Diesel Mach. Inc. v. the Manitowoc Crane Group

• Citation: 777 F.Supp.2d 1198
• Decision Date: 31 March 2011
• Docket Number: No. CIV 09–4087–RAL.,CIV 09–4087–RAL.
• Parties: DIESEL MACHINERY, INC., A South Dakota Corporation, Plaintiff,v.The MANITOWOC CRANE GROUP, a Wisconsin Corporation; The Manitowoc Group, Inc., a Wisconsin Corporation; Manitowoc Cranes, Inc., a Wisconsin Corporation; Grove U.S., LLC, a Delaware Limited Liability Company; National Crane Corporation, a Delaware Corporation; Deutsche Grove GmbH, a German Limited Liability Company; Potain SAS, a French Limited Liability Company, Defendants.
• Court: U.S. District Court — District of South Dakota

777 F.Supp.2d 1198

DIESEL MACHINERY, INC., A South Dakota Corporation, Plaintiff,

v.The MANITOWOC CRANE GROUP, a Wisconsin Corporation; The Manitowoc Group, Inc., a Wisconsin Corporation; Manitowoc Cranes, Inc., a Wisconsin Corporation; Grove U.S., LLC, a Delaware Limited Liability Company; National Crane Corporation, a Delaware Corporation; Deutsche Grove GmbH, a German Limited Liability Company; Potain SAS, a French Limited Liability Company, Defendants.

No. CIV 09–4087–RAL.

United States District Court, D. South Dakota, Southern Division.

March 31, 2011.

Michael P. Healy, Healy Law Firm, LLC, Kansas City, MO, for Plaintiff.Melanie L. Carpenter, James A. Power, Woods, Fuller, Shultz & Smith, PC, Sioux Falls, SD, Robert E. Diehl, Michael W. Haag, Thomas W. Pahl, Foley & Mansfield, P.L.L.P., Minneapolis, MN, for Defendants.

OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANTS' MOTIONS FOR SUMMARY JUDGMENT

ROBERTO A. LANGE, District Judge.I. INTRODUCTION

In this action, Plaintiff Diesel Machinery, Inc. (“DMI”) sued Defendants, collectively referred to as “Manitowoc,” ¹ for allegedly terminating the 2005 Distributor Sales and Service Agreement (“the Agreement”) between DMI and Manitowoc. DMI alleged that the claimed termination violated the South Dakota Dealer Protection Act (“SDDPA”), specifically SDCL § 37–5–3, and breached the Agreement. DMI's Complaint prayed for recovery of lost future profits and punitive damages. Manitowoc filed a counterclaim seeking a declaratory judgment that DMI is obligated to perform its obligations under the Agreement and alleging that DMI breached the Agreement.

DMI filed a Motion for Partial Summary Judgment. (Doc. 61). Manitowoc filed a Cross–Motion for Summary Judgment (Doc. 84) on all claims, along with a Memorandum in Opposition to DMI's Motion for Partial Summary Judgment and in Support of Defendants' Cross–Motion for Summary Judgment (Doc. 86). Subsequently, numerous discovery disputes arose and resulted in several extensions to the briefing schedule on the parties' dispositive motions. This Court granted DMI's request that its Motion for Partial Summary Judgment be denied without prejudice to refiling in accordance with the applicable scheduling order. (Doc. 197).

Manitowoc also filed a Motion to Dismiss Uninvolved Defendants (Doc. 121) and a brief in support thereof. (Doc. 122). DMI filed a Motion to Convert Defendants' Motion to Dismiss to One for Summary Judgment (Doc. 132), which this Court granted. (Doc. 148). After the parties completed briefing of these motions, this Court held a hearing addressing Manitowoc's two motions for summary judgment.

II. FACTS NOT SUBJECT TO DISPUTE

Defendants Grove U.S., LLC (“Grove”) and Deutsche Grove GmbH, now known as Manitowoc Crane Group, Germany, GmbH (“GMK”) are engaged in the business of manufacturing various types of mobile hydraulic cranes. (Doc. 210, Plaintiff's Response,² at ¶ 1). DMI is a construction and industrial equipment dealer located in South Dakota. Id. at ¶ 2.

In 1984, Grove entered into a dealership agreement with DMI designating DMI as a distributor of Grove hydraulic cranes for western South Dakota. Id. at ¶ 4. In 1997, DMI's territory was expanded to include the entire state of South Dakota. Id. at ¶ 5. In May of 2000, DMI also entered into an agreement with GMK to sell GMK products in South Dakota. Id. at ¶ 6. At the time, GMK was a subsidiary of Grove and also manufactured mobile hydraulic cranes. Id. at ¶ 7. In 2002, Grove and GMK were acquired by another defendant in this action and now are part of the group of defendants referred to as Manitowoc. Id. at ¶ 8. ³

On November 15, 2005, DMI entered into the Agreement. Id. at ¶ 9. The Agreement gave DMI the right to sell and service Grove and GMK mobile hydraulic crane products in South Dakota. Id. at ¶ 10. The first paragraph of the Agreement stated:

The Distributor Sales and Service Agreement (“Agreement”) is made and entered into as of the 15[th] day of Nov[ember], 2005, by and between the Manitowoc Crane Group, including Manitowoc Cranes, Inc., a Wisconsin corporation, Grove U.S., LLC, a Delaware limited liability company, National Crane Corporation, a Delaware corporation, Deutsche Grove GmbH, a German limited company, and Potain SAS, a French limited company (collectively “Manitowoc”) and Diesel Machinery, Inc. (“Distributor”). (Doc. 87–6, the Agreement, at 2). The Manitowoc Company, Inc. was not listed as a party to the Agreement or otherwise referenced in the Agreement. See (Doc. 87–6). DMI did not dispute that “Manitowoc Crane Group is a trade name used to refer to the crane companies related to the Manitowoc Company, Inc.” (Doc. 123, Defs.' Statement of Undisputed Material Facts in Support of Motion to Dismiss Uninvolved Defs., at ¶ 1; Doc. 205, DMI's Response, at ¶ 1).

Section 1 of the Agreement stated that “Manitowoc hereby appoints Distributor on the terms contained herein to sell, rent and service the products listed in Exhibit A attached hereto (“the Products”).” (Doc. 87–6, November 15, 2005 Distributor Sales and Service Agreement, at 2). DMI admits that Exhibit A only listed Grove and GMK brand products and authorized DMI to sell Grove and GMK branded products but not other brands. (Plaintiff's Response, at ¶¶ 32–33). Exhibit A to the Agreement provided:

The products referred to in Section 1 of the Agreement are as follows:

Grove Hydraulic Cranes consisting of the following:

—Mobile Hydraulic Truck Mounted (TM) Models

—Mobile Hydraulic Self–Propelled Rough Terrain (RT) Models

—Mobile Hydraulic Self–Propelled All–Terrain (AT) Models

—Hydraulic Crane Superstructures for special installations as offered

Deutsche Grove Mobile Hydraulic Cranes (GMK) Models

Parts, optional equipment and special additions for the above listed Products.

(Doc. 87–6, at 14). The Agreement is the most recent contract between DMI and any defendant. (Plaintiff's Response, at ¶ 12).

In 2008 and early 2009, Manitowoc evaluated its distributor situation in North Dakota and South Dakota for Grove/GMK mobile hydraulic cranes and Manitowoc lattice boom cranes. Id. at ¶ 13. At the time, DMI was the distributor of Grove products in South Dakota, while Titan Machinery, Inc. (“Titan”) was the distributor of Grove products in North Dakota. Id. Manitowoc had no distributor in either state. Id. Manitowoc's analysis included a memorandum evaluating numerous factors relating to its distributors in the Dakotas. Id. at ¶ 14. The internal documentation reflected a business decision for Grove to be represented in the Dakotas by the same dealer as Manitowoc. Id. at ¶¶ 14–15.

On June 17, 2009, during a meeting at DMI's office in Sioux Falls, DMI was provided with a letter providing 90 days' notice of termination of the Agreement. Id. at ¶¶ 21–24. The letter, written by Manitowoc Vice President David Hull and addressed to DMI President Dan Healy, provided:

Pursuant to Section 13.A of the above-referenced Distributor Sales and Service Agreement, Manitowoc Crane Group hereby gives notice that said Agreement and all amendments thereto are terminated effective ninety (90) days from your receipt hereof. The rights and obligations of the parties surrounding this termination are set forth in Section 13 of the Distributor Sales and Service Agreement.

(Doc. 87–8). Notwithstanding the clarity of the letter, DMI disputes that Manitowoc officials said that the termination would be effective in 90 days, and understood, rather, that the termination was effective immediately and that the 90 day period was a waiting or grace period to allow DMI to tie up loose business. (Plaintiff's Response, at ¶ 22; Plaintiff's Statement, at ¶ 114).

Two days after the meeting and the date of the letter providing 90 days notice of termination, on June 19, 2009, DMI commenced this action against Manitowoc. Plaintiff's Response, at ¶ 26; (Doc. 1). On July 17, 2009, Manitowoc's counsel wrote to DMI's counsel that:

“[I]t is Manitowoc's wish that DMI not advise customers that Titan will become a Grove dealer. At this time DMI is still the Grove dealer. Manitowoc will continue to support DMI as a Grove dealer until that relationship expires.”

(Doc. 231–7) (emphasis added).

On July 24, 2009, Hull sent Healy a letter responding to DMI's request that Grove buy back a Grove crane in DMI's inventory. Plaintiff's Response, at ¶ 34; (Doc. 87–9). In that letter, Hull, on behalf of Manitowoc, wrote that DMI's “request seems premature for the moment since you are still our dealer until the end of the 90 day contract period. Nonetheless, we will agree to honor your request.” Plaintiff's Response, at ¶ 34; (Doc. 87–9) (emphasis added). As counsel acknowledged at the March 24, 2011 hearing, DMI had just one Grove crane in inventory, and at DMI's request, Grove bought back that crane and DMI's inventory of Grove parts at invoice cost-the actual amount that DMI had paid Grove.

On September 8, 2009, fewer than 90 days after providing the June 17, 2009 letter to DMI, Hull transmitted another letter to DMI, stating:

After further consideration and discussions with our South Dakota counsel, in connection with the November 15, 2005 Distributor Sales and Service Agreement (“Agreement”), please be advised that the Manitowoc Crane Group (“Manitowoc”) hereby withdraws our June 17, 2009 letter in which Diesel Machinery Inc. (“DMI”) received a 90–day advance notice attempting to terminate the Agreement. As such, the Agreement remains in full force and effect. DMI has been, is and now will continue to be the distributor as outlined in the existing Agreement. To be clear, Manitowoc will unconditionally honor and abide by the terms and conditions of the existing Agreement and South Dakota law. We would expect that DMI would do likewise.

We look forward to working with DMI in the future as you distribute and service the products specified in the Agreement. We hope that we can grow that business to our mutual benefit.

(Doc....