Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: ‘Nixon-style hit list’ cited in 7-Eleven unfair termination suit, (Aug 5, 2014)

By Greg Hammond, J.D.

The owners of two 7-Eleven, Inc. franchise locations have filed suit against the convenience store giant, alleging—in part—violations of the New Jersey Franchise Practices Act (NJFPA). A complaint filed in the federal district court in Newark, New Jersey sought temporary restraints, injunctive and declaratory relief, an accounting, and damages against 7-Eleven for purportedly unfair franchise termination and retaliation (Patel v. 7-Eleven, Inc., July 30, 2014).

Summary of action. Bijen Patel and Kalpana Patel own two 7-Eleven franchise locations in New Jersey, and have filed suit against the corporation for threatening improper termination. Bijen Patel has been an active and vocal member of the Metro NJ Franchise Owners Association, which has addressed a number of issues in the 7-Eleven franchise system, and has led to the removal of a former 7-Eleven Market Manager for alleged discriminatory and abusive conduct.

In their complaint, the Patels assert that: (1) 7-Eleven compiles and maintains a “Richard Nixon-style ‘Enemy List’ or ‘Hit List’ of 160 to 170 franchisees,” who are targeted for investigation and termination in retaliation for their roles in franchisee associations throughout the United States; (2) in 2012, the corporation threatened to terminate the Patels for failing to adhere to 7-Eleven’s minimum “net worth” requirements, but the corporation’s calculations were “false and misleading” and relied upon simple accounting discrepancies 7-Eleven chose to ignore; and (3) 7-Eleven has threatened termination against the Patels again, based on erroneous financial information. The Patels consequently seek injunctive and declaratory relief, and a formal accounting.

NJFPA claim. According to the NJFPA claim, the Patels assert that 7-Eleven is threatening to terminate the parties’ franchise agreement without “good cause,” without providing proper notice under the NJFPA, and by creating unreasonable standards to cure any alleged default. Specifically, the Patels allege that 7-Eleven: (1) has failed to provide the time specified under the statute to cure any alleged deficiencies; (2) bases the termination on incorrect calculations and refuses to acknowledge the existence of tens of thousands of dollars in credits due and owing to the Patels; (3) asserts that it has the right to usurp the Patel’s 7-Eleven locations without a court order; (4) has failed to provide proper notice of default; (5) has failed to provide the Patels with the ability to sell their store locations; and (6) has created an unreasonable standard of performance. In addition to equitable relief, the Patels request full reimbursement of costs and damages for wrongful termination.

Attorneys: Gerald A. Marks, Louis D. Tambaro, and Evan M. Goldman (Marks & Klein, LLP) for plaintiffs.

Companies: 7-Eleven, Inc.

News: FranchisingDistribution NewJerseyNews