Judges are charged with performing justice among the litigants. Members of the bar benefit when the judiciary writes not only for the litigants, but to explain its reasoning for others. The decision in the U.S. District Court for the Eastern District of Pennsylvania in AAMCO Transmission v. Wirth expounds on what franchisees need to allege in order to succeed in overcoming a motion to dismiss for failure to state a claim under Pennsylvania law.
The case was brought by AAMCO to enforce a settlement agreement with its franchisee, Frank Wirth. The settlement agreement provided for catch-up payments by Wirth for economic defaults and upon default, the franchise agreement could be terminated. Upon termination, Wirth was to stop operating, observe a post-termination noncompete agreement and pay the back money. AAMCO terminated the franchise and filed a complaint to enforce the settlement agreement. AAMCO claimed that Wirth continued to operate after effective termination under the settlement agreement. AAMCO moved for a preliminary injunction, which was resolved by stipulation and Wirth filed a counterclaim.
