§2805 — Title 15 Commerce and Trade | U.S. Code

Summary

A franchisee can sue a franchisor in federal court if the franchisor did not follow the rules in sections 2802, 2803, or 2807. The case can be filed in a federal district where the franchisor’s main office is or where the franchisee does business. The suit must start within 1 year after the later of the franchise’s termination or nonrenewal, or the date the franchisor failed to follow those rules. The court must order whatever is needed to fix the problem, such as a ruling about the parties’ rights, orders to stop or require actions, and temporary relief. A preliminary injunction (a temporary court order) should be given if the franchisee shows the franchise was ended or not renewed, there are serious questions worth litigating, and the harm to the franchisor from the order is less than the harm to the franchisee without it. The court may require a bond. The court does not have to force continuation or renewal if the suit was filed more than 90 days after notice under section 2804(a), more than 180 days after notice under section 2804(b)(2), or more than 30 days after the termination takes effect when less than 90 days’ notice was given under section 2804(b)(1). The franchisee must prove the termination or nonrenewal. The franchisor must present evidence that the ending was allowed under section 2802(b) or 2803, and, if needed, that it followed section 2802(d). If the franchisee wins, they can get actual damages, and if the franchisor acted willfully, possible exemplary damages. The franchisee can also get reasonable attorney and expert witness fees unless only nominal damages are awarded. The judge, not a jury, decides exemplary damages. The judge may order the franchisee to pay fees if the suit is frivolous. The court will not force renewal if the franchisor shows a good‑faith business reason—such as changing or selling the premises, withdrawing from the market area, or renewal being uneconomical—and that section 2804 was followed. That showing does not stop a franchisee from getting damages and fees if nonrenewal violated section 2802. A franchisor cannot make a franchisee give up rights under this federal law or valid state law. A clause saying the franchise is governed by a state law other than the state where the franchisee’s main business is located is not valid.

Title 15, §2805

Commerce and Trade — Source: USLM XML via OLRC

(a)If a franchisor fails to comply with the requirements of section 2802, 2803, or 2807 of this title, the franchisee may maintain a civil action against such franchisor. Such action may be brought, without regard to the amount in controversy, in the district court of the United States in any judicial district in which the principal place of business of such franchisor is located or in which such franchisee is doing business, except that no such action may be maintained unless commenced within 1 year after the later of—

(1)the date of termination of the franchise or nonrenewal of the franchise relationship; or

(2)the date the franchisor fails to comply with the requirements of section 2802, 2803, or 2807 of this title.

(b)(1)In any action under subsection (a), the court shall grant such equitable relief as the court determines is necessary to remedy the effects of any failure to comply with the requirements of section 2802, 2803, or 2807 of this title, including declaratory judgment, mandatory or prohibitive injunctive relief, and interim equitable relief.

(2)Except as provided in paragraph (3), in any action under subsection (a), the court shall grant a preliminary injunction if—

(A)the franchisee shows—

(i)the franchise of which he is a party has been terminated or the franchise relationship of which he is a party has not been renewed, and

(ii)there exist sufficiently serious questions going to the merits to make such questions a fair ground for litigation; and

(B)the court determines that, on balance, the hardships imposed upon the franchisor by the issuance of such preliminary injunctive relief will be less than the hardship which would be imposed upon such franchisee if such preliminary injunctive relief were not granted.

(3)Nothing in this subsection prevents any court from requiring the franchisee in any action under subsection (a) to post a bond, in an amount established by the court, prior to the issuance or continuation of any equitable relief.

(4)In any action under subsection (a), the court need not exercise its equity powers to compel continuation or renewal of the franchise relationship if such action was commenced—

(A)more than 90 days after the date on which notification pursuant to section 2804(a) of this title was posted or personally delivered to the franchisee;

(B)more than 180 days after the date on which notification pursuant to section 2804(b)(2) of this title was posted or personally delivered to the franchisee; or

(C)more than 30 days after the date on which the termination of such franchise or the nonrenewal of such franchise relationship takes effect if less than 90 days notification was provided pursuant to section 2804(b)(1) of this title.

(c)In any action under subsection (a), the franchisee shall have the burden of proving the termination of the franchise or the nonrenewal of the franchise relationship. The franchisor shall bear the burden of going forward with evidence to establish as an affirmative defense that such termination or nonrenewal was permitted under section 2802(b) or 2803 of this title, and, if applicable, that such franchisor complied with the requirements of section 2802(d) of this title.

(d)(1)If the franchisee prevails in any action under subsection (a), such franchisee shall be entitled—

(A)consistent with the Federal Rules of Civil Procedure, to actual damages;

(B)in the case of any such action which is based upon conduct of the franchisor which was in willful disregard of the requirements of section 2802, 2803, or 2807 of this title, or the rights of the franchisee thereunder, to exemplary damages, where appropriate; and

(C)to reasonable attorney and expert witness fees to be paid by the franchisor, unless the court determines that only nominal damages are to be awarded to such franchisee, in which case the court, in its discretion, need not direct that such fees be paid by the franchisor.

(2)The question of whether to award exemplary damages and the amount of any such award shall be determined by the court and not by a jury.

(3)In any action under subsection (a), the court may, in its discretion, direct that reasonable attorney and expert witness fees be paid by the franchisee if the court finds that such action is frivolous.

(e)(1)In any action under subsection (a) with respect to a failure of a franchisor to renew a franchise relationship in compliance with the requirements of section 2802 of this title, the court may not compel a continuation or renewal of the franchise relationship if the franchisor demonstrates to the satisfaction of the court that—

(A)the basis for such nonrenewal is a determination made by the franchisor in good faith and in the normal course of business—

(i)to convert the leased marketing premises to a use other than the sale or distribution of motor fuel,

(ii)to materially alter, add to, or replace such premises,

(iii)to sell such premises,

(iv)to withdraw from the marketing of motor fuel through retail outlets in the relevant geographic market area in which the marketing premises are located, or

(v)that renewal of the franchise relationship is likely to be uneconomical to the franchisor despite any reasonable changes or reasonable additions to the provisions of the franchise which may be acceptable to the franchisee; and

(B)the requirements of section 2804 of this title have been complied with.

(2)The provisions of paragraph (1) shall not affect any right of any franchisee to recover actual damages and reasonable attorney and expert witness fees under subsection (d) if such nonrenewal is prohibited by section 2802 of this title.

(f)(1)No franchisor shall require, as a condition of entering into or renewing the franchise relationship, a franchisee to release or waive—

(A)any right that the franchisee has under this subchapter or other Federal law; or

(B)any right that the franchisee may have under any valid and applicable State law.

(2)No provision of any franchise shall be valid or enforceable if the provision specifies that the interpretation or enforcement of the franchise shall be governed by the law of any State other than the State in which the franchisee has the principal place of business of the franchisee.

Notes & Related Subsidiaries

Editorial Notes

References in Text

The Federal Rules of Civil Procedure, referred to in subsec. (d)(1), are set out in the Appendix to Title 28, Judiciary and Judicial Procedure.

Amendments

2007—Subsecs. (a), (b)(1), (d)(1)(B). Pub. L. 110–140 substituted “2802, 2803, or 2807” for “2802 or 2803” wherever appearing. 1994—Subsec. (f). Pub. L. 103–371 added subsec. (f).

Statutory Notes and Related Subsidiaries

Effective Date

of 2007 AmendmentAmendment by Pub. L. 110–140 effective on the date that is 1 day after Dec. 19, 2007, see section 1601 of Pub. L. 110–140, set out as an

Effective Date

note under section 1824 of Title 2, The Congress.

§2805 Enforcement provisions

Summary

Title 15, §2805

Notes & Related Subsidiaries

Editorial Notes

References in Text

Amendments

Statutory Notes and Related Subsidiaries

Effective Date

Effective Date

Citations & Metadata