A franchisor has submitted a dispute to the preliminary relief judge of the District Court of Gelderland about whether the director of a former franchisee is personally liable due to competitive activities, without a non-compete prohibition being imposed on him. The preliminary relief judge of the district court rendered judgment on 13 February 2015 (ECLI:NL:RBGEL:2015:2080).
The franchisor is a funeral company and it arranges funerals throughout the Netherlands, among other things through cooperation with franchisees who work under the franchise formula developed by the franchisor.
The franchise agreement stipulates, among other things, that the franchisee is prohibited from engaging in competitive activities for one year after termination of the franchise agreement, under penalty of a fine. It has also been stipulated that the franchisee must also impose the prohibition described above on all those who are employed by the franchisee or who are employed in any form whatsoever. The franchisee is also obliged to arrange this clause in writing in contracts with his/her staff and all those who perform work for the franchisee.
The franchisee in question is (for the sake of convenience) a BV. The director of the franchisee has entered into the franchise agreement on behalf of the franchisee. At any time, the franchise agreement will be terminated. The aforementioned director will work as a director of a competing funeral organization.
The franchisor is seeking summary proceedings to (among other things) order the director not to (any longer) act in violation of the aforementioned non-competition prohibition. An interesting question is whether the director is bound by the non-competition prohibition. After all, according to the court, this was not agreed with the director.
The court ruled that it is not acceptable that the director did not impose the non-compete prohibition on himself, contrary to the obligation to do so, while the director was the one who essentially exploited the franchise formula of the franchisor under the franchisee’s BV. The director thus acted unlawfully and the preliminary relief judge sanctioned this by prohibiting the director from developing competitive activities, as agreed with the franchisee in the franchise agreement, under penalty of a penalty.
From this ruling it can be concluded that, if the director must have known that the intention of the franchise agreement is very clear that the director does not engage in competitive activities, the director is personally liable if he or she does engage in competitive activities.
Mr AW Dolphijn – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice. Do you want to respond? Go to email@example.com