Antitrust Law Daily Wrap Up, ANTITRUST—Mich. App.: Telehandler distributors’ unlawful non-compete agreement warrants $3.85M judgment, (Feb 4, 2016)

By Greg Hammond, J.D.

A telescopic handlers (or “telehandlers”) dealer was properly granted $3.85 million in damages on its Michigan Antitrust Reform Act (MARA) counterclaim against a distributor for entering into an illegal horizontal agreement containing a non-solicitation clause that precluded the dealer from participating in the sale of certain telehandlers. In affirming the damages award with regard to the MARA violation, the Michigan Court of Appeals concluded that the dealer sufficiently proved a per se violation of the MARA, the dealer suffered antitrust injury, the MARA counterclaim was not time-barred, and the damages were sufficiently based on lost business income (Manitou North America, Inc. v. McCormick International, LLC, February 2, 2016, Per Curiam).

Manitou North America, Inc.—a company that distributes telehandlers to a network of dealers throughout the United States—filed suit against McCormick International, LLC after McCormick terminated the parties’ dealer marketing agreement. A jury found in favor of McCormick’s MARA and Michigan Farm and Utility Equipment Act (MFUEA) counterclaims and awarded McCormick $3.85 million for the MARA violation and $1.3 million for the MFUEA violation. On appeal, Manitou claims that the MARA counterclaim was time-barred; the MARA counterclaim should have been analyzed under the rule of reason; McCormick failed to adequately prove antitrust injury; the MFUEA lost-profit damages were too speculative; and there was no loss associated with the MARA counterclaim.

Per se MARA violation. After entering into the dealer marketing agreement with McCormick, Manitou entered into an OEM Supply Agreement with telehandler competitor Gehl Company. That agreement contained a non-solicitation provision in which Manitou and Gehl agreed not to compete against each with regard to certain telehandlers and particular dealers, including McCormick, thereby reducing telehandler competition at various business sites. The appellate court concluded that the non-solicitation provision clearly constituted a horizontal restraint on trade and per se violation of the MARA. The court therefore rejected Manitou’s argument that the MARA counterclaim should have been analyzed under the rule of reason.

Antitrust injury. Allegations that McCormick was prohibited from becoming an authorized dealer or reseller of Gehl telescopic handlers, due to the non-solicitation provision in the Manitou-Gehl OEM Supply Agreement, were sufficient to demonstrate antitrust injury. Allegations of direct injury—that Gehl actually refused to sell telehandlers to McCormick and that McCormick lost a 10 unit sale to a prospective customer—were also sufficient to demonstrate antitrust injury.

MARA claims not time-barred. Manitou’s argument that the MARA counterclaim should have been dismissed as time-barred under the applicable four-year statute of limitations was also rejected. The court concluded that, because the MARA counterclaim sprung from the same transactional setting as the MFUEA counterclaim, the MARA counterclaim related back to the original filing of the MFUEA counterclaim.

Damages. The court also affirmed the award of $3.85 million in damages for the MARA counterclaim because the award was based on lost business income claimed on a 2008 tax return. However, the lower court order—awarding $1.3 million in damages for the MFUEA claim—was vacated and remanded because the MFUEA counterclaim was based on an overly speculative claim of lost profits. The evidence, at most, demonstrated that McCormick suffered $69,000 in lost-profit damages relative to the MFUEA counterclaim.

The case is No. 324063.

Attorneys: John R. Trentacosta (Foley & Lardner LLP) for Manitou North America Inc. Richard C. Kraus (Foster, Swift, Collins & Smith, PC) for McCormick International LLC.

Companies: Manitou North America, Inc.; McCormick International, LLC

Cases: Antitrust FranchisingDistribution MichiganNews