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3 Int'l J. Franchising L. 3 (2005)

handle is hein.journals/intjoflw3 and id is 1 raw text is: I CASE NOTE Grounds for Recovering against a Franchisor- New York Court of Appeals Clarifies Tortious by David W. Oppenheim, Kaufmann, Feiner, Yamin, Gildin & & Robbins LLP, New York In Carvel Corporation v. Elizabeth A. Noonan, et al., 3 N.Y.3d 182, 785 N.Y.S.2d 359 (N.Y. 2004), New York's highest court has he[d that ice cream franchisor Carve[ did not tortious[y interfere with the prospective economic relations of its franchisees by implementing its controversiat 'supermarket sates program'. Another chapter in the decade-long battle between prominent ice-cream franchisor, Carvel, and its franchisees over Carvel's controversial 'supermarket sales program' has been written - this time by the New York Court of Appeals (New York's highest court). And for those of you keeping score at home (or abroad, as the case may be), it was Carvel that recorded a major victory and dealt the relentless franchisee plaintiffs a devastating blow by securing a ruling which effectively reversed three separate jury verdicts in favour of Carvel franchisees totaling in excess of $i million (USD). In its ruling, the New York Court of Appeals clarified the law of intentional interference with prospective economic relations, and declared that a franchisee cannot recover against a franchisor on a claim based on alleged intentional interference with prospective economic relations unless the franchisee can show that the franchisor's conduct was 'criminal or independently tortious.'1 Nature of the Dsopute In order to understand where we are in this saga, one must understand where we have been. The dispute < between Carvel and certain of its franchisees began in 1992, when Carvel began to sell its products in supermarkets. That decision marked a significant deviation in prior marketing and sales efforts and did 0 not sit well with certain Carvel franchisees who claimed that they had previously received assurances from the company's President and Chief Executive Officer that Carvel had no plans to distribute through supermarkets. Why did Carvel change its policy? Why would a company whose founder, Tom Carvel, once referred to supermarkets (and presumably the many ice cream and frozen yogurt manufacturers that sold to them) as the ,enemy' suddenly decide to distribute its ice cream products in supermarkets? Simply, Carvel had no choice. In the decade prior to instituting its supermarket program, Carvel had seen sales in its franchised stores steadily decline as a result of competition from other frozen dessert providers, who were selling their products in supermarkets, and from non traditional competitors such as McDonald's and Burger King, who began selling frozen desserts in their restaurants. Because of the steady decline in sales, Carvel commissioned a study of its market decline, which concluded that it would be in the best interests of Carvel to begin distributing in supermarkets. Carvel accepted the recommendation, and implemented its supermarket sales program in the 1992.2 The Carvel supermarket sales program was not designed exclusively to benefit the franchisor. To the contrary, all Carvel franchisees were invited to participate by servicing the many supermarkets, convenience stores and other retail venues with which Carvel had agreed to supply its products at wholesale. Most Carvel franchisees welcomed the new business venture and the opportunity it provided. But a splinter www.richmondLawtax.com

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