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Kahlo Jeep Chrysler Dodge of Knightstown10/12/2005
may wish to change the contracts with its franchisees in order to keep up with the competition . . . . t is important that the franchise agreement be drafted in such a manner as to make it clear that future system changes may be required." 62B Am.Jur.2d 294, Private Franchise Contracts § 345 (1990). Indiana Code Section 23-2-2.7-1(3) specifically prohibiting such provisions is not only in derogation of Indiana common law, but also apparently conflicts with general practice regarding franchise agreements. As such, we conclude it would be inappropriate to extend the protection offered by that statute any further than the legislature clearly intended or expressed.
What the statute prohibits is "any franchise agreement entered into between any franchisor and a franchisee" from containing a unilateral modification provision; doing so thus constitutes a violation of the Act. I.C. § 23-2-2.7-1. The Act, however, also says that any violation of the Act must be challenged within two years of the violation. Here, the violations of the Act occurred when the franchise agreements were executed or "entered into between" DaimlerChrysler and the Dealers. The Dealers' current lawsuit is premised upon DaimlerChrysler exercising its clear contractual right to modify the franchise agreement. In order to succeed on their claim they must establish that the unilateral modification provision itself is unlawful; otherwise, DaimlerChrysler properly modified the agreements under a contract provision that is not invalid under standard contract law. The Dealers are precluded from making such a challenge under the plain language of the Act because all of the franchise agreements were "entered into between" DaimlerChrysler and the Dealers more than two years before the Dealers filed this lawsuit.
Other states have different schemes for protecting franchisees from franchisors who wish to modify a franchise agreement. In Texas, for example, a motor vehicle manufacturer-franchisor is prohibited from modifying a franchise agreement, " otwithstanding the terms of any franchise," unless the manufacturer gives written notice to the dealer-franchisee and the Texas Motor Vehicle Board approves of the modification if the dealer objects to the proposed modification. Tex. Occ. Code § 2301.454. Thus, in Texas there is not a statute like Indiana's absolutely barring contractual provisions that give a franchisor free reign in modifying a franchise agreement, but there is an administrative limitation on actual attempts at modification. See also, e.g., Ariz. Rev. Stat. § 28-4363; 815 Ill. Comp. Stat. 710/4; 63 Pa. Cons. Stat. § 818.12.
Similarly, we note Indiana Code Section 9-23-3-23(1)(B), which prohibits manufacturers from requiring any new automobile dealer to "make any substantial alterations to the use of franchises . . . if to do so would be unreasonable or would not be justified by current economic conditions or reasonable business considerations." A dealer-franchisee may file suit for an alleged violation of this statute pursuant to Indiana Code Section 9-23-6-9. A cause of action for a violation of this statute would seem to accrue whenever a manufacturer-franchisor attempted to make an "unreasonable" alteration to a franchise agreement, but the Dealers have not sought relief under this statute. Instead, they seem to contend that it is irrelevant here whether DaimlerChrysler's amendment was "unreasonable" or "justified by current economic conditions or reasonable business considerations," and that any unilateral and substantial amendment of their franchise agreements is impermissible.
It would seem, however, that Section 9-23-3-23(1)(B) would be superfluous and unnecessary if a franchisee could always and at
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