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Court Watch Franchisors Rebuff Franchisees' Claims Of Bad Behavior

BY Zach Eyster
February 29, 2016

The implied covenant of good faith and fair dealing, while not always a separate cause of action, depending on the jurisdiction, can be a powerful tool in a franchisee's arsenal to assert claims based on breaches of franchise agreements due to a franchisor's bad conduct. However, recent cases coming out of New York and Michigan demonstrate just how difficult it can be for a franchisee to make out a claim premised on the franchisor's poor behavior.

Paolozzi v. Honda

In V.M. Paolozzi Imports, Inc. v. Am. Honda Motor Co., Inc., No. 7:12-CV-1052, 2015 WL 7776926 (N.D.N.Y. Dec. 2, 2015), Plaintiffs, the parties to certain franchise agreements with Defendant American Honda Motor Corporation (Honda), alleged various violations of laws and implied covenants related to the opening of Honda Dealerships at the height of the 2008 recession. According to the court, the Plaintiffs had alleged that Honda demanded “strict compliance” with the franchise agreements entered into, with the apparent objective of gaining control over the franchisees such that Honda could engineer the appointment of preferred franchisees in the Plaintiffs' geographic region.

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