Franchisors May Be Held Liable for the "Constructive Termination" of a Franchise
In a recent Appellate Court Decision, the New Jersey Court of Appeals has determined that a “constructive termination” of a franchise constitutes a violation of New Jersey’s Franchise Practices Act. In Maintainco Inc. v. Mitsubishi Caterpillar Forklift American, Inc., A-1485-07T2, the Appellate Division considered a situation where a franchisee learned from a customer that the franchisor had placed another franchisee (using a different platform concept) in the Plaintiff’s “area of proper responsibility.” After learning of this development, the Plaintiff concluded that its franchise had been “constructively terminated” and sued for damages. The Appellate Division agreed that constructive termination may constitute a violation of the New Jersey Franchise Practices Act. Also in the decision, was a holding that expert fees in this context are not allowable as damages under the Act.
