Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D.N.J.: Mitsubishi car dealer facially flubs response to notice of franchise termination under NJFPA, (Jul 10, 2026)

By Justin Marcus Smith, J.D.

Even if agreed termination procedures had been unenforceable, the termination was lawful because New Jersey courts recognize material breach of a franchise agreement as good cause to terminate.

Mitsubishi’s North American distributor was entitled to preliminary injunctive relief in a dispute with a dealer that was either slow to cure, or failed to respond effectively, to allegations that it breached the parties’ dealer agreement, held the federal district court in Trenton, New Jersey. First, the failure of the dealer to sue before the date of franchise termination foreclosed a stay under the New Jersey Franchise Protection Act (NFJPA). As for preliminary injunctive relief, continued use of the Mitsubishi marks, post-termination, meant the distributor had a likelihood of success on the merits of its Lanham Act counterclaim. The dealer could not claim the distributor misled it with later notices because the notice of termination stated that the distributor did not waive its rights to serve more notices. At oral argument, the dealer could not identify curative actions taken after the distributor noticed it would need to confirm cure. That was fatal to the dealer’s claim that the termination was without good cause. The court said it would have found good cause to terminate, even if the termination procedures in the dealer agreement were unenforceable, for material breach of required service department staffing. The distributor likewise satisfied the irreparable harm element for injunctive relief insofar as the Trademark Modernization Act established a rebuttable presumption of irreparable harm after a finding of likely success on the merits. The dealer failed to rebut presumed irreparable harm. The balance of equities weighed in favor of the distributor because any harm to the dealer appeared to be self-inflicted. The court granted preliminary injunctive relief to the distributor, and it denied the dealer’s cross-motion for same (Saliba Investment LLC v. Mitsubishi Motors North America, Inc., No. 3:26-cv-05112-GC-TJB (D.N.J. Jul. 7, 2026)).

Background. Car distributor Mitsubishi Motors North America, Inc. (MMNA), as licensed and authorized to use and protect Mitsubishi trademarks, sent Saliba Investment LLC (J&S Mitsubishi or J&S) a notice of material breach in connection with a series of Mitsubishi dealer agreements. The August 2023 MMNA notice cited putative staffing deficiencies and demanded J&S hire a qualified parts manager, parts counterman, and service writer within 1 month. J&S disputed any breach, but MMNA did not try to terminate the J&S dealership based on this part of their dispute.

At length, after more notices, MMNA issued a notice of termination. The termination notice cited three alleged grounds: (1) repeated failure to staff and train; (2) failure to maintain minimum Outlander PHEV (plug-in hybrid electric vehicle) inventory for sale; and (3) repeated failure to comply within minimum service department staffing. The notice gave 60 days to cure with continued business and no waiver of MMNA rights in the interim. At this point, J&S allegedly emailed MMNA suggesting it would cure, but J&S contended MMNA never acknowledged this.

On January 21, 2026, MMNA issued another notice of material breach in connection with best efforts to market Mitsubishi products, but the breach notice did not reference the notice of termination. The notice also mentioned working with J&S “over the next six months” to improve dealer performance. J&S stated it reasonably believed this meant MMNA suspended or withdrew the termination notice; however, on January 28, J&S asked MMNA to lift the notice of termination. That J&S email stated that J&S cured the breaches in the termination notice. J&S asked for written confirmation of rescinded termination. MMNA records reflected certain training occurred, but the employees’ logins allegedly went unused after completed training. MMNA deemed the training activity “unusual.”

MMNA delivered the requested J&S allocation of five Outlander PHEVs before the asserted effective date of termination. As for staffing, J&S stated it hired a new service advisor and parts manager who completed all training, testing, and certifications, but after an on-site visit, MMNA said it doubted whether this actually occurred. The parts manager did not appear to be a new hire. He appeared to work for a tangential entity.

On February 1, 2026, MMNA emailed it would not be rescinding the January 14, 2026 notice of termination until MMNA confirmed cure of identified breaches. MMNA said it only wanted to hear from the J&S general manager, not anyone else, and that it did not get a meeting earlier. MMNA asserted the general manager did not respond to this email.

MMNA contended a perfection of termination at the expiration of 60 days’ notice and that it sent a notice of termination setting forth post-termination obligations. Despite the purported termination, MMNA contended J&S continued to display the Mitsubishi name and logo at the Ewing location, and on its website and social media accounts, even despite having been cut off from the sales data interchange portal, all factory training, technical support for fixing Mitsubishi cars, and safety recall bulletins. MMNA expressed concern that it does not know the identity of car buyers entitled to warranty support.

J&S sued in state court after the alleged termination date. J&S alleged violation of the New Jersey Franchise Practices Act (NJFPA), N.J.S.A. 56:10-1 et seq., for termination without good cause; (2) violation of the NJFPA for defective notice of termination; (3) tortious interference with prospective economic advantage; (4) breach of the covenant of good faith and fair dealing; (5) breach of contract; and (4) negligent misrepresentation. J&S invoked equitable estoppel and waiver and called for an automatic stay pursuant to the NJFPA, N.J.S.A. 56:10-30. It also asked for declaratory judgment.

MMNA removed to federal court before perfection of service, and that same day it filed an answer and counterclaims for breach of contract; unfair competition, 15 US.C. § 1125(a); cybersquatting, 15 U.S.C. 1125(d); violation of the New Jersey Unfair Competition Act, N.J.S.A. 56:4-1; and common law trademark infringement. MMNA, too, asked for declaratory relief.

Also on that same day, MMNA moved for a temporary restraining order and a preliminary injunction. Among other relief, MMNA sought an order enjoining and restraining J&S and its agents from using the Mitsubishi marks “in any manner or medium”; holding themselves out as a Mitsubishi dealer or affiliate; selling, advertising, or servicing Mitsubishi cars in a manner suggesting MMNA authorization; and continuing to operate internet platforms using the marks or suggesting affiliation with MMNA.

J&S cross-moved for a preliminary injunction seeking an order reinstating itself as an authorized Mitsubishi dealer under the dealer agreement; preventing interposition of a replacement dealer; and prohibiting MMNA from retaliation for the litigation.

NJFPA stay. The court held J&S was not entitled to an automatic stay under the NJFPA. The court agreed with MMNA that J&S did not file its action “timely” insofar as that happened almost two weeks after the purported termination date. J&S said MMNA caused the delay by contradictory conduct, but the court rejected equitable estoppel because J&S did not satisfy the exacting requirements for it. The MMNA notice of termination stated that MMNA was not waiving any rights to issue more notices of breach. It did not mislead J&S. Party conduct also showed both sides knew the notice of termination was still in effect. An MMNA email said it was not rescinding the notice of termination until such time as MMNA might confirm cure.

Without estoppel, J&S was left with the fact that it started the action after the facially effective termination. That untimeliness foreclosed an NJFPA stay under N.J.S.A. § 56:10-30(a).

Likelihood of success. The court found J&S did not have a likelihood of success on the merits of its claims. The parties filed cross-motions for injunctive relief, so the court addressed whether MMNA was likely to succeed on the merits of its trademark infringement claim under the Lanham Act and conversely whether J&S was likely to succeed on the merits of its unlawful termination claim under the NJFPA.

Under the Lanham Act, termination means a franchisor has the right to enjoin mark use, and there was no dispute that J&S continued to hold itself out as a franchisee and continued to use the Mitsubishi mark. The question therefore boiled down to whether MMNA lawfully terminated the franchise. The cross-motions were intertwined.

New Jersey courts recognize material breach of franchise agreement as good cause to terminate. The MMNA notice of termination outlined three grounds. In the event, J&S claimed it cured, but MMNA responded it would not lift notice of termination until it confirmed cure. At oral argument, J&S “could not identify any actions it took” to cure after that response from MMNA. The court said that was “fatal” to the J&S argument that MMNA did not have good cause. Nothing in the dealer agreement required MMNA to withdraw the termination notice.

The termination was lawful. The court said it would have found good cause to terminate even if the termination procedures in the dealer agreement were unenforceable based on material breach of required service department staffing.

J&S was not likely to succeed on its NJFPA claim, and conversely, MMNA was likely to succeed on its trademark infringement claim to the extent J&S continued to hold itself out as a franchisee. The court then proceeded to apply the other factors for preliminary injunctive relief, but only to MMNA.

Irreparable harm. According to the irreparable harm standard Congress set in passing the Trademark Modernization Act, MMNA was entitled to a rebuttable presumption of irreparable harm after a finding of likely success on the merits. To rebut, J&S needed to show sufficient evidence that consumer confusion was unlikely to cause irreparable harm. However, J&S failed to do this. Because the court had to assume irreparable harm here, and J&S failed to rebut, MMNA satisfied the irreparable harm factor for preliminary injunctive relief.

Equities. In the balance of equities, the court analyzed that any injury J&S was likely to suffer was self-inflicted due to its failure to comply with the dealer agreement and its failure to take adequate steps to prevent termination. The balance of equities weighed in favor of MMNA.

Public interest. The court found J&S misuse of the Mitsubishi mark was likely to cause confusion. The court reasoned an injunction would put an end to it. This final factor supported entry of the preliminary injunction against the dealer.

The Case is No. 3:26-cv-05112-GC-TJB.

Judge: Castner, G.

Attorneys: Joshua Kelly (Fox Rothschild LLP) for Saliba Investment LLC. Brandon J. Bigelow (Nelson Mullins Riley & Scarborough LLP) for Mitsubishi Motors North America, Inc.

Companies: Saliba Investment LLC; Mitsubishi Motors North America, Inc.

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