Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.N.J.: Distributor of anti-drug curriculum survives motion to dismiss franchise suit, (May 7, 2026)

By Donielle Tigay Stutland, J.D.

The court found that the distributor alleged the “place of business,” “license,” and “community of interest” requirements to satisfy the existence of a franchise relationship under the NJFPA.

The federal district court in Trenton, New Jersey granted in part and denied in part a lawsuit between a distributor of anti-drug educational materials and the company that makes the materials. The court will allow claims alleging a violation of the New Jersey Franchise Practices Act (NJFPA) to proceed, holding that that the purported franchisee alleged the “place of business,” “license,” and “community of interest” requirements to satisfy the existence of a franchise relationship under the Act. However, the court dismissed claims for breach of contract with respect to an oral logistics agreement for lack of consideration and a claim for tortious interference with contractual relations (L.E.A.D., Inc. v. C.E. Mendez Foundation, Inc., No. 3:25-cv-14237-GC-RLS (D.N.J. May 5, 2026)).

L.E.A.D., Inc. d/b/a Law Enforcement Against Drugs and Violence is a New Jersey-based nonprofit in the business of training law enforcement officers to deliver drug- and violence-prevention programs to schoolchildren and after-school groups. C.E. Mendez Foundation, Inc. is a Florida nonprofit headquartered in Atlanta that develops and supplies the curricula materials used in those programs.

The parties entered into a Preferred Seller Agreement (PSA), under which LEAD purchased Mendez’ curricula at a discounted rate, resold the materials to law enforcement agencies, and marketed and delivered the associated trainings for law enforcement to bring the materials to students in schools in workshops and assemblies. Under the PSA, LEAD was an independent contractor authorized to sell Mendez’s curriculum to law enforcement agencies nationwide. LEAD was also granted exclusivity to distribute the materials, provided that LEAD did not market or distribute any competing programs.

Several years later, the parties entered into a verbal “Logistics Agreement” under which Mendez shipped curricula directly to LEAD’s law-enforcement customers as a cost-saving measure for LEAD. LEAD alleges that by shipping directly to its customers Mendez obtained customer information. Beginning in late 2024 or early 2025, LEAD alleges Mendez orchestrated a scheme to usurp LEAD’s business and customers, including hiring a former executive of the distributor allegedly in violation of a non-compete agreement, and terminating the PSA.

The distributor filed an action alleging a violation of the NJFPA and various claims related to breach of contract. The curriculum maker moved to dismiss a majority of the claims.

NJFPA. The court began its analysis by looking at the curriculum maker’s argument that the NJFPA does not apply to the relationship between the parties. “A franchise exists under the NJFPA if: (1) there is a ‘community of interest’ between the franchisor and the franchisee; (2) the franchisor granted a ‘license’ to the franchisee; and (3) the parties contemplated that the franchisee would maintain a ‘place of business’ in New Jersey.” Additionally, the court highlighted that, “[I]n order to satisfy the ‘place of business’ requirement under the NJFPA, the contractual agreement must ‘contemplate or require’ the franchisee to establish or maintain a place of business within the state of New Jersey.”

Under the NJFPA, a “place of business” means “a fixed geographical location at which the franchisee displays for sale and sells the franchisor’s goods or offers for sale and sells the franchisor’s services. Place of business shall not mean an office, a warehouse, a place of storage, a residence or a vehicle[.]” However, there exists an exception. With respect to persons who do not make a majority of their sales directly to consumers,” a “place of business” can also be “an office or a warehouse from which franchisee personnel visit or call upon customers or from which the franchisor’s goods are delivered to customers.” The court found this exception applied, as LEAD’s sales were not made directly to consumers. As such, with respect to the third factor, the court analyzed whether LEAD’s “location is the place where the franchisee’s employees call upon customers or goods are delivered from the location.” The court noted that LEAD satisfies this by alleging that it trains law enforcement customers at its Allentown, New Jersey headquarters. Given that LEAD alleged that it is an entity that does “not make a majority of their sales directly to consumers,” and has “an office or a warehouse from which franchisee personnel visit... customers” within the state, the court found the third factor was satisfied.

The court next reviewed whether LEAD alleged that it had been granted “a license to use a trade name, trade mark, service mark, or related characteristic[ ].” Here, the court found sufficient allegations of a license. LEAD alleged that the PSA requires it to market Mendez’ products, using the name and marks associated with Mendez’ products, and such products were not broadly available for sale to the public. The court also found it relevant that LEAD does not distribute the products of any other companies. The court found that the distributor has made a sufficient allegation of a license.

Finally, the court reviewed whether the distributor sufficiently plead facts to meet the NJFPA definition of a franchise as “a written arrangement... in which there is a community of interest in the marketing of goods or services.... ” Here, the distributor has alleged that, through the PSA, the curriculum maker exerts considerable control over it. The PSA imposed marketing and promotional requirements on the distributor. Additionally, the court highlighted that the distributor is required to sell the curricula materials to its own customers at a price provided in the PSA, and Plaintiff’s trainers are required to be certified by Defendant in advance of their trainings. Indeed, it is Defendant’s alleged weaponization of the fixed prices and trainer system that has given rise to the dispute between the parties. The court concluded that the distributor adequately pleaded a community of interest.

Finding that the distributor alleged the “place of business,” “license,” and “community of interest” requirements to satisfy the existence of a franchise relationship under the NJFPA, the court denied the motion to dismiss with respect to this claim.

Declaratory judgment. The court also found the declaratory judgment claim survives a motion to dismiss given that it “merely seek[s] to enforce its NJFPA claim.”

Other claims. The court dismissed several remaining claims, first indicating that it would not enforce the forum selection clause in the contract but it would analyze the remaining claims under the choice of law, which was Florida law.

The court dismissed the claim alleging a breach of the Logistics agreement, finding the distributor did not plead consideration or breach. The court dismissed the tortious interference with contractual relations claim, however, it gave the distributor a chance to replead with respect to customers, as the distributor had not plead any facts about whether the customers had any contracts with the distributor. The court also dismissed a claim alleging a breach of the covenant of good faith and fair dealing, finding it duplicative of the claim for a breach of the parties’ PSA. However, the court found it was premature to dismiss the claim for promissory estoppel.

The Case is No. 3:25-cv-14237-GC-RLS.

Judge: Castner, G.

Attorneys: Melanie E. Getz (Fox Rothschild LLP) for L.E.A.D., Inc. Evan Newman (Jacobowitz Newman Tversky LLP) for C.E. Mendez Foundation, Inc.

Companies: L.E.A.D., Inc.; C.E. Mendez Foundation, Inc.

Cases: FranchisingDistribution NewJerseyNews GCNNews