Cromeens, Holloman, Sibert, Inc v. Ab Volvo

• Decision Date: 07 November 2003
• Docket Number: No. 01-3770.,01-3770.
• Citation: 349 F.3d 376
• Parties: CROMEENS, HOLLOMAN, SIBERT, INCORPORATED, a Texas corporation, doing business as Cisco Ford Equipment; Hammer Equipment Sales, a Canadian corporation; Keil Equipment Company, a New York corporation; et al., Plaintiffs-Appellants, v. AB VOLVO, a Swedish corporation; Volvo Excavators AB, a Swedish corporation; Volvo Construction Equipment NV, a foreign corporation; et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Seventh Circuit

349 F.3d 376

CROMEENS, HOLLOMAN, SIBERT, INCORPORATED, a Texas corporation, doing business as Cisco Ford Equipment; Hammer Equipment

Sales, a Canadian corporation; Keil Equipment Company, a New York corporation; et al., Plaintiffs-Appellants, v. AB VOLVO, a Swedish corporation; Volvo Excavators AB, a Swedish corporation; Volvo Construction Equipment NV, a foreign corporation; et al., Defendants-Appellees.

No. 01-3770.

United States Court of Appeals, Seventh Circuit.

ARGUED September 10, 2002.

DECIDED November 7, 2003.

REHEARING DENIED DECEMBER 17, 2003.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

W. Michael Garner (argued), Ronald K. Gardner, Dady & Garner, Minneapolis, MN, for Plaintiffs-Appellants.

Michael J. Lockerby (argued), Hunton & Williams, Richmond, VA, for Defendants-Appellees.

Before COFFEY, ROVNER and WILLIAMS, Circuit Judges.

ILANA DIAMOND ROVNER, Circuit Judge.

The plaintiffs sued Volvo for breach of dealership agreements that each of the plaintiffs had entered into with Samsung, Volvo's predecessor. The district court entered summary judgment in favor of the defendants because the dealership agreements contained clauses permitting termination without cause. The plaintiffs appeal and we affirm the judgment except for one statutory claim brought by one plaintiff. For that claim, we vacate the judgment and remand.

I.

Between 1992 and 1997, each of the plaintiffs entered into "Dealer Agreements" with Samsung corporate entities (either Samsung America, Inc. or Samsung Construction Equipment America Corporation or Samsung Construction Equipment Company, all of which we will refer to as "Samsung") to become authorized dealers of certain Samsung products in designated territories. Following the lead of the parties, we will refer to the plaintiffs as the Samsung Dealers. The Samsung products covered by the contracts are listed sometimes specifically as excavators, wheel loaders, crawler dozers, rubber tired loaders and hydraulic excavators, and sometimes generally as "Samsung Construction Equipment for sale in North America" or "Samsung Heavy Equipment" or even "all products." In one instance, the contract fails to mention the products covered. In general, though, the contracts make clear that the Samsung Dealers were authorized to sell Samsung construction equipment.

In 1998, an affiliate of Volvo Construction Equipment North America, Inc. ("Volvo") acquired Samsung's worldwide construction equipment business. As a result, Volvo assumed Samsung's contractual rights and responsibilities, including the Dealer Agreements. Volvo had an existing dealership network for similar Volvo-manufactured construction equipment and eventually decided to terminate some of Samsung's dealership agreements. In mid-1999, Volvo began contacting the Samsung Dealers to negotiate terminations of the Dealer Agreements. Volvo sent the Samsung Dealers notices that they were terminated or were going to be terminated within sixty days pursuant to the "Termination Without Cause Provision" that is included in each of the Dealer Agreements. By June 15, 1999, all but two of the Dealer Agreements at issue here had been terminated. The remaining two were terminated on November 15, 1999 and December 31, 1999.

The Samsung Dealers took exception to the terminations, claiming that they had been promised they would not be terminated so long as they were performing adequately. They sued Volvo¹ in Arkansas state court claiming: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) violations of the Illinois Franchise Disclosure Act (all of the Dealer Agreements contained an Illinois choice-of-law provision); (4) violations of the Arkansas Franchise Practices Act; (5) violation of the Texas Farm, Industrial and Outdoor Power Equipment Dealer Act; (6) violation of the Texas Deceptive Trade Practices — Consumer Protection Act; (7) violations of the Maine Franchise Law for Power Equipment Machinery and Appliances; (8) violations of a Montana statute that prohibits grantors from terminating dealership agreements without good cause; (9) tortious interference with contractual relations and prospective economic advantage; (10) misappropriation; (11) unjust enrichment; (12) estoppel; and, for good measure, (13) recoupment. Volvo settled with the only non-diverse plaintiff and then removed the case to the United States District Court for the Eastern District of Arkansas. The district court then granted Volvo's motion to transfer the case to the United States District Court for the Northern District of Illinois. Volvo subsequently moved for summary judgment.

The district court granted the motion in its entirety. The court first noted that its jurisdiction rested solely on diversity. Although a court sitting in diversity normally applies the choice-of-law rules of the state in which it sits, when a case has been transferred from another district, the court instead applies the choice-of-law rules that the court in the transferring state would apply. See Van Dusen v. Barrack, 376 U.S. 612, 639, 84 S.Ct. 805, 11 L.Ed.2d 945 (1964). In this case, the district court noted, an Arkansas choice-of-law provision governed. Arkansas law provides that the parties to a multistate transaction may choose their own law so long as it bears a reasonable relation to the transaction. Arkansas Appliance Distrib. Co. v. Tandy Electronics, Inc., 292 Ark. 482, 485, 730 S.W.2d 899, 900 (1987); Ark. Stat. Ann. § 85-1-105(1). The parties here chose to apply the law of Illinois. At the time the parties signed the contract, Samsung Construction Equipment America Corporation was an Illinois company with its principal place of business in Illinois. Samsung Construction Equipment Company was a division of Samsung America, Inc., which was a New Jersey corporation with its principal place of business in Illinois. The plaintiffs in this diversity suit, of course, are all citizens of other states and foreign jurisdictions. Although the contracts were later assigned to Volvo, a Delaware corporation with its principal place of business in North Carolina, the contracts bore a sufficient connection to Illinois at the time they were executed to uphold the choice of Illinois law. There is no evidence, for example, that Samsung sought to apply the law of Illinois in order to avoid some less favorable law in a state more connected to the transactions. See Tandy, 292 Ark. at 485-86, 730 S.W.2d at 900. The district court remarked that much of the training and support provided to the Samsung Dealers took place in Illinois, providing an additional connection to the State. Therefore, as the district court did, we will apply the law of Illinois to the contracts.

At the time Volvo sought to terminate the Dealer Agreements, five of the seven contracts had already expired under their own terms. The district court found that for the five expired contracts, the parties either continued to operate under the terms of the original agreements or the relationships became terminable at will. In either case, the court held, Volvo had a right to terminate the relationships without cause. The court rejected the Samsung Dealers' attempt to apply the Illinois Franchise Disclosure Act (the "IFDA") to the contracts. The IFDA provides that franchises may not be terminated without cause, and that parties may not waive this protection in their contracts. See 815 ILCS §§ 705/19, 41. The court found that the IFDA did not apply because by its own terms it was limited in application to franchises located within the State of Illinois, and none of the franchises here were in Illinois. The court also declined to apply the IFDA because to do so would allow a general choice-of-law provision to trump a specific contradictory term of a bargained-for contract between sophisticated parties. Similarly, the anti-waiver provision of the IFDA did not help the Samsung dealers, according to the court, because it applied only to dealerships located within the State.

The district court rejected the Samsung Dealers' claim that Volvo breached the covenant of good faith and fair dealing by terminating the dealerships without cause because the contracts provided that the agreements could be so terminated. To hold otherwise, the court stated, would allow an implied covenant to replace an express contractual term. No quasi-contractual relief was available for the Samsung Dealers because that relief is available only when there is no express contract between the parties. The claim that Volvo tortiously interfered with its own relationship with the Samsung Dealers failed, according to the district court, because a party cannot tortiously interfere with its own contracts. To the extent the Samsung Dealers were claiming Volvo tortiously interfered with the Dealers' relationships with their customers, the district court held that the claim could not survive summary judgment. One of the elements of tortious interference is that the defendant must act without justification to induce a breach of contract. The court found that Volvo merely passed on truthful information to the Samsung Dealers' customers, and that supplying truthful information did not qualify as an unjustified act. The court did not specifically rule on the claims related to franchise laws in the states where particular plaintiffs resided, but granted summary judgment as to all claims. The Samsung Dealers appeal.

II.

On appeal, the Samsung Dealers maintain that the IFDA applies to them even though they are located outside of Illinois. They argue that the IFDA invalidates the "termination without cause" provisions in each of their contracts, and that the terminations violated the IFDA. They also contend that the choice-of-law provisions do not void the additional protections available in the states where some of the franchises are located. In particular, they ask us to apply the law of Texas, Maine and...