Wadena Implement Co. v. Deere & Co., Inc., s. C5-91-975
| Decision Date | 28 January 1992 |
| Docket Number | Nos. C5-91-975,C7-91-1402,s. C5-91-975 |
| Citation | 480 N.W.2d 383 |
| Court | Minnesota Court of Appeals |
| Parties | WADENA IMPLEMENT COMPANY, et al., Respondents, v. DEERE & COMPANY, INC., Appellant, Darrell Payne, Defendant. |
Syllabus by the Court
1. A manufacturer's termination of a dealership agreement violates the Minnesota Agricultural Equipment Dealership Act
when the manufacturer fails to communicate clearly the specific market share requirements being imposed on the dealer, where the manufacturer fails to show that the dealer consistently failed to meet those requirements, and where the termination notice and cure provisions are ambiguous and impossible to achieve.
2. Injunctive relief is proper where it is explicitly authorized by statute and where the trial court has had an opportunity to consider all relevant factors.
3. A dealership may be awarded attorney fees under the Minnesota Agricultural Equipment Dealership Act where it has proven that the manufacturer violated the Act.
J. Michael Dady, Joseph A. Thomson, Lindquist & Vennum, Minneapolis, for respondents.
Louise A. Dovre, Richard J. Nygaard, John M. Bjorkman, Rider, Bennett, Egan & Arundel, Minneapolis, for appellant.
Considered and decided by DAVIES, P.J., and PETERSON and FOLEY, * JJ.
Appellant Deere & Co. challenges (1) the trial court's finding that appellant violated the Minnesota Agricultural Equipment Dealership Act through improper termination of respondents' dealership; (2) the court's grant of a permanent injunction; and (3) the court's award of attorney fees. We affirm.
Respondent Wadena Implement Company (Wadena Implement) has been a farm equipment dealership for appellant Deere & Company (Deere) since 1959. Respondent Steven Nelson is the majority shareholder and vice president of Wadena Implement. Wadena Implement's business relationship with Deere is governed by a written dealer agreement.
Deere provides each of its dealers with a trade area, commonly referred to as the dealer's Area of Responsibility (AOR), which represents the area from which the dealer should draw customers. Wadena Implement's AOR includes parts of Cass, Ottertail, Todd, and Wadena Counties. Deere continuously evaluates and reviews its dealers based upon their sales performance within their AOR. As part of the evaluation process, Deere annually reviews its dealers and prepares for each a written Dealer Business Review, Dealer Marketing Objective, and Individual Action Plan.
In 1987, Deere began using weighted market share data developed to evaluate more accurately its dealers' performance. Wadena Implement's market share for 1987 was 8.6 percent, while other Deere dealers in Territory 24 averaged 31.9 percent and in Division II averaged 34.9 percent. In 1988, Wadena Implement's market share dropped to 8.1 percent, while the corresponding territory and division averages increased to 44.5 percent and 47.9 percent, respectively. During Wadena Implement's annual review in December 1988, Deere informed Nelson that he needed to increase his market share to between 16 and 20 percent of the market.
Deere sent Nelson a letter dated January 27, 1989, stating:
Your 8.6% agricultural market share * * * for the 1987 year, is totally unacceptable to us * * *. [I]f you do not achieve significant progress towards achieving market share levels at your Wadena dealership comparable to average market share levels [in Territory 24 and Division II] during 1989, we will reassess our position regarding a continuing business relationship with you.
On March 8, 1989, Nelson met with five Deere managers, at their request, to discuss his sales performance. The managers said they intended to review the 1989 sales figures and, unless Wadena Implement's share improved to the territory average, "different action" would be taken. Deere confirmed the substance of this meeting in a letter to Nelson dated March 9, 1989. The letter did not mention specific consequences to Wadena Implement if the territory average market share goal was not met.
During Wadena Implement's annual business review on January 9, 1990, Deere told Nelson that he needed to increase Wadena Implement's market share to between 20 and 30 percent. The annual business review form, dated January 9, 1990, states:
If Steve is to remain a JD dealer his market share has to increase sizeably above 8.1%. He is aware of this increase through a meeting [the managers] had with Steve last March 89.
The review form also indicates that ownership of the dealership would not continue for five years unless the market shares moved up from 8.1 percent to close to the territory average. A copy of the Business Review and Action Plan was provided to Wadena Implement. At the time of the review, 1989 market share information was not yet available.
In July 1990, Deere's 1989 market share data became available and revealed that Wadena Implement had improved its standing by 75 percent, to 14.3 percent of the market. This was still well below the territory and division averages, however, and in early August 1990, Deere made the final decision to terminate Wadena Implement, effective March 1, 1991.
This decision was communicated in an August 10, 1990, letter to Nelson. The letter provided Wadena Implement with the 180 days' notice required under the Dealer Agreement and also allowed Wadena Implement 60 days to cure the deficiencies for which it was being terminated, as required by the Minnesota Agricultural Equipment Dealership Act.
Wadena Implement filed this action on February 5, 1991, seeking injunctive relief damages based on Deere's alleged breach of contractual and common law obligations, as well as Deere's alleged violation of the Minnesota Agricultural Equipment Dealership Act. The trial court granted Wadena Implement's motion for summary judgment and ordered that Deere be permanently enjoined from using Wadena Implement's failure to achieve adequate market penetration in 1989 as a basis upon which to terminate the Dealership Agreement.
1. Did the trial court err in finding that appellant violated the Minnesota Agricultural Equipment Dealership Act through improper termination of respondents' dealership?
2. Did the trial court err in granting to respondents a permanent injunction?
3. Did the trial court err in awarding attorney fees to respondents?
On review of a summary judgment, this court must determine whether any genuine issues of material fact are disputed and whether the trial court erred in its application of the law. Betlach v. Wayzata Condominium, 281 N.W.2d 328, 330 (Minn.1979). An appellate court is not bound by the trial court's application of the law to any undisputed facts. A.J. Chromy Constr. Co. v. Commercial Mechanical Serv., Inc., 260 N.W.2d 579, 582 (Minn.1977).
The Minnesota Agricultural Equipment Dealership Act (MAEDA) provides that a farm equipment manufacturer may terminate a dealership agreement if it has "good cause." Minn.Stat. § 325E.062, subd. 1 (1990). The MAEDA defines "good cause" as:
[F]ailure by a farm equipment dealer to substantially comply with essential and reasonable requirements imposed upon the dealer by the dealership agreement, if the requirements are not different from those requirements imposed on other similarly-situated dealers by their terms.
Id. In addition to this general definition, the MAEDA enumerates eight other situations in which a manufacturer would have the requisite "good cause," including where:
[T]he farm equipment dealer, after receiving notice from the manufacturer of its requirements for reasonable market penetration based on the manufacturer's experience in other comparable marketing areas, consistently fails to meet the manufacturer's market penetration requirements.
Id. at subd. 1(8).
The trial court, in granting summary judgment, concluded that Deere had violated the MAEDA in five ways. 1 This court agrees with the trial court's grant of summary judgment based on three of its conclusions: (a) as a matter of law the market share requirement was not communicated by Deere to respondents in a way or at a time so as to make the requirement a reasonable term of the dealership agreement; (b) as a matter of law Deere cannot establish consistent failure by respondents to meet any market share requirements imposed by Deere; and (c) Deere's notice was defective in a practical way because the steps the dealer was required to take to rectify the deficiency were impossible to meet and thus were unreasonable as a matter of law. These three shortcomings in Deere's process of terminating Wadena Implement violate the MAEDA. We need not address the other two grounds for summary judgment.
The MAEDA allows a manufacturer to use market share data as criteria for measuring a dealer's performance, 2 see Minn.Stat. § 325E.062, subd. 1. But Deere's standardized Dealer Agreement did not include reference to any market share obligations until the October 26, 1989, amendment, which did not take effect until May 1, 1990. Also, it was not until the letters sent to Wadena Implement in January and March of 1989 that Deere included specific references to a "requirement" that the dealership achieve a market share level "comparable" to the division and territory averages. Thus, 1989 is the first year in which Wadena Implement could be found to have had notice that specific market share averages were being used by Deere as a performance requirement.
We agree with the trial court's conclusion that:
If a specific market share is to be required for a particular year, elementary notions of fairness would dictate that the dealer unambiguously be informed of the requirement before the year begins. * * * [T]he communication came too late to be reasonable.
Further, for a newly imposed market share requirement to be reasonable, the dealer must have at least some realistic prospect of achieving the...
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