In a follow up to our post on August 25, 2014, Governor Brown of California has vetoed SB 610, a bill which among other things would have made it considerably more difficult for franchisors to terminate franchisees in California and ended a franchisor's right to approve certain franchisee transfers of their business. In his veto message, the Governor stated that "The bill's changes would significantly impact California's vast franchise industry". His message states that he "needs a better explanation of the scope of the problem so I am certain that the solution crafted will fix those problems and not create new ones." The Governor also noted that "the parties supporting and opposing this bill have dramatically different views" and that "it is in the interest of all that a concerted effort be made to reach a more collaborative solution."
For the lawyers in our audience, Governor Brown's veto message mentions in particular that the new standards of materiality ("substantial and material breach") in the bill are unknown and the "good cause" standard is well-understood as a legal standard – indicating a potential concern that approval of this bill would produce additional litigation – a complaint voiced frequently by the International Franchise Association and others. We agree with the Governor that this bill has always seemed to be a solution in search of a problem, and applaud his suggestion that all parties involved go back to the bargaining table and commit themselves to working toward a mutually amicable solution.
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