John Deere Co. v. Gamble

• Decision Date: 05 February 1988
• Citation: 523 So.2d 95
• Parties: JOHN DEERE COMPANY, a corporation, v. Jim GAMBLE, individually, and d/b/a Cahaba Tractor Company; and Marineland, Inc., for itself and d/b/a Cahaba Tractor Company. 86-1157-CER.
• Court: Alabama Supreme Court

Page 95

523 So.2d 95

JOHN DEERE COMPANY, a corporation, v. Jim GAMBLE, individually, and d/b/a Cahaba Tractor Company; and Marineland, Inc., for itself and d/b/a Cahaba Tractor Company.

86-1157-CER.

Supreme Court of Alabama.

Feb. 5, 1988.

Michael R. Pennington and Braxton Schell of Bradley, Arant, Rose & White, Birmingham, and Dow N. Kirkpatrick of Alston & Bird, Atlanta, Ga., for appellant.

Kimberly R. West, Birmingham, and Robert E. Paden of Paden, Green, Paden & Bivona, Bessemer, for appellees.

HOUSTON, Justice.

This case is before us on certification of certain unresolved questions of Alabama law by the United States Court of Appeals for the Eleventh Circuit. The questions certified to us all concern an ambiguity in the statutory scheme codified at Ala.Code (1975), § 8-21-1 through -14, and entitled "Repurchase of Inventory from Farm Equipment Retailers." In essence, the statute is designed to supersede any contractual terms between farm equipment manufacturers or distributors and their retailers regarding the repurchase of farm equipment inventories at the termination of their dealership or franchise agreements. Among these protections is a repurchase pricing structure, see Ala.Code (1975), § 8-21-3, which is apparently more favorable to retailers than the terms they would normally obtain under their dealership agreements.

The following facts were set forth by the Court of Appeals for our consideration in answering the questions certified to us:

"From 1979 to 1985, Cahaba Tractor Company was a 'Consumer Products Dealer' for John Deere Company. Under the terms of the contract, John Deere gave Cahaba a one-year notice of its termination as a dealer in October of 1984, with the termination to be effective October 31, 1985. Appellant John Deere brought the present action, seeking a declaration of its rights and obligations with respect to the repurchase of Cahaba's inventory upon termination of the dealership. The district court concluded that Cahaba was a retailer of farm equipment and that Deere was therefore obligated to repurchase Cahaba's inventory under Ala.Code [ (1975) ], § 8-21-1 et seq. (1984 [Supp.] ).

"John Deere has three classifications of dealers: (1) industrial equipment dealers which primarily sell large earth moving equipment and wood harvesting products, (2) agricultural equipment dealers which sell tractors, planters, tillage and harvesting equipment, and (3) consumer products dealers. As a consumer products dealer, Cahaba was authorized to sell all John Deere products in the John Deere consumer product price list. This list includes utility and compact tractors, running from 14 to 60 horsepower. Accordingly, Cahaba was authorized to sell four models of utility tractors that were also sold by John Deere Agricultural Dealers. Five such tractors were in Cahaba's inventory at the time the dealership was terminated. Cahaba sold Japanese made John Deere diesel tractors starting at 14 1/2 horsepower. Cahaba also sold compact utility tractors ranging from 20 to 40 horsepower. Fifteen of these tractors were in Cahaba's inventory at the termination of the dealership. Thus, the various John Deere tractors sold by Cahaba ranged in suitability from heavy to light farming capability. Cahaba did in fact sell several tractors to farmers.

"Cahaba maintained a service department for John Deere equipment. This department worked on utility tractors from 60 to 14 1/2 horsepower, and the attachments for the tractors, such as back hoes and loaders. Cahaba kept an inventory of John Deere parts for this operation, including utility tractor, skid steer, industrial tractor and back hoe parts. At termination, Cahaba had a parts inventory of $70,000 to $75,000.

"In addition to John Deere equipment, Cahaba also sold Ford and Kubota tractors. In 1984, Cahaba sold approximately 200 tractors from these three manufacturers."

John Deere Co. v. Gamble, 818 F.2d 769, 770 (11th Cir.1987).

The ambiguity at the center of this dispute is found in the statutory definition of a farm equipment "retailer." That definition reads in pertinent part as follows:

"RETAILER. Any person, firm or corporation engaged in the business of selling and retailing farm implements, machinery, utility and industrial equipment, attachments or repair parts; but this term ... shall not include retailers of yard and garden equipment not primarily engaged in the farm equipment business."

Ala.Code (1975), § 8-21-1(5).

It is undisputed that Cahaba Tractor is what might be termed a "mixed dealership" as contemplated under the statute. The company sold, or was authorized to sell, equipment that was designed exclusively for yard and garden use; it also sold equipment that was designed exclusively for farm use; and, as reflected in the statement of facts provided by the United States Court of Appeals, it also sold equipment designed for either farm use or for yard and garden use. Consequently, Cahaba Tractor is certainly a "retailer[ ] of yard and garden equipment" under § 8-21-1(5). The primary question with which we are presented, however, is whether Cahaba Tractor is also a "retailer[ ] of yard and garden equipment not primarily engaged in the farm equipment business," id. (emphasis added), so as to be excluded from the inventory repurchasing scheme set forth in the statute. More precisely, the primary issue facing us is what test or standard was intended by the legislature to establish when a mixed dealership is nevertheless "primarily" a farm equipment retailer so as to bring that retailer within the scope of the statute.

The parties have advanced two opposing tests as to when a retailer is to be considered "primarily" a farm equipment retailer. Cahaba Tractor argues that the "actual sales" test is the appropriate standard. Under this test, the actual sales history of a dealership is to be assessed. If the dollar amount of farm equipment sales exceeds the dollar amount of yard and garden equipment sales over a certain period, then the dealership is to be considered a "farm equipment" retailer and may therefore invoke the provisions of the statute. On the other hand, John Deere argues that the "authorized product line" test is the appropriate standard. This test focuses on the complete spectrum of products that a retailer is authorized to sell under a dealership agreement. Under this test, each product in the line is considered to be of equal weight in determining the nature of the dealership. Under this test the number of all such products, either "farm equipment" or "yard and garden" equipment, is to be totalled and a comparison made. If the total number of yard and garden products exceeds the total number of farm products, then the retailer is to be considered a yard and garden equipment retailer "not primarily engaged in the farm equipment business" and therefore may not invoke the provisions of the statute.

Considering these and related arguments and the statutory ambiguity as to the proper test to resolve these issues, the United States Court of Appeals has certified the following questions to us:

"1. Under Ala.Code §§ 8-21-1 et seq., is the statutory definition of 'retailer,' insofar as its excludes 'retailers of yard and garden equipment not primarily engaged in the farm equipment business,' to be applied (1) by reference to a dealer's authorized product line (i.e. what the dealer offers for sale), (2) by reference to the dealer's actual sales results (i.e. what customers in fact purchase from the dealer), or (3) by reference to both product line and actual sales?

"2. If actual sales are to be considered in determining whether a dealer is a 'retailer' under Ala.Code §§ 8-21-1 et seq., is the actual sales standard to be applied by reference to the percentage of actual gross sales revenues attributable to farm equipment, the percentage of actual net profits attributable to farm equipment, the number of farm equipment items sold versus the number of other items sold, or by reference to some other basis?

"3. If actual sales are to be considered in determining whether a dealer is a 'retailer' under Ala.Code §§ 8-21-1 et seq., is the determination to be made by reference to actual sales over the life of the dealership, the last year of the dealership or by reference to some other period of time?

"4. If actual sales are to be considered in determining whether a dealer is a 'retailer' under Ala.Code §§ 8-21-1 et seq., is equipment that is suitable either for yard and garden applications or for light farming applications deemed to be 'farm equipment' or 'yard and garden equipment' under Ala.Code. § 8-21-1(5)?

"5. In determining whether a dealer is a 'retailer' of farm equipment, should the fact finder be restricted to considering the relationship of the dealer/terminating manufacturer or may the fact finder consider the dealer's sale of farm equipment produced by other manufacturers?"

John Deere Co. v. Gamble, 818 F.2d at 770-71.

As with such certified questions generally, the Court of Appeals also noted that "[t]he phrasing employed in the above certified questions is intended as a guide and is not meant to restrict the Alabama Supreme Court's consideration of the issues in its analysis of the record certified in this case." Id. at 771.

I. Answers to Certified Questions

A. Question One

Most of the issues in this case may be resolved by a careful consideration of the first question certified to us by the Court of Appeals. As might be indicated by our previous discussion, however, we do not regard the basic issue implicated by this question as narrowly as do the parties in this case. We cannot view this question as presenting us solely with the stark choice between an "authorized product line" standard or an "actual sales" standard, but as essentially presenting us with the issue of what standard generally was intended by the legislature in adopting Ala.Code (1975), § 8-21-1(5). We will therefore rephrase it accordingly, as...