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New Jersey Courts Broaden Franchisee Rights

Posted on December 7th, 2009

Bridgewater, NJ (December 7, 2009) – The New Jersey Supreme Court has upheld the protection of the New Jersey Franchise Practices Act for equipment dealers and other franchisees who have been “constructively terminated” by the franchisor. On November 4, 2009, the New Jersey Supreme Court decided in favor of Mitsubishi forklift dealer Maintainco, Inc., in Maintainco, Inc. v. Mitsubishi-Caterpillar Forklift America. The ruling upholds decisions by the Appellate Division and trial court that Maintainco is entitled to continue as the exclusive Mitsubishi dealer in northern New Jersey, and affirms the substantial award of monetary damages to Maintainco for the manufacturer’s constructive termination of its franchise. Maintainco was represented by Norris McLaughlin, P.A. Member Jeremy I. Silberman.

The Supreme Court decision successfully concludes Maintainco’s fight to protect its Mitsubishi forklift dealership in northern New Jersey. Maintainco, a family owned business with branches in South Hackensack and South Plainfield, has been the Mitsubishi dealer in northern New Jersey since 1982. In 1999, the manufacturer, Mitsubishi-Caterpillar Forklift America, decided to terminate Maintainco as part of MCFA’s plan to reorganize its distribution network into larger regional dealerships. When Maintainco refused to voluntarily give up its Mitsubishi dealership, MCFA engaged in a course of conduct designed to force Maintainco to drop the line, including appointing a second dealer in Maintainco’s territory.

Norris McLaughlin, P.A. immediately filed suit against MCFA on behalf of Maintainco, claiming that in 1985 Maintainco was granted the right to be the exclusive Mitsubishi dealer in the territory although the dealership agreement did not expressly use the term “exclusive.” Norris McLaughlin, P.A. further argued that Maintainco qualified for the protection of New Jersey’s Franchise Practices Act and that MCFA’s appointment of the second dealer in the territory not only breached the contract, but also illegally terminated Maintainco’s franchise in violation of the statute. MCFA denied that it had terminated Maintainco as a dealer because Maintainco was still in business. MCFA further denied that Maintainco had been granted any exclusive rights and denied that Maintainco was a franchise under the statute.

By filing the lawsuit, Maintainco was able to retain its Mitsubishi business while the litigation was pending. However, through their investigations and the litigation discovery process, Norris McLaughlin, P.A. and Maintainco uncovered that MCFA gave the new dealer better pricing than Maintainco, gave the new dealer Maintainco’s customer lists, and paid for letters sent to Maintainco’s customers directing them to buy from the new dealer. After a hard fought discovery battle, Norris McLaughlin, P.A. also obtained MCFA internal emails in which the executive vice president stated he wanted to “ditch” Maintainco.

In May 2007, after a 20 day trial, Judge William C. Meehan of the Superior Court of New Jersey found that Maintainco had indeed been granted an exclusive sales territory in 1985, that Maintainco was a franchise protected by the New Jersey Franchise Practices Act, and that MCFA had terminated Maintainco’s franchise in violation of the Act. Judge Meehan awarded Maintainco a multi-million dollar judgment for its damages including its attorney’s fees and litigation costs.

MCFA appealed Judge Meehan’s ruling to the New Jersey Appellate Division. On July 30, 2009, the Appellate Division issued a published opinion upholding the trial court’s decision in favor of Maintainco. In this important decision for equipment dealers and all franchisees, the Appellate Division held that the New Jersey Franchise Practices Act protects against “constructive termination.” The Appellate Division awarded Maintainco additional attorneys fees for the costs of the appeal, although it deducted some of the costs awarded by the lower court.

MCFA filed a petition with the New Jersey Supreme Court, seeking to reverse the Appellate Division’s decision. MCFA argued that the New Jersey Franchise Practices Act does not recognize a cause of action for “constructive termination.” On November 4, the Supreme Court denied MCFA’s petition, thereby upholding and finalizing the Appellate Division’s significant decision.

James G. Picarillo, President of Maintainco, said, “We have worked for over twenty years to build the Mitsubishi forklift business here in Northern New Jersey. We made the investment in money, in sweat equity, and in dedication to Mitsubishi, so when they tried to destroy us, we decided that we could not let it happen. We are gratified by the court’s ruling and believe justice has been done.” Picarillo added, “We look forward to the success of our efforts to continue to build the Mitsubishi brand over the coming decades.”

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