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ALI/ABA National Teleseminar: Panelist on U.S. Supreme Court Franchising Decision

Mac's Shell Service: The Supreme Court's Ruling on Constructive Termination/Nonrenewal Has Broad Implications for Distribution and Franchise Relationships

June 2, 2010

When:
June 2, 2010

Rarely does the Supreme Court speak on issues central to distribution and franchise relationships, but this past March, it did just that--with implications for parties in all types of franchise, dealer, and distributor relationships. Ruling unanimously in Mac's Shell Service v. Shell Oil Products Co., the Court held that even the franchisor’s material breach of contract does not amount to constructive termination or nonrenewal under the Petroleum Marketing Practices Act (PMPA) if the franchisee remains in business. The Court also ruled that when a dealer faces renewal terms that it believes are improper, the dealer must either challenge the new terms and risk losing its franchise or accept the new agreement; it cannot do both.

Mac's Shell Service goes way beyond service station dealerships and the interpretation of the PMPA. Any franchise, dealer, and distributor relationship in which termination or nonrenewal is at stake may be affected by this decision.

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