Hunt Enter., Inc. v. John Deere Industrial Equip.
| Citation | 18 F.Supp.2d 697 |
| Decision Date | 23 May 1997 |
| Docket Number | No. 3:96CV-822-S.,3:96CV-822-S. |
| Parties | HUNT ENTERPRISES, INC. d/b/a R. Scott Conequip, Plaintiff, v. JOHN DEERE INDUSTRIAL EQUIPMENT COMPANY, Defendant. |
| Court | U.S. District Court — Western District of Kentucky |
R. Van Young, Thomas Edward Powell, II, Greenebaum, Doll & McDonald, Louisville, KY, for Plaintiff.
C. Kent Hatfield, Charles Gibson Middleton, III, Augustus S. Herbert, Middleton & Reutlinger, Louisville, KY, Victor E. Grimm, John R. Myers, Erick F. Dyhrkoop, Bell, Boyd & Lloyd, Chicago, IL, Daniel Harvey, Deere & Company, John Deere Road, Moline, IL, for Defendant.
This matter is before the court on the motion of the defendant, John Deere Industrial Equipment Company (hereinafter "Deere"), to dismiss the complaint of the plaintiff, Hunt Enterprises, Inc. (hereinafter "Hunt"), for failure to state a claim upon which relief can be granted. This action is before the court on diversity jurisdiction pursuant to 28 U.S.C. § 1332. The complaint alleges causes of action for breach of contract, misrepresentation, unfair trade practice and tortious interference with business opportunity.
In 1988, Hunt and Deere entered into a written dealership agreement. Pursuant to this agreement, Hunt, who had previously been a dealer of Case construction equipment only, began selling Deere industrial equipment. From 1992 to 1995, Hunt's performance declined. In December of 1995, Hunt met, to discuss the sale of its assets, with a representative of Pioneer Equipment Company (hereinafter "Pioneer"), a California-based Case products dealer. Deere exercised its contractual right to disapprove the attempted assignment of the dealership agreement.
By letter dated January 25, 1996, Deere informed Hunt that it was still expected to perform at a satisfactory level and imposed minimum performance requirements. On November 14, 1996, Deere gave Hunt written notice of termination of the agreement. The termination was to be effective March 14, 1997. Hunt then filed this action on December 18, 1996.
In its complaint, Hunt articulated four causes of action. Deere contends that Hunt has not established the material elements of any of these four causes of action. In determining a motion to dismiss, we must "construe the complaint liberally in the plaintiff's favor and accept as true all factual allegations and permissible inferences therein." Sistrunk v. City of Strongsville, 99 F.3d 194, 197 (6th Cir.1996) (quoting Gazette v. City of Pontiac, 41 F.3d 1061, 1064 (6th Cir.1994)). The Sixth Circuit expounded on this standard in the case of Andrews v. Ohio, 104 F.3d 803 (6th Cir.1997).
This Court must ... determine whether the plaintiff undoubtedly can prove no set of facts in support of his claims that would entitle him to relief. A complaint need only give "fair notice of what plaintiff's claim is and the grounds upon which it rests." A judge may not grant a Fed. R.Civ.P. 12(b)(6) motion to dismiss based on a disbelief of a complaint's factual allegations. While this standard is decidedly liberal, it requires more than a bare assertion of legal conclusions. "In practice, a ... complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory."
Id. at 805 (quoting In re DeLorean Motor Co., 991 F.2d 1236, 1240 (6th Cir.1993))(internal citations omitted).
Even under this liberal standard, we find that Hunt's complaint fails to establish a viable claim under any of the four asserted causes of action. Hunt can prove no set of facts which would entitle it to recover under any of its claims.
Hunt contends that Deere breached the agreement in a variety of manners. First, Deere violated the contract's implied covenant of good faith and fair dealing when it terminated the dealership agreement. Second, Deere again violated this implied covenant when it refused to approve the proposed sale of Hunt's dealership to Pioneer. Third, Deere's termination of the agreement was in violation of the parties' oral understanding as to the projected duration and scope of the relationship. In response to these allegations, Deere asserts that the covenant of good faith and fair dealing cannot be used to contradict express contractual provisions and that the parol evidence rule precludes the introduction of any evidence demonstrating a prior or contemporaneous oral understanding.
The parties' agreement contains provisions for termination of the agreement. Section two lists five reasons which justify Deere's immediate termination of the agreement. The third section then discusses termination on a specified date. This section provides:
Unless the Dealer's appointment is terminated under Section 2, it shall continue until it is terminated by one or both of the parties as provided in this Section 3. The Dealer's appointment may be terminated at any time: ...
(b) by written notice of either the Company or the Dealer to the other party given at least one hundred twenty (120) days prior to the effective date specified in such notice ....
The agreement also contains a provision respecting the assignability of the agreement. Section fourteen of the agreement states, "This Agreement cannot be assigned by the Dealer without the prior written consent of the Company."
Hunt cites various cases for the proposition that an implied covenant of good faith is read into every contract to prevent a party from exercising any of its contractual rights in bad faith. We find that the case law does not support this contention. Travelers Ins. Co. v. Corporex Properties, Inc., 798 F.Supp. 423, 425 (E.D.Ky.1992) (internal citations omitted). "[M]any courts have held that the implied covenant [of good faith and fair dealing] may not be applied to limit a clear contractual provision allowing termination of the contract without cause." Taylor Equip., Inc. v. John Deere Co., 98 F.3d 1028, 1032 (8th Cir.1996) (citing Cardinal Stone Co. v. Rival Mfg. Co., 669 F.2d 395, 396 (6th Cir.1982)).
Deere's termination of the agreement with Hunt was done in accordance with the express termination provisions provided in Section three of the agreement. Similarly, Deere withheld its approval for the proposed assignment of the agreement to Pioneer as it was empowered to do by the express provisions of section fourteen of the agreement.
Hunt argues that Deere contradicts itself when it argues that the agreement allows for termination without cause, but then provides a reason in its notice of termination letter. It is true that Deere detailed its reasons for terminating the agreement, but we do not believe this weakens its argument that termination without cause is proper. In reading sections two and three of the contract, it is clear that section two provides for immediate termination, without notice, by Deere in the event of only five particular types of events. It is also clear in reading both section two and three that section three allows for termination by either party with 120 days notice with or without cause. The fact that Deere provided reasons for termination along with 120 days notice does not transform section three into a for cause only termination provision. More importantly even if section three required cause for termination, Deere provided ample reasons for its decision to terminate the agreement.
Hunt cites the case of Leibel v. Raynor Mfg. Co., 571 S.W.2d 640 (Ky.App.1978) for the proposition that the implied covenant applies to express contract terms and that a termination clause may only be exercised once the other party has had sufficient time to realize the benefits of its investment. We read this case to hold that reasonable notification of termination is the only thing required for sufficient protection of either party. Id. at 643. The agreement provides for 120 day notice for termination. Deere delivered notice of termination on November 14, 1996 to be effective March 14, 1997. Hunt may even have had notice before the official letter since Deere informed it in its letter of January 1996 that it intended to terminate the agreement if Hunt did not meet Deere's performance standards.
Hunt asserts that the parties had an oral understanding in addition to the terms of the written contract. According to Hunt, the substance of this agreement was that Hunt was to remain a Deere dealer at least until its capital investment could be recouped and that Hunt's area of responsibility would be expanded or acquired to achieve that goal. The agreement did not provide a specific termination date. As we have already discussed, the agreement did, however, contain two provisions which provided for immediate termination under certain circumstances and for termination with notice. The agreement also contained provisions concerning Hunt's area of responsibility. The agreement states:
The Dealer [Hunt] accepts as his Area of Responsibility the counties of Bullitt, Carroll, Hardin, Henry, Jefferson, Larue, Marion, Nelson, Oldham, Shelby, Spencer, Trimble, and Washington in the State of Kentucky; Clark and Scott in the State of Indiana....
The Dealer's Area of Responsibility may be enlarged at any time with the written consent of the Dealer. Upon not less than 120 days written notice to the Dealer, the Area of Responsibility may be reduced by the Company.
Deere contends that any evidence of the alleged oral...
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