Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—S.D.N.Y.: Truck engine manufacturer not subject to New York Franchised Motor Vehicle Dealer Act, (Apr 3, 2014)

By Edward L. Puzzo, J.D.

A manufacturer of truck engines was not a manufacturer of “motor vehicles” under the New York Franchised Motor Vehicle Dealer Act and therefore could not be liable as franchisor under that Act, the federal district court in White Plains, New York, has ruled (Agar Truck Sales, Inc. v. Daimler Trucks North America, LLC, April 1, 2014, Roman, N.).

New York tractor-trailer dealer Agar Truck Sales brought an action under the New York Franchised Motor Vehicle Dealer Act against Daimler Trucks North America (DTNA) and its wholly owned subsidiary, Detroit Diesel Corporation (DDC).

Agar had a Freightliner truck franchise agreement with DTNA expiring December 31, 2014. In April 2012, DTNA notified Agar that it had breached the sales performance requirements of the franchise agreement and gave Agar a six-month cure period. Agar admitted that it did not met DTNA’s sales objectives in the years 2009 through 2012, but asserted that the sales requirements were unfair, unreasonable and arbitrary. In June 2013, DTNA notified Agar that it would terminate the franchise agreement due to a failure to cure the sales shortcomings.

Agar also had a separate Detroit Diesel engine franchise agreement with DDC expiring December 31, 2012. These engines are often used in Freightliner trucks. DDC sent Agar a renewal contact extending the agreement beyond December 31, 2012 to December 31, 2016, but never signed it. In June 2013, DDC notified Agar that it would discontinue business with Agar. It did not assert any breach of contract, but stated that the franchise agreement had expired on December 31, 2012 and it had continued to conduct business with Agar beyond that date only on a day-to-day basis.

DDC moved to dismiss Agar’s action; DTNA did not join in the motion.

Franchised Motor Vehicle Dealer Act. The court explained that New York’s Franchised Motor Vehicle Dealer Act prohibits a franchisor from terminating or refusing to renew the franchise of motor vehicle dealers without due cause.

DDC denied that it was a “franchisor” under the Act, and Agar conceded this. The court explained that the Act covered those engaged in the business of manufacturing or assembling motor vehicles for sale in New York. The court stated that the term “engine” was noticeably absent from the Act’s definition of “motor vehicle.” DDC, a manufacturer of engines, not motor vehicles, did not qualify as a franchisor under the Act, the court ruled.

Nevertheless, Agar argued that DDC should be held liable under the DTNA Freightliner franchise agreement, and its actions imputed to DTNA, because the Detroit Diesel engines sold by DDC are “part and parcel” of the Freightliner franchise and the term “franchise,” as defined in the Act, encompasses “related components of a franchise.” These arguments, opined the court, contend that DTNA is liable for the actions of its subsidiary DDC under certain antitrust concepts. But the court found that general federal antitrust law considers parents and subsidiaries to be a single actor, so antitrust law would not apply here. Consequently, the court granted DDC’s motion to dismiss.

The case is Civil Action No. 13-cv-S471 (NSR).

Attorneys: Russell Pries McRory (Robinson Brog Leinwand Greene Genovese & Gluck) for Agar Truck Sales, Inc. Robert Allen Scher (Foley & Lardner, LLP) for Daimler Trucks North America LLC.

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

Cases: FranchisingDistribution NewYorkNews