Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—W.D. Wash.: Volvo dealership partially stalls summary judgment briefing timeline, (Oct 24, 2014)

By Greg Hammond, J.D.

A Washington-based Volvo construction equipment dealer was given 90 additional days to conduct discovery into the franchisor’s Washington Manufacturers’ and Dealers’ Franchise Agreements Act (Washington Dealer Act) and Washington Franchise Investment Protection Act (FIPA) claims. In partially granting the dealership’s motion for continuance, the federal district court in Seattle determined that the motion was timely, and the dealer specifically identified the relevant information it was seeking and the bases for believing the information exists (Volvo Construction Equipment North America, LLC v. Clyde/West, Inc., October 20, 2014, Robart, J.).

Background. In 2002, Clyde/West, Inc. began selling Volvo Construction Equipment North America, LLC’s heavy construction equipment, and in 2010, the two companies entered into a franchise agreement, wherein Clyde was appointed Volvo’s "exclusive authorized dealer" in Washington. However, in 2012, Volvo sent Clyde a letter terminating the agreement. The franchisor also filed suit requesting declaratory judgment that its termination of Clyde’s dealership does not violate the Washington Dealer Act, the FIPA, the Federal Dealer Suits Against Manufacturers Act (Federal Dealer Act), or any covenant of good faith and fair dealing implied by the agreement. Volvo moved for summary judgment, and Clyde moved for a continuance on the summary judgment briefing schedule.

Washington Dealer Act and FIPA. The Washington Dealer Act governs the conditions under which a manufacturer may terminate a franchise of a new motor vehicle dealer. However, Volvo argues that the Act is inapplicable to Clyde because the construction equipment it sells is not required to be registered and titled in Washington, and that Clyde is therefore not a "new motor vehicle dealer." The court agreed that Clyde is entitled to develop the factual record regarding whether its inventory is required to be registered. The court consequently granted Clyde a 90 day extension to conduct discovery on this claim, noting that: Clyde participated affirmatively in discovery since it opened; the company’s motion was timely; and Clyde identified the relevant information it intends to seek and its bases for believing the information exists.

Similarly, FIPA provides franchisees with certain protections, including the requirement that a franchise can only be terminated for "good cause." In favor of its motion for summary judgment, Volvo argues that Clyde is unable to show an unfair or deceptive trade practice that has an impact on the public interest, because a "breach of a private contract affecting no one but the parties to the contract is not an act or practice affecting the public interest." The court concluded that because the public interest element is a question of fact, Clyde is entitled to an opportunity to discover evidence that will support a finding in its favor. Consequently, the court awarded Clyde a 90 day extension to conduct discovery on this claim, finding that the motion for continuance was timely, and Clyde adequately identified the relevant information it will be requesting and its bases for believing that information exists.

Federal Dealer Act and duty of good faith. Clyde’s motion for continuance was denied with regard to Volvo’s Federal Dealer Act and duty of good faith claims. The Federal Dealer Act allows an "automobile dealer" to bring suit against an "automobile manufacturer" who—in part—fails to act in good faith when terminating a franchise. Clyde argued that it needs discovery from Volvo regarding the features of its vehicles that classify them as trucks. However, the court determined that Clyde failed to offer any explanation as to why it is not aware of, or cannot discover, those features itself, having been in the business of selling Volvo construction equipment for more than 12 years. In addition, Clyde failed to demonstrate that it lacks access to facts essential to oppose Volvo’s argument that there is no "free-floating" duty of good faith and fair dealing in Washington.

The case number is C14-0534JLR.

Attorneys: Ann Maher (Whyte Hirschboeck Dudek SC) for Volvo Construction Equipment North America, LLC. Jessica L. Farley (Pia Anderson Dorius Reynard & Moss) for Clyde/West Inc.

Companies: Volvo Construction Equipment North America, LLC; Clyde/West Inc.

Cases: FranchisingDistribution WashingtonNews