Franchise Termination. In 1985, Bruce Byrne, with his sons Scott and Gordon, opened Lone Star R.V. Sales, Inc, a motor home dealership in Houston, Texas. In 1994, Lone Star became a franchised dealer for Winnebago Industries, Inc, a manufacturer of

Question

recreational vehicles. The parties renewed the franchise in 1995, but during the next year, their relationship began to deteriorate. Lone Star did not maintain a current inventory, its sales did not meet goals agreed to between the parties, and Lone Star disparaged Winnebago products to consumers and otherwise failed to actively promote them. Several times, the Byrnes subjected Winnebago employees to verbal abuse. During one phone conversation, Bruce threatened to throw a certain Winnebago sales manager off Lone Star's lot if he appeared at the dealership. Bruce was physically incapable of carrying out the threat, however. In 1998, Winnebago terminated the franchise, claiming, among many other things, that it was concerned for the safety of its employees. Lone Star filed a protest with the Texas Motor Vehicle Board. Did Winnebago have good cause to terminate Lone Star's franchise? Discuss.

Answer 1

Franchise termination
The board issued an order finding, among other things, that Lone Star did not maintain a current inventory, its sales did not meet goals agreed to between the parties, and Lone Star disparaged Winnebago products to consumers and otherwise failed to actively promote them. This, the board found, was good cause for termination of the franchise. Lone Star filed a suit in a Texas state court against the board, seeking judicial review of the order. The court affirmed the order, and Lone Star appealed to a state intermediate appellate court, arguing in part that the board focused "unduly" on an isolated incident—the phone conversation between Bruce and the Winnebago employee in which Bruce threatened to throw the Winnebago sales manager off Lone Star's lot. Because Bruce was physically incapable of carrying out the threat, Lone Star contended that Winnebago misconstrued Byrne's "hyperbolic outburst." The appellate court affirmed the lower court's judgment. The appellate court concluded that "reasonable minds could infer or find from evidence in the record that [Bruce] made the statement attributed to him and that Winnebago was reasonably concerned for its employees who might call upon the dealer." The court noted other evidence of "verbal abuse, hostility, and profanity," including the incidents in which Winnebago employees were subjected to the Byrnes' verbal abuse. From this, the court concluded that "[t]he Board's decision was not based on an isolated outburst or a single finding."