Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—1st Cir.: Baskin-Robbins franchise renewal dispute dished back to district court, (Jun 7, 2016)

By Greg Hammond, J.D.

Ice cream store franchisor Baskin-Robbins Franchising LLC’s attempted exercise of jurisdiction over a dairy products manufacturer in Massachusetts is consistent with due process, the U.S. Court of Appeals in Boston has decided. In reversing and remanding the action to the federal district court in Boston, the appellate court determined that: (1) the claims related to the manufacturer’s activities in Massachusetts; (2) the manufacturer’s contacts represented a purposeful availment of the privilege of conducting activities in Massachusetts; and (3) exercising jurisdiction over the manufacturer in Massachusetts would not be unfair or unreasonable (Baskin-Robbins Franchising LLC v. Alpenrose Dairy, Inc., June 6, 2016, Selya, B.).

Baskin-Robbins sued for a judicial declaration that its territorial franchise agreement with dairy products manufacturer Alpenrose Dairy, Inc. expired on December 8, 2014, and that Alpenrose is not entitled to any compensation in connection with the expiration of the agreement. Although Baskin-Robbins was headquartered in California when the franchise agreement was reached, the company subsequently moved its headquarters to Massachusetts. Alpenrose had Baskin-Robbins store locations in Washington, Oregon, Montana, and Idaho. The district court dismissed the action for lack of in personam jurisdiction, and Baskin-Robbins appealed.

Relatedness. The appellate court first concluded that Baskin-Robbins’ claims arose directly out of Alpenrose’s in-forum contacts. Alpenrose allegedly sent Baskin-Robbins two letters: one stating that Alpenrose did not intend to renew the agreement and one stating that Alpenrose wished to "revoke" its decision not to renew and warning that it would otherwise be entitled to fair compensation under the Washington Franchise Investment Protection Act. Baskin-Robbins sought declarations both that Alpenrose’s second letter did not effectively renew the franchise agreement and that Alpenrose is not entitled to any compensation in connection with the expiration of the agreement. It was the letters that set the present controversy in motion, creating a sufficient nexus between Alpenrose’s letters and Baskin-Robbins’ claims to satisfy the flexible and relaxed standard for relatedness, according to the court.

Purposeful availment. Next, the court found that Alpenrose deliberately targeted the Massachusetts economy and reasonably should have foreseen that, if a controversy developed, it might be haled into a Massachusetts court. Alpenrose’s contacts with Massachusetts therefore crossed the purposeful availment threshold. In particular, the court noted that Alpenrose’s co-president went to Massachusetts and paid a courtesy visit to Baskin-Robbins’ new owners; Alpenrose’s director of franchise relations traveled to Baskin-Robbins’ Massachusetts headquarters at least twice to attend Brand Advisory Council meetings; Alpenrose mailed 180 royalty checks to the Massachusetts headquarters; Baskin-Robbins conducted product testing, processing of customer complaints, and product supply planning in Massachusetts for Alpenrose; and Baskin-Robbins coordinated a variety of operational issues with Alpenrose in Massachusetts. Performance of these manifold activities, according to the court—most of which Alpenrose irrefutably knew were taking place in Massachusetts—was vital to the continuation of the franchisor-franchisee relationship.

Gestalt factors. Lastly, the court determined that exercising jurisdiction over Alpenrose in Massachusetts was fair and reasonable under the five Gestalt factors. Although Alpenrose’s burden of appearing in Massachusetts weighed only modestly in its favor, Massachusetts’ interest in adjudicating this dispute cut in favor of Baskin-Robbins, and Alpenrose conceded that Baskin-Robbins’ interest in obtaining convenient and effective relief weighs in Baskin-Robbins’ favor.

The case is No. 15-2190.

Attorneys: Peter J. Klarfeld (Gray, Plant, Mooty, Mooty & Bennett, P.A.) for Baskin-Robbins Franchising LLC. Eric H. Karp (Witmer, Karp, Warner & Ryan LLP) for Alpenrose Dairy, Inc.

Companies: Baskin-Robbins Franchising LLC; Alpenrose Dairy, Inc.

Cases: FranchisingDistribution MaineNews MassachusettsNews NewHampshireNews PuertoRicoNews RhodeIslandNews