Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Farm equipment maker lacked good cause to terminate dealer, suit says, (Dec 5, 2016)

By Linda O’Brien, J.D., LL.M.

A manufacturer of agricultural equipment did not have good cause to terminate its distributor agreement with a former dealer after it began selling another company’s equipment and failed to provide the dealer with an opportunity to cure any bona fide breach of the agreement, according to a complaint filed in the federal district court in Minneapolis (Tri-State Bobcat, Inc. v. Finn Corp., December 2, 2016).

Finn Corporation manufactures hydro-seeding equipment which is designed and used for the agricultural application of seeds to seed beds. In January 2014, Tri-State Bobcat, Inc. entered into an agreement with Finn to become an authorized Finn dealer, with the right to purchase Finn products for resale in Minnesota, Wisconsin, and Iowa.

The complaint states that in early 2016, Tri-State entered into an agreement with Fecon, Inc.—a manufacturer of heavy duty tractors and equipment for use in land clearing, forestry, and biomass harvesting—to sell Fecon brand products. The distributor agreement with Finn did not contain any prohibition on selling non-Finn products or a requirement that Tri-State exclusively sell only Finn equipment. The agreement only prohibited Tri-State from selling other manufacturers’ attachments for use on Finn brand products.

In October 2016, Finn notified Tri-State that it was terminating its distributor agreement, effective November 11, 2016, and that included all equipment, parts and service sales to customers in the designated territory. Finn stated that the agreement prohibited Tri-State from selling competing products and that the agreement with Fecon was a violation of Tri-State’s agreement with Finn. Finn contended that Fecon was its competitor because the owner of Fecon owns another company, Site Worx, LLC, which manufactures hydro-seeding products under the brand name of "Apex." Tri-State claims that Site Worx is a separate legal entity from Fecon and Tri-State is not a dealer of Site Worx’ Apex brand products.

According to the complaint, the dealer agreement sets forth the circumstances under which the agreement can be terminated, including when the contract is terminated without notice, with notice, and when 30 days’ written notice must be given prior to any termination. Tri-State never received 30 days’ written notice of termination by Finn, Finn did not claim that Tri-State committed any acts prohibited under the dealer agreement, and Finn failed to identify any bona fide breach of the agreement or provided an opportunity to cure. In the absence of good cause or contractual breach, such termination was unlawful.

Tri-State has made substantial investments to promote the sales of Finn-brand products at its dealership and successfully increased sales of Finn products in its assigned territory. Further, Tri-State has generated over $5 million in sales and service revenue in Finn products in 2015. Finn did not have good cause to terminate Tri-State’s dealership rights and failed to provide Tri-State with an opportunity to cure any bona fide performance deficiency, the complaint claims.

The plaintiff asserts claims for breach of contract, as well as violations of the Minnesota Agricultural Equipment Dealers Act, Wisconsin Fair Dealership Law, and Iowa Agricultural Equipment Dealership Statute. The action seeks compensatory damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 0:16-cv-04060-DWF-SER.

Attorneys: John D. Holland and Serena I. Chiquoine (Dady & Gardner, P.A.) for Tri-State Bobcat, Inc.

Companies: Tri-State Bobcat, Inc.; Finn Corp.

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