Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—IowaAppCt: Damages Unavailable to Prevailing Party in Wrongful Termination Case, (Jan 11, 2013)

By Jody Coultas, J.D.

A fertilizer equipment company was properly denied damages and attorney’s fees in a wrongful termination case, according to an Iowa appellate court (FECO, Ltd. v. Highway Equipment Co., Inc., January 9, 2013, Potterfield, A.).

FECO, Ltd. entered into an agricultural equipment dealership agreement with Highway Equipment Co., Inc. for the sale of its chassis and spreaders. The agreement was terminated by Highway Equipment. FECO filed suit for wrongful termination and sought damages. Highway Equipment admitted it did not have good cause, as defined by Iowa Code, Chapter 322F, and did not provide the required notice of termination.

A state district court found Highway Equipment liable, but held that damages were not available to FECO. The court of appeals reversed the holding on damages and sent the case back to the district court to determine damages.

On appeal, the district court again declined to award damages based on its finding that FECO had fully mitigated any potential loss incurred by Highway Equipment’s improper termination of their agreements. After the contract was terminated, FECO sold its own proprietary line of spreaders boxes, which took over most of the spreader market. The spreaders were developed during its contract with Highway Equipment.

The district court’s findings were supported by sufficient evidence, according to the court. FECO argued that the court erred in accepting Highway Equipment’s calculations that FECO would have sold 250 Highway Equipment spreaders between 2003 and 2008 in addition to the 177 spreaders it manufactured and sold under its own label. The district court made many findings of fact underlying its unwillingness to adopt FECO’s projected sales numbers. Those findings were supported by the evidence. Also, there was nothing to indicate the rejection of FECO’s calculations were arbitrary or capricious.

Evidence of mitigation of damages was properly admitted by the district court, according to the court. FECO argued that Highway Equipment should not have been allowed to present evidence regarding mitigation of damages as it did not specifically plead an affirmative defense of mitigation. However, Iowa law requires the affirmative defense of failure to mitigate damages. The court also rejected FECO’s argument that the district court erred in declining to award it the costs of its mitigation. Given the district court’s rejection of FECO’s calculations, the district court’s failure to award costs of mitigation was not error.

The district court did not err in declining to award attorney’s fees and costs, according to the court. A dealer may bring a legal action against a supplier for damages sustained by the dealer as a consequence of the supplier’s violation of this chapter. A supplier shall compensate the dealer for damages sustained by the dealer as a consequence of the supplier’s violation, together with the actual costs of the action, including reasonable attorneys’ fees. To allow an award of attorney fees without a showing of damages would result in an unreasonable interpretation, the court concluded.

The cases are Nos. 2-996 and 2-1013 / 11-2096 and 12-0784.

Jeffery S. Faff (Dady & Gardner, P.A.) for FECO, Ltd. Stephen J. Holtman (Simmons Perrine Moyer Bergman PLC) for Highway Equipment Co., Inc.

Cases: FranchisingDistribution IowaNews