Adjunct Claims And Defenses

This chapter reviews a variety of “adjunct” claims and defenses that
have been raised in termination disputes, but that do not arise under the
termination provisions of the parties’ agreement or termination statutes.
Adjunct claims (i.e., non-termination related) may or may not, in and of
themselves, resolve the propriety of a disputed termination or
nonrenewal. Such claims and defenses may have a significant impact,
however, on the conduct and outcome of a termination lawsuit. A
terminated franchisee or dealer might assert adjunct claims or
counterclaims to prevent or forestall termination, to recover its
investment, to redress other grievances it has against the franchisor, and,
when possible, to obtain other affirmative relief. Likewise, franchisors
and suppliers might consider adjunct claims and defenses against
franchisees and dealers.
Examples of adjunct claims include fraud, both in the inducement to
enter into the relationship and also during the course of performance;
negligent misrepresentation as to matters other than the termination or
the grounds for termination; violation of the Racketeer Influenced and
Corrupt Organizations Act (RICO) and state RICO equivalents; state
unfair and deceptive trade practices acts (UDTPAs) and “little Federal
Trade Commission” (FTC) statutes; tortious interference with contractual
relations or advantageous prospects; breach of implied covenants of good
faith and fair dealing or other implied duties; breach of fiduciary duty;
breach of a “best efforts” obligation; discrimination claims; and violation
of federal and state antitrust laws.
A. Procedural Considerations
In raising an adjunct claim or defense, the claimant must ensure that
all elements are satisfied. Adjunct claims may, in the context of a
termination action, be considered mandatory and thus must be asserted
not only as a defense to termination by the franchisee or dealer but, if
affirmative relief is sought, as a compulsory counterclaim. Conversely, it
Franchise and Dealership Termination Handbook
may be incumbent upon a franchisor or supplier to raise termination
issues in response to, or as a counterclaim in, an action in which an
adjunct claim is asserted. If mandatory claims are not properly and
timely asserted, they will be deemed waived.1 Counsel must also pay
attention to restraints on “splitting claims.”2
B. Types of Adjunct Claims
1. Fraud, Negligent Misrepresentation, and Estoppel
Fraud and negligent misrepresentation, whether related to
inducement to enter into the relationship or to conduct during subsequent
performance by a franchisor/franchisee, may serve not only as the basis
for a termination or nonrenewal action, but as a defense to termination of
a franchise relationship as well as an independent cause of action.3 In
pursuing a claim for common law fraud, the franchisor or franchisee
generally must allege and prove that the other party intentionally
misrepresented material facts pertaining to the franchise operation or
business;4 that the other party knew that the representations it made were
false;5 that the misrepresentations were made with the intention to
deceive the harmed party; that the harmed party justifiably relied on the
1. See, e.g., Fed. R. Civ. P. 8(c).
2. See, e.g., Shaver v. F.W. Woolworth Co., 840 F.2d 1361, 1366-67 (7th
Cir. 1988) (plaintiff required to allege in one proceeding all claims for
relief arising out of single core of operative facts).
3. Eden Elec. v. Amana Co., 370 F.3d 824, 827-29 (8th Cir. 2004); Forklifts
of St. Louis v. Komatsu Forklift USA, 178 F.3d 1030, 1032-33 (8th Cir.
1999); Crosthwait Equip. Co. v. John Deere Co., 992 F.2d 525, 528 (5th
Cir. 1993); Vaughn v. Gen. Foods Corp., 797 F.2d 1403, 1410-16 (7th
Cir. 1986); Crossland v. Canteen Corp., 711 F.2d 714, 724 (5th Cir.
4. Carlock v. Pillsbury Co., 719 F. Supp. 791, 827-30 (D. Minn. 1989); cf.
Vaughn, 797 F.2d at 1411 (“trade talk” does not constitute actionable
5. See Zuckerman v. McDonald’s Corp., 35 F. Supp. 2d 135, 144 (D. Mass.
1999) (as to negligent misrepresentation, evidence must demonstrate that
if defendant had exercised due diligence, it would have discovered the
fallacy of its misrepresentations).

To continue reading

Request your trial

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT