Dorso Trailer Sales, Inc. v. American Body and Trailer, Inc.
| Decision Date | 13 August 1985 |
| Docket Number | No. C9-85-386,C9-85-386 |
| Parties | DORSO TRAILER SALES, INC., Respondent, v. AMERICAN BODY AND TRAILER, INC., et al., Defendants, and Polar Manufacturing Company, defendant and third party plaintiff, Appellant. POLAR TANK TRAILER, INC., et al., Defendants and Third Party Plaintiffs, v. AMERICAN RIM & BRAKE, INC., et al., Third Party Defendants, Dorso Trailer Sales, Inc., third party defendant, Respondent. |
| Court | Minnesota Court of Appeals |
Syllabus by the Court
1. Where a dealership agreement does not state whether it is terminable at-will or only for-cause, Minnesota law construes it to be terminable at-will.
2. A dealership agreement providing that it may be cancelled by either party upon notice is terminable at-will.
3. The termination-at-will provision was not unconscionable given the relationship between the parties, their relative bargaining power, and the ability of either party to terminate the agreement.
David L. Graven, Holmes & Graven, Chtd., Minneapolis, for appellant.
James P. Miley, Larkin, Hoffman, Daly & Lindgren, Ltd., Minneapolis, for respondent.
Heard, considered and decided by FORSBERG, P.J., and WOZNIAK and SEDGWICK, JJ.
This appeal is from a judgment entered for Dorso Trailer Sales on its breach of contract claim against appellant Polar Manufacturing. The claim arose out of the termination by Polar of a dealership agreement with Dorso covering the American line of semi-trailers. The trial court ruled before trial that as a matter of law the agreement allowed termination only for cause. The jury found cause lacking, and assessed damages for lost profits. We reverse.
Dorso Trailer Sales is a dealer selling semi-truck trailers, with main offices in St. Paul and facilities in five neighboring states. American is a manufacturer of a broad line of trailers, with headquarters in Oklahoma City. American was purchased by appellant Polar Manufacturing, a Minnesota-based company, in July, 1979.
In 1953, Dorso, in the person of its founder Carmen T. Dorso, entered into a verbal dealership agreement with American, represented by its president, Robert King. This agreement made Dorso the first dealer of American trailers. This "handshake deal" was very simple in its terms: "I will build them, you go up and sell them."
In 1970, a written agreement was signed by both parties which included a termination clause, as follows:
It is understood and agreed this agreement is binding on both parties and subject to cancellation by either party after giving 30 days written notice.
In 1972, another written dealership agreement was signed, which also provided that either party could terminate the agreement by giving 30 days' notice.
Dorso's territory expanded over the years, and it became the exclusive American dealer in Minnesota, the Dakotas and Montana. Dorso sold some other vans and trailers, but only those which did not compete with American products. In 1976, at the urging of American, Dorso established a facility in Appleton, Wisconsin, involving an investment of about $600,000. It had little success, however, in penetrating the Wisconsin market.
As the first, and one of the largest American dealers, Dorso felt it had a "special relationship" with American, dating back to the 1953 "handshake deal." Dorso was excused from some arrangements imposed on other dealers, such as the furnishing of financial statements and factory financing of dealer inventory.
In November, 1976, a disagreement arose over general distributor mailings being sent to Dorso despite this relationship. Dorso requested a rewritten dealership agreement, and continued to press American for a contract which would merely restate the terms of the old "handshake deal." American, however, sent its newly-drafted general distributor agreement, an 8-page document, which provided for termination by either party "with or without cause."
Dorso rejected this agreement, without specific reference to the termination provision, insisting generally on reinstatement of the 1953 "handshake deal." American sent back the two-page 1970 agreement, slightly revised, providing for cancellation upon 90 days' written notice. This was signed by both parties.
Appellant Polar Manufacturing began negotiations to purchase American in 1979. Before buying, Polar met with some of American's top dealers, seeking assurances that they would stay on with the company if the deal was made. Polar officials, including president Harry Dayton, met with the Dorsos in July, 1979.
Polar took over American in August, 1979. That fall there was a dramatic decline in the trailer market. Sales continued to decline the following three years.
In 1980, a disagreement arose over Dorso's sales performance on the American line of trailers. In May, 1981, Polar terminated the dealer agreement with Dorso by letter, giving 90 days' notice as required by the 1977 agreement, after Dorso declined to surrender the Wisconsin territory in lieu of termination. The parties then entered into discussions on reinstatement following Dorso's protest, but no agreement was reached.
The trial court, having ruled the agreement terminable only for cause, submitted the cause issue to the jury, which found good cause lacking and assessed damages for lost profits for three years preceding trial and future damages for the three years following trial.
Did the trial court err in ruling that the dealership agreement was terminable only for cause?
The trial court based its construction of the agreement in part on Pickerign v. Pasco Marketing, Inc., 303 Minn. 442, 228 N.W.2d 562 (1975), and in part on its view that the law was moving away from the presumption favoring at-will termination of employment or dealership contracts. The trial court stated:
In the area of long-standing business or employment relationships the direction of statutory and case law has been to reduce the quantum of arbitrariness with which such [a] relationship may be severed and to increase the extent to which the dominant party must show good cause for the termination.
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In this case the plaintiff appears to have spent 28 years of work and investment to build a business in substantial reliance upon its flow of a product from defendants and its predecessors. Of necessity,...
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