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

Summary

A franchisee can sue a franchisor in federal court if the franchisor breaks the rules in sections 2802, 2803, or 2807. The suit can be filed where the franchisor’s main office is or where the franchisee does business. The amount of money at issue does not matter. The case must start within 1 year after the later of the franchise ending or the date the franchisor failed to follow the rules. A court can order whatever is needed to fix the problem, like declaring rights, stopping or forcing actions, or giving temporary relief. A judge must grant a preliminary injunction if the franchisee shows the franchise was ended or not renewed, there are serious questions worth a trial, and the harm to the franchisor from the injunction is less than the harm to the franchisee without it. The court can require the franchisee to post a bond. The court may refuse to force continuation if the suit starts more than 90 days after one kind of notice, more than 180 days after another kind of notice, or more than 30 days after termination when less than 90 days’ notice was given. The franchisee must prove the termination or nonrenewal. The franchisor must present evidence that the ending was allowed under 2802(b) or 2803 and, if needed, that it followed 2802(d). If the franchisee wins, the court can award actual damages, and in willful cases it can award exemplary (punitive) damages. The court can also make the franchisor pay reasonable lawyer and expert fees unless only nominal damages are given. The judge—not a jury—decides exemplary damages. The court may order the franchisee to pay fees if the suit is frivolous. A franchisor cannot force a franchisee to waive federal or state rights to get or renew a franchise. Any contract clause that says another state’s law governs is invalid if the franchisee’s main business is in a different state.

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