Friday, January 19, 2007

Minnesota Dealer Terminated Without “Good Cause”

This posting was written by Peter Reap, editor of CCH Business Franchise Guide.

An equipment manufacturer did not have “good cause” under the Minnesota heavy equipment dealer law to terminate a dealer for failing to meet unreasonable sales requirements that were different from those imposed on similarly-situated dealers, the U.S. Court of Appeals in St. Louis has ruled. The appeals court affirmed a jury verdict in favor of dealer on the termination claim.

However, the Eighth Circuit reversed the district court’s rejection of claims that the manufacturer coerced the dealer into refusing to purchase equipment from another manufacturer and substantially changed the competitive circumstances of the parties’ agreement without “good cause,” in violation of the dealer law.

Damages, Fees, Costs

A jury returned verdicts in favor of the dealer on three of its claims and awarded the dealer more than $14 million in damages. The federal district court in Minneapolis entered judgment for the dealer, but reduced the award by almost $1.7 million on the ground that the calculations made by the dealer’s expert improperly included prejudgment interest. The district court’s award of attorney fees and costs to the dealer was remanded with instructions to calculate damages, attorney fees, and costs in light of the holdings made on appeal.

“Good Cause”

There was evidence that the sales requirements imposed by a 1993 amendment to the agreement were not reasonable. Thus, the jury could have found that the termination was without “good cause,” the appeals court held.

Under the 1993 amendment, the dealer was required to improve—or at least maintain—its market share for at least three classes of the manufacturer’s lift trucks. There was extensive testimony of the “unrealistic” nature of these market share requirements, the court noted.

In addition to setting market-share benchmarks, the 1993 amendment required the dealer to improve or maintain its "dollar volume of parts per truck of population" sales. Testimony that the parts purchase requirement created “unachievable goals” was further evidence from which a jury could have found the conditions of the 1993 amendment unreasonable and more stringent than those imposed on similarly-situated dealers.

The decision is Minnesota Supply Co. v. The Raymond Corp., Nos. 04-1416/1850/2168/2169, filed December 28, 2006. It appears at CCH Business Franchise Guide ¶13,504.

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