## Facts

- Connecticut Packing Company, Inc. (Connecticut Packing) supplied meat products to Genovese Drug Stores, Inc. (Genovese) under a long-running supply relationship.
- Genovese specified key requirements for the products and how they would be sold, including detailed standards for the goods and aspects of packaging and labeling associated with Genovese’s retail operation.
- Genovese also exercised significant influence over commercial terms and operating details tied to the supply arrangement, including scheduling and other logistics.
- Connecticut Packing made substantial investments to serve Genovese’s needs, including equipment and operational commitments that were difficult to redeploy to other customers.
- Over time, Connecticut Packing became heavily dependent on Genovese’s purchases for a large share of its sales.
- Genovese ended the relationship and shifted the business away from Connecticut Packing.
- Connecticut Packing brought suit under the Connecticut Franchise Act (CFA), claiming the parties’ relationship constituted a statutory “franchise” and that Genovese unlawfully terminated it without “good cause.”
- After a bench trial, the United States District Court for the District of Connecticut entered judgment for Connecticut Packing and awarded damages (including lost profits) and attorneys’ fees under the CFA.
- Genovese appealed to the United States Court of Appeals for the Second Circuit.

## Issues

1. Whether the parties’ long-term supply relationship constituted a “franchise” under the Connecticut Franchise Act, Conn. Gen. Stat. § 42-133e(b).
2. Whether Genovese terminated the relationship without “good cause” in violation of Conn. Gen. Stat. § 42-133f(a), supporting an award of damages and attorneys’ fees.

## Decision

- The Second Circuit affirmed the district court’s judgment for Connecticut Packing.
- The court held that the relationship fell within the CFA’s definition of a franchise, because Genovese prescribed the operative marketing plan or system in substantial part through its control over product and sales-related requirements.
- The court also agreed that the parties had a statutory “community of interest,” supported by Connecticut Packing’s substantial, relationship-specific investments and its economic dependence on Genovese’s business.
- The court held that Genovese’s termination was not supported by “good cause” under the CFA where the termination was driven by Genovese’s desire for improved margins rather than performance-related deficiencies by Connecticut Packing.
- The court left undisturbed the district court’s damages award (including lost profits) and the award of attorneys’ fees authorized by the CFA.

## Legal Principles

- The Connecticut Franchise Act defines a franchise broadly; a relationship may qualify even if the parties did not label it a franchise or execute a traditional franchise agreement.
- A “marketing plan or system prescribed in substantial part by a franchisor” may be shown by meaningful control over how goods are specified, packaged or labeled for sale, priced, distributed, and otherwise supplied for retail marketing.
- A “community of interest” exists when the parties’ business fortunes in the sale of the covered goods are interdependent, including where the alleged franchisee makes significant relationship-specific investments and relies on the relationship for a substantial portion of revenue.
- Under Conn. Gen. Stat. § 42-133f(a), a franchisor may not terminate a franchise except for “good cause,” which generally requires legitimate, performance-related grounds rather than a mere preference for different economic terms.
- When a franchise is terminated unlawfully under the CFA, the franchisee may recover provable damages (including lost profits), and the statute permits an award of reasonable attorneys’ fees.

## Conclusion

The Second Circuit affirmed judgment for Connecticut Packing, concluding that Genovese’s supply arrangement satisfied the Connecticut Franchise Act’s franchise definition and that Genovese terminated the relationship without good cause, making Genovese liable for damages and attorneys’ fees.


Genovese Drug Stores, Inc. v. Connecticut Packing Company, Inc., 732 F.2d 286 (1984)