Opinion ID: 660189
Heading Depth: 3
Heading Rank: 3

Heading: Compliance with Section 56:10-6

Text: 25 GM facially complied with section 56:10-6. Initially, it responded in the prescribed amount of time with a facially acceptable reason (unsatisfactory levels of sales performance in other GM franchises) why Warnock was not an acceptable transferee. Subsequently, it gave Warnock additional reasons. Appellants argue, however, that GM acted unreasonably or in bad faith when it responded in this facially correct manner and therefore that it actually did not comply with the FPA. To the extent that the New Jersey courts have interpreted the FPA to impose a requirement of reasonableness on a franchisor's decision to disapprove a transfer, Simmons v. General Motors Corp., 180 N.J.Super. 522, 435 A.2d 1167, 1177 (N.J.Super.App.Div.), (In keeping with the sense of the franchise Practice Act, we would hold a franchisor to the reasonable exercise of discretion in passing upon a proposed transferee.), certif. denied, 88 N.J. 498, 443 A.2d 712 (1981), we recognize that a genuine issue of material fact exists with regard to the reasonableness of GM's disapproval of Warnock. Appellants assert that GM changed its reasons for disapproving the transfer and that the reasons given are not accurate. This raises an issue of material fact which requires that the case be remanded to the bankruptcy court. The bankruptcy court should proceed to determine the ultimate fact whether the franchisor failed to exercise discretion and acted unreasonably in disapproving Warnock. 5 26 GM's argument that it has an independent reason under the franchise agreement and the FPA 6 for rejecting the transferee, namely Warnock's proposal to relocate, does not change our conclusion because this reason also raises an implicit question concerning the reasonableness of the rejection. Remand to the bankruptcy court is therefore proper to determine whether GM's disapproval was reasonable.