Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—D. Del.: Heavy equipment distributor proceeds with misrepresentation claims, (Sep 25, 2015)

By Greg Hammond, J.D.

A heavy equipment manufacturer obtained partial summary judgment against claims it made misrepresentations that there was a market for Terex heavy equipment in Southern Florida. The federal district court in Wilmington, Delaware, concluded that those claims were time-barred. Nevertheless, the distributor could move forward with allegations that the franchisor made other misrepresentations concerning a market for Terex parts, and that the manufacturer failed to disclose important facts (TL of Florida, Inc. v. Terex Corp., September 24, 2015, Stark, L.).

TL of Florida, Inc. filed suit against Terex Corp., alleging fraudulent non-disclosure, negligent misrepresentation, violation of the Florida Deceptive and Unfair Trade Practice Act (FDUTPA), and breach of implied covenant of good faith and fair dealing. Terex allegedly approached TL about becoming a Terex distributor, misrepresenting four sets of facts that TL alleges would have been material to TL’s decision to enter into the distributorship agreement, including: (1) that there was a market for Terex heavy equipment in Southern Florida (Equipment Market Representation); (2) that there was a market for Terex parts in Southern Florida (Parts Market Representation); (3) a failure to disclose that Terex did not select distributors on the basis of demand in the marketplace or quality of the distributor, and that Terex was in financial distress and engaged in a practice of signing up distributors and obligating them to purchase whole goods without regard to the demand in the marketplace or ability of the distributor in the market (Dealership Selection Representations); and (4) a failure to disclose that TL was surrounded by dealers of authorized Terex parts who could sell those parts to customers without having to maintain the inventory of whole goods or infrastructure that TL was required to maintain (Dealer Representations and Omissions).

Terex filed a combined motion for summary judgment and judgment on the pleadings, as well as a motion to stay discovery pending the resolution of its dispositive motion.

Summary judgment. Terex argued that TL’s claims concerning the Equipment Market Representations and Dealership Selection Representations are barred by the statute of limitations. The court first noted that TL did not contend that its claims based on the Equipment Market Representation are timely, and therefore granted the motion for summary judgment to the extent the counterclaims were based on the time-barred Equipment Market Representation.

The court, however, denied the motion for summary judgment with regard to the Dealership Selection Representations. In particular, the court determined that despite Terex’s arguments to the contrary, TL’s interrogatory response did not bar its claims based on the Dealership Selection Representation, because the response did not discuss Terex’s distributor selection criteria, Terex’s alleged financial distress, or how that financial distress affected Terex’s selection of distributors. Although Terex argued that the allegations are a repackaging of the time-barred Equipment Market Representation, the court was not persuaded, noting that the representations do not overlap to such an extent that the bar on the Equipment Market Representation should also apply to the claims based on the Dealership Selection Representations.

Judgment on the pleadings. Terex next argued that the claims based on the Dealer Representations and Omissions are barred as a matter of law because they are expressly contradicted in, or adequately covered by, the dealership agreement between TL and Terex. The court concluded, however, that Terex is not entitled to judgment on the pleadings because the terms of the dealership agreement neither contradicted nor adequately addressed the Dealer Representations and Omissions.

The motion to stay or in the alternative to bifurcate discovery was denied as moot, as the court resolved the motion for summary judgment and judgment on the pleadings.

The case number is 13-2009-LPS.

Attorneys: Alyssa S. Rothman (Offit Kurman) and W. Michael Garner (Garner & Ginsburg, P.A.) for TL of Florida, Inc. John C. Phillips, Jr. (Phillips Goldman & Spence, P.A.) for Terex Corp.

Companies: TL of Florida, Inc.; Terex Corp.

Cases: FranchisingDistribution StateUnfairTradePractices DelawareNews