Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION NEWS: Truck dealer seeks injunction preventing termination of its Freightliner and Detroit Diesel franchises, (Aug 9, 2013)

By Peter Reap, J.D., LL.M.

New York truck dealer Agar Truck Sales, Inc. has filed suit in the federal district court in New York City seeking injunctive relief preventing Daimler Trucks N.A., LLC, from terminating its Freightliner franchise and preventing Detroit Diesel Corporation from terminating Agar’s Detroit Diesel franchise. Specifically, Agar alleges that the terminations lack “due cause” and “good faith” as required by the New York Franchised Motor Vehicle Dealer Act and that there is no contractual basis under the respective dealer agreements to terminate the franchises.

According to the complaint, on April 27, 2012, Daimler notified Agar that it had breached the sales performance requirements of its dealer agreement and provided Agar a six month cure period. Over seven months later, on June 7, 2013, after Agar had developed and implemented a truck sales plan that included, with one exception, each of the action items identified by Daimler in its termination letter, Daimler notified Agar that it had failed to correct the breach and that its franchise would be terminated in 90 days. Also, Detroit Diesel, upon information and belief a wholly owned subsidiary of Daimler, or an affiliate of Daimler, notified Agar that it would no longer conduct business with Agar effective September 3, 2013.

The complaint states that the dealer law places the burden of proof on Daimler to establish “due cause” to terminate Agar’s franchise by showing that Agar breached a reasonable and necessary provision of the franchise. Agar alleges that Daimler cannot meet that burden because Daimler’s sales requirements are unfair, unreasonable, and arbitrary. In fact, Agar alleges that they “are not merely unreasonable, they are patently absurd.”

Agar contends that the territory assigned to Agar by Daimler is too large because it contains territory away from Agar’s location that is closer to other Freightliner dealers. This improper assignment of territory unfairly inflates Agar’s expected sales and deflates its perceived sales performance. Moreover, Daimler’s method of calculating Agar’s sales objectives is also flawed. According to Agar, this is demonstrated by the fact that Daimler constantly changes its methodology and its calculations of Agar’s sales objectives have varied wildly over the years. For examples, in 2009, Agar’s sales objective was 82 trucks. For 2010, Daimler changed its methodology and more than doubled Agar’s sales objective to 166 trucks.

Agar alleges that the termination letter from Detroit Diesel falsely states that the parties’ dealer agreement expired on December 31, 2012. However, Agar and Detroit Diesel are parties to a dealer agreement that expires on December 31, 2015, not 2013.

Agar seeks declaratory judgments that the terminations violate the dealer law and injunctions stopping them. Agar also seeks its reasonable attorney fees and costs as provided by the dealer law.

The complaint in Agar Truck Sales, Inc. v. Daimler Trucks North America LLC, Case No. 7:13-cv-05471-NSR, was filed August 6, 2013.

Attorneys: Russell R. McRory (Robinson Brog Leinwand Greene Genovese & Gluck, P.C.) for Agar Truck Sales, Inc.

Companies: Agar Truck Sales, Inc.; Daimler Trucks North America LLC; Detroit Diesel Corporation.

News: FranchisingDistribution NewYorkNews