Williston Farm Equipment, Inc. v. Steiger Tractor, Inc.

• Decision Date: 10 August 1993
• Docket Number: No. 920140,920140
• Citation: 504 N.W.2d 545
• Parties: WILLISTON FARM EQUIPMENT, INC., Plaintiff and Appellant, v. STEIGER TRACTOR, INC., a foreign corporation, Defendant and Appellee. Civ.
• Court: North Dakota Supreme Court

Page 545

504 N.W.2d 545

WILLISTON FARM EQUIPMENT, INC., Plaintiff and Appellant, v. STEIGER TRACTOR, INC., a foreign corporation, Defendant and Appellee.

Civ. No. 920140.

Supreme Court of North Dakota.

Aug. 10, 1993.

Charles L. Neff, of Bjella, Neff, Rathert, Wahl & Eiken, PC, Williston, for plaintiff and appellant. Appearance by F. Dan Baker President of Williston Farm Equipment, Inc.

Sarah Andrews Herman, of Nilles, Hansen & Davies, Ltd., Fargo, for defendant and appellee.

VANDE WALLE, Chief Justice.

Williston Farm Equipment (WFE) appeals from a judgment entered upon a jury verdict dismissing its action against Steiger Tractor for bad faith termination of a farm implement dealership and from an order denying its post-trial motions. We affirm.

WFE owned a farm implement business in Williston, North Dakota, which carried several different lines of farm equipment, including a Steiger dealership from 1972 until Steiger terminated that dealership, effective October 29, 1984. According to Steiger, it terminated that non-exclusive dealership under a provision of a "Sales and Service Agreement" with WFE which required WFE to provide "sufficient working capital and net worth to fulfill properly all [its] responsibilities and duties." Steiger claimed that WFE was undercapitalized with a debt/equity ratio of about sixteen-to-one, while the industry average was about three-to-one. According to Steiger, WFE's debt/equity ratio had deteriorated since 1981, and its financial difficulties were compounded when Steiger learned that the personal assets of WFE's president and sole shareholder, F. Dan Baker, had been previously encumbered and were unavailable to meet Steiger's capitalization requirements.

WFE sued Steiger, ¹ asserting that Steiger terminated the dealership without good cause and in bad faith in violation of Section 51-07-01.1, N.D.C.C. ² WFE alleged that Steiger's stated reason for the termination was a pretext and that Steiger's ulterior motive for the termination was to offer a dealership for the Williston area to Tractor & Equipment Co. of Billings, Montana [T & E]. WFE asserted that the termination was arbitrary and discriminatory because Steiger imposed different, and stricter, financial conditions on WFE than on other similarly situated dealerships. WFE claimed that Steiger had not terminated other dealerships in worse financial predicaments.

Prior to trial, Steiger moved "for an order in limine limiting or restricting the testimony, comment or argument of or by [WFE], its attorneys or witnesses regarding Sales and Service Agreements between Steiger and any dealership" other than WFE. WFE resisted, contending that it intended to introduce evidence that Steiger treated it differently than other similarly situated dealerships, and that that evidence was relevant to show that the termination was in bad faith and without good cause. The trial court granted Steiger's motion in limine, concluding that, under Rule 403, N.D.R.Ev., the marginal relevance of that evidence was substantially outweighed by a number of dangers, including unfair prejudice, confusion of issues, undue waste or delay, and needless presentation of cumulative evidence.

The jury found that Steiger terminated WFE's dealership for good cause and in good faith and judgment was entered dismissing WFE's action. The trial court thereafter denied WFE's motions for a judgment notwithstanding the verdict and for a new trial. WFE appealed from the judgment and from the denial of its post-trial motions.

WFE contends that the trial court abused its discretion in granting Steiger's pre-trial motion in limine to exclude an entire category of evidence about Steiger's other dealerships, because the court's determination required it

"to try its case against Steiger in a vacuum devoid of any evidence which could establish the arbitrary, discriminatory and bad faith actions involved with Steiger's decision to terminate WFE as a Steiger dealer. The windfall to Steiger from this ruling was that Steiger no longer had to explain to a jury why WFE was given a sales quota and was terminated for its alleged failure to have sufficient capitalization to carry on its dealer responsibilities when similarly situated dealers in the area which had much worse financial problems than WFE were given arbitrary preferential treatment, were not given a sales quota, and were allowed to keep their Steiger dealerships. WFE was further prevented from presenting evidence to the jury that WFE was a leading dealership in the area market and that Steiger had other options it was using with other Steiger dealers in the area other than dealer cancellation to guaranty payment of Steiger parts and equipment. Finally, WFE was prevented from presenting evidence that on the same day Steiger told WFE that it would be terminating WFE as a dealer for lack of adequate capitalization; Steiger, on the same day 93 miles away, made a sweetheart deal with Moe Motor Company to voluntarily repossess $220,815.30 of delinquent floor-plan inventory, sell the inventory at a loss, without recourse and keep Moe Motors as a Steiger dealer."

Steiger responds that the trial court did not abuse its discretion in determining that the probative value of evidence regarding other Steiger dealerships was substantially outweighed by unfair prejudice, confusion of issues, undue delay, and needless presentation of cumulative evidence. Steiger argues that the excluded evidence was not relevant to Steiger's subjective exercise of good faith under its contract with WFE and would have greatly prolonged the thirteen-day trial.

We review this issue within the context of the evidentiary rules for relevancy and the procedural posture of a motion in limine. Relevant evidence means evidence that would reasonably and actually tend to prove or disprove any fact that is of consequence to the determination of an action. Shark v. Thompson, 373 N.W.2d 859 (N.D.1985); Rule 401, N.D.R.Ev. Relevant evidence is generally admissible. Rule 402, N.D.R.Ev. A trial court has discretion to determine whether evidence is relevant, and its decision will not be reversed on appeal absent an abuse of discretion. State v. Biby, 366 N.W.2d 460 (N.D.1985). Relevant evidence "may be excluded if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury, or by considerations of undue delay, waste of time, or needless presentation of cumulative evidence." Rule 403, N.D.R.Ev. A trial court has discretion to balance the probative value of the proffered evidence against the dangers enumerated in Rule 403, N.D.R.Ev., and we also review that determination under the abuse-of-discretion standard. Williams County Social Services Board v. Falcon, 367 N.W.2d 170 (N.D.1985). See Explanatory Note to Rule 403, N.D.R.Ev.

In this case, WFE alleged that Steiger terminated the dealership without good cause and in bad faith under Section 51-07-01.1, N.D.C.C. The statute limits "good cause" for purposes of terminating a dealership to "failure by the person, firm, or corporation in the business of selling and retailing to comply with those requirements imposed by the written contract between the parties." See Foley Equipment, Inc. v. Krause Plow Corp., 456 N.W.2d 121 (N.D.1990). The trial court instructed the jury on "good cause" and on "good faith" in language from that statute and from Section 1-01-21, N.D.C.C. ³ WFE did not object to the trial court's instructions, and they are the law of the case. Erickson v. Schwan, 453 N.W.2d 765 (N.D.1990); Smith v. Anderson, 451 N.W.2d 108 (N.D.1990).

Pursuant to those instructions, Steiger asserts that "good faith" is a subjective standard based upon its honest belief that WFE could not comply with the terms of the dealership agreement and that the only evidence relevant to that issue is evidence concerning Steiger's subjective reason for terminating that agreement. We do not believe that the concepts of good faith and good cause, as outlined in the statutes and the jury instructions, are that limited. Steiger's argument ignores the prophylactic purpose of Section 51-07-01.1, N.D.C.C., to equalize the disparity in bargaining power between manufacturers and dealers, and to protect dealers from a termination based solely upon a manufacturer's subjective whim and caprice. Steiger's argument is repugnant to our primary goal of statutory construction to interpret statutes to effect the legislative intent. County of Stutsman v. State Historical Society, 371 N.W.2d 321 (N.D.1985). Although "good cause" must relate to a dealer's compliance with the requirements imposed by a written dealership agreement and a manufacturer must make a good faith determination about good cause, we disagree with Steiger's assertion that the only evidence relevant to those issues is evidence concerning Steiger's subjective reason for terminating the dealership agreement. We believe evidence about a manufacturer's treatment of other similarly situated dealerships may have some probative value to establish "good cause" and "good faith" for the termination of a dealership agreement.

Notwithstanding that evidence about other dealerships may have some probative value, a trial court, in its discretion, may determine that that evidence is not relevant because the other dealerships are not similarly situated, or that the relevance of that evidence is substantially outweighed by the dangers enumerated in Rule 403, N.D.R.Ev. Here, the trial court initially made that determination in the context of a motion in limine, and we consider this issue within that context.

A motion in limine is a procedural tool to ensure that potentially prejudicial evidentiary matters are not discussed in the presence of the jury. Shark v. Thompson, 373 N.W.2d 859 (N.D.1985). See Twyford v. Weber, 220 N.W.2d 919 (Iowa 1974). See also Annot., 63 A.L.R.3d 311, Modern Status of Rules as to Use of Motion in...