Opinion ID: 3017022
Heading Depth: 2
Heading Rank: 1

Heading: The Jury Instruction and Verdict Sheet

Text: Coast’s main contention is that it was entitled to a verdict on the NJFPA claim because § 56:10-9 is not a defense to Coast’s 1996-1997 allocation claims. It argues that the jury instruction and verdict sheet question completely misstated the law and essentially deprived Coast of its proper NJFPA claim under § 56:10-7(e). According to Coast, the District Court erred in instructing the jury to excuse VOA/AOA from all 3 Shortly before trial in the federal action in 2001, Aspen-Knolls Automotive Group, LLC, the contract purchaser of Coast’s franchises, intervened in the federal action, seeking a ruling that any judgment or other relief obtained by VOA/AOA on its equitable rescission counterclaim would not adversely impact Aspen’s right to acquire Coast’s Volkswagen and Audi franchises. None of the District Court orders expressly disposed of the complaint. Upon review of the parties’ responses to our inquiry as to the status of the Aspen complaint, we are now satisfied that we have jurisdiction to consider the matter. VOA/AOA did not prevail on its counterclaim, and thus, it was not necessary for the District Court to adjudicate Aspen’s complaint in intervention and the Judgment and Order closing the federal action entered on January 8, 2003, was final as to all claims. 6 liability based on Coast’s alleged substantial noncompliance with the franchise agreement because VOA/AOA never elected to terminate the contract in the relevant time period and because no factual nexus existed between Coast’s inequitable allocation claim and the alleged material breach. The question before us is whether § 56:10-9 applies in actions brought under § 56:10-7(e). The parties have cited no New Jersey law on point and we have found no decision of the New Jersey Supreme Court, or of lower state courts, on point. We must, as a federal court asked to decide an open question of state law, look to the fundamental principles of statutory construction that would inform the New Jersey court’s consideration of the issue. New Jersey abides by well-known rules of statutory construction. In New Jersey, when a statute is clear and unambiguous on its face, “the sole function of the courts is to enforce it according to its terms.” Velazquez v. Jiminez, 798 A.2d 51, 61 (2002). “All terms in the statute should be accorded their normal sense and significance.” Id. The “overriding objective in determining the meaning of a statute is to effectuate the legislative intent in light of the language used and the objectives sought to be achieved.” McCann v. Clerk of the City of Jersey City, 771 A.2d 1123, 1128 (N.J. 2001) (quoting State v. Hoffman, 695 A.2d 236, 243 (N.J. 1997)). Section 56:10-9 provides that “[i]t shall be a defense for a franchisor, to any action brought under this act by a franchisee, if it be shown that said franchisee has failed to substantially comply with requirements imposed by the franchise and other agreements 7 ancillary or collateral thereto.” Giving these terms their normal meaning, as we must, we find no support for Coast’s contention that the statutory defense does not apply to actions brought under § 56:10-7(e). To the contrary, § 56:10-9 provides a complete defense to a franchisor in “ any action” brought under the NJFPA where the franchisee has itself committed a material breach of the franchise agreement. The plain meaning of § 56:10-9 is consistent with the NJFPA’s stated legislative policy of regulating the responsibilities of both the franchisee and the franchisor. In Westfield Centre Service, Inc. v. Cities Service Oil Co., 432 A.2d 48, 55 (N.J. 1981), the New Jersey Supreme Court construed the “good cause” language of § 56:10-5 as limiting termination of the franchise agreement under the NJFPA only in cases where the franchisee committed a breach. The New Jersey Supreme Court recognized that the plain meaning of the “good cause” provision supported the “legislative desire to protect the innocent franchisee when the termination occurs at the franchisor’s convenience.” Id. The same can be said of § 56:10-9 and its application to § 56:10-7(e). The statutory defense does not protect the franchisor from suit brought under § 56:10-7(e) by an “innocent franchisee.” This Court and federal district courts have recognized that § 56:10-9 allows a franchisee’s substantial noncompliance to serve as a complete defense to any action brought under the NJFPA. See General Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 321 n. 11 (3d Cir. 2001); In re The Matterhorn Group, Inc., Nos. 97B 41274- 8 97B 41278, 2002 Bankr. Lexis 1275 (Bkr. S.D.N.Y. November 15, 2002); Zaro Licensing, Inc. v. Cinmar, Inc., 779 F.Supp. 276, 286 (S.D.N.Y. 1991) (“It is a defense to a claim brought under the act [NJFPA] by a franchisee that the franchisee has failed to comply substantially with the requirements imposed by the franchisor”). Coast argues that § 56:10-9 is contrary to the common law duty of good faith and fair dealing as codified in § 56:10-7(e). Even if we assume that § 56:10-7(e) codifies the common law duty of good faith and fair dealing and that § 56:10-9 effects a change by providing a defense to franchisors not available at common law, we are not persuaded that § 56:10-9 is inconsistent with or inapplicable to actions brought under § 56:10-7(e). In New Jersey, statutes that impose duties or burdens, or establish rights, or provide benefits not recognized by common law, are subject to strict construction. State v. International Fed’n of Prof’l and Technical Engrs., 780 A.2d 525 (2001). It is clear that if the statutory defense makes any change in the common law at all, it does so only with regard to those cases where the franchisee also breached the franchise agreement. And, as we have already discussed, § 56:10-9 so construed does not circumvent the Legislature’s intended purpose for enacting NJFPA, that is to protect the innocent franchisee. Accordingly, we conclude that the District Court did not err in its instruction to the jury with regard to the NJFPA statutory defense. The District Court accurately stated that VOA/AOA cannot be held responsible under the NJFPA if Coast did not substantially 9 comply with the franchise agreement. And we find that jury question 6 did not misstate the law in asking “did Defendant’s (sic) prove by a preponderance of the evidence that Plaintiff failed to substantially comply with requirements of the Franchise Agreement?”