Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-16-02239/USCOURTS-ca7-16-02239-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

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In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 16-2239

TEXAS UJOINTS LLC,

Plaintiff-Appellant,

v.

DANA HOLDING CORP., et al.,

Defendants-Appellees.

____________________

Appeal from the United States District Court for the

Eastern District of Wisconsin.

No. 1:13-cv-01008-WCG — William C. Griesbach, Judge.

____________________

ARGUED NOVEMBER 29, 2016 — DECIDED DECEMBER 16, 2016

____________________

Before POSNER, EASTERBROOK, and SYKES, Circuit Judges.

POSNER, Circuit Judge. In this diversity suit, governed by 

Texas law, the plaintiff, Texas UJoints (to simplify, we’ll call 

it just UJoints), argues that it was a dealer in products of Dana Holding Corporation (a supplier of drive shafts, which 

typically are devices for transmitting power from an engine 

to the wheels of a vehicle, and other industrial equipment),

in particular Dana’s GWB and Spicer products, and that Dana terminated the dealership of GWB products in violation 

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2 No. 16-2239

of a Texas statute. (Dana is the principal defendant; we can 

ignore the others.) The statute provides that “a supplier may 

not terminate a dealer agreement without good cause,” 

Vernon’s Texas Statutes and Codes Annotated, Business and 

Commerce Code § 57.153, “dealer agreement” being defined 

as “an oral or written agreement or arrangement, of definite 

or indefinite duration, between a dealer and a supplier that 

provides for the rights and obligations of the parties with 

respect to the purchase or sale of equipment or repair parts.” 

§ 57.002(4). But “good cause for termination of a dealer 

agreement exists ... if there has been a sale or other closeout 

of a substantial part of the dealer’s assets related to the business.” § 57.154(a)(4).

Dana had a dealer agreement in Texas with a company 

named Automotive Industrial Supply Co. (“AISCO”). Unbeknownst to Dana, AISCO sold off most of its assets to a newly formed company named DanMar Holdings (unrelated to 

Dana), which in turn transferred the assets to a firm named 

Texas UJoints. The name “UJoints” had been a trade name

used by AISCO, but now became the name of an independent firm, the plaintiff in this case. That transfer of assets, like 

AISCO’s sale of its assets to DanMar, gave Dana, pursuant to

§ 57.154(a)(4), quoted above, good cause to terminate its 

dealer agreement with AISCO. The termination precluded 

Texas UJoints from claiming to have been authorized to step 

into AISCO’s shoes and thereby become a Dana dealer in 

Texas. And so the district judge held, granting summary 

judgment in favor of Dana.

The transfer of assets from DanMar to UJoints had taken 

place in September 2012. In November the two owners of 

DanMar (who were also the owners of UJoints), Dan Zahn 

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No. 16-2239 3

and Martin Brown (hence “DanMar”), met for the first time 

with representatives of Dana. Zahn and Brown did not reveal the existence of DanMar or UJoints but said they’d

bought AISCO; they hadn’t, though they had bought its assets.

Dana’s representatives told Zahn and Brown that they 

would have to submit a business plan for their reconstituted 

AISCO (i.e., UJoints). Discussions with Dana continued for 

months, and finally in May 2013 Zahn sent Dana a PowerPoint presentation containing the business plan. But the following month Dana informed Zahn that it wouldn’t make 

UJoints a Dana dealer of its GWB products, although it 

would allow UJoints to continue selling the Spicer products. 

UJoints responded by filing this suit, which Dana removed 

to the federal district court in the Eastern District of Wisconsin. The court ruled for Dana, precipitating this appeal.

UJoints argues that either Dana entered into a new dealer 

agreement with it or UJoints had become a party to Dana’s 

agreement with AISCO just by virtue of the transfer of 

AISCO’s assets to it. There was no new dealer agreement, 

however; and as for the sale of AISCO’s assets to UJoints, 

since that was “a sale or other closeout of a substantial part 

of the dealer’s assets related to the business” it gave Dana 

good cause to terminate its dealer agreement with AISCO 

pursuant to § 57.154(a)(4). The termination left Dana with no 

business relations with AISCO and no shoes for UJoints to 

step into and to claim to be an authorized Dana dealer, 

bound to Dana by an agreement.

UJoints argues that Dana terminated the agreement only 

because of complaints from other dealers. That’s irrelevant. 

Dana had good cause to terminate the agreement once 

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AISCO sold its assets. UJoints points out that at the November meeting a Dana representative told Brown and Zahn: “I 

don’t care what you are going to do or how you are going to 

do it as long as it includes [Bob Stoddard, a long-time

AISCO employee].” UJoints argues that this statement constituted Dana’s blessing UJoints’ stepping into AISCO’s 

shoes as a Dana dealer by purchasing AISCO’s assets. No 

way; at the November meeting Dana’s representatives didn’t 

know that UJoints had purchased AISCO’s assets. And Zahn 

testified that Dana’s representatives didn’t make any promises at the November meeting, or at any other meeting.

UJoints is left to argue that Dana “intentionally and expressly entered into a dealership agreement with” UJoints 

after learning that UJoints had acquired AISCO’s assets. This 

is not inconceivable, since Dana had been content to use 

those assets in its business. As evidence of a dealership 

agreement with Dana, UJoints points out that until Dana 

terminated its relationship with it in June 2013, Dana gave it 

its standard distributor terms and conditions and protocols 

for ordering product, introduced Zahn and Brown to Dana 

officials in Germany (where apparently some of Dana’s 

products originate), sent UJoints a credit application to fill 

out “as part of the partnership going forward,” provided 

UJoints with certain product specifications, and continued 

filling orders by UJoints for products for UJoints to distribute.

But UJoints has again missed the point. When AISCO’s 

assets were shifted to UJoints, Dana naturally wanted to 

learn more about the new company, and so it cooperated 

with UJoints to the extent of providing some inducements to 

it to continue distributing Dana products. That does not 

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No. 16-2239 5

mean that Dana entered into a “dealer agreement,” specifying the ongoing rights and obligations of it and UJoints—a 

new, unknown entity the identity of which the owners had 

concealed from Dana for a significant time, which must have 

undermined their credibility with Dana. Glancing back at 

our quotations from the Texas statute, we see that a distributor agreement can be of indefinite duration, implying that it 

can be terminated at any time if no duration is specified, and 

none was here, and also that it can be terminated because the 

distributor sold its assets, which AISCO did.

All else aside, precipitate classification of a pattern of 

dealing as a dealership agreement terminable only for good 

cause would have a disruptive effect on distribution. When a 

distributor suddenly vanishes, the supplier may still need its 

distribution; it may be unable to afford the protracted interruption that might ensue if it lost its existing distribution

and had to create a new system of distribution from scratch.

It is also natural for a supplier to want to learn more about a 

successor to its former dealer before granting the successor a 

dealership. And so it was natural for Dana to continue selling, for a time, to its dealer’s, AISCO’s, successor—UJoints.

Obviously not all sales are pursuant to dealer agreements, as opposed to merely being agreed upon. If you buy 

a car from someone and resell it, that doesn’t make you a 

dealer, and so the fact that UJoints bought products from 

Dana and resold them did not make UJoints a party to a 

dealer agreement. Because UJoints was distributing Dana’s 

products, Dana had to furnish it with information necessary 

to facilitate that distribution and avoid errors. That provision 

of information, necessary for efficient distribution even if 

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there is no dealer agreement, did not constitute or create 

such an agreement.

The judgment of the district court is therefore affirmed.

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