Florida Appeals Court Rules Against Auto Dealers in Franchise Law Case
On January 9th, 2019, Florida’s Fourth District Court of Appeal ruled in favor of an auto manufacturer (the franchisor) in a franchise law dispute. In the case of Maserati of Fort Lauderdale and Maserati of Palm Beach v. Maserati North America, the appeals court overturned a lower court’s decision — ruling that the automaker had the right to alter its incentive structure, without providing a 90-day advanced notice to affected franchisees. In this post, our top-rated West Palm Beach franchise law attorneys provide an overview of this case and we highlight the important implications for franchisors and franchisees in Florida.
The Background: The Franchisor Changed the Incentive Structure
Two South Florida auto dealers (Maserati of Ft. Lauderdale and Maserati of Palm Beach) filed a lawsuit against their franchisor (Maserati North America) after the company changed the terms of its incentive structure. Notably, both auto dealers have franchise agreements with the Italian luxury automaker. These franchise agreements stated that the auto dealers will receive compensation from Maserati based on their sales, their overall revenue, and other bonus/incentive programs. Beginning in 2017, Maserati reduced the total value of its incentive package for the dealerships. The franchisees were given relatively little advanced notice that the bonus program was being changed.
The Legal Issue: To What Extent Can Franchisors Modify Business Relationships
The two auto dealers filed a claim arguing that Maserati failed to comply with Florida law. Under Section 320.641 of the Florida statutes, franchisors must give franchisees 90 days’ notice when modifying material terms of franchise agreements. The plaintiffs contend that Maserati’s restructuring of their business relationship qualifies as modification of the contract. Notably, the underlying franchise agreement only refers to ‘bonuses’ and ‘incentives’ in general terms. No specific amounts were stated.
The Decision: The Appeals Court — Franchisors Given Broader Discretion
Florida’s Fourth District Court of Appeal ruled that the state’s 90-day notice requirement was inapplicable to this case. In the eyes of the court, the fact that the original franchise agreement never spelled out specific amounts for the incentive program was the key factor. As the franchise agreement was vague on this point, the franchisor retains broad discretion to adjust its incentive program annually based on the changing market conditions. Such changes do not amount to a modification of the contract.
Franchisees should take note of this decision: If terms for payment, incentives, or other key issues are not specified in the franchise agreement, then the franchisor likely has the right to make modifications without providing a 90-day notice.
Consult With a South Florida Franchise Law Attorney Today
At Pike & Lustig, LLP, our Florida franchise law attorneys have extensive experience handling the full range of franchise law cases. We represent both franchisors and franchisees. To find out more about what our legal team can do for you and your business, please contact us today. We have law offices in Miami and West Palm Beach and serve communities throughout the wider region.