Volvo Const. Equip. North America v. Clm Equip.
| Decision Date | 08 October 2004 |
| Docket Number | No. 03-1108.,03-1108. |
| Citation | 386 F.3d 581 |
| Parties | VOLVO CONSTRUCTION EQUIPMENT NORTH AMERICA, INC., a Delaware corporation; Volvo Trademark Holding Aktiebolaget, a Swedish corporation; Champion Road Machinery Limited, a Canadian corporation, Plaintiffs-Appellees, v. CLM EQUIPMENT COMPANY, INC., a Louisiana corporation; Future Equipment Company, Inc., a Texas corporation, Clark Machinery Company, an Arkansas corporation, Defendants-Appellants, and AIS Construction Equipment Corporation, a Michigan corporation; Nueces Farm Center, Inc., d/b/a Nueces Power Equipment, a Delaware corporation, Defendants. |
| Court | U.S. Court of Appeals — Fourth Circuit |
Appeal from the United States District Court for the Western District of North Carolina, Lacy H. Thornburg, J.
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Scott E. Korzenowski, Dady & Garner, P.A., Minneapolis, Minnesota, for Appellants. Michael J. Lockerby, Hunton & Williams, Richmond, Virginia, for Appellees. J. Michael Dady, Ronald K. Gardner, Dady & Garner, P.A., Minneapolis, Minnesota; Robert B. Delano, Jr., Sands, Anderson, Marks & Miller, Richmond, Virginia; Edward L. Bleynat, Jr., Ferikes & Bleynat, P.L.L.C., Asheville, North Carolina, for Appellants. Kimberley A. Isbell, Hunton & Williams, Richmond, Virginia; Nash E. Long, III, Hunton & Williams, Charlotte, North Carolina, for Appellees.
Before WIDENER, TRAXLER, and KING, Circuit Judges.
Affirmed in part, vacated in part, and remanded by published opinion. Judge KING wrote the opinion, in which Judge TRAXLER joined, Judge WIDENER wrote an opinion concurring in part and dissenting in part.
Three retail dealers of large earth-moving motor graders (the "Dealers")1 appeal the district court's decision in favor of the graders' manufacturers (collectively, "Volvo")2 in this contract dispute. Volvo Trademark Holding Aktiebolaget v. CLM Equip. Co., Inc., 236 F. Supp.2d 536 (W.D.N.C.2002) (the "Opinion"). The Dealers maintain that the court lacked jurisdiction in the declaratory judgment proceeding initiated by Volvo because no actual controversy existed. The Dealers also assert that, even if the court possessed jurisdiction, it abused its discretion by exercising jurisdiction in that proceeding. Finally, the Dealers contend that the court erroneously ruled in favor of Volvo on the merits of this dispute, in that Volvo's refusal to supply them with equipment constituted a breach of its contractual obligations and contravened several state statutes. For the reasons explained below, we affirm in part, vacate in part, and remand.
Prior to being purchased by Volvo in 1997, Champion Road Machinery Limited ("Champion") was a Canadian corporation specializing in the manufacture of large earth-moving motor graders (the "Champion Motor Graders").3 The contract dispute underlying this litigation emanates from Volvo's 1997 purchase of Champion and Volvo's subsequent decision to cease supplying Champion Motor Graders to the Dealers — CLM Equipment Company, Inc. ("CLM"), Clark Machinery Company ("Clark"), and Future Equipment Company, Inc. ("FEC") — for resale. That decision resulted in what the Dealers contend was Volvo's unlawful termination of their dealer agreements with Champion (the "Dealer Agreements").4 According to the Dealers, Champion promised them, during a 1970s effort to increase its dealerships in this country, that it would "continue a business relationship with a dealer unless the dealer was having financial difficulties or was performing poorly." The Dealers allege that Champion promised to terminate a Champion dealer "only after first giving the dealer notice of its deficiencies and an opportunity to correct those deficiencies." The Dealers maintain that Champion representatives also made contemporaneous oral representations that the Dealers could continue as Champion dealers so long as they adequately performed. This contract dispute relates primarily to the interpretation and application of a specific subsection of the Termination section of the Dealer Agreements. That subsection, the "Without Cause Provision," authorizes termination of a dealership without cause, providing as follows:
Champion may terminate this agreement at any time without cause by written notice of termination delivered to [Dealer or Distributor], such termination to be effective not less than sixty (60) days after receipt or deemed receipt by Dealer of such notice.
CLM, Clark, and FEC Dealer Agreements § 24.4. Although the Without Cause Provision is important in this appeal, several other provisions of the Dealer Agreements are also significant. They include:
• a merger and integration clause (the "Integration Clause"), providing that a Dealer Agreement contains the entire agreement respecting a Dealer's purchase and distribution of Champion products and parts; CLM and Clark Dealer Agreements § 32.1, FEC Dealer Agreement § 33.1;
• a clause prohibiting oral modification (the "Modification Clause"), providing that any modification of a Dealer Agreement must be in writing and signed by a duly authorized officer of Champion; CLM and Clark Dealer Agreements § 32.2, FEC Dealer Agreement § 33.2;
• a market withdrawal provision (the "Market Withdrawal Provision"), pursuant to which Champion reserves the right to discontinue its product lines without notice to the Dealers; CLM, Clark, and FEC Dealer Agreements § 27;
• a best efforts provision (the "Best Efforts Provision"), under which the Dealers agree to use their best efforts to sell Champion products; CLM and Clark Dealer Agreements § 6, FEC Dealer Agreement § 7;
• a choice-of-law provision (the "Choice-of-Law Provision"), providing that, pursuant to CLM's and Clark's Dealer Agreements, the obligations of the parties are to be determined under South Carolina law; CLM and Clark Dealer Agreements § 29; and that, pursuant to FEC's Dealer Agreement, the obligations of the parties are to be governed by the law of Ontario; FEC Dealer Agreement § 29; and
• a conformity with local laws provision (the "Local Law Provision"), under which the rights and obligations of the parties are subject to all applicable laws of government entities having jurisdiction over them, and providing that, if local law substantially alters relationships under a Dealer Agreement, a party may request modification of the Agreement; CLM, Clark, and FEC Dealer Agreements § 30.
After consummating its purchase of Champion, Volvo decided that it could compete more effectively with such manufacturers as Case, Caterpillar, John Deere, and Komatsu if it marketed motor graders under a single brand name (i.e., Volvo) and through a single dealer network (i.e., that of Volvo).5 As a result, Volvo implemented a plan to "Volvoize" its products and "rationalize" its dealer network. Volvo characterized the "Volvoization" program as a process of reengineering and rebranding Champion Motor Graders for sale under the VOLVO trademark. Volvo characterized its "Dealer Rationalization" plan as the integration of the Volvo and Champion dealer networks.
In 2000, the Dealers responded to Volvo's plan by demanding that Volvo continue to provide them with motor graders manufactured by Volvo at the former Champion factory. Despite these demands, the Dealers were not selected by Volvo as authorized dealers of such motor graders, and Volvo notified the Dealers that it would no longer supply them with Champion Motor Graders. On January 19, 2000, FEC received notice that its Dealer Agreement would be terminated on March 19, 2000. On October 10, 2000, Volvo notified Clark and CLM that their Dealer Agreements would be terminated on January 9, 2001. Upon receipt of these termination notices, the Dealers advised Volvo that they would litigate all efforts to terminate the Dealer Agreements. In January 2001, after receipt of such advice from the Dealers, Volvo ceased manufacturing Champion brand motor graders.
On October 10, 2000, Volvo filed its declaratory judgment complaint in the Western District of North Carolina (the "North Carolina Litigation"), naming as defendants CLM, FEC, AIS Construction Equipment Corporation ("AIS"), and certain other Champion dealers, including Nueces Farm Center, Inc. ("NFC"). By this civil action, Volvo sought a declaration that, pursuant to the Dealer Agreements, it was not obliged to continue supplying Champion Motor Graders to Champion dealers. On November 27, 2000, the defendants sought dismissal of the North Carolina Litigation for lack of subject-matter jurisdiction. In response, Volvo amended its declaratory judgment complaint and, inter alia, named Clark as an additional defendant. On March 19, 2001, before the district court addressed the jurisdictional issue, Volvo sought leave to amend its complaint for a second time, dropping defendant NFC from the North Carolina Litigation and asserting diversity jurisdiction in the North Carolina court.6
On March 20, 2001, the Dealers filed a separate civil action against Volvo in the Eastern District of Arkansas (the "Arkansas Litigation"). The Dealers then moved the North Carolina court to dismiss, abstain from, or stay the North Carolina Litigation, in deference to the Arkansas Litigation (the "Dealers' Motion"). On April 9, 2001, a magistrate judge in North Carolina recommended to the district court that the Dealers' Motion be denied and that Volvo be authorized to file its Second Amended Complaint. Volvo Trademark Holding Aktiebolaget v. AIS Const. Equip. Corp., No. 1:00CV238 (W.D.N.C. April 9, 2002).
On April 20, 2001, Volvo moved the Arkansas court to dismiss, abstain from, or stay the Arkansas Litigation, in deference to the North Carolina Litigation. On June 21, 2001, the Arkansas court granted that motion, entering a stay of the Arkansas Litigation pending resolution of the Dealers' Motion...
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