The Franchise Memorandum - Issue # 268 (Distribution Issue)

Lathrop GPM

Welcome to The Franchise Memorandum by Lathrop GPM. Periodically, The Franchise Memorandum focuses on topics primarily of interest to companies that use distributors and dealers rather than manage a business format franchise system. The distribution-related topics in this issue include choice of law, terminations, and arbitration.

Eleventh Circuit Affirms Ruling that Manufacturer Is Not Bound by Agreement to Which It Was Not a Party -

The Eleventh Circuit Court of Appeals recently affirmed a ruling that forklift manufacturer Taylor Group could not be compelled to arbitrate a dispute pursuant to an arbitration provision in an agreement to which it was not a party. Taylor Grp., Inc. v. Indus. Distribs. Int’l Co., 2021 WL 2327910 (11th Cir. June 8, 2021). In 1991, Taylor Group entered into a distribution agreement with Taylor Machine Works, Inc., giving Machine Works the right to distribute Taylor Group’s forklifts overseas. In 1999, Machine Works entered into a marketing agreement with Industrial Distributors, granting Industrial the right to market Machine Works’ products in the Dominican Republic. That agreement contained an arbitration clause. Machine Works terminated the marketing agreement in 2018. Then, in 2019, Taylor Group repurchased Machine Works’ international distribution rights. Taylor Group subsequently accused Industrial of trademark infringement and brought suit in federal court in Florida. Industrial, in turn, moved to compel Taylor Group to arbitrate its claims pursuant to the arbitration clause in the marketing agreement. The district court denied Industrial’s motion and Industrial appealed, arguing that Taylor Group, though a nonsignatory, could and should be bound by the arbitration clause under the theories of estoppel, third-party beneficiary, agency, and assumption. The Eleventh Circuit disagreed and affirmed the district court.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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