Court Watch

The United States District Court for the District of Minnesota recently granted in part a franchisor's motion to dismiss a franchisee's claims for breach of contract and breach of the duty of good faith and fair dealing, holding that the franchisor acted within the bounds of the franchise agreements between the parties when the franchisor commenced the operation of an online store. Newpaper, LLC v. Party City Corp., No. 13-1735 ADM/LIB, 2013 U.S. Dist. LEXIS 137796, at 16 (D. Minn. Sept. 25, 2013).

In Newpaper, a party supply retail franchisee operating 25 Party America retail locations entered into an agreement (the “Agreement”) to convert its Party America locations to Party City stores, also agreeing to terminate all of its Party America franchise agreements and execute new Party City franchise agreements. Id., at 2. Said conversions were the result of the sale of Party America Corporation and Party City Corporation to a parent company. Id. The Agreement granted to the franchisee the exclusive right to operate Party City retail stores in Minnesota, Iowa, North Dakota, South Dakota, and 12 Wisconsin counties bordering Minnesota and Iowa. Id., at 3. In the Agreement, the franchisor reserved the right to sell its products as well as products sold by the franchisee through other distribution channels, including the Internet. Id.