No one enters into a franchise assuming that someday, they will need to file a lawsuit to enforce their rights. Unfortunately, however, sometimes that need does arise. The first and foremost question at that point, from the franchisee’s perspective, is can I receive reimbursement for my legal fees and costs?
Fortunately, in limited circumstances, the law does provide just such a remedy. The New Jersey Franchise Act (N.J.S.A. 56:10-10) states: “Any franchisee may bring an action against its franchisor for violation of this act in the Superior Court of the State of New Jersey to recover damages sustained by reason of any violation of this act and, where appropriate, shall be entitled to injunctive relief. Such franchisee, if successful, shall also be entitled to the costs of the action including but not limited to reasonable attorney’s fees. “
The court in Westfield Centre Service, Inc. v. Cities Service Oil Company, 172 N.J. Super 196, 203 (Ch. Div. 1980) analyzed the need for this statutory provision from the perspective of the disparity in bargaining power between the franchisor and franchisee. “Where such disparity exists the right to award counsel fees against the more powerful party is justifiable in an effort to maintain a reasonable balance between them.” Id. Thus in order to level the playing field, a franchisee can usually recover his attorney fees in a successful suit against a franchisor.
The general rule of thumb is that when a statute includes an attorney’s fee reimbursement provision, the Legislature is seeking to encourage lawsuits that would further a public policy objective. Essentially, the Legislature is hoping that private individuals and entities will litigate such matters and, therefore, discourage the very practices that the statute outlaws. For example, in this case, the Legislature determined that it was in the public’s interest to encourage lawsuits by the franchisees against franchisors who might take advantage of the latter’s superior bargaining power and resources.
© 2011 Nissenbaum Law Group, LLC