The recent case of Girl Scouts of Manitou Council, Inc. v. Girl Scouts of the United States of America decided by the U.S. Court of Appeals for the Seventh Circuit this summer indicates that non-profit organizations may not be immune to the imposition of state franchise and dealership laws.
The Wisconsin Fair Dealership Law prohibits a franchisor from changing the competitive arrangement of an agreement with a franchisee without good cause. When the Girl Scouts of America attempted to re-distribute territory from the Manitou Council as part of a nationwide reorganization effort, the Council filed suit seeking to enjoin the Girl Scouts of America from taking the territory which would have prevented it from representing itself from using the Girl Scouts’ intellectual property to represent itself as a organization of the Girl Scouts.
The Manitou Council successfully argued that it was a “dealer” under Wisconsin’s Fair Dealership Law and therefore the Girl Scouts of America could not constructively terminate its agreement. The Seventh Circuit agreed with the Council and disagreed with the Girl Scouts’ argument that the Wisconsin Fair Dealership Law did not apply to a non-profit because it did not engage in commercial activities. Specifically, the Court found commercial activity in the fact that the Manitou Council had cookie sales in excess of $1 million per year. The Seventh Circuit wrote that “from a commercial standpoint, the Girl Scouts are not readily distinguisable from Dunkin’ Donuts.”
In light of this decision, non-profits should review the structure of their organizations in light of state franchise and dealership laws where they maintain chapters or other operations to determine whether their current contracual arrangements may implicate such laws.