L. Michael Hankes  |  ATTORNEY AT LAW
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Vendor Rebates

Calendar year 2012 has ushered in significant changes to Meineke corporate’s upper echelon leadership. Following the appointment of Jonathan Fitzpatrick, Ken Walker departed on July 9, 2012. On Tuesday, August 7, 2012, a significant number of other Meineke corporate executives also departed. As the Meineke Dealers begin their relationships with Meineke’s new corporate leadership, there is no better time to review certain aspects of the Meineke FTA which set Meineke’s franchise culture apart from other franchise systems.

This article will be the first in a limited series discussing some of the aspects of the Meineke FTA.

Many, but not all, current Meineke Dealers remember the landmark litigation entitled Broussard, et al. v. Meineke Discount Muffler Shops, Inc., a class action which resulted in a March, 1997 judgment against Meineke corporate and others in excess of $590,000,000.00. History tells us that the Broussard judgment was reversed by the Fourth Circuit Court of Appeals in 1998. However, the Meineke FTA, as it currently exists, was negotiated almost in its entirety in the 1999-2000 time period following the devastation left after the Broussard litigation concluded.

Few people know that the Broussard litigation had its roots in the discovery by the Meineke Dealers of unlawful rebates being paid in connection with advertising purchases made from funds paid by the Meineke Dealers to Meineke to advertise their franchised businesses.

Understandably, the subject of vendor rebates was one of the more fundamental issues incorporated into the Meineke FTA that was rolled out to the dealership in calendar year 2000. Section 7.2 contained a number of protections for the Meineke Dealers in order to discourage the potential for any future disputes over use of rebates as a source of revenue for Meineke. Section 7.2 expressly forbids the solicitation or acceptance by Meineke of any rebates from any approved supplier of equipment, signs, parts or other supplies based upon the amount of the Meineke Dealer’s purchases from any supplier. Not only that, but the Meineke Dealers have the legal right to review Meineke’s agreements and other arrangements with any vendor.

These protections were considered so important that separate class action and multi-plaintiff litigation rights were expressly incorporated into the Meineke FTA to facilitate enforcement of Section 7.2. Section 17.4 of the Meineke FTA (which provides the vehicle for the Meineke Dealers to challenge violations of Section 7.2) states:

Subject to and in accordance with applicable law, you may institute a multi-plaintiff claim (involving more than one plaintiff that is not one of your Owners or Affiliates) or a class action claim in a court of competent jurisdiction against us for the sole purpose of seeking: (a) preliminary and permanent injunctive relief or specific performance as a result of a breach of this Agreement; (b) restitution to the MAF as a result of a breach of Article 8 hereof; or (c) restitution as a result of a breach of our obligation under Section 7.2 not to take rebates, benefits and promotional allowances from suppliers, other than in accordance with the terms of Section 7.2. You agree that multi-plaintiff or class action claims may not be instituted for any claims or purposes other than those listed above in this Section 17.4. You further agree that any such actions shall be brought exclusively in the jurisdiction where we then have our principal place of business, notwithstanding the provisions of Section 17.5. The provisions of this Section 17.4 shall continue in full force and effect subsequent to and notwithstanding the expiration of this Agreement.

As a result of the incorporation of these provisions into the Meineke FTA, the Meineke Dealers have been able to continue the culture of cooperative negotiation with Meineke corporate on significant issues affecting the Meineke chain. For instance, it was the cooperative negotiation culture that produced a Fleet Addendum which the Meineke Dealer’s Association (hereafter MDA) was able to recommend to the dealership.

Similar negotiations and discussions had been taking place with respect to a potential national tire arrangement at the time that the paradigm shift occurred within Meineke’s corporate management. At the time of this writing, there was no agreement reached with the MDA on any potential national tire contract. It will be interesting to see how future discussions and negotiations, if any, play out with respect to a national tire deal.

This article is intended for informational purposes only and is not to be relied upon as legal advice, as individual facts and circumstances may vary.