Ag-Chem Equipment Co., Inc. v. Hahn, Inc.
| Decision Date | 06 March 1973 |
| Docket Number | 72-1199.,No. 72-1152,72-1152 |
| Citation | 480 F.2d 482 |
| Parties | AG-CHEM EQUIPMENT CO., INC., a Minnesota corporation, Appellee, v. HAHN, INC., an Indiana corporation, and Kearney-National, Inc., a Delaware corporation, Appellants. AG-CHEM EQUIPMENT CO., INC., a Minnesota corporation, Appellant, v. HAHN, INC., an Indiana corporation, and Kearney-National, Inc., a Delaware corporation, and Hahn, Inc., a Delaware corporation, Appellees. |
| Court | U.S. Court of Appeals — Eighth Circuit |
COPYRIGHT MATERIAL OMITTED
Veryl L. Riddle, Thomas C. Walsh, Daniel R. O'Neill, Bryan, Cave, McPheeters & McRoberts, St. Louis, Mo., for Hahn, Inc. of Indiana and Kearney National, Inc.
James P. Larkin, Robert J. Hennessey, and Larkin, Hoffman, Daly & Lindgren, Minneapolis, Minn., for Ag-Chem Equipment Co., Inc.
Martin Weinstein, Minneapolis, Minn., for Hahn, Inc. of Delaware.
Before MATTHES, Chief Judge, BRIGHT, Circuit Judge and TALBOT SMITH, Senior District Judge.*
The main controversy in this litigation is between Ag-Chem Equipment Co., Inc. (hereinafter referred to as Ag-Chem), a Minnesota corporation and plaintiff below, and Hahn, Inc., and Kearney-National, Inc., Indiana and Delaware corporations, respectively (hereinafter referred to collectively as Hahn), the original defendants in the trial court.1
A protracted jury trial involving numerous complex issues resulted in jury verdicts in favor of Ag-Chem against all defendants as follows:
$ 91,192.00 Violation of Robinson-Patman
Act (illegal price
and service discrimination)
(before trebling)
98,740.00 Breach of exclusive distributorship
contract
104,086.00 Recoupment
3,500.00 Malicious defamation of
credit
In response to Hahn's timely motion for judgment n. o. v., or in the alternative, for a new trial, the district court, 350 F.Supp. 1044, granted judgment n. o. v. on the exclusivity claim, ordered Ag-Chem to remit 80 percent of the Robinson-Patman damages,2 and vacated the judgment against Hahn of Delaware, leaving undisturbed the defamation and recoupment verdicts. The court also awarded Ag-Chem $18,000 reasonable attorney fees allocable to the Robinson-Patman claim.
Neither Hahn nor Ag-Chem was satisfied with the final judgment as evidenced by their respective appeals. In No. 72-1152 Hahn has appealed the judgment in favor of Ag-Chem on the claims of defamation of credit, recoupment, and violation of the Robinson-Patman Act. In No. 72-1199 Ag-Chem has appealed the trial court's reduction of the Robinson-Patman verdict, the directed verdict in favor of Hahn on the Sherman Act price-fixing claim, the judgment n. o. v. in favor of Hahn on the exclusivity claim, and the dismissal of Hahn of Delaware.
Ag-Chem was organized in 1963, and is the corporate successor in interest to the sole proprietorship of Alvin E. McQuinn, president of Ag-Chem. Hahn, a manufacturer of specialty machinery for the application of all types of agricultural chemicals, entered into a written distribution sales agreement with McQuinn on November 1, 1962, granting McQuinn an exclusive one-year franchise to sell Hahn chemical spraying equipment in Minnesota. A second written agreement which expanded Ag-Chem's territory to include the northern part of Iowa was executed for fiscal year 1964.3 Subsequently, the franchise was extended to cover all of Iowa. After expiration of the 1964 written agreement, the parties continued their relationship on an oral basis until Hahn terminated the distributorship in 1968. Ag-Chem and Hahn differ as to the actual date of termination, and we review the facts in this respect as a means of portraying the relationship between the parties prior to termination. The record shows that on July 8, 1968, an authorized representative of Hahn by letter informed Ag-Chem:
This letter provoked a lengthy response from Ag-Chem protesting the recent decision made by Hahn to sell its equipment to Allis-Chalmers Manufacturing Co., a nationwide distributor of agricultural equipment with dealers situated in the Ag-Chem territory.
Finally, by letter of December 18, 1968, Hahn informed Ag-Chem:
From the foregoing we conclude the franchise agreement was cancelled on July 8, 1968, subject to further negotiations; that negotiations were not productive, and on December 18, 1968, the arrangement was formally terminated, effective March 1, 1969.
This lawsuit was instituted by the filing of the original complaint on September 11, 1969. The complaint was amended several times before and during course of trial.4 Hahn stood on its motion for directed verdict made at close of Ag-Chem's case, offered no evidence, and the jury returned the verdicts set forth above.
The doctrine of recoupment is designed to remedy the inequity which arises when a manufacturer, after having required a distributor to make a sizeable investment in the furtherance of a distributorship, terminates the working relationship without just cause, leaving the distributor with substantial unrecovered expenditures.
Recoupment appears to have evolved from the principle that, if an agent or employee of the principal or employer furnishes a consideration in addition to his mere services, he will be deemed to have purchased the employment for at least a reasonable period of time where the duration of the employment is not otherwise defined. Gellhorn, Limitations on Contract Termination Rights — Franchise Cancellations, 1967 Duke L.J. 465, 479; 9 Williston, Contracts § 1017A (3rd ed. 1967); Restatement (Second) of Agency § 442, comment c (1957). Employing this rationale, a number of courts have declared that a manufacturer would be in breach and liable for damages should he terminate the distributorship contract without just cause before a reasonable period of time had lapsed. Allied Equipment Co. v. Weber Engineered Products, Inc., 237 F.2d 879 (4th Cir. 1956); Jack's Cookie Co. v. Brooks, 227 F.2d 935 (4th Cir. 1955), cert denied, 351 U.S. 908, 76 S.Ct. 697, 100 L.Ed. 1443 (1956). See cases collected in Annot., 19 A.L.R.3d 196, 319 (1968). The purpose of allowing a reasonable time for the contract is to provide the distributor with a reasonable opportunity to recoup his expenditures. Allied Equipment Co. v. Weber Engineered Products, Inc., supra, 237 F.2d at 882. What period of time is, in fact, "reasonable" varies with the circumstances of each case. General Tire and Rubber Co. v. Distributors, Inc., 253 N.C. 459, 117 S.E.2d 479, 489 (1960).
Other courts have reached the same or a similar result, while still holding that the contract remains terminable at will, by requiring the manufacturer to reimburse the distributor in quantum meruit for unrecouped expenses.5 Gibbs v. Bardahl Oil Co., 331 S.W.2d 614 (Mo. 1960); Beebe v. Columbia Axle Co., 233 Mo.App. 212, 117 S.W.2d 624 (1938). See cases collected in Annot., 19 A.L.R. 3d 196, 312 (1968).
This court in Clausen & Sons Inc. v. Theo. Hamm Brewing Co., 395 F.2d 388, 391 (8th Cir. 1968), construing Minnesota law, adopted the former of these approaches as follows:
"Thus we feel that under Minnesota law where an exclusive franchise dealer under an implied contract, terminable on notice, has at the instance of a manufacturer or supplier invested his resources and credit in establishment of a costly distribution facility for the supplier\'s product, and the supplier thereafter unreasonably terminates the contract and dealership without giving the dealer an opportunity to recoup his investment, a claim for breach of contract may be stated."
A review of the authorities on recoupment makes it clear that a threshold requirement to the right is the existence of an agreement which is terminable at will. Under Minnesota law, as is generally true elsewhere, a contract having no definite duration is terminable at will by either party upon reasonable notice to the other. McGinnis Piano & Organ Co. v. Yamaha Int'l Corp., 480 F.2d 474 (8th Cir. 1973);* Benson Coop. Creamery Ass'n v. First District Ass'n, 276 Minn. 520, 151 N.W.2d 422, 426 (1967); Victor Talking Machine Co. v. Lucker, 128 Minn. 171, 150 N.W. 790, 792 (1915).
As we understand Hahn's position on this appeal, it does not dispute the right of one whose distributorship has been cancelled without cause to recoup his investment. Instead, Hahn argues that, on the record before us, no evidentiary basis exists for the award of such damages to Ag-Chem. Hahn premises its argument on three grounds: (1) the evidence failed to establish the amount of Ag-Chem's investment and that such...
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