|
LEGAL BRIEFS
THE SHOCK AND INJUSTICE OF IT ALL ;-)
INJURED FRANCHISEES ACTUALLY ABLE TO SUE FOR DAMAGES
CAUSED BY THEIR FRANCHISOR’S BREACH OF CONTRACT!
An interesting item of news was relayed across the American Bar
Association’s list serv regarding a California Court of Appeals decision.
The names have been changed in order not to embarrass the writer; otherwise,
the text below appears exactly as the shocked franchisor lawyer wrote it to
his colleagues:
“Bill Smith [fictitious name] brought to my attention a new California Court
of Appeal decision which holds that a franchisee claiming that its franchise
agreement was wrongfully terminated is not limited in remedies to the
inventory buy back remedies set forth in the California Franchise Relations
Act [CFRA]. In JRS Products, Inc. v. Matsushita Electric Corporation, 2004
WL 113493 (January 24, 2004), the Court of Appeal, Third Appellate District,
held that a Panasonic dealer could sue the franchisor for damages for
wrongful termination based on common law and statutory breach of contract
principles. The Court distinguished Boat & Motor Mart v. Sea Ray Boats, Inc.
(9th Cir. 1987) 125 F.2d 1285. Sea Ray has often been cited by many of us
for the proposition that a franchisee’s sole remedy for violations of the
California Franchise Relations Act was to require a buy-back of inventory by
the franchisor. No so, said the Court in the JRS (Panasonic) case. It
pointed out that in Sea Ray, the franchisee had waived any common law right
to claim damages for breach of contract and that the Court simply held that
the CFRA did not in and of itself create a right to damages. But where the
franchisee has not waived its right to damages and claims damages for
wrongful termination under the guise of a breach of the franchise agreement,
the CFRA does not act to preclude such an action. The CFRA specifies in
section 20037, Cal. Bus. & Prof. Code, that 'the right of a franchisee to
sue under any other law' is not abrogated, and the court in the JRS case
said that a common law claim for breach of contract was an 'other law.'
”
PS--Certain franchisor lawyers often have a tough time realizing that they
don’t always get to play judge, jury and executioner all within the bounds
of the franchise contract!
|
