Franchising (& Distribution) Currents
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This decision of the U.S. District Court for the Southern Dis-
trict of New York actually represented the fourth reported
decision in a Robinson-Patman Act case brought by magazine
wholesalers against their distributors
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FRANCHISING (& DISTRIBUTION) CURRENTS MICHAEL J. LOCKERBY, CHRISTOPHER P. BUSSERT, AND RONALD T. COLEMAN JR. Antitrust requires only a “marketing plan” and “substantial association” United Magazine Co. v. Murdoch Magazines Distrib., Inc., with the franchisor’s trademark. 393 F. Supp. 2d 199, Bus. Franchise Guide (CCH) ¶ 13,192 The marketing plan element is satisfied by “an oral or (S.D.N.Y. Sept. 22, 2005) written agreement or arrangement in which a franchisee is This decision of the U.S. District Court for the Southern Dis- granted the right to engage in the business of offering, selling, trict of New York actually represented the fourth reported or distributing services under a marketing plan or system decision in a Robinson-Patman Act case brought by magazine prescribed in substantial part by a franchisor.” The trademark wholesalers against their distributors. Before the court’s latest element is satisfied if “[t]he operation of the franchisee’s busi- ruling on the defendants’ summary judgment motion, all that ness pursuant to this marketing plan or system” is “substantial- remained of the plaintiffs’ price discrimination claims were ly associated with the franchisor’s trademark, service mark, allegations of “secret discounts, rebates, other payments, ser- trade name, logotype, advertising, or other commercial symbol vices of value and other benefits” to certain competitors of the designating the franchisor or its affiliate.” plaintiffs. The district court’s grant of summary judgment in The court rejected Nationwide’s argument that no franchise this decision disposed of these remaining claims. relationship was present because Charts could not bind it to an At issue were the defendants’ “return policies,” pursuant to insurance policy and therefore could not actually sell an insur- which unsold magazines were returned to the publishers for ance policy. The flaw in that argument, according to the court, credit. The plaintiffs claimed that their price per magazine was that “there is no dispute as to Charts’ ability to ‘offer’ increased to the extent that a distributor did not allow a credit Nationwide policies to customers, and to execute an initial, for return magazines. Fatal to the plaintiffs’ claims was the non-binding contract with customer[s].” lack of evidence that the defendants acted in a discriminatory The marketing plan element of the statutory definition of fashion. Moreover, the court noted that these allegations sim- franchise was satisfied by testimony from the insurance compa- ply failed to allege viable claims for price discrimination in ny’s own witness that agents operated under a marketing plan violation of § 2(a) of the Robinson-Patman Act. prescribed by Nationwide. Other facts that helped establish this Even if the plaintiffs could establish a Robinson-Patman element included the employment of agency managers to ensure Act violation, they failed to create a triable issue as to the that agents met Nationwide’s standards, the provision of sample “antitrust injury” necessary to sustain a private right of action. advertising to insurance agents, and the requirement that Although the plaintiffs claimed lost sales or profits, they Nationwide approve the use of its logo in any advertisements. failed to demonstrate any relationship between their claimed Having found the existence of a protectable franchise under losses and the alleged discrimination. This failure was also Connecticut law, the court found that Nationwide failed to fatal to their Robinson-Patman Act claims. establish good cause for termination. In support of its good cause argument, Nationwide argued that its former agent had Definition of Franchise violated the Connecticut Insurance Code by paying for the Charts v. Nationwide Mut. Ins. Co., 397 F. Supp. 2d 357, Bus. policies of at least ten individuals. This alleged illegal rebating Franchise Guide (CCH) ¶ 13,200 (D. Conn. Oct. 25, 2005) was not among the issues that had been presented to the jury. This decision from the U.S. District Court in Connecticut high- Moreover, the notice of termination did not include rebating as lights the potential for state franchise and dealer relationship grounds for termination. laws to be applied in industries whose distribution relationships are not commonly considered franchises. The reported decision Discrimination decided various posttrial motions in favor of the plaintiff and Hubmann v. McKenna BMW, No. B177259, 2005 WL thus upheld judgment on a jury verdict awarding damages in 2435840, Bus. Franchise Guide (CCH) ¶ 13,193 (Cal. Ct. the amount of $2.3 million. The plaintiff in Charts was a termi- App. Oct. 4, 2005) nated insurance agent. Among Charts’s claims were those for This case is discussed under the topic heading “Statute violation of the Connecticut Franchise Act. Unlike most fran- of Limitations.” chise disclosure and registration laws, but not unlike many rela- Earnings Claims tionship laws, the Connecticut Franchise Act does not include a “franchise fee” among its definitional elements. Rather, it FTC v. USA Beverages, Inc., No. 05-61682-CIV-Lenard/ Klein, Bus. Franchise Guide (CCH) ¶ 13,201 (S.D. Fla. Michael J. Lockerby is a partner in the law firm of Foley & Lardner Nov. 4, 2005) LLP in Washington, D.C. Christopher P. Bussert is a partner in the To paraphrase Mark Twain, this case shows that rumors of the law firm of Kilpatrick Stockton LLP in Atlanta, Georgia. Ronald T. death of the Federal Trade Commission (FTC) Franchise Rule Coleman Jr. is a partner in the law firm of Parker, Hudson, Rainer & Dobbs LLP in Atlanta, Georgia. are greatly exaggerated. The FTC secured an ex parte tempo- Number 4 • Volume 25 • Spring 2006 • American Bar Association • Franchise Law Journal • 209 “Franchising (& Distribution) Currents” by Michael J. Lockerby, Christopher P. Bussert, and Ronald T. Coleman Jr. published in Franchise Law Journal, Volume 25,No.4, Spring 2006 © 2006 by the American Bar Association. Reproduced by permission. All rights reserved. This information or any portion there- of may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association.
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