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Rare Move By the U.S. Supreme Court

By Craig R.Tractenberg
October 26, 2010

The U.S. Supreme Court rarely tackles commercial law issues, but has addressed an important franchise law issue this year. Recently, a franchise law case did raise a federal question involving the Petroleum Marketing Practices Act (Act). The Act is intended to protect service station dealers from unjust terminations and non-renewal, but did not address constructive termination or nonrenewal. On March 2, 2010, the Court unanimously held that a franchisee that stays in business cannot sue for constructive termination under the Act. The Court also decided that a franchisee waives its constructive nonrenewal claim when it actually enters into a renewal agreement.

These decisions by the Supreme Court are more than mere questions of whether the dealers can obtain a federal forum. Under the Act, not only are the dealers entitled to a federal forum, but in addition, they are granted a relaxed standard in order to obtain a preliminary injunction against termination or nonrenewal and enhanced recovery of damages in the form of counsel and expert fees.

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