Litigation Issues

This chapter identifies and summarizes some common litigation
issues arising in the context of franchise and distribution system
terminations, including the implications of state statutes governing
termination, choice of forum, removal, temporary and preliminary
injunctions, and choice of law. This chapter also addresses the remedies
available for termination-based claims and discusses broader issues such
as the disparity of bargaining power, fraud or misconduct, and
discrimination and their effect on termination litigation.
Most franchise or distribution litigation involves termination issues:
the franchisee or dealer wants either to exit or stay in the system, while
the franchisor or supplier wants the opposite. Proper termination is
necessary in many jurisdictions in order to obtain injunctive relief.1
Establishing the validity of termination may be a prerequisite to being
able to enforce other rights under the parties’ agreement. In the franchise
context, to date, at least 22 jurisdictions regulate the termination or
nonrenewal of franchises.2 Of these jurisdiction, 18 require a showing of
1. See, e.g., McDonald’s Corp. v. Robertson, 147 F.3d 1301, 1307-08 (11th
Cir. 1998) (franchisor is required to establish proper termination of
franchise agreement as prerequisite to obtaining injunction against post-
termination trademark infringement); S&R Corp. v. Jiffy Lube Int’l, 968
F.2d 371, 375 (3d Cir. 1992) (“Jiffy Lube will merit preliminary
injunctive relief if it can adduce sufficient facts indicating that its
termination of Durst’s franchises was proper”).
2. ALASKA STAT. § 45.45.700(a); ARK. CODE ANN. § 4-72-202(7), § 4-72-
204, CAL. BUS. & PROF. CODE §§ 20020-26; CONN. GEN. STAT. § 42-
133f; DEL. CODE ANN. tit. 6, § 2552; HAW. REV. STAT. § 482E-6(2)(H);
815 ILL. COMP. STAT. 705/19-20; IND. CODE § 23-2-2.7-1(7)-(9); IOWA
CODE § 523H.7(1); MD. CODE ANN. COM. LAW § 11-1303; MICH. COMP.
LAWS § 445.1527(c)-(d); MINN. STAT. § 80C.14(3)-(4); MISS. CODE ANN.
§ 75-24-53; MO. REV. STAT. § 407.405, § 407.410; NEB. REV. STAT.
§ 87-404, § 87-402(8); N.J. STAT. ANN. § 56:10-5; R.I. GEN. LAWS §§ 6-
Franchise and Dealership Termination Handbook
good cause before termination,3 and 18 require written notice listing the
reason for the action and a time period within which to effect a cure.4
Across the board, states show considerable variation in termination and
nonrenewal regulations. A brief list of the various jurisdictional
requirements appears in Appendix D.
A. Forum Selection
The ability to choose jurisdiction and venue, before litigation arises,
is a luxury that franchisors and suppliers do not take lightly. Some
agreements mandate that if any suit arises out of the parties’ relationship
the action must be brought in the forum dictated in the agreement.
Predetermining jurisdiction and venue may help bring about the speedy
litigation of claims, particularly when the designated forum is one with a
reputation for “rocket dockets.” For obvious reasons, franchisors and
suppliers typically choose to litigate in their home state. To protect
franchisees, some states have enacted laws prohibiting the enforcement
of forum selection clauses.5
1. Fast Forum/Rocket Docket
Some courts have dockets that feature expedited litigation of civil
claims. A race to the courthouse in competing jurisdictions may ensue as
each party seeks to control the pace of litigation. For similar reasons, a
filing of this nature may be challenged by a motion to transfer venue
where the movant thinks that the filing party is forum shopping or that
50-2-4; VA. CODE ANN. § 13.1-564; WASH. REV. CODE 19.100.180(2)(i)-
(j); WIS. STAT. § 135.02(4), § 135.03; P.R. LAWS ANN. tit. 10, c. 14,
§§ 278, 278(d), 278a, 278a-1; V.I. CODE ANN. tit. 12A, c.2, subd. III,
§§ 131-32.
3. Of these 22 jurisdictions, only Alaska, Maryland, Mississippi, and
Missouri do not require a showing of good cause to terminate a franchise.
4. Of these 22 jurisdictions, only Alaska, Virginia, Puerto Rico, and the
Virgin Islands do not require the franchisee have a specific amount of
time to cure before termination.
5. See part A.5 of this chapter for a discussion of anti-waiver statutes that
may preclude enforcement of forum selection clauses in franchise

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