N.A.R., Inc., Etc. v. Eastern Outdoor Furnishings

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3990-22

N.A.R., INC., ASSIGNEE OF

FIRST WESTERN CREDIT,

Plaintiff,

v.

EASTERN OUTDOOR APPROVED FOR PUBLICATION

FURNISHINGS A/K/A January 24, 2025

JC PARTNERS LLC, APPELLATE DIVISION

Defendant/Third-Party

Plaintiff-Appellant,

v.

AMD DIRECT, INC.

D/B/A SUMMERSET

PROFESSIONAL GRILLS,

Third-Party Defendant-

Respondent.

Argued January 6, 2025 – Decided January 24, 2025

Before Judges Sabatino, Gummer and Berdote Byrne.

On appeal from the Superior Court of New Jersey, Law

Division, Passaic County, Docket No. L-3511-20.

Marisa Rauchway Sverdlov argued the cause for

appellant (Chiesa, Shahinian & Giantamosi PC,

attorneys; Marisa Rauchway Sverdlov, on the briefs).

Christopher R. Carton argued the cause for respondent

AMD Direct, Inc. D/B/A Summerset Professional

Grills (Bowman and Brooke LLP, attorneys;

Christopher R. Carton and Erica S. Mekles, on the

brief).

The opinion of the court was delivered by

SABATINO, P.J.A.D.

This commercial litigation mainly presents issues under the New Jersey

Franchise Practices Act ("NJFPA"), N.J.S.A. 56:10-1 to -15. As its principal

claim in this case, defendant/third-party plaintiff Eastern Outdoor Furnishings

("Eastern Outdoor") contends that third-party defendant AMD Direct, Inc.,

("AMD") violated the NJFPA in terminating Eastern Outdoor's alleged franchise

to sell AMD's products. AMD denies that such a franchise relationship existed.

The trial court granted summary judgment to AMD, dismissing Eastern

Outdoor's claims under the statute, upon specifically finding there was no

"written agreement" establishing a franchise between the parties. Eastern

Outdoor has appealed that decision, along with other rulings made by the trial

court.

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For the reasons that follow, we affirm the trial court's grant of summary

judgment dismissing the NJFPA claims, albeit based on somewhat different

reasoning. Specifically, we agree with Eastern Outdoor that to establish a

franchise enforceable under the NJFPA the statute does not require a

comprehensive and integrated "written agreement" between the parties. Instead,

N.J.S.A. 56:10-3(a) more flexibly defines a franchise to consist of a "written

arrangement" that also meets various other requirements. Nonetheless, it is clear

the record—even when viewed in a light most favorable to Eastern Outdoor—

fails to provide sufficient evidence to establish such a qualifying "written

arrangement."

Consequently, we affirm summary judgment in AMD's favor dismissing

the NJFPA claims. We also affirm related orders of the trial court respecting

discovery and other matters. However, we are constrained to remand the case

to the trial court to adjudicate Eastern Outdoor's claims of tortious interference

and indemnification that were not expressly addressed in the trial court's

decision.

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I.

Because the parties are well familiar with the factual contentions 1 and

procedural history underlying this case, we need not detail them here. The

following brief recitation will suffice for our purposes.

Eastern Outdoor is a New Jersey retailer of custom outdoor kitchens,

including appliances. AMD is a manufacturer of outdoor grills. Starting in

2010, Eastern Outdoor began selling grills produced by AMD, among several

other brands of grills. Eastern Outdoor displayed AMD grills at its showroom

in Totowa. Eastern Outdoor purchased the grills and other products from AMD

on a wholesale distributorship basis. Eastern Outdoor consulted with AMD on

AMD's development of a line of "Summerset" grills, and marketing materials

identified Eastern Outdoor as a distributor of that brand. In 2018, an estimated

$600,000 to $700,000 of Eastern Outdoor's $3.3 million in total annual sales

revenues were attributed to AMD products.

1

Several volumes of appellant's appendix, which included certain financial

information and deposition testimony, were filed under seal. At oral argument,

appellant's counsel confirmed with us that appellant does not object to this court

reciting information from those sealed materials in our opinion, as the reasons

that prompted the sealing several years ago are no longer important. See R.

1:38-1A. Respondent's counsel agreed.

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In March 2019, AMD terminated Eastern Outdoor's wholesale

distributorship in favor of a competitor. As explained to us at oral argument,

AMD felt that Eastern Outdoor was not sufficiently focused on the sale of AMD

grills and was instead more broadly engaged in marketing outdoor furniture and

kitchen systems. AMD's chief executive officer Jeffrey Straubel testified at his

deposition that Eastern Outdoor struggled for years to match the sales volume

of other AMD grill distributors.

According to Eastern Outdoor, AMD's termination of its status as a

wholesale distributor made it infeasible to continue purchasing AMD grills and

meet customer orders. When it was notified of the termination, Eastern Outdoor

possessed an inventory of AMD grills that it had ordered but had not yet paid

for. According to Eastern Outdoor, AMD promised to take back the grills but

failed to do so.

A collection agency, plaintiff N.A.R., Inc., as assignee of the purported

debt, sued Eastern Outdoor in the Law Division to collect on the unpaid sums.

In turn, Eastern Outdoor filed a third-party complaint against AMD alleging a

violation of its franchise rights under the NJFPA. Eastern Outdoor also asserted

claims of tortious interference with prospective business relations and common-

law indemnification. Meanwhile, N.A.R. and Eastern Outdoor settled the

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collection action. The third-party complaint continued to be litigated.

Discovery ensued, with document production and depositions of company

officials and other witnesses.

AMD moved for summary judgment and sought dismissal of the third-

party complaint in its entirety. AMD also asked the court to bar Eastern

Outdoor's expert and dismiss its claims because it could not establish damages.

In an oral opinion issued on March 27, 2023, the trial court granted AMD's

summary judgment motion, finding Eastern Outdoor could not prove the

existence of what the court termed as a "written agreement," and thus failed to

satisfy the first element of the NJFPA test for establishing a franchise.

Eastern Outdoor appeals from the summary judgment order, a companion

order issued that same date denying as moot AMD's motion to bar Eastern

Outdoor's expert, and the court's order dated July 17, 2023, denying

reconsideration and relief under Rule 4:49-2.

On appeal, Eastern Outdoor argues the court erred by: (1) granting AMD's

summary judgment dismissing the NJFPA, tortious interference, and indemnity

claims; (2) denying Eastern Outdoor's motion to amend the summary judgment

order because of new evidence obtained from a third party (who had failed to

produce all documents in response to a subpoena); and (3) denying AMD's

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expert motion as moot instead of with prejudice, given AMD's alleged violation

of a case management order.

Fundamentally, Eastern Outdoor contends the NJFPA requires a written

arrangement, not a written agreement, and that it established the existence of

such a written arrangement through its submission of several documents.

Eastern Outdoor further contends the trial court improperly dismissed its

tortious interference and indemnity claims without any discussion or analysis

within its oral opinion. AMD maintains the court properly construed the statute

and rightly concluded that Eastern Outdoor had failed to show the existence of

a franchisor-franchisee relationship between the parties.

In considering these arguments, we review the trial court's grant of

summary judgment de novo. Branch v. Cream-O-Land Dairy, 244 N.J. 567, 582

(2021). We consider the factual record, and reasonable inferences that can be

drawn from those facts, "in the light most favorable to the non-moving party" to

decide whether "the moving party [was] entitled to judgment as a matter of law."

Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520, 529, 540 (1995); R. 4:46-

2(c).

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II.

The NJFPA "provides franchisees protection against indiscriminate

terminations by prohibiting cancellation or non-renewal of franchises for other

than good cause." Instructional Sys., Inc. v. Computer Curriculum Corp., 130

N.J. 324, 340 (1992). "Good cause" is defined as "failure by the franchisee to

substantially comply with those requirements imposed upon him by the

franchise." N.J.S.A. 56:10-5. The NJFPA was prompted by "concerns [that]

were raised about the degree of control the franchisor exercised over the

franchisee, in particular, the franchisor's power of 'life or death' to terminate the

franchise." Instructional Sys., 130 N.J. at 339.

The NJFPA defines a "franchise" as

a written arrangement for a definite or indefinite period,

in which a person grants to another person a license to

use a trade name, trade mark, service mark, or related

characteristics, and in which there is a community of

interest in the marketing of goods or services at

wholesale, retail, by lease, agreement, or otherwise.

[N.J.S.A. 56:10-3(a) (emphasis added).]

Not all alleged franchises are covered by the Act, which applies only

to a franchise (1) the performance of which

contemplates or requires the franchisee to establish or

maintain a place of business within the State of New

Jersey, (2) where gross sales of products or services

between the franchisor and franchisee covered by such

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franchise shall have exceeded $35,000.00 for the 12

months next preceding the institution of suit pursuant

to this act, and (3) where more than 20% of the

franchisee's gross sales are intended to be or are derived

from such franchise; or [to a franchise car dealership].

[N.J.S.A. 56:10-4.]

In summary, based on the statutory requirements pursuant to N.J.S.A.

56:10-3(a) and N.J.S.A. 56:10-4(a), Eastern Outdoor must prove: (1) a written

arrangement between Eastern Outdoor and AMD; (2) within that written

arrangement, that AMD granted Eastern Outdoor "a license to use" its

intellectual property; (3) the written arrangement reflected a "community of

interest" between the parties; (4) the parties contemplated or required Eastern

Outdoor to maintain a "place of business" within New Jersey; (5) "gross sales

of products or services" between the parties exceeded $35,000 "for the 12

months next preceding the institution of suit pursuant to this act"; and (6) "more

than 20% of the franchisee's gross sales are intended to be or are derived from

such franchise."

Eastern Outdoor argues the trial court misinterpreted the NJFPA to require

a written agreement that grants a license. Eastern Outdoor asserts the NJFPA

"does not require an agreement or contract, and that one or multiple writings

could constitute a written 'arrangement' under the statute," as recognized by our

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Supreme Court in Instructional Systems, 130 N.J. at 347. In this regard, Eastern

Outdoor highlights this passage from Instructional Systems, which uses the

plural term "written arrangements" in explaining when an enforceable franchise

exists as a matter of law:

Granted, there are cases that have held that the

existence of a franchise is a question of law to be

decided by a court. See Kania v. Airborne Freight

Corp., 300 N.W.2d 63, 70 ([Wis.] 1981) ("[I]n the

absence of a claim of ambiguity, which might require

extrinsic evidence, the construction of a written

contract is only a question of law for the court.").

However, we conclude that that proposition applies

only when the entire relationship between the parties

may be deduced from their written arrangements. See

Kinn v. Coast Catamaran Corp., 582 F.Supp. 682, 686

(E.D. Wis. 1984) (finding that written dealership

agreement clearly and unambiguously conferred a non-

exclusive distributorship); see also Nebraska Im-Pruv-

All, Inc. v. Sass, 247 N.W.2d 924, 926 ([Neb.] 1976)

(stating that in absence of sufficient factual issues,

interpretation of contract to determine existence of

franchise is matter of law).

[Id. at 346–47 (emphasis added).]

In Instructional Systems, the Court further observed that "courts must

attempt to determine on a 'case-by-case basis' the nature of the relationship and

the just obligations of the parties to the franchise contract." Id. at 373. Although

the statement presupposes the existence of a "franchise contract," the word

"contract" in legal writing can refer to a written agreement or "conduct by both

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parties which recognizes the existence of such a contract." N.J.S.A. 12A:2-

204(1); accord Comprehensive Neurosurgical, P.C. v. Valley Hosp., 257 N.J.

33, 70, 71 (2024) ("an implied-in-fact contract may form based on the parties'

actions, course of conduct, oral expressions, or a combination of the three," yet

"despite the difference in the way the contracts are created, an implied-in-fact

contract is generally 'as binding as [an] express contract'" (quoting Troy v.

Rutgers, 168 N.J. 354, 365 (2001))).

We concur with Eastern Outdoor that the NJFPA's use of the term "written

arrangement" in N.J.S.A. 56:10-3(a) conveys that a fully integrated and

comprehensive written franchise agreement does not have to be executed to

create a franchise under New Jersey law. Instead, a series of documents can

suffice, provided they are documents in which the franchisor has granted the

franchisee "a license to use a trade name, trade mark, service mark, or related

characteristics," and also in which there is a "community of interest in the

marketing of goods or services." Ibid. In addition, the fulfillment of

requirements of a New Jersey place of business and the numerical gross sales

criteria set forth in N.J.S.A. 56:10-4 must also be established.2

2

Although the NJFPA is not based upon a uniform or model statute, we note

that Delaware's franchise statute defines a franchise as "a contract or other

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We are unpersuaded by AMD's argument that Finlay & Associates, Inc. v.

Borg-Warner Corporation, 146 N.J. Super. 210 (Law Div. 1976), aff'd, 155 N.J.

Super. 331 (App. Div. 1978), which was cited by the Supreme Court in

Instructional Systems, 130 N.J. at 353, requires that franchisees prove a written

and integrated contractual agreement to establish a franchise relationship under

the NJFPA. Finlay concerned the relationship between Finlay and Associates,

the purported franchisee, and a predecessor to Borg-Warner, the purported

franchisor. 146 N.J. Super. at 215. The parties entered into a "written

distributorship agreement" whereby Finlay would distribute Borg-Warner's

products. Ibid. Finlay sued Borg-Warner under the NJFPA after Borg-Warner

arrangement" meeting certain criteria. DEL. CODE ANN. tit. 6, § 2551 (1970).

Furthermore, albeit limited to motor vehicle franchises, New York's statute

mirrors New Jersey's definition of "franchise" as "a written arrangement." N.Y.

VEH. & TRAF. L. § 462(6) (McKinney 2009). A New York court has held "VTL

§ 462.6 uses the term 'written arrangement' to express the writing requirement.

What document or combination of documents might constitute a 'written

arrangement,' under the Act, is unknown." JJLG Motors, Inc. v. SMS-Retail

Corona, 975 N.Y.S.2d 556, 562 (N.Y. Sup. Ct. 2013) (holding although a written

agreement gave a franchisee the exclusive right to distribute the franchisor's

products within a geographic region, the arrangement was not a franchise license

because the agreement gave the franchisor no control, unequal bargaining

power, or other characteristics of a franchise relationship); see also Beck

Chevrolet Co. v. Gen. Motors LLC, 53 N.E.3d 706, 716 (N.Y. 2016) (observing

that "other documents may be constituent parts of the parties' written

arrangement" delineating the terms of a franchise).

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allegedly had changed the product lines offered to Finlay for distribution from

the products specified in the agreement. Ibid. The Law Division focused on the

nature of the agreement between the parties in finding the NJFPA inapplicable,

noting "[t]here is no written agreement granting a 'license' to [Finlay] from

[Borg-Warner] to 'use' anything." Id. at 217. The agreement between Finlay

and Borg-Warner placed "no controls . . . on it in manner of operation or sales,

or specific location." Ibid. The Law Division found the mere distribution of

advertising materials to be insufficient to create a franchise:

Mere furnishing of advertising materials as

contemplated by the distributorship agreement, and

allowing plaintiff to have its name placed on certain

items, if it wished, as advertising (plaintiff using its

own business name) for their own benefit does not

fulfill the letter or intent of the Franchise Practices Act.

. . . Distributing advertising materials of another's

products, with or without plaintiff's name, or having

those materials available, including catalogs, or

participating in advertising or listing advertisements

that certain individuals or businesses sell certain

products, is not what is meant by a license to use the

various items referred to in the statute.

[Id. at 219.]

Even so, Finlay does not signify that a fully integrated written franchise

contract must be executed to satisfy the NJFPA's definition of a "written

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arrangement." The plaintiff in Finlay failed not because of the form of the

writing between the parties, but rather due to the substance of their relationship .

We need not rely on the federal cases and Federal Trade Commission

materials cited to us by Eastern Outdoor to determine from the text of the NJFPA

that a claimant must prove a written arrangement evidencing a franchise rather

than a written agreement. The trial court erred in its oral opinion by using the

terms synonymously. Nonetheless, we conclude the assortment of documents

presented by Eastern Outdoor fall short of establishing such a qualifying written

arrangement, even when they are viewed in a light most favorable to Eastern

Outdoor.

Eastern Outdoor points to various documents as evidence that allegedly

satisfies the written arrangement statutory requirement: (1) invoices; (2) a 2009

email describing AMD and Eastern Outdoor as "trusted partners," and other

various emails; (3) certain "AMD-owned websites" referring to Eastern Outdoor

as the "point of contact, distributor, Director of Sales, or the like"; (4) catalogs

designed by AMD entitled "Summerset . . . by Eastern Outdoor"; and (5) a letter

referencing the "distributor arrangement" between the parties. Although these

documents reflect the history of the parties' business relationship and Eastern

Outdoor's role as a wholesale distributor of AMD grills, they do not satisfy the

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NJFPA's requirement of a writing in which AMD "grant[ed] . . . a license to

[Eastern Outdoor] to use [its] trade name, trade mark, service mark, or related

characteristics." N.J.S.A. 56:10-3(a).3 Evidently, Eastern Outdoor made use of

AMD's logos and other intellectual property in selling the AMD grills as a

wholesale distributor. But nothing in the record demonstrates the grant of a

license to do so was ever conveyed in writing. A distribution agreement or

relationship is insufficient to establish a franchise under the NJFPA. Finlay,

146 N.J. Super. at 219.

In particular, the January 19, 2009 email from Straubel to Eastern

Outdoor's president, which appellant has cited to us as a key document reflecting

the parties' relationship, did not establish or substantiate a franchise. The email,

transmitted nearly a decade before AMD ended Eastern Outdoor's wholesale

distributorship in 2019, bespeaks an informal mutual desire to grow their

business together as "trusted partners in this endeavor." Although that

aspirational terminology may be indicative of a possible joint business venture,

it is not akin to the relationship between a dominant franchisor granting

specified rights to a subordinate franchisee.

3

We assume, without deciding, that a trier of fact could view the writings as

bespeaking a "community of interest" between the parties, which is independent

of the license requirement within N.J.S.A. 56:10-3(a).

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It is undisputed that AMD never sought or exerted control over Eastern

Outdoor's marketing and sale of AMD grills, and that AMD never had access to

or reviewed financial records of Eastern Outdoor. Further, AMD's corporate

representative, Straubel, testified that AMD had at least one other distributor of

AMD products in New Jersey. The course of dealings does not reflect a

franchise relationship substantiated by, as the statute requires, a qualifying

written arrangement or arrangements.

Summary judgment on this pivotal element was appropriately granted, and

there is no need to have a jury attempt to make the legal assessment 4 of whether

a qualifying written arrangement was established.

Because the writings cited by Eastern Outdoor fall short of the written

arrangement(s) required by N.J.S.A. 56:10-3(a), we do not need to evaluate

whether the record satisfies the 20% numerical gross sales requirement of

N.J.S.A. 56:10-4(3) for the applicable twelve-month period.5

4

Notably, there is no model civil jury charge on the subject, which may be

indicative of the inherently judicial nature of the evaluation of the writings.

5

AMD acknowledges that appellant maintains a place of business in New Jersey

satisfying N.J.S.A. 56:10-4(1) and that Eastern Outdoor met the $35,000 gross

sales criterion of N.J.S.A. 56:10-4(2).

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Based on the above, we affirm the trial court's dismissal of Eastern

Outdoor's franchise claims under the NJFPA, albeit for different reasons than

those stated by the trial court. An order will be affirmed on appeal if it is correct,

even if we do not adopt the specific reasoning of the trial judge. State v.

McLaughlin, 205 N.J. 185, 195 (2011); see also Isko v. Planning Bd. of

Livingston Twp., 51 N.J. 162, 175 (1968) (appellate court may affirm judgment

on different grounds than set forth below). We furthermore discern no reason

to disturb the trial court's related rulings concerning discovery, expert opinion

on damages, and the denial of relief under Rule 4:49-2.

That said, the trial court's decision lacks any analysis of Eastern Outdoor's

non-statutory claims of tortious interference and indemnification. The court was

required to issue a statement of reasons explaining why it dismissed those

claims. R. 1:7-4. We remand the case for the limited purpose of requiring the

trial court to adjudicate those claims with adequate reasons. Because the motion

judge has since retired, a successor judge shall be assigned the task, and that

judge will have the prerogative to invite further briefing and argument limited

to those issues.

To the extent we have not addressed them, all other points raised on appeal

lack sufficient merit to warrant discussion. R. 2:11-3(e)(1)(E).

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Affirmed in part and remanded in part. We do not retain jurisdiction.

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