Thursday, April 26, 2007

Manufacturer Did Not Have "Good Cause" to Terminate Dealer

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

A jury's determination that a manufacturer of excavators did not discontinue production of a particular model of excavator—and, thus, did not have "good cause" to terminate a dealer under the meaning of the Maine power equipment dealer law—was neither unreasonable nor against the manifest weight of the evidence, according to a federal district court in Chicago. Therefore, the manufacturer's motion for a new trial was denied.

The manufacturer acquired the original maker of the excavators and terminated the dealer one year later, informing the dealer that it intended to discontinue the model of excavator sold by the dealer.

However, the manufacturer did not stop making excavators, the court noted. Instead, it continued to manufacture an excavator based on the same platform and sold those excavators under a different brand.

The dealer brought suit against the manufacturer for wrongful termination and the Seventh Circuit, in Cromeens, Holloman, Sibert, Inc. v. AB Volvo (CCH Business Franchise Guide ¶12,746), held that a disputed issue of fact existed as to whether or not the manufacturer had good cause under the dealer law to terminate the dealer on the grounds that the manufacturer discontinued the production or distribution of the franchise goods. The dispute was tried to a jury, which awarded a $2.1 million verdict in favor of the dealer.

The manufacturer contended that no reasonable jury could have concluded that it did not discontinue the excavator line when: (1) it made a series of safety modifications before initially rebranding the excavator, or (2) it later replaced the type of engine in the excavator.

However, the dealer presented evidence that the excavator was still produced at the same factory, was largely of the same design, and, even with a different engine, and retained the same performance capabilities, the court noted.

Additionally, the dealer presented evidence that the manufacturer's changes were merely cosmetic, minor, or the result of standardizing or renaming systems. Both the manufacturer and the dealer presented credible, competing views of the import of the changes made to the excavator and the possibility that the jury could have reached a different result was not grounds for a new trial, the court ruled.

The decision is FMS, Inc. v. Volvo Construction Equip. N. A., Inc., DC Ill., filed March 20, 2007, CCH Business Franchise Guide ¶13,559.

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