Larry Hobbs Farm Equip. v. Cnh America, 08-1056.

• Decision Date: 22 January 2009
• Docket Number: No. 08-1056.,08-1056.
• Citation: 291 S.W.3d 190,375 Ark. 379
• Parties: LARRY HOBBS FARM EQUIPMENT, INC. d/b/a Hobbs Farm Implement and Hobbs Farm Equipment, Appellant, v. CNH AMERICA, LLC d/b/A Case IH, successor in interest to DMI, Inc., Appellee.
• Court: Arkansas Supreme Court

291 S.W.3d 190

375 Ark. 379

LARRY HOBBS FARM EQUIPMENT, INC. d/b/a Hobbs Farm Implement and Hobbs Farm Equipment, Appellant, v. CNH AMERICA, LLC d/b/A Case IH, successor in interest to DMI, Inc., Appellee.

No. 08-1056.

Supreme Court of Arkansas.

January 22, 2009.

Easley and Houseal, P.A., by B. Michael Easley, Forrest City, and Dady & Garner, P.A., by John D. Holland, Minneapolis, MN, for petitioner.

Foley and Lardner LLP, by Michael J. Lockerby, Washington, DC, and Brian W. McGrath, Milwaukee, WI, and Womack, Landis, Phelps & McNeill, P.A., by J.V. Phelps, Jonesboro, for respondent.

Friday, Eldredge & Clark, LLP, by Kevin A. Crass, Little Rock, and Peter B. Rutledge, Little Rock, for amici curiae Association of Equipment Manufacturers and National Association of Manufacturers.

JIM HANNAH, Chief Justice.

This case involves three questions of law certified to this court by the United States District Court for the Eastern District of Arkansas in accordance with Arkansas Supreme Court Rule 6-8 (2008) and accepted by this court on September 18, 2008. See Larry Hobbs Farm Equip., Inc. v. CNH Am., LLC, 374 Ark. 268, 287 S.W.3d 550 (2008) (per curiam). The questions certified are the following:

1. Under the facts of this case, whether the market withdrawal of a product or of a trademark and trade name for the product constitutes "good cause" to terminate a franchise under Arkansas Code Annotated § 4-72-204(a)(1).

2. Under the facts of this case, whether liability under Arkansas Code Annotated § 4-72-310(b)(4) is created when a manufacturer terminates, cancels, fails to renew, or substantially changes the competitive circumstances of the dealership agreement based on re-branding of the product or ceasing to use a particular trade name or trademark for a product while selling it under a different trade name or trademark.

3. Under the facts of this case, whether the sole remedies for a violation of the Arkansas Farm Equipment Retailer Franchise Protection Act (AFERFPA) are: (1) the requirement that the manufacturer repurchase inventory for a termination without good cause, and (2) damages, costs, and attorneys' fees that result from the failure to purchase inventory as provided in Ark.Code Ann. § 4-72-309, or whether other remedies are also available.

As to the first question, we conclude that the answer is no. As to the second question, we also conclude that the answer is no. With respect to the third question, we conclude that other remedies are available.

The certified questions arise from an action filed in district court on April 17, 2008, by Hobbs Farm Equipment (Hobbs) after the termination of a dealer agreement between Hobbs and CNH America (CNH). CNH moved to dismiss the complaint, and the district court granted the motion to dismiss on all claims except the claims pertaining to the legal issues certified to this court. For purposes of CNH's motion to dismiss and the district court's certification order, the district court assumed the following facts to be true.

Hobbs and DMI, Inc., entered into an agreement enabling Hobbs to sell DMI products in June 1993. In early 1995, Hobbs executed a new dealer agreement with DMI, which enabled Hobbs to be a nonexclusive dealer of DMI products, specifically its tillage and soil management equipment, in its trade area.

In November 1998, Case Corporation, a predecessor of CNH, acquired DMI. Both Hobbs and each of DMI's successors, including CNH, continued to perform under the 1995 agreement until August 2007.

According to the complaint, in late 2004 or 2005, CNH began to supply Hobbs's competitor, Heartland Equipment, Inc., of East Arkansas (Heartland), with the DMI tillage and soil management equipment that Hobbs Farm Equipment had distributed since 1993. However, instead of bearing the DMI trademark and trade name, the equipment supplied to Heartland bore the Case IH trademark and name. Case IH is a trademark owned by and the name of a division of CNH. The equipment supplied to Heartland was painted red like other Case IH products, whereas DMI products were painted blue. Stated differently, CNH engaged in dual branding of identical tillage and soil management equipment originally distributed in blue paint under the DMI brand name but, beginning in 2004 or 2005, also distributed in red paint under the Case IH brand name.

On August 14, 2007, Hobbs received a letter from CNH that included the following:

CNH America LLC ("The Company") wishes to provide you with advance notice of its decision to withdraw from the DMI-branded tillage business effective in 2008. As a result, Hobbs Farm Equipment Co. Inc.'s last ordering period for wholegoods will run through August 31, 2007. After that date, the Company will no longer accept orders for any DMI-branded tillage wholegoods products. However, Hobbs Farm Equipment Co. Inc. will be able to continue to purchase DMI-branded replacement parts through August 31, 2008.

The Company will continue to provide you with retail programs throughout 2007 and the first half of 2008 to assist you in retalling [sic] these products prior to August 31, 2008. If any DMI-branded wholegoods remain at your dealership by that date, the Company will repurchase those products in accordance with the terms of your dealer agreement and company policy, or state law. The Company will also repurchase your remaining DMI replacement parts according to state law or company policy.

CNH decided that effective August 31, 2008, it would no longer sell equipment bearing the DMI trademark and trade name but would do so under the Case IH trademark and trade name.

Good Cause

In its brief before us, Hobbs contends that, under the plain language of the Arkansas Franchise Practices Act (AFPA), specifically, Arkansas Code Annotated section 4-72-204(a)(1) (Repl.2001), neither the market withdrawal of a product nor the withdrawal of a trademark or trade name for a product constitutes "good cause" to terminate a franchise. For its part, CNH contends that the AFPA's requirement of "good cause" for terminating an Arkansas franchise does not prevent market withdrawal. CNH states that, while the AFPA prohibits discriminatory termination of a franchise, the Act does not prohibit nationwide discontinuation of a product line or brand.

The basic rule of statutory construction is to give effect to the intent of the legislature. Ward v. Doss, 361 Ark. 153, 205 S.W.3d 767 (2005). Where the language of a statute is plain and unambiguous, we determine legislative intent from the ordinary meaning of the language used. Id. In considering the meaning of a statute, we construe it just as it reads, giving the words their ordinary and usually accepted meaning in common language. Id. We construe the statute so that no word is left void, superfluous or insignificant, and we give meaning and effect to every word in the statute, if possible. Id.

Arkansas Code Annotated section 4-72-204(a)(1) provides that "[i]t shall be a violation of [the AFPA] to terminate or cancel a franchise without good cause." Pursuant to Arkansas Code Annotated section 4-72-202(7) (Repl.2001), "good cause" is defined in the AFPA as:

(A) Failure by a franchisee to comply substantially with the requirements imposed upon him or her by the franchisor, or sought to be imposed by the franchisor, which requirements are not discriminatory as compared with the requirements imposed on other similarly situated franchisees, either by their terms or in the manner of their enforcement; or

(B) The failure by the franchisee to act in good faith and in a commercially reasonable manner in carrying out the terms of the franchise; or

(C) Voluntary abandonment of the franchise; or

(D) Conviction of the franchisee in a court of competent jurisdiction of an offense, punishable by a term of imprisonment in excess of one (1) year, substantially related to the business conducted pursuant to the franchise; or

(E) Any act by a franchisee which substantially impairs the franchisor's trademark or trade name; or

(F) The institution of insolvency or bankruptcy proceedings by or against a franchisee, or any assignment or attempted assignment by a franchisee of the franchise or the assets of the franchise for the benefit of the creditors; or

(G) Loss of the franchisor's or franchisee's right to occupy the premises from which the franchise business is operated; or

(H) Failure of the franchisee to pay to the franchisor within ten (10) days after receipt of notice of any sums past due the franchisor and relating to the franchise.

Hobbs points out that the franchise was not terminated for any of these reasons and that the plain language of the statute, coupled with the canon of statutory construction expressio unius est exclusio alterius, prohibits an interpretation of the AFPA's list of circumstances constituting "good cause" for termination that includes circumstances not specifically listed in section 4-72-202. The phrase expressio unius est exclusio alterius is a fundamental principle of statutory construction that the express designation of one thing may be properly construed to mean the exclusion of another. MacSteel v. Ark. Okla. Gas Corp., 363 Ark. 22, 210 S.W.3d 878 (2005).

Hobbs's argument is well taken. "Good cause" is clearly defined by the plain language of section 4-72-202(7). In that section, the General Assembly listed several examples of good cause for termination, and market withdrawal was not included as an example of good cause. Had the legislature intended to include market withdrawal as good cause for termination, it could have done so.

We also note that the United States Court of Appeals for the Fourth Circuit construed section 4-72-202(7) in Volvo Trademark Holding Aktiebolaget v. Clark Machinery Co., 510 F.3d 474 (2007). In Volvo, the Fourth Circuit held that the enumerated occurrences in section 4-72-202 are the exclusive means by which a franchisor can terminate a franchise for "good cause." Decisions of the federal...