by the franchisor; (4) To restrict the sale of any equity or debenture issue or the transfer of any securities of any 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 and any such sale, transfer, or issuance does not have the effect of accomplishing a sale of the franchise; (5) To impose unreasonable standards of performance upon a franchisee; and (6) 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 the NFPA.

Section 87-408 sets out a defense for the franchisor under the Act, when it states that it shall be a defense for a franchisor facing a claim under the NFPA if it be shown that such franchisee has failed to substantially comply with requirements imposed by the franchise and other agreements ancillary or collateral thereto.

Last, the NFPA explicitly creates a cause of action for the franchisee allowing it to bring an action against its franchisor for violation of the Act to recover damages sustained by reason of any violation of the Act. In addition, the section allows the franchisee to obtain injunctive relief. The prevailing party in any action brought pursuant to this section is entitled to the costs of the action including but not limited to reasonable attorney's fees.

In Nebraska, the following Dealer/Franchise Termination, Fraud and Non-Renewal Laws, and Franchise Industry-Specific Laws, are identified as follows:

Nebraska State Franchise Disclosure/Registration Laws
Nebraska does not have a franchise statute in this area
Franchisors must comply with the FTC franchise disclosure rule

Nebraska State Franchise Relationship/Termination Laws
Franchise Practices Act.
Revised Statutes of Nebraska, Chap. 87, Article 4, Sec. 87-401 through 87-410

Nebraska State Business Opportunity Laws
Seller-Assisted Marketing Plan Act.
Revised Statutes of Nebraska, Chapter 59, Article 17, Sections 59-1701 through 59-1761

Nebraska Alcoholic Beverage Franchise/Wholesaler Laws
Nebraska beer law
Neb. Rev. Stat. Chap. 53, Art. 2

Nebraska Equipment Franchise/Dealer Laws
Nebraska Equipment Business Regulation Act
Neb. Rev. Stat. Chap. 87, Art. 7

Nebraska Gasoline Franchise/Dealer Laws
Nebraska fuel franchises law
Ne. Rev. Stat. Chap 87, § 87-411 to § 87-414 .

Nebraska Marine Franchise/Dealer Laws
Nebraska Does Not Have a Franchise Statute in this Area Niche

Nebraska Motor Vehicle Franchise/Dealer Laws
Nebraska Motor Vehicle Industry Licensing Act
Neb. Rev. Stat. Chap. 60, Art. 14.

Nebraska Motorcycle Franchise/Dealer Laws
Nebraska Does Not Have a Franchise Statute in this Area Niche
See Nebraska motor vehicle Franchise/Dealer law

Nebraska Recreational and Powersports Vehicle Franchise/Dealer Laws
Nebraska Does Not Have a Franchise Statute in this Area Niche

Nebraska Restaurants
Nebraska Does Not Have a Franchise Statute in this Area Niche

Coverall North America, Inc. v. Verica, L.L.C., United States District Court, D. Nebraska.May 2, 2013Not Reported in F.Supp.2d2013 WL 1856518 (“Interrogatory No. 21 seeks a statement of “all contract breaches and/or defaults by Verica [Coverall was] aware of on May 18, 2011 that are not stated in the May 18, 2011 letter.” See Filing No. 68—Skalka Aff. Ex. A Answers to Interrogatories p. 12–13. Coverall objected to the interrogatory, arguing it is vague, ambiguous, and not limited in time as to when the breach occurred. Id. at 13–14. Coverall answered, subject to the objections, stating, “all material defaults that it had evidence to support were encompassed by the May 18, 2011 letter.” Id. at 14. Verica argues the information sought in this interrogatory is relevant to Nebraska law requiring identification of all breaches when issuing a termination demand. See Filing No. 70—Brief p. 9 (citing Neb.Rev.Stat. § 87–404); Filing No. 117—Reply p. 8 (stating requested information is “highly relevant”). Specifically, Verica references Coverall's claim for the minimum royalties from the time of the franchise's termination until the end of the franchise term. See Filing No. 70—Brief p. 9. Although the letter listed an amount for “past due royalty payments,” it is silent on future royalties. See Filing No. 35—Complaint ¶ 40, Ex. 6—Letter. Coverall maintains its objections based on vagueness and ambiguity because the interrogatory is not limited as to time of a breach or breach of any particular contract or whether the breach was material. See Filing No. 109—Response p. 47–48. Additionally, Coverall states it is unable to determine what “aware of” means. Id. Furthermore, Coverall denies the Nebraska statute applies and contends it has sufficiently answered the interrogatory. Id. at 48. While the information sought appears relevant, Coverall did not object on the basis of relevance. Despite the well taken objections, Coverall provided a full and unequivocal response. Should some additional contract breach or default surface, Coverall is bound by the Federal Rules requiring supplemental or amended responses subject to sanctions. See Fed.R.Civ.P. 26(e), 37(c). Otherwise, the court will not compel Coverall to supplement its answer to Interrogatory No. 21 at this time.”)

Modern Computer Systems, Inc. v. Modern Banking Systems, Inc., United States Court of Appeals, Eighth Circuit.October 14, 1988, 858 F.2d 1339 9 (“While as a general rule both Minnesota and Nebraska have evidenced a willingness to enforce parties' choice of law agreements, in the case of franchiser-franchisee relations, both states have expressed a contrary intent through the enactment of antiwaiver provisions. See Minn.Stat. § 80C.21 (1986); Neb.Rev.Stat. § 87–406(1) (1987). These provisions recognize the often superior bargaining power and economic resources of the franchiser, and seek to protect against the use of that power to avoid the law. See Southern International Sales Co. v. Potter & Brumfield Division of AMF, Inc., 410 F.Supp. 1339, 1341–43 (S.D.N.Y.1976); Business Incentives Co. v. Sony Corp., 397 F.Supp. 63, 66–67 (S.D.N.Y.1975); Winer Motors, Inc. v. Jaguar Rover Triumph, Inc., 208 N.J.Super. 666, 506 A.2d 817, 820 (1986). Comment g of Restatement section 187(2) recognizes as “fundamental” a policy embodied in a statute designed to protect a person against the oppressive use of superior bargaining power, such as in the insurer-insured relationship. See Restatement (Second) of Conflict of Laws § 187(2), comment g (1971). The distributorship agreement in this case is a form contract drafted by defendant Modern Banking and presented to plaintiff on a “take it or leave it” basis. At the time the parties entered into the agreement, plaintiff was a two-person start-up company which was unrepresented by legal counsel. No negotiation of the choice of law provision occurred. Our Court has not hesitated to negate contractual choices regarding the litigation of disputes when to enforce the parties' agreement would be unfair and unreasonable. Farmland Industries v. Frazier–Parrott Commodities, Inc., 806 F.2d 848, 851–52 (8th Cir.1986). We find such is the case here, and we hold, under the Restatement (Second) of Conflict of Laws § 187(2), that enforcement of the parties' choice of law provision would be contrary to fundamental public policy.”)

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