Dealer’s New Hampshire Law Claims Dismissed, Based on Contractual Choice of Maine Forum

This posting was written by John W. Arden.

A terminated snowplow dealer’s New Hampshire Equipment Dealership Act, Consumer Protection Act, and Antitrust Act claims against its manufacturer were dismissed without prejudice, based on a contractual choice of Maine forum, according to the federal district court in Concord, New Hampshire (Summa Humma Enterprises, LLC v. Fisher Engineering, January 3, 2013, McCafferty, L.)

Summa Humma Enterprises, a New Hampshire equipment dealer, entered into a “purchase and security agreement” with Fisher Engineering, a Maine-based snowplow manufacturer. The parties also executed a “terms of sale agreement.” The purchase and security agreement included a clause providing that the agreement shall be governed by Maine law and that the dealer consented to personal jurisdiction in the State of Maine. The terms of sale agreement included a provision in which the dealer irrevocably consented to the exclusive jurisdiction of the State of Maine for the resolution of any dispute concerning any products of the terms and conditions of sale.

After representing Fisher for four years, Summa Humma began promoting and selling an additional line of snowplows and related equipment manufactured by BOSS, one of Fischer’s competitors. On May 10, 2012, Fisher sent a letter informing Summa Humma of its intention to terminate the distribution relationship, effective September 10, 2012. The primary reason for termination was the belief that Summa Humma was not fully committed to the promotion and sale of Fisher products. It also cited the dealer’s allegedly unfavorable approach to conducting business with Fisher as a reason for termination.

Summa Humma brought this action for a declaratory judgment reinstating the dealership and claiming damages under New Hampshire Equipment Dealership Act, Consumer Protection Act, and Antitrust Act. The action was filed in New Hampshire Superior Court and removed to the federal district court in Concord. Fisher moved to dismiss the claims, arguing that Summa Humma was contractually obligated to litigate them in Maine. Summa Humma contended that (1) the forum selection clause was permissive, (2) the forum selection clause was not applicable to the claims in this case, and (3) public policy disfavored enforcement of the forum selection clause.

Forum Selection Clause

The magistrate judge held that the forum selection clause of the terms of sale agreement was mandatory rather than permissive. Rather than just consenting to the jurisdiction of the federal and state courts of Maine, the dealer irrevocably consented and submitted to the exclusive jurisdiction of the state and federal courts located in the State of Maine.

The questions remaining concerned the relationship between section 14 of the purchase and security agreement (voluntarily submitting to the jurisdiction of Maine courts) and section 13 of the terms of sale agreement (irrevocably submitting to the exclusive jurisdiction of the Maine courts). Summa Humma argued that the “permissive” forum selection clause of the purchase and security agreement conflicted with—and displaced—the mandatory forum selection clause of the terms of sale agreement. Fisher characterized the clauses as complementary rather than contradictory, allowing the enforcement of the forum selection clause of the terms of sale agreement without violating the purchase and security agreement.

The judge found Fisher’s argument more compelling, holding that the purchase and security agreement and the terms of sale agreement could be harmonized to avoid rendering any provision of either document meaningless. All parties agreed that the clause in the purchase and security agreement was permissive while the clause in the terms of sale agreement was mandatory, the court observed. But there was nothing in the dealer’s submitting to the exclusive jurisdiction of the state and federal courts of Maine in the terms of sale agreement that was inconsistent with its consenting to personal jurisdiction in the courts of Maine in the purchase and security agreement.

“Because the two forum selection clauses are not in conflict, the provision establishing that the P&S Agreement controls the Terms of Sale does not come into play,” the judge held. “Accordingly, there is nothing is the P&S Agreement to preclude the court from enforcing the forum-selection clause in the Terms of Sale.”

Applicability of Clause

Contrary to Summa Humma’s contention, the claims it asserted in this case did not fall outside of the reach of the terms of sale agreement’s forum selection clause. It argued that the purchase and security agreement governed the general relationship of the parties and that the terms of sales covered merely a subset of that relationship. “That position is somewhat difficult to square with [the dealer’s] well-supported legal argument that the two documents ‘are, in the eyes of the law, one legal instrument.’”

The court concluded that the parties entered into a single agreement for Summa Humma to purchase snowplows and accessories from Fisher, subject to the terms and conditions stated in the purchase and security and the terms of sale agreements.

Equipment Dealer Law

Summa Humma’s claim for a declaratory judgment reinstating the relationship of the parties under the New Hampshire Equipment Dealership Act was unavailing. Fisher argued that the wrongful termination claim under the Act had to be adjudicated in Maine because it concerned the terms and conditions of the agreements between the parties. Summa Humma contended that the claim related to the unlawful termination of the supplier-dealer relationship rather than the products or terms and conditions of the sale of the products.

The court found that Summa Humma offered “no convincing argument that a dispute over Fisher’s termination of the P&S agreement is not a dispute concerning the P&S Agreement.” By its express terms, the forum selection clause covers “any” dispute “concerning” the terms and conditions of Fisher’s sales to Summa Humma. The language was broad enough to cover the wrongful termination claim. Thus, the claim had to be adjudicated in Maine.

Consumer Protection Act, State Antitrust Act

Fisher contended that the New Hampshire Consumer Protection Act and Antitrust Act claims must be adjudicated in Maine because they concerned the termination of the agreement under which it sold equipment to Summa Humma. The court agreed for the same reasons as stated for the Equipment Dealer Law claim.

Since all state law claims fell within the scope of the forum selection clause in the terms of sale agreement, they were all subject to dismissal. The clause itself was enforceable, since such claims are prima facie valid and Summa Humma did not demonstrate any ground for finding it invalid.

While the Equipment Dealer Law expressed a strong public policy in favor of having arbitration proceedings take place in a city or county where a dealer is located, the law said nothing about the proper venue for litigation, according to the court. The legislature consciously chose not to include an anti-forum-selection provision in the law, the court found.

The court rejected the dealer’s citation to opinions from other jurisdictions holding that other state dealer laws expressed a strong public policy disfavoring forum selection clauses that require litigation in out-of-state courts.

Thus, Fisher’s motion to dismiss the claims was granted without prejudice to Summa Humma’s right to bring the claims in another forum in accordance with the forum selection clause in the terms of sale agreement.

“Safe for Consumption by Infants” Formula Claim Could Be Misleading

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

Infant formula purchasers alleging that Abbott Laboratories misled consumers about safety in connection with the sale of five million containers of contaminated Similac brand formula stated claims under the New York Deceptive Practices Act, Texas Deceptive Trade Practices Act, and New Hampshire Consumer Protection Act, the federal district court in Central Islip New York has ruled.

Regardless of whether the claims “sounded in fraud” or were premised on specific misrepresentations rather than an “advertising scheme,” they were not subject to the heightened requirements of pleading fraud with particularity under Rule 9(b) of the Federal Rules of Civil Procedure, the court determined. The applicable standard for claims under all three statutes was notice pleading under Rule 8(a).

The purchasers alleged that Abbott misled consumers as to the safety of Similac through the following affirmative statements:

(1) Similac is “safe for the consumption by infants”;

(2) Abbott was “dedicated to the highest standards of manufacturing and marketing—and to complying with all applicable laws and regulations”;

(3) Similac “provid[es] babies with excellent nutrition for growth and development and has been clinically proven to aid brain, bone and immune system development”; and

(4) Abbott is “committed to conducting research to ensure that formula-fed infants receive the highest quality products to meet their nutritional needs.

Puffery v. Affirmative Misrepresentation

Statements that are vague or mere puffery or hyperbole such that a reasonable consumer would not view them as significantly changing the general gist of available information are not material, even if they are misleading. Under this standard, statements (2), (3), and (4) were not actionable, the court decided.

However, the court held that statement (1) about safety supported claims under the statutes based on affirmative misrepresentation. By identifying the alleged misrepresentation as being located on the product packaging and alleging that they relied on this statement in purchasing and paying a premium price for the contaminated formula, the purchasers asserted the requisite causal connection between the deceptive act and their injuries.

Recall

A recall program did not render the claims under the New York and New Hampshire statutes moot, according to the court. Without more specific information about whether the recall program would reasonably compensate the Texas plaintiffs, the question of whether the program constituted a reasonable offer under the Texas statute was not ripe for review.

Ohio Laws

A class action claim failed under the Ohio Uniform Consumer Sales Practices Act because the purchaser did not contend that she could meet the Act’s class action notice requirements, the court ruled. The Act provided that a class action could not be maintained unless the purported violation was either (1) an act or practice declared to be deceptive or unconscionable by a rule adopted by the Attorney General before the consumer transaction on which the action was based or (2) an act or practice determined by an Ohio state court to violate the Act and committed after the decision had been made public.

The purchaser could not pursue a claim under the Ohio Uniform Deceptive Trade Practices Act because consumers lacked standing to sue under the Act, according to the court.

Claims Under Texas Law

Purchasers bringing a claim under the Texas Deceptive Trade Practices Act were ordered to provide written notice to Abbott Laboratories of the claim within 20 days, after which the claim would be abated for 60 days.

The March 5 opinion in Leonard v. Abbott Laboratories, Inc. will be reported at CCH Advertising Law Guide ¶64,612.

National Banks’ “No Fee” Gift Card Ads Could Violate State Consumer Laws

This posting was written by William Zale, Editor of CCH Advertising Law Guide.

In two suits against that TD Bank, N.A. and Commerce Bank, N.A., consumer claims that the banks deceptively advertised “no fee” gift cards in violation of state consumer protection laws were not preempted by the National Bank Act or federal regulations, the federal district courts in Philadelphia and Camden, New Jersey have ruled.

On the front of the cards appeared a “Good Thru” date in large, raised letters. Very small print on the back of the cards stated that use was subject to terms and conditions accompanying the card. Each card came prepackaged in a decorative box, tied shut. Inside was a hidden pouch with a cardboard folding envelope containing a piece of paper stating terms and conditions of the card.

Dormancy Fees

In class action complaints, the consumers alleged that the cards were subject to “dormancy fees.” If the cards were not used for a specified number of months after issuance, the banks would deduct $2.50 monthly, silently reducing the value of the cards prior to the “Good Thru” date.

No issue date appeared anywhere on the cards. There allegedly was no mechanism, such as an 800 number or website, that a cardholder could use to ascertain the issue date or fees deducted.

The banks’ advertising campaigns allegedly claimed that, unlike other bank cards, their gift cards had “no fees.”

Banks’ Power to Assess Fees

To the extent that the New Jersey Consumer Fraud Act claims in Mann v. T.D. Bank, N.A. were based on the banks’ assessment of dormancy fees, the claims were federally preempted, the federal district court in Camden ruled.

The court relied on SPGGC, LLC v. Ayotte (1st Cir. 2007) CCH Advertising Law Guide ¶62,824. In that case the First Cicuirt held that enforcement of a New Hampshire Consumer Protection Act prohibition against sale of gift certificates containing dormancy fees would “significantly interfere” with the issuing bank’s powers under the National Banking Act and regulations of the Office of the Comptroller of the Currency (OCC).

State Laws Barring Deceptive Advertising

Not all state laws affecting a national bank’s practice of issuing gift cards are preempted, however.

In Mann, the court went on to hold that the New Jersey Consumer Fraud Act, as applied to the banks’ allegedly deceptive marketing and advertising, did not “significantly interfere” with their federally created powers.

Similarly, in Mwantembe v. TD Bank, N.A., the federal district court in Philadelphia held that enforcing the Pennsylvania Unfair Trade Practices and Consumer Protection Law would not interfere with the banks’ operations or unduly impair their ability to sell gift cards. There are no federal regulations directing what disclosures a national bank must provide in connection with the issuance of a gift card, according to the court.

State laws of general application, which merely require all businesses, including banks, to abide by contracts and refrain from making misrepresentations to customers, do not impair a bank’s ability to exercise its gift-card issuing powers, the court concluded.

U.S. Supreme Court

Both courts cited the U.S. Supreme Court’s 2009 decision in Cuomo v. Clearing House Ass’n, LLC (CCH Federal Banking Law Reporter ¶101-126). Cuomo reversed a trend of expanding the scope of federal preemption for national banks and dispelled the notion that all state laws affecting national banks are preempted, the court said in Mwantembe.

OCC Guidance

In addition, both courts found that the banks’ argument of conflict preemption was not supported by an OCC guidance document on gift card disclosures (OCC Bulletin 2006-34).

The OCC advised national banks that it “expects national bank gift card issuers to take appropriate actions to ensure that critical information is provided in a form that is likely to be readily available to recipients, as well as purchasers, of gift cards.”

The November 12, 2009 opinion in Mann v. T.D. Bank, N.A. will be reported at CCH Advertising Law Guide ¶63,679.

The November 17, 2009 opinion in Mwantembe v. T.D. Bank, N.A. will be reported at CCH Advertising Law Guide ¶63,678.