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Tuesday, October 22, 2019

Cottman franchisees allege breach of contract and interference by parent companies

By Molly English-Bowers | Mar 25, 2016

PHILADELPHIA – Four corporations in the business of automobile transmissions are suing over issues they have experienced with a franchiser and its owner.

The Jade Group Inc., Jade WR Inc., B&C Transmissions LLC and CDL Transmission LLC filed the suit March 17 in U.S. District Court for the Eastern District of Pennsylvania against Cottman Transmission Centers LLC, American Driveline Systems Inc. and Global Powertrain Systems LLC, citing breach of contract.

The suit states that since the 1960s, defendant Cottman has sold franchises for Cottman Transmission Centers. In March 2006, defendant and Cottman's parent company American Driveline allegedly acquired AAMCO Transmissions Inc., Cottman's most significant competitor.

The intent, the suit states, was to phase out the Cottman brand and convert existing Cottman centers to the AAMCO brand. However, enough Cottman franchisees allegedly refused to comply, so Cottman retreated, and existing Cottman branches were allowed to remain as such.

Defendant American Driveline also interfered with existing contracts by allegedly urging the plaintiffs to use only remanufactured transmissions purchased from defendant Global Powertrain.

In addition, the suit states that Cottman announced it would honor its contractual obligation to continue to grow the Cottman brand. During 2013, however, the suit states little progress was made in that direction. Other incidents convinced franchisees that Cottman was not committed to its obligations, according to the complaint.

The counts against Cottman include breach of contractual obligations such as advertising and hiring assistance and help with acquiring venues and installing new equipment in those locations.

American Driveline, the suit states, has interfered with the license agreements between the plaintiffs and Cottman, specifically because it decided to invest no resources in growing the Cottman brand and focus on AAMCO instead.

The plaintiffs seek compensatory and consequential damages including their losses from Cottman's breaches of contracts and the same from American Driveline's interference; pre- and post-judgment interest; attorney fees and court costs; and a judgment that Cottman's breaches excuse the plaintiffs' obligation to perform under the franchise agreements and to terminate the franchise relationships.

The plaintiffs are represented by Harris J. Chernow and Steven Kapustin of Reger Rizzo Darnall LLP in Philadelphia.

U.S. District Court for the Eastern District of Pennsylvania Case number 2:16-cv-01237

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Reger Rizzo Darnall LLP

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