IFA, DLA Piper Reaction to Rhode Island Law
Little Debate on Act; No Input from State Regulator
WASHINGTON D.C. (Blue MauMau) - Although little information has been available from the International Franchise Association on its web site or in its news bulletins regarding the Rhode Island Fair Dealership Act, Terry Hill, Vice President of Communications, did reveal that IFA knew about the Rhode Island bill in advance. He explained, "Since there are literally thousands of bills introduced in state legislatures each year (more than 2,300 last year), that have a potential impact on commercial contractual relationships of the distribution/dealer/licensee/franchise variety, we didn't detect the application to franchises in this particular bill. There was little debate on the bill, not even the state's franchise regulator was asked for input."
Hill said they we're making efforts now to establish a constructive dialogue with lawmakers in Rhode Island. He did note that IFA had published an article on the act in its Insider newsletter: Rhode Island Enacts Fair Dealership Law - July 16, 2007
DLA Piper: Rhode Island Clones Wisconsin’s Fair Dealership Law 
WASHINGTON D.C. (Blue MauMau) - In DLA Piper's Francast email bulletin, partner David Beyer, Tampa, Florida, reported that, with no fanfare, Rhode Island has become the first state to enact franchise relationship legislation since Iowa did so in 1992. The Rhode Island Fair Dealership Act was enacted effective June 14, 2007 with almost no publicity, and the Act has now become law. "Until now, since 1992 every state that had considered enacting franchise relationship legislation chose not to." Franchise relationship bills are currently pending in Massachusetts and Tennessee.
Beyers states that the Act is virtually identical to the Wisconsin Fair Dealership Law. It purports to impose a “good cause” standard on franchisors for certain events including franchise terminations, non-renewals, and any undefined “substantial change in competitive circumstances” (a Termination Event). In Wisconsin, the virtually identical law has resulted in literally hundreds of litigated cases.
While Rhode Island has regulated franchise offers and sales since 1973, the state did not attempt to regulate the terms of franchise agreements or the relationship between franchisors and franchisees. But, through the Act, Rhode Island now does regulate the franchise relationship. Moreover, as in the Wisconsin law, Rhode Island’s broad “community of interest” definition applies not only to franchises but to non-franchise distributorships and dealerships.
Today Beyer said in an interview, "I hope they repeal it as quickly as they passed it."
Click here for DLA Piper's brief overview of Rhode Island's new act.
AAFD and Arbitration
I would not have anything to do with an organization who mandates arbitration.
The fact that the AAFD is involved with this process has given me reason for pause
DLA Says Rhode Island Act may be Unconstitutional
Not at all surprising that DLA Piper would indicate that the act is unconsitutional insofar as it would pertain to existing contracts. I'm sure it will be tested just as soon as possible in an effort to secure the position of their existing clients.
The IFA must be in shock wondering how they let this get by them.
If the Congress really does do something about the unconstitutionality of mandated arbitration in contracts of adhesision and unilateral consumer contracts, there may be a new age of fairness in franchising relationships and consumer relationships with Corporate America.
Hopefully, our Judicial Committees in the Congress will go beyond public hearings and PR and do something to protect the essential rights of all Americans to Due Process of Law.
DLA Piper
I think that everyone would have to agree that there are more ZEES then ZORS
Yet, every time there is a question raised about what needs to be done to change things, the answer is an automatic default to the ZORS
We can change things if we are willing to put up and shut up
We may not have the money that the IFA and DLA Piper has, but we have have something better
THE MAJORITY VOTE
We can determine, by shear numbers, the votes for state representatives.
We ave a voice we just need to come together to be loud enough to be heard
Interesting Lawsuit
Although this happened a year ago, it's the first I'd heard about it. It seems relative to some of the current complaints about franchisors gouging their franchisees with inflated product costs, etc.
Ziebart Lawsuit Award
I would have paid to be a fly on the wall when the officers came into corporate to clean its property out. What a site that had to be.
AAFD has to face reality and status quo!
The AAFD as an independed association has to survive on the best terms it can. Is this a not-for-profit organization or a for-profit organization. Can they survive without some degree of cooperation with franchisors? Probably not!
Mandated arbitration in franchise contracts is the long-standing status quo of public policy. Just how could the AAFD change this policy that has so much precedent in the law and in arbitration history? Only the Congress can do something about this.
They have started to try to change FA's to make them fairer to the franchisees through a voluntary rating system that could work to point out those Franchisors with bad-faith agreements and as this concept grows, it will put pressure on the bad franchisors to come into line with fairer FA's and fairer practices.
Tinker has suggested that the AAFD does not support state relationship law and this troubles me but I'm sure Mr. Purvin will, perhaps, post the AAFD's position on state relationship laws and help us out. Or, perhaps Michael Webster will do this in the event Mr. Purvin doesn't.
Majority Vote?
Absurd! ZEES out number ZORS that's the business model.
Good ZORS listen, consider and learn from the suggestions of their ZEES. This does not mean that good ZORS automatically incorporate all suggestions from all ZEES or ZEE groups. MOST suggestions from ZEES may sound great on the surface, from a ZEES perspective, yet have no place within the system as a whole.
Franchising IS NOT a democracy! The only vote ZEES have is with their feet. If you don't like the ZOR and their systems, procedures, and practices MOVE ON! If you do like the ZOR, buy into the system with the understanding that the ZOR is responsible for defining the game, your job is to implement. If you implement well you'll be rewarded for your efforts. If you do not, you will pay the price. It is simply the price of admission.
FRANMASTER
AAFD's Standards on Dispute Resolution
The appropriate standard is Chapter 14 If you read this entire standard, including the unadopted commentary, you will see that the AAFD does not support binding or mandatory arbitration.
The Standard is only satisfied by arbitration that is freely consented to, with a number of conditions on the arbitration process.
My informal take on the AAFD's lobbying efforts is that the franchisee associations were not prepared to put up either the bucks or the money for access to the Senators/Representatives that the IFA and franchisors did.
You have to put up or shut up, especially when it comes to influencing the legislative process.
Michael Webster PhD LLB
Misleading Advertising Law
You seem to have missed something....
No one suggested that franchising is a democracy. The remark about our votes very specifically mentioned our STATE Representative as in the those in our legislature. The guest was right. We may not out-number the zor's dollars, but we do out-number our votes for those people who provide legal regulations and remedies to their voters.
Rhino Super Center
Status Qou
The reason for the AAFD is to loke out for the best interest of the Franchisee.
Mandatory Arbitration is not with in any ones best interest.
If it is such a great deal let them bargain for a voluntarty arbitration clause. After all they are the ones who claim they are trying to make franchising more level a poaying field.
You can't defend the AAFD based on the Status Qou for anything, if that is what they are out there for
WHO NEEDS THEM
...or did you?
It does not matter if ZEES colectively seek to cause ZOR to change or if ZEES seek to use numbers (votes) to force legislature to force ZOR to change.
Franchising is what franchising is! Franchisors should have the right to run their system and deal with their ZEES in basicly anyway they see fit. If ZEES do not like the ZOR do not plug into the ZORS system. If ZEES fail to plug in, ZOR will change or fail.
I'm not personally in favor of corporal punishment, but I am in favor of the parent having the right to raise their children how they see fit. As my momma said "I brought you into this world, I can take you out at any time before the age of 18".
ZORS own the brand, ZEES use it. No one must become a ZEE or join a given system. With less regulation on how a ZOR behaves, the more a ZOR is allowed to behave in accordance with their own value system. Creating greater distinctions between ZORS and making it easier to determine the good from the bad. If you make them all wear the same mask and the same clothing....
Read the Standard
Why don't you read the Standard, first. They you will know the AAFD's position on mandatory arbitration -they are against it.
Michael Webster PhD LLB
Misleading Advertising Law
Then how do contracts that have it
still receive the AAFD's Seal of Excellence for their 'fair franchising'? I can only assume that there is some formula that attaches a score to each standard passed, but since Meineke is reported to have received a 'score' of 92%, how much weight is put into their not passing the manditory arbitration standard?
Rhino Super Center
Michael, it's the truth
It's the Truth In Franchising! It's what's wrong in franchising!
People don't read and they're to tight to hire some one to read for them.
FRANMASTER
AAFD Grading
On the last contract I assisted in grading, there were 65 points out of 830 allocated to Chapter 14.
One obvious difficulty with the Standard on arbitration, Chapter 14.2, is that you could receive full points for having an arbitration process that meets all the criteria, but since some of those criteria are in the hands of the third party arbitrator, time of hearing on the merits, reasoned written opinion within 30 days, those things might change which should theoretically effect your score -but none of that will be known until the 5 year review.
Michael Webster PhD LLB
Misleading Advertising Law
Thanks, that's very helpful to know.
I'm a little confused though. So if they have manditory arbitration they don't meet the standard of 'choice' and yet they can receive points for having an 'arbitration process'? Did I misunderstand?
Now in relationship to the Meineke..........you know I'm always coming back to them......the 5 years have passed, the 1 year extension has passed, there are public court documents that demonstrate Meineke REFUSED to go to arbitration and fought it in court saying they weren't obligated to (the court disagreed with them) and yet the AAFD still promotes Meineke's seal. They can certainly choose to stick their heads in the sand and ignore even the documented evidence I have until the suit is finished, but how can they ignore the public records and Meineke's own words? Can you understand why this reflects so badly on the AAFD? Are they willing to let this unethical company tarnish all the hard work and progess the AAFD has been able to make?
Rhino Super Center
The Truth
Funny and sad.
Michael Webster PhD LLB
Misleading Advertising Law
Standard 14.0
1. Chapter 14 always allows a franchisor to seek equitable or injunctive relief -Meineke sought it and was refused. But it isn't a breach of the standards. They thought they were entitled to an injunction and were wrong. It is consistent with the Chapter on Dispute Resolution that Meineke and other franchisors can go to Court instead of arbitration if they are seeking injunctive relief -only the Courts can grant that type of relief.
2. Standard 14.0 states that "alternative dispute resolutions procedures which offer adequate protection for a substituted fundamental right, may be utilized, if and only if, consent for the substitution is freely given and actually negotiated.
This Standard is worth 10 points of the 65. My own personal view is that none of the AAFD Seal Franchisors should get any points -none of them have a separate arbitration contract which is "freely given and actually negotiated".
I don't think that even a contract which the MDA negotiates with Meineke will meet this standard unless there is a separate contract. I can safely say that I am in the minority on this point.
Finally, as I mentioned a number of times, if the arbitrator rules that Meineke was wrong, breached the franchise agreement in such way that violated the Standards, the AAFD would be obliged to look at the problem, in my view.
Michael Webster PhD LLB
Misleading Advertising Law
I apreciate your candor
Actually, Meineke sought injunctive relief AND they stated they were not obligated to arbitrate the matter even though the contract itself stated they HAD to initiate arbitration BEFORE they could seek injunctive relief. The judge called them on that fact and plainly told them not to seek relief from him and the courts when they aren't even following their own contract............his words, not mine. But that's splitting hairs with what we're discussing here, so I'll try not to rattle on.
Perhaps after this is all settled, the AAFD will step up and look at this matter with open honesty. However, they will have to answer the questions about why they waited till they couldn't ignore it any longer and why they didn't even accept the open offer to look at the evidence for themselves.
That aside, I sincerely apreciate your openess to some of the weaknesses with the seal and continue to respect both your professionalism and your integrity.
Thank you.
Rhino Super Center
Breach of Contract and AAFD Standards
There is no question that if any franchisor is found to have breached their contract, then their grade should be effected.
Unfortunately, the Seal is not like a bond rating which can go up or down in response to material changes in fairness -perhaps we should make that change as it bears looking into.
Overall, I would encourage all franchise associations to spend the $7k to have their franchise agreements reviewed or graded by the AAFD. (Disclosure: I will not receive any recompense for this review.)
Michael Webster PhD LLB
Misleading Advertising Law