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.