American Mart Corp., Plaintiff-Appellant/cross-Appellee v. Joseph E. Seagram & Sons, Inc., Defendant-Appellee/cross-Appellant

American Mart Corp. (AMC) brought this action in district court alleging that Joseph E. Seagram & Sons, Inc.’s (Seagram) termination of AMC’s liquor distribution franchises violated the Nevada Alcoholic Beverage Franchise Act (Franchise Act). Nev. Rev.Stat. §§ 598.290-598.350 (1985). The Franchise Act prohibits, inter alia, the termination of liquor distribution franchises without “good cause.” Id. § 598.330(2). But a franchisor is given a complete defense if it can prove that the termination was done “in good faith and for good cause.” Id. at § 598.350. The district court held that “good cause” exists where “in the exercise of prudent business judgment the supplier terminates the franchise on grounds that are truly legitimate and are not arbitrary, capricious, irrational, unreasonable or irrelevant,” whether or not the distributor is at fault. American Mart Corp. v. Joseph E. Seagram & Sons, Inc., 643 F.Supp. 44, 48 (D.Nev.1985). Finding that Seagram terminated the franchise for a legitimate business purpose, it denied AMC’s request for injunctive relief and entered judgment for Seagram. AMC appeals.

Discussion

As noted, section 598.350 provides the franchisor with a complete…