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Client Alert: Automobile Dealers May Be Protected By State Franchise Practices Acts

05.19.09

 
 
Automobile dealers threatened with the termination of their franchise may have rights under their state’s franchise act that protects them against arbitrary action by their manufacturer. For instance, The New Jersey Franchise Practices Act, NJSA 56:10 et seq. protects a franchisee from termination, cancellation or failure to renew as long as it is in substantial compliance with the terms of the franchise agreement, even if the agreement allows the franchisor to terminate for no reason (an “at will termination”), and even if the franchisor has a legitimate business reason for termination. The Act provides a basis for the dealer to prevent the termination or failure to renew and, if successful, provides for reimbursement of attorneys fees. 
 
Other state statutes provide similar remedies. Franchisees threatened with termination of their franchise are cautioned to consult counsel before agreeing to any proposal made by their franchisor. You may be giving up substantial legal rights.
 
For more information, please contact Don Foster at 215 569 4646 or dfoster@klehr.com. Don has been trying franchise cases on behalf of franchisees for 20 years.