Cent. Jersey Constr. Equip. Sales v. LBX Co.
| Decision Date | 26 April 2023 |
| Docket Number | 22-5581 |
| Parties | CENTRAL JERSEY CONSTRUCTION EQUIPMENT SALES, LLC, Plaintiff-Appellant, v. LBX COMPANY, LLC, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
NOT RECOMMENDED FOR PUBLICATION
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF KENTUCKY
Before: STRANCH, MURPHY, and DAVIS, Circuit Judges.
Central Jersey Construction Equipment Sales contracted with LBX Company to become a dealer of LBX's construction equipment. According to Central's complaint, LBX later asked it to open an additional facility and promised a new dealer agreement if it obliged. Central invested in a costly expansion but never got the promised contract. LBX instead terminated the parties' existing agreement a few years later. Central claims that LBX's conduct violated a Kentucky law that requires a manufacturer to have "good cause" to terminate a contract with a retailer. Central also raises a promissory-estoppel claim, asserting that it opened the additional location in reliance on LBX's unfulfilled promise of a new agreement.
The district court properly dismissed both claims. As for its statutory claim, the parties' existing agreement gave Central one year to file "any action" "pertaining to" the agreement. Yet Central waited over a year before suing under the Kentucky law that required "good cause" for its termination. This statutory claim "pertains to" (that is, has a connection with) the agreement because the claim would not exist without it. Central also gives us no reason to conclude that Kentucky courts would refuse to enforce this contractual time limit. As for Central's promissory-estoppel claim, we predict that the Kentucky Supreme Court would enforce only definite promises in promissory-estoppel cases-just as it does in contract cases. And the abstract promise of a future "agreement" without reference to any of its terms does not suffice. We thus affirm.
We must accept the well-pleaded allegations in Central's complaint at this stage. See Rudd v. City of Norton Shores, 977 F.3d 503, 511 (6th Cir. 2020). LBX, a company located in Kentucky, manufactures excavators and other large construction equipment using the Link-Belt name. To sell this equipment, it relies on authorized dealers.
Central a New Jersey company, became an LBX dealer in 2005. LBX's "Dealer Agreement" governed their relationship. Agreement, R.38-1, PageID 354. This Dealer Agreement allowed Central to sell LBX's equipment in six and a half counties in central and southern New Jersey, including Middlesex County. Id., PageID 355. The Agreement dated to a time when the law barred a manufacturer from setting the minimum prices at which its dealers could sell its products. So the Agreement instead prohibited Central from competing with LBX's other dealers outside Central's territory. Id.; cf. Leegin Creative Leather Prods., Inc. v. PSKS, Inc., 551 U.S. 877, 903-04 (2007). The Agreement also required Central to sell LBX's equipment under Central's name but to inform customers that the equipment had been "furnished by" LBX. Agreement, R.38, PageID 361. And it required Central to place LBX signs at "all approved facilities." Id., PageID 357.
The Agreement initially expired on August 31, 2006. Id., PageID 366. But it would "automatically" renew "for additional one (1) year terms" if the parties took no action to end their relationship. Id. To terminate the Agreement at the close of any annual term, a party had to give notice at least 30 days in advance that the party did not intend to renew it. Id.
For several years, the parties automatically renewed the Agreement and had a mutually beneficial relationship under its terms. In late 2011, LBX asked Central to begin serving customers "in the North Jersey market[.]" Am. Compl., R.38, PageID 347. LBX requested that Central open another location in either Staten Island, New York (which was outside its territory) or Middlesex County (which was inside it). Id.; see Agreement, R.38-1, PageID 355. If Central chose to open this facility, LBX promised it a new dealership agreement.
At first, Central opened a Staten Island facility. But this location did not succeed because of the high costs and logistical problems on the island. At LBX's urging, Central looked for land to operate another facility in Middlesex County. In 2016, it found a suitable spot. Central spent substantial sums renovating the buildings at this location, adding "LBX" signs and a "custom designed model of an excavator" out front. Am. Compl., R.38, PageID 348.
Throughout this time, Central kept asking LBX for a new dealership agreement that would include an expanded North Jersey territory. LBX's dealer development manager repeatedly promised this new agreement, stating that the parties had a "good" relationship. Id. In March 2017, LBX executives also promised a new agreement to Central executives at a Las Vegas trade show. Central renewed its request for the new agreement over the next several months. Yet LBX executives did not provide one and told Central to continue "business as usual[.]" Id.
Some two years later, the parties still did not have a new agreement. In August 2019, moreover, LBX told Central that it would not renew the Dealer Agreement and that the Agreement would expire on August 31. Central alleges that it had been performing admirably up to this time and that LBX gave no reason for the termination. Central later learned that LBX had been negotiating with another dealer to operate a Staten Island dealership. Central adds that it made costly investments branding its business with LBX logos in reliance on LBX's promise of a new agreement that never came.
On October 1, 2020, Central sued LBX in a New Jersey court. (LBX suggests that Central did not sue until November 3, but the difference in dates does not matter now.) LBX removed this suit to federal court and successfully moved to transfer it to a Kentucky district court under the Dealer Agreement's forum-selection clause. Central then amended its complaint to assert two claims-one under a Kentucky law governing "retail agreement contracts" and the other for promissory estoppel under Kentucky common law.
The district court dismissed Central's complaint at the motion-to-dismiss stage. See Cent. Jersey Constr. Equip. Sales, LLC v. LBX Co., LLC, 2022 WL 2161482, at *7 (E.D. Ky. June 15, 2022). Under the Dealer Agreement's terms, Central had one year to file any suit on a claim "pertaining to" the Agreement. The district court held that this limit barred Central's claim that LBX improperly terminated the Agreement under the law governing retail agreement contracts. Id. at *4-6. The court next held that Central did not plausibly plead a promissory-estoppel claim. See id. at *6-7. We review its dismissal order de novo. See Ryan P. Estes, D.M.D., M.S., P.S.C. v. Cincinnati Ins. Co., 23 F.4th 695, 699 (6th Cir. 2022).
Even though Central sold LBX's equipment in New Jersey, the parties agree that Kentucky law governed their relationship. We thus may assume the point. See Masco Corp. v Wojcik, 795 Fed.Appx. 424, 427 (6th Cir. 2019).
On appeal, Central argues that the district court wrongly found its statutory claim untimely and wrongly held that it failed to plead a promissory-estoppel claim.
Central first asserts that the district court mistakenly applied the Dealer Agreement's one-year limitations period to its claim under the Kentucky law governing "retail agreement contracts." See Ky. Rev. Stat. §§ 365.800-840. Central sought to enforce a section of this law that bars a manufacturer from ending "a retail agreement contract without good cause." Id. § 365.831(1). This section identifies several specific reasons that would give a manufacturer "good cause" to fire a dealer, including the dealer's dissolution, its default on a loan, or its failure to operate for a certain time. Id. § 365.831(1)(a)-(f). The section alternatively allows the manufacturer to treat the dealer's violation of a contractual requirement as "good cause" so long as the manufacturer imposes that requirement on similarly situated retailers. Id. § 365.831(1). If, however, the manufacturer terminates the agreement due to a retailer's breach of one of its requirements, it must give the retailer 90 days' notice of termination and 60 days to cure the breach. Id. § 365.831(4).
At the outset, we highlight two issues about this Kentucky law that we do not decide on appeal. The law's good-cause section does not itself contain a cause of action allowing retailers to sue. Central nevertheless argued in the district court that it may enforce the section under a different law that provides a generic cause of action for "[a] person injured by the violation of any statute[.]" Id. § 446.070; Hickey v. Gen. Elec. Co., 539 S.W.3d 19, 23-24 (Ky. 2018). Like the district court, we may avoid this issue. See Cent. Jersey, 2022 WL 2161482, at *4. Next, the Kentucky law elsewhere requires a manufacturer to repurchase a dealer's inventory after a termination. Ky. Rev. Stat. §§ 365.805, .825. Central raised a separate claim under this inventory section. But the district court rejected the claim, and Central did not reassert it on appeal.
This appeal instead turns on whether the Dealer Agreement's one-year time limit barred any claim that Central might have pursued under the Kentucky law's good-cause section. The Dealer Agreement stated: "Except for any indebtedness of [Central] to [LBX] or security related thereto, any action by [LBX] or [Central] pertaining to this Agreement must be instituted within one year after the accrual of the claim upon which such action is based." Agreement, R.38-1 PageID...
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