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)
- Franchise topic:
It appears that while the powers were working against Kansas, Tennessee & Massachusetts...........little UnderDog Rhode Island snuck in the back door. Don't ya just love it!?!
Rhino Super Center
Lisha
Rhino Super Center
of a great story about perspective that two of our children taught me. We have 5 children, 2 boys, 3 girls.....all grown now. Years ago, two of our children were on the high school Quiz Team which competed throughout the state (NC) and that year our tiny little school actually won the state competition which meant they got to go to nationals. Now realize, that our tiny little mountain area had graduating classes in the 40-50 range so you can imagine how low our expectations were about success at the national level. However, when our son and daughter got off the plane they were grinning ear to ear and yelled out in unison................."We Beat Virginia". Now, some might have looked at them as losers coming in 49th place, but THEY concentrated on the fact that they Beat #50, Virginia. We take our successes where we can get them.
Rhino Super Center
Lisha
Rhino Super Center
Aaah if it was only that simple. Our Franchisor has said that they can elect not to renew whomever they wish and don;t have to have a reason. Our franchise has gone from about 100 stores to under 80 in three years time. Enough said. How about franchisees having the ability to terminate bad franchisors? Or, are you saying that its only the franchisor and not the franchisee that has an interest in the betterment of the system?
If you have a bad franchise and the quality of its performance is bad just about throughout the system - unworkable business model/abusive franchisor -the franchisees can walk, no matter what the contract says.
There is a difference between just looking at the contract and its legalistics and looking at the relationship that the contract is supposed to govern/serve.
If the business doesn't work and the franchisees all want to leave - AND THEY HAVE THE WILLINGNESS TO ACT TOGETHER -they can leave.
A record of franchisee attrition, lack of financial success and a small population of franchisees presents a profile that makes termination by franchisees a lot better than would appear simply from reading contract language.
Richard Solomon
www.FranchiseRemedies.com
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
"Most judges will not be 'just looking at the contract and its legalistics' but will dispense with 'legalistics' and do the right thing." - Guest
What country is this?
Where the franchise is really a bozo deal or when the franchisor sees that he's probably going to lose, or that his covenant not to compete is about to be blown, they just about always settle. No franchisor wants judicial/arbitrator precedent that his covenant isn't enforceable or that he blew the disclosure and that the quality of the business is really low grade.
The contract has its legal meaning and it has its reality meaning. If you only read opinions, you miss the reality half.
Richard Solomon
www.FranchiseRemedies.com
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
Other related reality issues include that a franchisor does not want a franchisee's lawyer to become known as someone who can win cases against that franchisor. The fear is that all the disgruntled franchisees will go hire that lawyer.
This raises the error - in my opinion - of ever reassuring a franchisor that there is not an intent to sue. You never take confrontation off the table until the very last moment. Before you clients came to you, they already tried with all their might to find a conciliatory resolution to their issues, and were rebuffed. The "nice guy" gambit is sheer BS. It almost never achieves anything positive of greater value than pocket change. If you have no intention to enforce your rights, why are you there with a lawyer in the first place? If the lawyer was worth anything, he would have done the homework and know whether there are assertable claims with potential to be winners.
If the franchisee lawyer didn't do his homework, or if he did and found no claims to assert. he has nothing to bargain with. If he has something to bargain with and starts out by giving that away, he is a fool.
The franchisor has already been told by his lawyers that he is right and that you are just blowing smoke. He has no incentive to cave in on anything worth anything. If you tell him you aint suing, his position will always be that he ought to just drag you around for as long as it takes to run you out of your retainer and then tell you to go to hell.
These guys who fleece and abuse people aren't your parlor game personalities. They will cut your throat just for the hell of it. If you do the Mr. Nice Guy number, you deserve their disdain. Once they come to a realization that their contract may have vulnerability caused by the abuse or by the low quality of the business model, and to the realization that you are represented by a real litigator, good stuff starts to happen.
Richard Solomon
www.FranchiseRemedies.com
Richard Solomon, FranchiseRemedies.com, has over 45 years experience with franchise litigation and crisis management. He is a graduate of The Citadel and The University of Michigan Law School
But if I disclosed what I've run across over the past year, I'd be showing my hand to 'you-know-who'...........so I'll bite my tongue...... FOR NOW.
Rhino Super Center
Lisha
Rhino Super Center