Window World battling with franchisees over license agreement

Two franchisees are continuing their legal case against Window World Inc. and Associated Materials Inc. (AMI).

 Window World battling with franchisees over license agreement

On October 16, 2015, the plaintiffs filed a suit in the U.S. District Court in Nebraska over a license agreement with the national window chain in 18 markets. While the defendants filed a motion to dismiss earlier this year, the fact that the plaintiffs filed a brief just last week opposing this motion shows the case will continue to play out in the courts for some time.

The plaintiffs, Mike Bendfeldt and Betty Muhr-Bendfeldt, had a license agreement with the national window chain in 18 markets. According to the original court documents, “WW licensees would receive the best possible pricing for windows based upon WW representations made to them.”

According to the plaintiff, “In 2007, WW announced it was moving to a ‘sole source’ supplier of windows and thereafter required that its franchisees purchase vinyl replacement windows only from AMI. After that time, plaintiffs made their wholesale window purchases exclusively from AMI.”

The plaintiffs also say that “WW receives a substantial portion of the purchase price its franchisees pay to WW-designated suppliers, including AMI for products and certain options on those products.” They also contend that WW failed to make its required disclosures pertaining to these agreements. Plaintiff documents also accuse WW of failing to disclose the stock interests that its principals held in AMI.

At the core of the issue is whether or not the plaintiffs reasonably perceived that WW would secure pricing that was more favorable than what would otherwise be available in the market.

“As it turned out, WW has failed to meet its commitment to secure superior wholesale pricing for its franchisees, including the Plaintiff’s franchisees. On the contrary, the amounts these franchisees pay and have paid to their vinyl replacement window supplier AMI, exceed the amounts they would otherwise pay to AMI and to suppliers of comparable products in the relevant markets were they not Window World franchisees,” plaintiffs say in the complaint.

According do documents, representatives of AMI admitted that “it has sold windows to non-WW retailers at prices lower than those charged to Window World franchisees.” 

On January 29, 2016, Window World and Associated Materials filed a motion to dismiss or transfer. That was followed by an amended complaint by the plaintiffs, and a request for a time extension by the defendants.

Meanwhile, Window World moves for a transfer of some of this action to the United States District Court for the Western District of North Carolina. In those court documents, the defendants refute the plaintiffs statement alleging that Associated violated the Robinson-Patman Act (the “Act”) by selling custom-order windows to the Bendfeldts’ businesses at higher prices than it sold windows to other companies.

“Such a claim fails because the Complaint fails to state a claim for violation of the Act, particularly in the context of the bidding, custom-order nature of Associated’s replacement window business. The Bendfeldts do not allege and cannot show they competed for ‘the same dollar’ with favored retailers,” according to the court documents.

The defendants also contend that the Bendfeldts cannot show that Associated made two sales—one to the Bendfeldts and one to a favored retailer—for the same job, because the losing job bidder would never order the homeowners’ custom windows from Associated. Courts routinely hold that the Act does not protect price quotes or bids—only actual sales.