Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Franchisee Seeks to Enjoin Termination of Distributorship Agreement , (May 1, 2013)

By Jody Coultas, J.D.

Franchisee Universal Supply Group, Inc. has filed New Jersey Franchising Practices Act (FPA) claims and price fixing claims under the Sherman Act against franchisor Alliance Laundry System LLC to enjoin Alliance from terminating the parties’ distribution agreement. The complaint, Universal Supply Group, Inc. v. Alliance Laundry Systems LLC, was filed in the federal district court in New Jersey on April 25, 2013.

Universal has been a franchised distributor of Speed Queen-brand laundry equipment manufactured by Alliance since 2006. After receiving notice from Alliance that it planned to terminate the distributorship agreement, Universal filed FPA and price fixing claims seeking to enjoin Alliance from terminating the agreement.

Alliance has allegedly violated the FPA by seeking to terminate the distribution agreement without good cause. The FPA prohibits a supplier from terminating a business relationship with its distributor in the absence of: (a) good cause, (b) advance written notice of any performance deficiency, and (c) an opportunity to cure any deficiency in the distributor’s performance. The notice of termination failed to identify a performance deficiency or an opportunity to cure any performance deficiencies. Universal alleged that Alliance true reason for terminating the agreement failed to meet the FPA provisions.

Antitrust Claims.

In support of its price fixing claims, Universal alleged that Alliance’s true motivations for its planned termination of Universal included: (a) Alliance’s interest in eliminating distributors in order to position Alliance to sell directly to retailers; (b) Universal’s refusal to pay certain "passover" payments demanded by Alliance but not contemplated by the parties’ distribution agreement; and (c) Universal’s refusal to participate in an agreement between Alliance and other franchisees to fix prices.

Universal sought injunctive relief to keep Alliance from terminating the agreement, as well as actual monetary damages sufficient to compensate for having been stripped of its ongoing rights to distribute the laundry equipment so long as Universal reasonably performs. Universal allegedly invested in the promotion of the product line and hired staff exclusively to the promotion, sale, and delivery of the products. The investments by Universal would allegedly be lost if Alliance proceeds with its planned termination.

The case is No. 2:13-cv-02655-FSH-SCM

Attorneys: Valerie A. Vladyka (Schenck, Price, Smith & King, LLP) for Universal Supply Group, Inc.

Companies: Universal Supply Group, Inc.; Alliance Laundry Systems LLC

News: FranchisingDistribution Antitrust NewJerseyNews