Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—EDMo: Claims for Violation of Statutory Notice Provision Were Without Merit, Issues Remain as to “Good Cause” for Termination, (Jun 13, 2013)

By Peter Reap, J.D., LL.M.

Forklift dealer Lift Truck Lease and Service, Inc.’s claims against franchisor Nissan Forklift Corporation N.A. for violation of the notice of termination provisions of the Missouri Franchise Act and Missouri Power Equipment Act were without merit because the dealer could not show that the franchisor failed to provide it with 90 days’ notice of termination, the federal district court in St. Louis has decided (Lift Truck Lease and Service, Inc. v. Nissan Forklift Corporation, N.A., June 12, 2013, Shaw, C.). However, there were genuine issues of material fact that precluded summary judgment on the dealer’s claim that the franchisor violated the “good cause” for termination provision of the Power Equipment Act. Thus, the franchisor’s motion for summary judgment on the dealer’s claims under the two statutes was granted in part and denied in part.

Missouri Franchise Act. The dealer alleged that Nissan violated the Missouri Franchise Act by failing to provide it with at least 90 days’ notice that it was terminating or failing to renew the parties’ Nissan brand forklift franchise agreement (“Term Agreement”). The statute provides:

No person who has granted a franchise to another person shall cancel or otherwise terminate any such franchise agreement without notifying such person of the cancellation, termination or failure to renew in writing at least ninety days in advance of the cancellation, termination or failure to renew . . . .

§ 407.405, Mo. Rev. Stat.

The franchisor argued that it was entitled to summary judgment on this claim because: (1) the Missouri Franchise Act did not apply to ADL’s claims, because regulation of power equipment dealer practices is governed instead by the Missouri Power Equipment Act; and (2) even if the Franchise Act were applicable, the dealer could not show that Nissan failed to provide 90 days’ notice of termination in compliance with § 407.405.

It was not necessary to address the franchisor’s first argument, because the second argument was dispositive, the court determined. Assuming that the Missouri Franchise Act applied to the parties’ business relationship, Nissan’s written notice to ADL met the statute’s requirements.

It was uncontroverted that the franchisor gave written notice to the dealer (the “Notice Letter”) on January 10, 2012 that it intended to terminate the parties’ agreements effective April 15, 2012, unless the dealer cured the deficiencies identified in the letter within the next 60 days. The Notice Letter of January10, 2012 thus gave the dealer more than 90 days’ notice of the impending termination. Although the parties’ Term Agreement was set to expire on February 1, 2012, the Notice Letter expressly advised the dealer that any non-renewal or termination would not go into effect until April 15, 2012, and thus continued in effect the parties’ franchise relationship. In addition, in an attempt to allow the parties to reconcile their legal dispute, Nissan stayed the dealer’s termination for 90 days and the dealer continued to operate as a Nissan dealer through July 15, 2012.

The dealer also contended that Nissan violated the Franchise Act when it delivered the Notice Letter on January 10, 2012, giving notice of Nissan’s intent not to renew the franchise on April 15, 2012, where the Term Agreement by its own terms expired February 1, 2012. Because of the intervening expiration of the Term Agreement, the dealer argued that the franchisor actually gave it only 22 days’ notice prior to termination, rather than 90 days as required by the statute.

The dealer’s argument did not raise a genuine issue of material fact for trial, the court held. The fact that the Term Agreement called for an expiration date of February 1, 2012 did not mean that the parties’ franchise relationship ended on February 1, 2012, because the Notice Letter expressly stated that any non-renewal or termination would not take effect until April 15, 2012. ADL actually continued to be a Nissan dealer through July 15, 2012. ADL therefore received all of the notice required under the Franchise Act, the court reasoned. The franchisor was granted summary judgment on this claim.

Missouri Power Equipment Act. The dealer alleged that Nissan violated the Power Equipment Act by (1) failing to comply with the statute’s requirement to provide at least ninety days’ prior written notice of nonrenewal of any of the Agreements; and (2) terminating the Agreements without “good cause” as defined under the statute.

Nissan was entitled to summary judgment on the dealer’s Power Equipment Act claim to the extent it was based on an alleged violation of the statute’s notice provision, for the reasons discussed above with respect to the Franchise Act claim, the court ruled.

However, genuine issues of material fact precluded summary judgment on the dealer’s Power Equipment Act claim based on termination without “good cause,” the court explained. Those issues included: whether Nissan’s sales goals for the dealer were “essential” or “reasonable;” whether the dealer failed to substantially comply with those goals; whether Nissan treated the dealer differently than other similarly situated retailers; and whether the dealer “consistently” failed to meet Nissan’s requirements for “reasonable market penetration” in “comparable marketing areas.”

Therefore, the franchisor was denied summary judgment on the Power Equipment Act claim for violation of the “good cause” provision.

The case is No. 4:12-CV-153 CAS.

Attorneys: Adam D. Hirtz (Lowenbaum Partership, LLC) for Lift Truck Lease and Service, Inc. Adrienne N. Russell (Hartline and Dacus) for Nissan Forklift Corporation, North America.

Companies: Lift Truck Lease and Service, Inc.; Nissan Forklift Corporation, North America.

Cases: FranchisingDistribution MissouriNews