Abstract
Coast to Coast Stores, Inc. v. Gruschus was the first Washington case to deal with the potential conflict between the Uniform Commercial Code (U.C.C.) and the Franchise Investment Protection Act (FIPA), arising when a franchisor repossesses goods after a franchisee defaults under a security agreement. The Washington Supreme Court avoided the conflict, however, by holding that because the franchisor never terminated the franchise, the FIPA protections were not triggered. The U.C.C. remedies therefore applied: the franchisor could collect the proceeds of a liquidation sale of the secured goods-in this case the franchisee's inventory and supplies-in reduction of the franchisee's indebtedness; and the franchisor was relieved of the FIPA burden of purchasing all of the franchisee's inventory and supplies at fair market value. Washington franchisors breathed a sigh of relief, no longer fearing that they would be forced to buy out franchisees who fail in business: to avoid the FIPA purchase provision, the franchisor need only repossess its security without explicitly terminating the franchise contract. In correctly choosing not to apply FIPA, the Washington Supreme Court found basis for its decision in a technical construction of the terms "franchise" and "termination" as they appear within the Act. This technical construction, however, need not determine the result, for even when the franchisor terminates, the U.C.C. remedies should apply if the franchisee has defaulted on a secured obligation to the franchisor. As the Coast dissent argued,' a strict construction of the law probably mandated application of the FIPA purchase provision in lieu of the U.C.C. default sections. That same constructionist interpretation, however, unreasonably burdens the franchisor and exceeds the remedy necessary to implement the protectionist policy that inspired FIPA. The logical interpretation of the franchisor's duty to purchase the franchisee's inventory and supplies denotes their fair market value as the actual proceeds realized at a wholesale level sale. This Note explains the difference between the U.C.C. and FIPA remedies and why their respective valuations should be interpreted as more similar than different. The Note then examines the Coast court's reasoning and offers additional support for preserving the U.C.C. remedies even if a franchise is terminated when a franchisor repossesses franchised goods after a franchisee defaults on a secured obligation owed to a franchisor.
Recommended Citation
Misty Ellen Mondress, The U.C.C. and Franchise Act Remedies: Coast to Coast Stores, Inc. v. Gruschus, 9 SEATTLE U. L. REV. 563 (1986).
