Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—C.D. Ill.: HVAC maker’s suit against former franchisee’s estate stays hot, (Mar 6, 2024)

By George Basharis, J.D.

Statute of limitations did not bar lawsuit against franchisee’s estate to the extent the estate was protected by liability insurance.

A lawsuit filed by HVAC maker Trane U.S. Inc. against the estate of a former franchisee, who had entered into a franchise agreement with Trane more than 50 years ago, barely survived a motion to dismiss on the basis that it was time-barred under the Illinois Probate Act, according to the federal district court in Peoria, Illinois. The lawsuit concerned the use of Tracer TU, proprietary software developed by Trane for customizing and servicing Trane HVAC products, as well as a territorial franchise agreement. The court determined that the Probate Act’s two-year limitation was jurisdictional but denied the estate’s and other defendants’ motions to dismiss pending the outcome of limited discovery to determine whether the estate was covered by a policy of insurance, as the Probate Act’s limitation does not bar claims against an estate to the extent the estate is protected by liability insurance (Trane U.S. Inc. v. Hunzeker Service Agency, Inc., March 4, 2024, Shadid, J.).

In 1965, Myron E. Hunzeker established M.E. Hunzeker Co. (MEHCO) to promote Trane products. Trane is a leading manufacturer of HVAC equipment. In 1966, Trane entered into a territorial franchise agreement with MEHCO under which the company would sell Trane products within a certain area. Later that year, Hunzeker established Hunzeker Service Agency, Inc. (HSA) to service Trane equipment. In 2016, Trane developed proprietary software, Tracer TU, to assist franchisees in servicing Trane equipment. Trane licensed Tracer TU to HSA.

Hunzeker died in 2016. In 2017, Trane notified MEHCO and Hunzeker’s estate that the territorial franchise agreement was terminated. Despite termination of the franchise agreement, Trane alleged that HSA continued to use Tracer TU. According to Trane, HSA retained the licenses with the intent to use Tracer TU and maintain Trane equipment until HSA could transition its customers away from Trane products.

Trane sued Hunzeker’s estate and several related entities, alleging breach of contract and misuse of proprietary software. The lawsuit claimed that Hunzeker’s companies, MEHCO and HSA, violated the terms of their franchise agreement and end-user licensing agreement with Trane by continuing to use and sell Tracer TU after the franchise agreement was terminated in 2017.

The defendants moved to dismiss the lawsuit on various grounds, including invoking the bar of the Illinois Probate Act, which imposes a two-year time limit for making claims against a decedent’s estate. Trane argued that the Probate Act did not bar the lawsuit, and that the 10-year statute of limitations for contract claims should govern its case. Trane contended that the Illinois Probate Act was relevant only in probate proceedings, and did not extend to situations where the estate, rather than the decedent, is liable. Additionally, Trane raised concerns that allowing the Probate Act to take precedence over statutes of limitations would deprive plaintiffs of recourse when an estate engages in wrongful acts more than two years after the decedent’s death.

The court rejected Trane’s arguments, citing instances where the Illinois Probate Act had been invoked by other courts in a range of civil claims beyond probate proceedings, including contract actions. Moreover, Trane failed to substantiate its assertion that the Probate Act applied solely if the liability fell on the decedent rather than the estate. The court observed that disregarding the Probate Act’s limitation would have its own consequences, such as the failure efficiently to close out estates. However, most importantly, the court ruled that the Probate Act’s limitation was jurisdictional.

The court clarified that the Illinois Probate Act was a “nonclaim statute,” and therefore the limitation imposed by the Act functioned as a limitation on jurisdiction rather than a statute of limitations to which a defense could be raised. Consequently, the court did not have jurisdiction over Trane’s claims. However, the Illinois Probate Act does not completely preclude lawsuits if the estate is covered by a policy of insurance. Therefore, the court reserved judgment on the matter and ordered limited discovery to ascertain whether the estate was indeed covered by a relevant insurance policy, potentially exempting it from the Probate Act’s limitation.

Case is No. 1:23-cv-01169-JES-JEH.

Attorneys: Cyrus Alcorn Morton (Robins Kaplan LLP) for Trane U.S. Inc. David G. Lubben (Davis & Campbell LLC) for Hunzeker Service Agency, Inc.

Companies: Trane U.S. Inc.; Hunzeker Service Agency, Inc.

Cases: FranchisingDistribution IllinoisNews