Mississippi franchise disputes: notice, fraud and the broker’s actual role

The notice rule has a coverage question and exceptions

A franchisor grants the brand and operating rights; a franchisee receives them. The Mississippi text enacted in 2018 requires a person who has granted a covered franchise to give written notice at least 90 days before cancellation, termination or failure to renew. It removes that notice requirement when the stated basis is criminal misconduct, fraud, abandonment, bankruptcy or insolvency of the franchisee, or a no-account or insufficient-funds check.

Coverage comes first. The enacted definition requires a written arrangement, consideration (something of value given in exchange), a licence to use a trade name or related characteristic, and a community of interest in marketing goods or services. It excludes sales from warehouses or similar storage places, leased departments in retail stores, and places of original manufacture. Consideration excludes the specified at-cost demonstration materials and equipment not for resale, and payments below $100 on an annual basis. That is this state text’s consideration provision, not the federal franchise threshold.

The same enacted material excludes retailers defined in a separate equipment-dealer statute, section 75-77-1. “Retailer” cannot safely be read here as every business that sells to consumers. This guide examines the enacted 2018 text and identified historical court decisions; the current official consolidated code has not been recovered through the publisher’s public route.

Sources: Mississippi Legislature: Sections 5–6: franchise definitions and notice language Mississippi Legislature: Law status, chapter 394 and governor approval Mississippi Secretary of State: Official publisher and public code link

Crosthwait: proven false records were more than an allegation of breach

In the 1993 Crosthwait Equipment case, a John Deere dealer challenged termination. The court described extensive evidence of false sales and credit documents, including inflated down payments, incorrect prices and fictitious trade-ins. The dealer admitted submitting documents he knew contained false information. The court affirmed that Deere lawfully terminated under the agreements.

For the franchise-notice issue, the Fifth Circuit said the parties’ statutory franchise status was arguable. Even assuming coverage, fraud was a notice exception; the trial court had also allowed the dealer to continue operating for 90 days. The opinion separately remanded Deere’s account-damages issue, so it should not be retold as a final ruling on every dollar owed.

The lesson is about the evidence behind an exception. A disputed late report, ordinary poor performance or an accusation labelled “fraud” is not the same record as deliberate, material falsification proven in this case. The 1993 decision also does not determine how later equipment-dealer legislation applies to a present dealership.

Sources: United States Court of Appeals for the Fifth Circuit: Crosthwait Equipment Co. v. John Deere Co., No. 92-7181, 4 June 1993, especially part IV

Hamilton: identify the party that actually granted the franchise

A later dispute involved a buyer of iLoveKickboxing franchises who sued FranChoice and its broker, Tom Scarda. The complaint alleged misleading statements about marketing, opening costs and expected performance. Those statements were allegations considered at the dismissal stage, not facts the court proved.

The adopted analysis read Mississippi’s earnings-representation provision, section 75-24-55, as applying to “franchise companies” in light of the statutory franchise definition. The brokers, as alleged, had not entered the arrangement granting the franchise. The court also found that the cited remedies provision did not supply relief for the alleged broker conduct.

On 16 January 2020, in an order filed the next day, the district judge adopted that analysis and dismissed the Mississippi claim without prejudice. The motion to dismiss the New York statutory claim was denied. That limited result does not establish that the sales statements were accurate, that all claims failed, or that brokers are immune under other law.

Sources: United States District Court for the District of Minnesota / GovInfo: Hamilton v. FranChoice, No. 19-1426, document 47, 19 December 2019, factual allegations pages 1–4 and Mississippi analysis pages 23–26 United States District Court for the District of Minnesota / GovInfo: Hamilton v. FranChoice, No. 19-1426, document 52, signed 16 January/filed 17 January 2020, both pages

Do not turn either case into a sales or termination shortcut

The enacted Mississippi earnings text is more specific than “use a realistic forecast.” It addresses stated gross or net earnings and representations of past earnings, requiring the represented results to reflect a substantial number of participants in the community or geographic area and accurately reflect their average earnings under similar circumstances. Hamilton’s broker result does not erase that wording for a covered franchise company.

For a proposed termination, identify the covered relationship, the contractual grounds, the evidence and any applicable sector law before relying on a notice exception. For a disputed sales statement, identify who made it, who granted the franchise, and which law supplies the particular duty and remedy. The two decisions show why those questions must be answered separately.

Sources: Mississippi Legislature: Sections 5–6: franchise definitions and notice language United States Court of Appeals for the Fifth Circuit: Crosthwait Equipment Co. v. John Deere Co., No. 92-7181, 4 June 1993, especially part IV United States District Court for the District of Minnesota / GovInfo: Hamilton v. FranChoice, No. 19-1426, document 47, 19 December 2019, factual allegations pages 1–4 and Mississippi analysis pages 23–26 United States District Court for the District of Minnesota / GovInfo: Hamilton v. FranChoice, No. 19-1426, document 52, signed 16 January/filed 17 January 2020, both pages