Last month, the District Court of New Jersey clarified the type of conduct that could give rise to a claim that a franchisor imposed “unreasonable standards of performance” on a franchisee in violation of the New Jersey Franchise Practices Act (the “NJFPA”), N.J.S.A. 56:10-7(e).

In South Gas, Inc. v. ExxonMobil Oil Corp., Docket No. 09-cv-6236 (KM)(MAH) (D.N.J. Feb. 29, 2016), plaintiffs, ExxonMobil Oil Corporation (“Exxon”) franchisees, filed suit against Exxon. Plaintiffs’ claimed, inter alia, that Exxon imposed “unreasonable standards of performance” on plaintiffs in violation of the NJFPA. Specifically, Plaintiffs’ Second Amended Complaint included allegations that Exxon had imposed unreasonable “inventory standards” and “volume requirements.” Exxon moved to dismiss plaintiffs’ claim, arguing that (1) plaintiffs had not alleged specific conduct that, even if proven, constituted “unreasonable standards of performance,” and (2) plaintiffs did not have standing to sue pursuant to N.J.S.A. 56:10-7(e) because Exxon did not terminate plaintiffs.

The District Court rejected both of Exxon’s arguments and denied Exxon’s motion to dismiss plaintiffs’ claim under N.J.S.A. 56:10-7(e). Specifically, the Court held that unreasonable “inventory standards” and unreasonable “volume requirements” satisfied even “a fairly strict reading of the ‘standards of performance’ section” of the NJFPA. The Court also emphasized that even where individual actions by a franchisor do not, alone, violate N.J.S.A. 56:10-7(e), the “cumulative effect” of these actions may amount to the franchisor’s imposition of an unreasonable standard of performance. Finally, the Court held that a franchisee need not be terminated in order to file a claim under N.J.S.A. 56:10-7(e), explaining that “Exxon cites no case law for this proposition . . . the statute does not explicitly require termination[,] [n]or would requiring termination be faithful to the policy of reading the NJFPA broadly to effect its legislative purpose.”