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.
- Franchise topic:
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.
Lisha
Rhino Super Center
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
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
Lisha
Rhino Super Center
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
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
Lisha
Rhino Super Center
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
Funny and sad.
Michael Webster PhD LLB
Misleading Advertising Law
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
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
Lisha
Rhino Super Center
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"
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
Lisha
Rhino Super Center
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
Michael Webster, a franchisee attorney in Toronto, Ontario, publishes a website on business opportunities and franchises called "The BizOp News"