Thursday, June 21, 2012

Michigan Equipment Dealer Act Did Not Require Election of Remedies

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

The Michigan Farm and Utility Equipment Act did not require two dealers to make an election of remedies between their breach of contract and dealer law claims against equipment manufacturer Deere & Company, the U.S. Court of Appeals in Cincinnati has ruled.

The district court did not err in refusing to reduce a jury’s award of more than $5.4 million in damages against Deere in a lawsuit brought by the two dealers against Deere for termination of their dealership agreements in violation of the Michigan statute, among other claims.

Election of Remedies

Deere argued that the clear and unambiguous language of the dealer law required the dealerships to elect to recover either on their breach of contract claim or their statutory claim, but not both. No case has analyzed this provision, and Deere does not explain which words in this provision create the obligation it asserts, the court noted.

Subsection 1 of Section 5 of the Act provided that the dealer may elect to pursue either a contract remedy or the remedy provided in the Act, the court observed. Subsection 2 did not generally require a dealer to choose between its statutory claim and its breach of contract claim. Rather, it provided that a dealer’s pursuit of a contract remedy did not bar its right to pursue a statutory remedy as to inventory not affected by the contract remedy.

To the extent Section 5 required an election of remedies, its purpose was to protect against double recovery. Once the dealers opted not to seek the remedy of inventory buy-back under the statute, and instead sought the statutory remedy of recovery of the loss of asset value, no further election was required, the court determined.

Reduction of Damages

Michigan’s comparative-fault scheme did not require a reduction in the jury’s award of damages, based on the jury’s finding of 65% of the fault allocated to Deere and 35% of the fault allocated to a dealer.

The jury found Deere liable to the dealers on three separate grounds. The district court had instructed the jury that, in the event it found Deere liable on any of those grounds, the damages should amount to the loss of net asset value for the dealerships.

One of the theories of liability was subject to Michigan’s comparative fault statute. If Deere had been found liable only on that claim, the damages would have been reduced in proportion to the jury’s fault allocation, according to the court. But the award of damages for loss of net asset value was also supported by two additional theories of liability—a breach of contract claim and the violation of the Farm and Utility Equipment Act—either of which was adequate grounds to support the plaintiffs’ recovery of the full amount of damages assessed without any reduction of fault to one of the dealers, the court decided.

The June 13, 2012 decision is Laethem Equipment Co. v. Deere & Co., CCH Business Franchise Guide ¶14,846.

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