John Deere v. Reliable

• Decision Date: 15 September 2008
• Docket Number: Misc. No. 12 Sept. Term, 2007.
• Citation: 406 Md. 139,957 A.2d 595
• Parties: JOHN DEERE CONSTRUCTION AND FORESTRY CO. v. RELIABLE TRACTOR, INC.
• Court: Court of Special Appeals of Maryland

957 A.2d 595

406 Md. 139

JOHN DEERE CONSTRUCTION AND FORESTRY CO. v. RELIABLE TRACTOR, INC.

Misc. No. 12 Sept. Term, 2007.

Court of Appeals of Maryland.

September 15, 2008.

Reconsideration Denied October 31, 2008.

Randall L. Allen (Mike H. Shanlever of Alston & Bird LLP of Atlanta, Georgia; Kevin F. Arthur and Catherine M. Manofsky of Kramon & Graham, P.A. of Baltimore), on brief for appellant.

Kevin B. Getzendanner (Debra G. Buster and Roger A. Chalmers of Arnall Golden Gregory LLP of Atlanta, Georgia; Paul Mark Sandler of Shapiro Sher Guinot & Sandler of Baltimore), on brief, for appellee.

Argued before BELL, C.J., HARRELL, BATTAGLIA, GREENE, MURPHY, IRMA S. RAKER (Retired, Specially Assigned), DALE R. CATHELL (Retired, Specially Assigned), JJ.

GREENE, J.

This case comes to this Court as a certified question from the United States District Court for the Middle District of Georgia. We are asked to decide whether the good cause provision of the Maryland Equipment Dealer Act ("the Act"), Md. Code (1975, 2005 Repl.Vol.), § 19-103 of the Commercial Law Article, applies to two dealer agreements, where the good cause provision of the Act was enacted after the contracts were executed but before the attempted termination of the contracts that gave rise to the cause of action in this case.

We shall hold that the good cause provision applies to the dealer agreements at issue in this case, and that the attempted termination, without cause, of the agreements at issue in this case, is prohibited by Maryland law. Further, we shall hold that the two open-ended agreements,¹ which were subject to termination by either party with 120 days notice, were renewed following the enactment of § 19-103. Accordingly, the law, which was in effect at the time of the renewal, was incorporated into the agreements in accordance with Maryland law.

FACTUAL AND PROCEDURAL BACKGROUND

We adopt the underlying facts as set forth by the United States District Court for the Middle District of Georgia in its certification order. The court stated:

Plaintiff Reliable Tractor, Inc. is an authorized dealer of [appellant²] John Deere Construction & Forestry Company's ("John Deere") Forestry Equipment and Utility Equipment lines. The dealer agreements under which [Reliable] operates as an authorized John Deere dealer were entered into by [Reliable] and [John Deere] in 1984. On March 27, 2007, [appellant] John Deere issued a notice of termination to [appellee], stating that [appellant] was going to terminate the dealer agreements in 120 days. The dealer agreements specifically state that John Deere may terminate the agreements without cause if John Deere gives 120 days notice prior to termination. At the time [Reliable] and [John Deere] entered into the dealer agreements, Maryland did not have any law that prohibited the termination of a dealer agreement without cause.

In 1987 Maryland enacted the Equipment Dealer Contract Act ("the Equipment Dealer Act"). See MD.CODE ANN., COM. LAW §§ 19-101 to 19-305 (West 2007). In 1998 the Maryland Legislature amended the Equipment Dealer Act to provide that equipment suppliers, such as John Deere, cannot terminate a dealer agreement "without good cause" ("the good cause provision"). See MD. CODE ANN., COM. LAW § 19-103.

In this case, [Reliable] has moved for summary judgment on Count II of its complaint, which seeks a declaratory judgment that [John Deere's] attempted without cause termination is prohibited by the Equipment Dealer Act. [John Deere], on the other hand, contends that the Equipment Dealer Act's good cause provision does not apply to this case because the good cause provision was enacted after the dealer agreements at issue were executed, and Maryland law does not permit the retroactive application of a law in the absence of clear legislative intent.

(Footnote omitted.)

The U.S. District Court then certified the following question of law to this Court, pursuant to Md.Code (1973, 2006 Repl. Vol.), § 12-603 of the Courts and Judicial Proceedings Article,³ and Md. Rule 8-305⁴ 28:

Whether the Maryland Equipment Dealer Act's good cause provision applies to the termination of a dealer agreement where the dealer agreement was entered into before the good cause provision was enacted but the alleged without cause termination occurred after the good cause provision was enacted?

DISCUSSION

Maryland law currently prohibits suppliers⁵ from terminating a dealer⁶ contract "without good cause" ("the good cause provision"). Md.Code (1975, 2005 Repl.Vol.), § 19-103 of the Commercial Law Article (hereinafter "§ 19-103"). This requirement that suppliers have "good cause" to terminate a dealer contract was first enacted in 1998. 1998 Md. Laws, ch. 333.⁷ John Deere argues that, because the good cause provision was not enacted until 1998, application of the statute to the contracts executed in 1984 would constitute a retroactive application of the statute. Applying a retroactive analysis, John Deere argues that the statute cannot apply to the contracts in this case, because it fails both requirements for a proper retroactive application of a statute: there must be clear legislative intent for the statute to apply retroactively, and the application of the statute must not interfere with vested rights, or deny due process.

Reliable Tractor argues, by contrast, that application of the good cause provision would not constitute a retroactive application of the statute. Reliable Tractor's argument is based on its assertion that these were open-ended agreements that, because they required 120 days notice for termination, effectively became a series of 120 day contracts. As such, Reliable Tractor asserts that application of the good cause provision in this case is, in effect, prospective, as neither party had a vested right in the contracts beyond that 120 day notice period.

John Deere is correct in its assertion that, pursuant to Maryland law, a proper retroactive application of a statute requires a two part analysis: first, a determination that the legislature clearly intended the statute to apply retroactively and second, a determination that retroactive application does not "impair vested rights, deny due process, or violate the prohibition against ex post facto laws." Allstate Ins. Co. v. Kim, 376 Md. 276, 289, 829 A.2d 611, 618 (2003). We do not, however, reach the retrospective application analysis because we conclude that applying the good cause provision to these contracts is not a retroactive application, but rather a prospective one.

It is well-established in Maryland that "laws subsisting at the time of the making of a contract enter into and form a part thereof as if expressly referred to or incorporated in its terms, and the principle embraces alike those provisions which affect the validity, construction, discharge and enforcement of the contract." Dennis v. Mayor and City Council of Rockville, 286 Md. 184, 189, 406 A.2d 284, 287 (1979); see also Lema v. Bank of America, 375 Md. 625, 645, 826 A.2d 504, 516 (2003) (noting that "parties are presumed to know the law when entering into contracts, and thus, `all applicable or relevant laws must be read into the agreement of the parties just as if expressly provided by them, except where a contrary intention is evident'" (quoting Wright v. Commercial & Sav. Bank, 297 Md. 148, 153, 464 A.2d 1080, 1083 (1983))). In order to determine whether the good cause provision existed at the time of the "making" of the contract, such that the provision was incorporated in its terms, we must first decide whether the good cause provision of § 19-103 is being applied retroactively or prospectively.

Generally, the presumption is that statutes operate prospectively unless there is evidence of a contrary intent. Kim, 376 Md. at 289, 829 A.2d at 618. We have said that "`[r]etroactivity, even where permissible, is not favored and is not found, except upon the plainest mandate in the act.'" State Farm Mut. Auto. Ins. Co. v. Hearn, 242 Md. 575, 582, 219 A.2d 820, 824 (1966) (quoting Bell v. State, 236 Md. 356, 369, 204 A.2d 54, 61 (1964)). "This rule of construction is particularly applicable where the statute adversely affects substantive rights, rather than only altering procedural machinery." Id.

To date, although we have clearly established the analysis to be used when applying a statute retroactively, this Court has only provided limited analysis of what constitutes a retrospective application of a statute. See Kim, 376 Md. at 289-90, 829 A.2d at 618-19 (noting only that retroactive application of a statute is one that "`determine[s] the legal significance of acts or events that occurred prior to its effective date'" (quoting State Comm'n on Human Rel. v. Amecom Div., 278 Md. 120, 123, 360 A.2d 1, 3-4 (1976))); Langston v. Riffe, 359 Md. 396, 406, 754 A.2d 389, 394 (2000) (defining the terms "retroactive" and "retrospective" as "acts which operate on transactions which have occurred or rights and obligations which existed before passage of the act"); see also State Ethics Comm'n v. Evans, 382 Md. 370, 389, 855 A.2d 364, 375 (2004) (Harrell, J., dissenting) ("Our cases, for the most part, however, have not considered in any depth the definition of, or developed an analytical paradigm for determining in the first instance, what constitutes retroactive application of a statute.").

Notably, the Supreme Court of the United States has provided some guidance on how to define retroactive application of a statute. In Landgraf v. USI Film Products, 511 U.S. 244, 280, 114 S.Ct. 1483, 1505, 128 L.Ed.2d 229, 262 (1994), the Supreme Court defined retroactive application of a statute as one that "would impair rights a party possessed when he acted, increase a party's liability for past conduct, or impose new duties with respect to transactions already completed." The Court rejected a bright line rule, noting that "a statute does not operate `retrospectively' merely because it is...