American Suzuki Motor Corp. v. Bill Kummer, Inc.

• Court: U.S. Court of Appeals — Seventh Circuit
• Writing for the Court: Before BAUER and MANION, Circuit Judges, and STIEHL; MANION
• Citation: American Suzuki Motor Corp. v. Bill Kummer, Inc., 65 F.3d 1381 (7th Cir. 1995)
• Decision Date: 12 October 1995
• Docket Number: 94-3037,Nos. 94-3128,s. 94-3128
• Parties: 27 UCC Rep.Serv.2d 366 AMERICAN SUZUKI MOTOR CORPORATION, a California corporation, Plaintiff-Appellant, Cross-Appellee, v. BILL KUMMER, INCORPORATED, a Wisconsin corporation and William B. Kummer, Defendants-Appellees, Cross-Appellants.

Page 1381

65 F.3d 1381

27 UCC Rep.Serv.2d 366

AMERICAN SUZUKI MOTOR CORPORATION, a California corporation Plaintiff-Appellant, Cross-Appellee, v. BILL KUMMER, INCORPORATED, a Wisconsin corporation and William B. Kummer, Defendants-Appellees, Cross-Appellants.

Nos. 94-3128, 94-3037.

United States Court of Appeals Seventh Circuit.

Argued March 29, 1995.

Decided Sept. 15, 1995.

Rehearing Denied Oct. 12, 1995.

Brian E. Butler, Gary M. Young (argued), Stafford, Rosenbaum, Rieser & Hansen, Madison, WI, for plaintiff-appellee.

Gary L. Antoniewicz (argued), Christopher J. Dodge, Tomlinson, Gilman & Rikkers, Madison, WI, for defendant-appellant.

Before BAUER and MANION, Circuit Judges, and STIEHL, District Judge. ^*

MANION, Circuit Judge.

Bill Kummer, Inc. ("Kummer") entered into a Dealer Agreement with American Suzuki Motor Corp. ("Suzuki") giving Kummer the right to sell and service Suzuki motorcycles. In January of 1993, Suzuki notified Kummer of its intent to terminate the dealership and shortly thereafter Suzuki filed a complaint in federal court alleging breach of contract, violation of the Wisconsin Motor Vehicle Dealer Law, and tortious interference with prospective business relations. Kummer counterclaimed, alleging that Suzuki breached the Dealer Agreement, violated the Wisconsin Motor Vehicle Dealer Law and wrongfully terminated his Suzuki dealership. After a bench trial, held before a magistrate judge, the court held that neither party had breached the Dealer Agreement or violated the Wisconsin Motor Vehicle Dealer Law; that Kummer had not tortiously interfered with Suzuki's prospective contractual relations; and that Suzuki's termination of Kummer's dealership was proper. We affirm the district court's decision that Kummer had not tortiously interfered with Suzuki's prospective contractual relations and that Suzuki did not violate the Wisconsin Motor Vehicle Dealer Law or wrongfully terminate Kummer's dealership. However, we reverse the district court's holding that Kummer did not breach the Dealer Agreement or violate the Wisconsin Motor Vehicle Dealer Law, and remand with instructions to enter judgment on liability for Suzuki and to proceed with a determination as to damages.

I. Statement of the Case

William B. Kummer, the owner and president of Bill Kummer, Inc. ("Kummer"), is in the business of selling motorcycles. In February of 1986, Kummer entered into an Authorized Suzuki Motorcycle Dealer Agreement ("Dealer Agreement") with American Suzuki Motor Corporation ("Suzuki"). This Dealer Agreement authorized Kummer to purchase Suzuki motorcycles and motorcycle parts and accessories for resale in his retail shop in Sheboygan, Wisconsin. Kummer in turn was required to use his best efforts to sell Suzuki motorcycles.

In each of 1987 and 1988, Kummer sold twenty-six Suzuki vehicles. Suzuki, however, was apparently not satisfied with Kummer's performance because on December 13, 1988 it sent Kummer notice that it was terminating the Dealer Agreement in 60 days. Upon receiving the notice of termination Kummer filed a complaint with the Office of the Commissioner of Transportation of Wisconsin ("OCT") protesting the proposed termination. Wisconsin, like numerous other states, has a Motor Vehicle Dealer Law which is, in part, a dealer protection statute. Wis.Stat. Sec. 218. One of the aspects of this statute is that it prohibits unfair terminations and allows a dealer to protest a proposed termination by filing a complaint with the OCT. Wis.Stat. Sec. 218.01(3)(a)(17), 218.01(2)(bd)2. The filing of such a complaint triggers an automatic stay provision requiring any dealer agreement to remain in effect until the OCT reaches a final decision on the complaint. Wis.Stat. Sec. 218.01(2)(bd)2. After Kummer filed his complaint with the OCT protesting the 1988 termination, both Suzuki and Kummer were therefore bound by the terms of the Dealer Agreement until the OCT resolved the issues presented in Kummer's complaint.

But as could be expected, Kummer and Suzuki did not get along well during the automatic stay period. Kummer stopped ordering Suzuki motorcycles. Suzuki, for its part, stopped making personal visits to Kummer's shop. The strain between Kummer and Suzuki was exacerbated by the OCT's delay in resolving Kummer's complaint protesting the proposed termination. Kummer's complaint was originally filed on February 7, 1989, but a hearing before the OCT was not held until October of 1991, and it was January 4, 1993 before the OCT issued a proposed decision and June 8, 1993 before the OCT issued a final decision.

Both the proposed decision and the final decision of the OCT held that Suzuki had wrongfully terminated Kummer in December of 1988. By this time, however, Kummer no longer had any Suzuki motorcycles in stock. In fact, the record shows that Kummer had not purchased any Suzuki vehicles since December of 1988, and by September of 1989 Kummer had only three Suzuki vehicles in stock. By August of 1990, Kummer had sold his last Suzuki; since then Kummer had not stocked any more Suzuki motorcycles. Thus, when Suzuki received the OCT's proposed decision in January of 1993, it sent a new notice of termination to Kummer, now purporting to terminate Kummer for his failure to stock and sell Suzuki products during the mandatory stay period. That same day Suzuki filed a complaint in federal court alleging that defendant Bill Kummer, Inc.: (1) breached the Dealer Agreement with Suzuki; (2) violated the Wisconsin Motor Vehicle Dealer law; and (3) tortiously interfered with Suzuki's prospective contractual relations. ¹ Kummer counterclaimed against Suzuki alleging that Suzuki breached the Dealer Agreement, violated the Wisconsin Motor Vehicle Dealer law and wrongfully terminated his dealership ² Kummer also filed another complaint with the OCT protesting Suzuki's latest attempt to terminate his dealership. ³

The case was tried before a magistrate. The magistrate, after holding a full bench trial on the merits of Suzuki and Kummer's complaints, held that neither Suzuki nor Kummer had breached the Dealer Agreement, that neither Kummer nor Suzuki had violated the Wisconsin Motor Vehicle Dealer law, and that Kummer had not tortiously interfered with Suzuki's prospective contractual relations. The magistrate also held that Suzuki's 1993 termination of Kummer was valid under the Wisconsin Motor Vehicle Dealer law. Both parties appeal the rulings adverse to their positions.

We have jurisdiction to hear an appeal directly from a magistrate judge's decision pursuant to 28 U.S.C. Sec. 636(c)(1) where all parties have consented to the magistrate hearing the case. In this case, Suzuki and Kummer, Inc. consented to the magistrate hearing the case. The record, however, did not evidence consent from William Kummer, individually. The court ordered the parties to address this jurisdictional issue with supplemental filings and in response Kummer, individually, attested that he had consented to having the case tried before a magistrate. This is sufficient to confer jurisdiction on this court. King v. Ionization Intern., Inc., 825 F.2d 1180, 1185 (7th Cir.1987) (holding that jurisdiction will be found where parties file a stipulation, even after the magistrate has entered judgment, stating that the proceeding before the magistrate and the entry of judgment had been with their consent); Smith v. Shawnee Library Sys., 60 F.3d 317, 321 (7th Cir.1995) (reaffirming King 's holding).

II. Analysis

On appeal, Suzuki asserts that the court erred in finding that Kummer had not breached the Dealer Agreement, had not violated the Wisconsin Motor Vehicle Dealer Law and had not tortiously interfered with Suzuki's prospective contractual relations. In turn, Kummer argues that the court erred in holding that Suzuki had not breached the Dealer Agreement, had not violated the Wisconsin Motor Vehicle Dealer Law, and had not wrongfully terminated his dealership. We review a court's findings of fact for clear error and decisions of law de novo. Bankston v. Illinois, 60 F.3d 1249, 1254 (7th Cir.1995). Applying these standards, we consider Suzuki and then Kummer's appeals.

A. Suzuki's Appeal

1. Breach of contract.

Suzuki first argues on appeal that the court erred in finding that Kummer had not violated the Dealer Agreement. Suzuki contends that Kummer failed to employ best efforts in ordering and selling Suzuki motorcycles after 1988 as required by the Dealer Agreement and as required by state law during the pendency of the OCT proceedings. At this point we emphasize that the merits of the December, 1988 notice of termination and Kummer's challenge of that termination in the OCT are not before us. At issue in this appeal is the conduct of the parties between 1988 and 1993 when the claim before the OCT was pending and when, under Wisconsin law and the terms of the contract, the parties were obligated to continue doing business.

There is no dispute here that Kummer stopped ordering and selling Suzuki products after he received the original notice of termination in December of 1988. The district court found as much when it stated that "Kummer chose to, in effect, abandon the Suzuki line while his litigation [with the OCT] was pending." And Kummer himself admitted that he stopped ordering and selling Suzuki products during this period. The court, however, found that "the parties mutually abandoned or modified their agreement, allowing a cessation from an active dealership agreement" or in other words, allowing Kummer to become "inactive as a Suzuki dealer." Relying on this finding of "mutual abandonment" the court thus denied Suzuki's claim for damages arising from any breach of the Dealer Agreement.

Suzuki claims that the court committed clear error in finding that the parties had modified the Dealer Agreement. In support of its position, Suzuki relies on the Dealer Agreement and Section 2-209(2) of the Uniform Commercial Code ("UCC"). The...