Opinion ID: 1450488
Heading Depth: 3
Heading Rank: 1

Heading: Arkansas Franchise Practices Act

Text: Southeastern alleges that the circuit court erred in granting summary judgment on its claim under the Arkansas Franchise Practices Act (the Franchise Act). [2] Specifically, Southeastern alleged in its complaint that Miller did not act in good faith and violated the following provision of the Franchise Act: It shall be a violation of this subchapter for any franchisor, through any officer, agent, or employee to engage directly or indirectly in any of the following practices: . . . (6) To refuse to deal with a franchise in a commercially reasonable manner and in good faith[.] Ark.Code Ann. § 4-72-206 (Repl.2001). Southeastern suggests that Miller's acts in preapproving O'Conner and refusing to approve a buyer other than O'Conner were commercially unreasonable and not in good faith. Miller's response is that this claim fails because Southeastern did not meet the statutory requirements to trigger Miller's obligation to review or approve any potential buyers other than O'Conner. [3] Therefore, Miller argues, Southeastern's claim that Miller acted commercially unreasonably and in bad faith for failing to approve any other buyers fails as a matter of law. We stated in Miller Brewing Co. v. Ed Roleson, Jr., Inc., 365 Ark. 38, 223 S.W.3d 806 (2006) ( Ed Roleson ), that whether Miller dealt with the franchise in that case in a commercially reasonable manner and in good faith under the Franchise Act was a question of fact. In Ed Roleson , a Miller franchisee, Roleson, claimed that Miller violated the good-faith provision of the Franchise Act by adopting and executing a plan to eliminate Roleson as a distributor and by applying pressure to other distributors in furtherance of that plan. Id. Roleson presented evidence to support this claim in the form of internal Miller documents and testimony indicating that Miller prevented Roleson from purchasing other distributors to expand its business and increase its revenues, which, as Miller admitted at trial, was critical to Roleson's ability to remain competitive in the beer market. We held that a franchisor's attempt to force a franchisee out of business may constitute a refusal to deal with a franchise in a commercially reasonable manner and in good faith under Ark.Code Ann. § 4-72-206(6). Id. In this case, Southeastern claims that Miller prevented it from selling its business to any purchaser other than Miller's preferred purchaser for less than fair market value. It provided the following deposition testimony to support its position. Richard Metcalf testified that while interested in Southeastern, he never made an offer because Young told him that Miller would prefer to approve an existing Miller distributor as the purchaser of Southeastern. Freeman testified that Young told him not to waste his time submitting letters of intent from potential purchasers other than O'Conner because Miller wanted O'Conner to purchase Southeastern. Freeman also testified that, after Miller cut off Southeastern's credit, Young told him that Miller would reinstate credit if Freeman would work out a deal with O'Conner. Danny Frye, an employee of Southeastern, testified that Judy Stefanovitz, a Miller employee, told him in April that she thought that Miller had already decided that O'Conner was going to get the business. Finally, Lloyd Lee, a prospective purchaser of Southeastern, testified that Maddox of Miller told him that O'Conner was going to be the buyer regardless of what Freeman wanted, and it was a done deal. Southeastern's claim and supporting evidence suggests that the very issue in this case is whether Miller's actions in thwarting Southeastern's attempts to obtain offers other than O'Conner's violated Miller's duty under the Franchise Act. Miller has an obligation under the Act to deal with its franchise in a commercially reasonable manner and in good faith. Ark. Code Ann. § 4-72-205, cited by Miller, prevents a franchisee from transferring or assigning its franchise without notice to the franchisor. There is no question in this case that Miller had notice of the proposed transfer. The first question is whether Miller prevented Southeastern from obtaining offers from potential purchasers by forcing a sale to its preferred purchaser. The second question is if it did, did its conduct violate the Franchise Act? Ark.Code Ann. § 4-72-205 does not authorize Miller to disregard its obligation under Ark.Code Ann. § 4-72-206(6) to deal with its franchise in a commercially reasonable manner and in good faith. Viewing the evidence in the light most favorable to Southeastern and resolving all doubts and inferences against Miller, we hold that Southeastern has presented proof demonstrating the existence of a material issue of fact on whether Miller's actions constituted a refusal to deal with a franchise in a commercially reasonable manner and in good faith under Ark.Code Ann. § 4-72-206(6). It is therefore entitled to submit this claim to a jury.