New Rhode Island Relationship Law Unexpected

New Act Could Level Playing Field for Franchisees

PROVIDENCE (Blue MauMau) - According to a Nixon Peabody news alert, effective June 14, 2007, Rhode Island enacted the Rhode Island Fair Dealership Act. It will effectively apply to dealerships and franchises within the state and affect both oral and written distribution and franchise relationships. Franchisors are urged to review their agreements to arbitrate and procedures regarding default and termination in response to the act.

Craig Tractenberg, partner in the Nixon Peabody firm, said, "This legislation was quite unexpected and probably not well vetted in the franchise community. We have not seen a franchise relationship law like this in decades." He added that the act looks like something similar to the Wisconsin relationship law and that there does not seem to be much legislative history regarding it.

According to the article, the act will level the playing field by protecting dealers and franchisees against unfair treatment from their companies that "have inherently superior economic and bargaining power in their negotiations." It is intended to protect franchisees and dealers from unfair treatment in terminations, renewals and amendments.

Although the Rhode Island act appears to enhance the common law rights and remedies for franchisees and dealers, Nixon Peabody states it may be subject to constitutional challenge to the extent that it impairs contracts that existed prior to its effective date.

The legislation was sponsored by Rep. Stephen R. Ucci and Sen. Christopher B. Maselli.

Massachusetts Relationship Legislation Update

The Nixon Peabody Franchise Law Alert also addresses pending legislation in Massachusetts now before the Senate. Senate Bill 142 proposes to limit the circumstances under which a franchise may be terminated or not renewed. It would prohibit both, "except for good cause," which would include the franchisee's refusal or failure to comply with reasonable obligations of the franchise agreement.

The bill prohibits franchisors and dealers restricting operators from forming associations. It also requires the franchisor to repurchase inventory, supplies, and goods upon termination or nonrenewal of the franchisee or dealership.

• To read the entire Nixon Peabody article click here.
• The Rhode Island Fair Dealership Act: (2007 - H5275Aaa)