Contractors Home Appliance v. Clarke Distribution

• Decision Date: 21 March 2002
• Docket Number: Civil Action No. 3:00 CV 1630(CFD).
• Court: U.S. District Court — District of Connecticut
• Parties: CONTRACTORS HOME APPLIANCE, INC., Plaintiff, v. CLARKE DISTRIBUTION CORPORATION, Defendant.

196 F.Supp.2d 174

CONTRACTORS HOME APPLIANCE, INC., Plaintiff, v. CLARKE DISTRIBUTION CORPORATION, Defendant.

Civil Action No. 3:00 CV 1630(CFD).

United States District Court, D. Connecticut.

March 21, 2002.

Martin A. Clayman, Kent D. Mawhinney, Clayman, Markowitz, Litman & Tapper, Bloomfield, CT, Christopher S. Acquanita, Murphy & Raccio, Wallingford, CT, for plaintiff.

Nicole J. Anker, William N. Berkowitz, Fiona S. Trevelyan, Alicia L. Downey, Hartford, CT, Holly M. Polglase, Campbell, Campbell & Edwards, East Hartford, CT, for defendant.

RULING ON MOTION FOR SUMMARY JUDGMENT

DRONEY, District Judge.

The plaintiff, Contractors Home Appliance, Inc., ("Contractors") brings this action against Clarke Distribution Corporation ("Clarke") alleging violations of the Connecticut Franchise Act, Conn.Gen.Stat. §§ 42-133 et. seq., and the Connecticut Unfair Trade Practices Act, Conn.Gen. Stat. § 42-110b, arising from Clarke's termination of a dealership agreement between the parties. Clarke has filed a motion to dismiss [Doc. # 5]¹.

I. Facts²

Clarke is based in Hopkinton, Massachusetts and distributes "high-end" kitchen appliances, including those manufactured by Sub-Zero, Dynasty, Thermador, and Gaggenau, to retail dealers located throughout New England. Contractors, at all relevant times located in East Granby, Connecticut, sells kitchen appliances, primarily to contractors and home builders. In 1994, Clarke became Contractors' supplier of Sub-Zero appliances, when it took over the account from a competitor. In 1996, Clarke became Contractors' supplier of Thermador appliances, when Thermador discontinued direct sales and transferred its then-existing accounts to Clarke. Clarke and Contractors entered into their first written dealership agreement on July 15, 1997. On January 1, 2000, the parties entered into the dealership agreement that is the subject of this case ("Agreement"). That agreement provided that Contractors was authorized by Clarke to sell Sub-Zero, Dynasty, and Thermador appliances.³ Under the Agreement, inter alia, Contractors was required to use its best efforts to promote and market these brands purchased from Clarke, and Clarke was required to use its best efforts to supply the products to Contractors on a timely basis. By letter dated April 14, 2000, Clarke gave Contractors notice that Clarke was terminating the Agreement on the basis that Contractors' violated its "best efforts" requirement, effective ninety days thereafter. Clarke refused to accept any new orders for products from Contractors after July 14, 2000. Contractors' then filed this action.⁴

Clarke argues in this motion that a forum selection clause in the Agreement requires that this action be brought in Massachusetts.

II. Summary Judgment Standard

In a motion for summary judgment, the burden is on the moving party to establish that there are no genuine issues of material fact in dispute and that it is entitled to judgment as a matter of law. See Fed. R.Civ.P. Rule 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A court must grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact. . . ." Miner v. Glens Falls, 999 F.2d 655, 661 (2d Cir.1993) (citation omitted). A dispute regarding a material fact is genuine "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Aldrich v. Randolph Cent. Sch. Dist., 963 F.2d 520, 523 (2d Cir.) (quoting Anderson, 477 U.S. at 248, 106 S.Ct. 2505), cert. denied, 506 U.S. 965, 113 S.Ct. 440, 121 L.Ed.2d 359 (1992). If the nonmoving party "has failed to make a sufficient showing on an essential element of [its] case with respect to which [it] has the burden of proof," then summary judgment is appropriate. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

The Court resolves "all ambiguities and draw[s] all inferences in favor of the nonmoving party in order to determine how a reasonable jury would decide." Aldrich, 963 F.2d at 523. Thus, "[o]nly when reasonable minds could not differ as to the import of the evidence is summary judgment proper." Bryant v. Maffucci, 923 F.2d 979, 982 (2d Cir.), cert. denied, 502 U.S. 849, 112 S.Ct. 152, 116 L.Ed.2d 117 (1991). See also Suburban Propane v. Proctor Gas, Inc., 953 F.2d 780, 788 (2d Cir.1992). Additionally "[w]here, as here, the non-movant bears the burden of proof at trial, the movant can satisfy its burden of production by pointing out an absence of evidence to support an essential element of the non-movant's case." Ginsberg v. Healey Car & Truck Leasing, Inc., 189 F.3d 268, 270 (2d Cir.1999) (citing Celotex, 477 U.S. at 323-24, 106 S.Ct. 2548 and Tops Mkts., Inc. v. Quality Mkts., Inc., 142 F.3d 90, 95 (2d Cir.1998)).

III. Discussion

Clarke maintains that the instant action cannot be pursued in this Court because the forum selection clause in the Agreement provides that any action to enforce the Agreement must be brought in Massachusetts. Contractors argues, however, that the parties' relationship constitutes a "franchise" under Connecticut law and thus the forum selection clause is invalidated by the Connecticut Franchise Act's mandate that "any waiver of the rights of a franchisee under Sections 42-133f or 42-133g which is contained in any franchise agreement entered into or amended on or after June 12, 1975, shall be void." Conn. Gen.Stat. § 49-133(f); see also Conn.Gen. Stat. § 49-133g(a) (providing that "any franchisee may bring an action for violation of Sections 42-133e to 42-133g inclusive, in the superior court to recover damages sustained by reason of such violation . . ."). Clarke responds that there are no genuine issues of material fact that the relationship between the parties was not that of franchisee and franchisor and thus, the forum selection clause controls. In the alternative, Clarke asserts that, even assuming their relationship was that of franchisee and franchisor and the action is properly here, there are no genuine issues of material fact that Clarke had "good cause" to terminate its relationship with Contractors.

The first step in the analysis is to determine whether there was a franchise relationship between Clarke and Contractors as a result of the Agreement.

A. "Franchise" Under Connecticut Law

Connecticut General Statute § 42-133e(b) defines "franchise" as an oral or written agreement or arrangement in which:

(1) a franchisee is granted the right to engage in the business of offering, selling or distributing goods or services under a marketing plan or system prescribed in substantial part by a franchisor, . . . and (2) the operation of the franchisee's business pursuant to such plan or system is substantially associated with the franchisor's trademark, service mark, trade name, logotype, advertising or other commercial symbol designating the franchisor or its affiliate. . . .

Conn.Gen.Stat. § 42-133e(b). Here, the parties expressly disavowed the existence of a franchise relationship in the Agreement. See Agreement § 1.2 ("Dealer agrees that it is an independent contractor, not an agent, employee or franchise of the Distributor. . . ."). However, the label given to the relationship by the parties, while relevant, is not determinative of the existence of a franchise relationship. See Hartford Elec. Supply Co. v. Allen-Bradley Co., Inc., 250 Conn. 334, 736 A.2d 824, 833 (1999); Petereit v. S.B. Thomas, Inc., 853 F.Supp. 55, 60 (D.Conn.1993) (stating that the existence of a franchise relationship "is fixed by reality, not by what defendant[s] or plaintiffs call it, though descriptive language may be relevant") aff'd. in part, rev'd in part, 63 F.3d 1169 (2d Cir. 1995), cert. denied, 517 U.S. 1119, 116 S.Ct. 1351, 134 L.Ed.2d 520 (1996). Overall, a franchise relationship is exemplified by a certain "level of control" of the franchisee's operation by the franchisor. See Hartford Elec. Supply Co., 736 A.2d at 833.

While there is no precise formula as to what meets the first part of the test for determining a franchise relationship under § 42-133e of a "marketing plan or system prescribed in substantial part by a franchisor," see id. at 834; Chem-Tek, Inc. v. General Motors Corp., 816 F.Supp. 123, 129 (D.Conn.1993); Sorisio v. Lenox, Inc., 701 F.Supp. 950, 960 (D.Conn.1988), aff'd, 863 F.2d 195 (2d Cir.1988), the Connecticut Supreme Court and U.S. District Court in Connecticut have generally applied the factors outlined in Consumers Petroleum of Connecticut, Inc. v. Duhan, 38 Conn.Supp. 495, 452 A.2d 123 (1982), to determine this issue. See Hartford Elec. Supply Co., 736 A.2d at 834; Ackley v. Gulf Oil Corp., 726 F.Supp. 353, 365 (D.Conn.1989); Aurigemma v. Arco Petroleum Prods. Co, 698 F.Supp. 1035, 1038-39 (D.Conn.1988); McKeown Distributors Inc. v. Gyp-Crete Corp., 618 F.Supp. 632, 642 (D.Conn.1985). Those factors include the level of control the putative franchisor had over the putative franchisee's: "(1) hours and days of operation; (2) advertising; (3) lighting; (4) employee uniforms; (5) prices; (6) trading stamps; (7) hiring; (8) sales quotas; and (9) management training." Hartford Elec. Supply Co., 736 A.2d at 834 (citing Petroleum, 452 A.2d at 125). Courts have also looked at whether the franchisor provided the franchisee with financial support, audited its books, or inspected its premises. See id.

As to the second prong of Conn.Gen. Stat. 42-133e, requiring that the operation of the franchisee's business be "substantially associated with the franchisor's trademark . . . or other commercial symbol," the Connecticut Supreme Court has held that, while the statute does not require that a putative franchisee carry exclusively franchisor-trademarked products, a showing of a "dependen[ce] on the public's confidence in the franchised product for...