March 29, 2019
- Whether a franchisor that allows a franchisee additional time to come into compliance of a franchise agreement forfeits its ability to cancel the franchise agreement when the franchisee continues to fail to address the compliance issues.
TS & A Motors, LLC, d/b/a Kia of Somersworth (Petitioner) appealed an order affirming a decision of the New Hampshire Motor Vehicle Industry Board (the “Board”) granting the right of Kia Motors, Inc. (Respondent) to cancel a franchise agreement between the parties.
On appeal, the Petitioner argued that the Respondent illegally cancelled a franchise agreement between the parties when it failed to bring the cancellation upon first having actual knowledge of deficiencies in the Petitioner’s compliance of the franchise agreement. In rejecting this argument, the Court reviewed the history between the parties from the proceeding before the Board. The evidence established that the Petitioner had been having staffing issues practically since inception of the franchise agreement, and that the Respondent had worked with the Petitioner to help resolve the issues. Despite these efforts, the record showed that the Petitioner ultimately could not maintain the minimum staffing required by the franchise agreement.
Specifically, the Petitioner argued that the Respondent was required to give a 180 day notice upon learning of the violations of the franchise agreement. In rejecting this argument, the Court noted that the Respondent did give the 180 day notice once it determined that no amount of assistance from the Respondent would allow the Petitioner to come into compliance with the requirements of the franchise agreement. The Court rejected the Petitioner’s argument that the Respondent was obligated to give this notice as soon as it was aware of compliance issues. The Court noted that to do so would be to the detriment of a franchisee, because it would foreclose an opportunity as the one that is presented in this case, where a franchisor is willing to work with a franchisee on compliance. The Court also analyzed similar statutes from other jurisdictions to aid it in its decision to affirm the decisions of the lower court and the Board.
Joshua L. Gordon on the brief and orally for the Appellant. Kevin M. Fitzgerald and Nathan P. Warecki, both of Nixon Peabody, LLP, on the brief and Kirti Datla on the brief with Catherine E. Stetson on the brief and orally, both of Hogan Lovells US, LLP for the Appellee