Allied Equipment Co. v. Weber Engineered Products

• Decision Date: 01 October 1956
• Docket Number: No. 7208.,7208.
• Citation: 237 F.2d 879
• Parties: ALLIED EQUIPMENT COMPANY, Incorporated, Appellant, v. WEBER ENGINEERED PRODUCTS, INCORPORATED, et al., Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

237 F.2d 879 (1956)

ALLIED EQUIPMENT COMPANY, Incorporated, Appellant, v. WEBER ENGINEERED PRODUCTS, INCORPORATED, et al., Appellees.

No. 7208.

United States Court of Appeals Fourth Circuit.

Argued June 21, 1956.

Decided October 1, 1956.

Robert R. Gwathmey, III, and George E. Allen, Richmond, Va. (Allen, Allen, Allen & Allen, Richmond, Va., on the brief), for appellant.

William H. King, Richmond, Va. (Robert H. Paterson, Jr., and McGuire, Eggleston, Bocock & Woods, Richmond, Va., on the brief), for appellees.

Before PARKER, Chief Judge, and SOPER and PRETTYMAN, Circuit Judges.

PRETTYMAN, Circuit Judge.

Our appellant, in this litigation called simply "Allied", is a business concern of Richmond, Virginia, which, in addition to a retail sales business in farm and garden equipment, held a number of distributor franchises for that equipment. Our appellee, called herein simply "Weber", is a manufacturer of such equipment. In the summer of 1949 the two concerns made an arrangement by which Weber gave Allied a wholesale distributorship on an exclusive basis in 85 counties in Virginia. It was understood that Allied would develop a distribution system throughout this territory, and it proceeded to do so. It increased the number of dealers in Weber products from four or five in 1949 to over a hundred in 1953. Allied says that in doing so it expended large sums of money. In the latter part of 1952 Allied contemplated an enlargement of its facilities which would require it to enter upon a lease for a period of fifteen years at a rental of $500 a month. The lessor desired some assurances as to the duration of Allied's franchises. Allied wrote Weber upon the subject and asked for a letter "setting forth the intended permanency of our franchise with you." In response Weber wrote in somewhat vague fashion but saying in part: "I know that your thinking and ours coincides in that we are all interested in building Choremaster (a Weber product trade name) year after year. That is exactly what you have done, and I wanted to take this opportunity to express my appreciation for your splendid cooperation. With the rapid expansion of the Choremaster line, i. e., tillers, mowers, we feel that our volume, and that of our distributors, should grow from year to year in the future. I hope that we may have the pleasure of many more years of pleasant, profitable association."

Allied exhibited the foregoing letter to the intended lessor, and the lease was executed.

In September of 1953 Allied considered adding to its lines a cultivator made by the Quick Manufacturing Company. Weber considered this cultivator to be in competition with its product. Representatives of Weber and Allied conferred, and thereafter correspondence was exchanged. It clearly appeared from the notes of the conference and from the correspondence that, if Allied undertook to sell equipment which was in competition with Weber's equipment, the Weber distributorship would be terminated. Allied replied by wire that it would distribute certain competitive lines and assumed that this cancelled the distributorship with Weber. Allied commented, "We regret exceedingly that this decision is forced upon us." Thereupon the franchise was terminated and Weber immediately took over the territory and proceeded to distribute its products throughout Virginia through many of the dealerships which had been set up by Allied.

Litigation ensued, of which one phase is the subject matter of this appeal. Allied claimed from Weber damages in the amount of $75,000 for unlawful cancellation of its contract, and claimed further that the damages should be trebled on the ground that Weber's acts constituted a violation of the antitrust laws. Allied's claims were asserted in a counterclaim in a suit brought against it by Weber to collect on an open account, but we need not relate the details of the litigation. A jury, answering written interrogatories, assessed Allied's damages at $15,000 and found that Weber had violated the antitrust laws. Thereafter the District Court rendered judgment n.o.v. for Weber. The basis for the action of the District Court was its opinion that the contract between Weber and Allied was lacking in mutuality, was not enforceable, and could not be the basis for an award of damages for breach. This appeal followed.

The purported agreement or arrangement between Weber and Allied was not in writing. It is not claimed by either party that a time of duration was fixed, that prices or quantities were indicated, that obligations to buy or sell were undertaken, or that methods or times of delivery were prescribed. On the other hand, in so far as this appeal is concerned, it seems to be assumed by both parties that some arrangement amounting to an exclusive dealership in certain territory was made, that it existed from mid-1949 to late 1953, that an extensive system of dealerships was established by Allied for Weber products, and that Allied's lease of the new building was, in part at least, in reliance upon Weber's representations.

The first question in our consideration of the problem is whether the arrangement between Weber and Allied was such that its termination by Weber afforded Allied a cause of action for damages. The question is settled by the decision of this court in Jack's Cookie Company v. Brooks.¹ Judge Soper, writing for the court, said:

"On the other hand, if the manufacturer appoints an agent not merely to sell the goods, but the agent in addition to making sales furnishes additional consideration, as when he sets up a distributive system for the manufacturer\'s goods and his compensation is measured by the amount of goods sold in the territory assigned to him, the manufacturer is not at liberty to terminate the agreement at will even though it contains no provision for its termination, but must retain the agent in the employment for a reasonable period of time. Citing authorities." ²

It is perfectly true that generally speaking a distributorship arrangement such as this does not constitute the basis for suits on account of quantities, prices, terms, and such items; and, generally speaking, they are terminable by either of the parties.³ In the Kirkmyer case,⁴ for example, this court held that an oral promise of a dealership, in so far as it related to the sale of the manufacturer's products to the dealer, was lacking in mutuality and was too indefinite to form the basis for a binding obligation on the part of the manufacturer. In that case the dealer had a franchise and was located in West Richmond. The manufacturer wanted a dealer in South Richmond and told the dealer it must move or lose the franchise. The manufacturer also promised that if an additional dealership were placed in West Richmond this dealer would get it. The dealer moved, and later another concern was awarded a dealership in West Richmond. The franchise which the dealer had, and in respect to...