Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—N.D. Cal.: Christie’s charged with unlawfully terminating franchise with real estate broker, (Apr 13, 2016)

By Michael Menzhuber, J.D., LL.M.

Christie’s International Real Estate, Inc. created a franchise relationship by appointing Pacific Union International, Inc. as its exclusive real estate broker and violated the California Franchise Relations Act by terminating the franchise without good cause, according to a complaint filed in the federal district court in San Francisco (Pacific Union International, Inc. v. Christie’s International Real Estate, Inc., April 12, 2016).

The complaint alleged that a franchise relationship was established because the “Participating Broker Agreement,” which appointed Pacific Union as Christie’s exclusive broker for certain California counties, provided that Pacific Union was obligated to: (1) participate in Christie’s advertising and marketing program, which Christie’s retained sole control over; (2) pay minimum annual fees, beginning with a first-year annual participation fee, as well as various other fees; (3) prominently display Christie’s name on various media; (4) refrain from displaying any other luxury real estate marketing affiliation more prominently than Christie’s on its website; and (5) comply with Christie’s detailed instructions on how to use its trademark.

The complaint further alleges that Pacific Union did not breach the Agreement; Christie’s terminated the franchise relationship pursuant to a provision in the Agreement, which provided that it could do so without good cause; and the contractual provision allowing for termination of the franchise relationship without good cause was void for violating the California Franchise Relation Act’s prohibition against terminating a franchise relationship without good cause.

The complaint seeks declaratory relief that Pacific Union and Christie’s had a franchise relationship; the franchise relationship was unlawfully terminated by Christie’s without good cause; and Christie’s had no lawful right to terminate the franchise relationship in the absence of a material breach and a failure to cure the breach.

The complaint asserted claims that Christie’s (1) violated the California Franchise Relations Act when it terminated its franchise relationship with Pacific Union; (2) breached the Agreement when it terminated the franchise relationship, without cause or an opportunity to cure, pursuant to an unenforceable provision in the Agreement; (3) violated California’s Unfair Competition Law, when it violated the California Franchise Relation Act’s prohibition against terminating a franchise relationship without good cause.

The complaint seeks an award of damages; declaratory relief; injunctive relief; an award of rights and remedies; attorney fees, costs, and expenses; pre and post-judgment interest; and any further relief the Court may deem proper and just.

Attorneys: Jonathan Solish and Nicole N. King (Bryan Cave LLP) for Pacific Union International, Inc.

Companies: Pacific Union International, Inc.; Christie’s International Real Estate, Inc.

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