Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-03333/USCOURTS-ca7-14-03333-0/pdf.json

Parties Involved:
BouMatic LLC
Appellant
Sid Tilstra
Appellee
Tilstra Dairy Equipment, LTD
Appellee

Document Text:

In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 14-3333 

SID TILSTRA and TILSTRA DAIRY EQUIPMENT, LTD., 

Plaintiffs-Appellees, 

v.

BOUMATIC LLC, 

Defendant-Appellant. 

____________________ 

Appeal from the United States District Court for the 

Western District of Wisconsin. 

No. 3:12-cv-00827-slc — Stephen L. Crocker, Magistrate Judge. 

____________________ 

ARGUED APRIL 17, 2015 — DECIDED JUNE 30, 2015 

____________________ 

Before POSNER and WILLIAMS, Circuit Judges, and WOOD, 

District Judge.

*

POSNER, Circuit Judge. This diversity suit pits a dealer in 

dairy (“milking parlor”) equipment (the corporate plaintiff, 

owned by Sid Tilstra, the other plaintiff, but to simplify we’ll 

pretend that Mr. Tilstra is the only plaintiff) in southwestern 

 

*

 Hon. Andrea R. Wood of the Northern District of Illinois, sitting by designation. 

Case: 14-3333 Document: 31 Filed: 06/30/2015 Pages: 8
2 No. 14-3333 

Ontario against a manufacturer of such equipment, BouMatic, a Wisconsin company. The parties agree that the law 

applicable to the substantive issues in this case is Wisconsin 

law; their contract authorized BouMatic to designate either 

Wisconsin law or the law of the jurisdiction in which the 

dealer is located as the law to govern a dispute between the 

parties, and it chose Wisconsin law. 

Tilstra had been a dealer in BouMatic’s dairy equipment 

for about twenty years. He claims that by devious means, 

violating the rule of contract law that contracts be performed 

in good faith, BouMatic forced him to sell his dealership to a 

neighboring BouMatic dealer at a below-market price. The 

jury agreed and awarded Tilstra $471,124 in damages, which 

the magistrate judge (presiding by agreement of the parties) 

upheld over the objections of BouMatic, which has appealed. 

Each BouMatic dealer is assigned a territory within 

which he has the exclusive right to sell and service BouMatic 

products. Tilstra’s territory included (according to John 

Ghey, the BouMatic district sales manager whose domain 

included that territory) “arguably the richest dairy county in 

Canada,” on which 55,000 dairy cows grazed. His dealership 

was making a profit of about $400,000 a year. 

The dealership contract reserved to BouMatic “the right 

to change, at its sole discretion, the assigned territory,” but 

further provided that “BouMatic shall not terminate this 

[dealership] Agreement or effect a substantial change in the 

competitive circumstances of this Agreement without good 

cause and only upon at least ninety (90) days’ advance written notice sent by certified mail. The term ‘good cause’ 

means Dealer’s failure to comply substantially with essential 

Case: 14-3333 Document: 31 Filed: 06/30/2015 Pages: 8
No. 14-3333 3 

and reasonable requirements imposed upon Dealer by BouMatic.” 

Adjacent to Tilstra’s territory was another BouMatic territory, this one assigned to a dealership that the parties call 

Dortmans. Dortmans’ territory grazed only about half the 

number of dairy cows as Tilstra’s. Dortmans wanted to buy 

Tilstra’s dealership in order to obtain his territory. But the 

two were unable to come to terms—Tilstra was demanding a 

much higher price than Dortmans was willing to pay. A 

BouMatic district sales manager, Ghey, whose district included both territories, advised his superiors that Tilstra was 

doing a poor job with his territory; whether this was true is 

unclear, but in 2009, BouMatic’s regional sales manager, 

Stephane Desjardins, advised Ghey by email that “We 

[should] approach Sid [Tilstra] again and ask him to sell. If 

he refuses or makes it too difficult, we would in the short 

term, modify the territory lines in favor of Advanced [another adjacent BouMatic dealer] and Dortmans. This would 

... put unbearable pressure on Sid [to sell]—without cancelling him outright or immediately.” 

Desjardins and Ghey met with Tilstra and told him that 

BouMatic would eliminate his territory altogether unless he 

agreed to sell his dealership, with all its assets, to the Dortmans by the first of the next month (December 2009), the sale 

to be closed by January 1. There is evidence that BouMatic 

also threatened to stop selling dairy equipment to Tilstra. 

Tilstra was willing to sell his dealership, but he continued to resist the terms offered by Dortmans. On January 8 

BouMatic’s North American Director of Sales sent Tilstra a 

letter reminding him that BouMatic had decided to “have 

Dortmans ... take over the territory covered by your comCase: 14-3333 Document: 31 Filed: 06/30/2015 Pages: 8
4 No. 14-3333 

pany. ... [O]ur decision ... is not negotiable and ... we will 

proceed with or without your cooperation.” The following 

month Tilstra sold the dealership to Dortmans for $500,000 

plus a five-year consulting contract under which he would 

receive a total of $310,000 in consulting fees. The sale was 

completed in March. 

Tilstra had valued the goodwill of his dealership at $1.5 

million; BouMatic, siding with Dortmans, had forced him to 

sell it for half that amount even when the consulting contract 

awarded to Tilstra as part of the deal is deemed part of the 

price of the dealership. In this suit, brought some two and a 

half years later, Tilstra argues that BouMatic both violated 

the dealership agreement and improperly interfered with his 

negotiations with Dortmans; but the latter claim was dismissed as untimely, leaving only the former. 

The jury was entitled to find that BouMatic, though it did 

not purport to terminate its contract with Tilstra, in fact terminated it, and did so without complying with the provision, quoted earlier, forbidding termination “without good 

cause and only upon at least ninety (90) days’ advance written notice sent by certified mail.” True, BouMatic didn’t 

formally terminate the agreement. But by telling Tilstra that 

unless he sold out to Dortmans his territory would be 

shrunk to zero, BouMatic was telling him that he was finished, his dealership doomed; for without a territory his position as a BouMatic dealer would be untenable. The territorial clause of the dealership agreement provides that the 

“Dealer shall purchase Bou-Matic products only ... for resale 

to purchaser-users in Dealer’s assigned territory ... [and] 

shall solicit sales only in their assigned territory unless allowed by Bou-Matic in writing prior to any solicitation.” So 

Case: 14-3333 Document: 31 Filed: 06/30/2015 Pages: 8
No. 14-3333 5 

if Tilstra’s territory were eliminated, Tilstra wouldn’t be able 

to buy any products from BouMatic for resale to anyone, or 

solicit any sales from anyone. In other words, no territory, 

no dealership. BouMatic ripostes that, as also quoted earlier, 

the dealership contract reserved to it “the right to change, at 

its sole discretion, the assigned territory.” Elimination of a 

dealership’s entire territory is certainly a change, but were it 

a change permitted by the contract, it would amount to allowing termination “without good cause,” contrary to an 

explicit contract term. That would not be a tenable interpretation of the contract. 

Contract law imposes on both parties to a contract a duty 

of good faith in the performance of their contractual obligations. E.g., In re Estate of Chayka, 176 N.W.2d 561, 564 (Wis. 

1970). One form of bad faith that Wisconsin law recognizes 

is “evasion of the spirit of the bargain,” Foseid v. State Bank of 

Cross Plains, 541 N.W.2d 203, 212 (Wis. App. 1995)—an apt 

description of BouMatic’s de facto termination (“constructive termination” is the conventional legalism) by taking 

away a dealer’s entire territory. Another form of bad faith 

recognized in Wisconsin law is “abuse of a power to specify 

terms” (in this case to specify the size and shape of the 

dealer’s territory). Id. at 213, quoting (as in our earlier quotation from the Foseid opinion) Restatement (Second) of Contracts

§ 205, comment d (1981); see also Zenith Ins. Co. v. Employers 

Ins. of Wausau, 141 F.3d 300, 308 (7th Cir. 1998) (Wisconsin 

law). An internal email by Desjardins accurately describes 

what BouMatic was trying to do to Tilstra (and succeeding) 

as “cancellation.” 

Backhandedly conceding the point, BouMatic argues that 

it had good cause to terminate Tilstra. But it never told TilCase: 14-3333 Document: 31 Filed: 06/30/2015 Pages: 8
6 No. 14-3333 

stra that, as required by the contract, or proved at trial that 

Tilstra had failed “to comply substantially with essential and 

reasonable requirements imposed upon [Tilstra] by BouMatic.” No doubt BouMatic thought it would make more 

money if Dortmans rather than Tilstra managed what had 

been Tilstra’s territory. But the dealership contract did not 

authorize BouMatic to terminate a dealer merely because it 

had found a substitute that it thought it could make more 

money from. That would have made the contract terminable 

at will by BouMatic. The dealership agreement specifies that 

Tilstra may terminate it at will but BouMatic may terminate 

only if it has good cause to do so. 

With regard to remedy, BouMatic fires a blunderbuss of 

objections to the calculation of damages by Tilstra’s expert, a 

certified management accountant (with four other professional certifications as well) named Rinaldo Sciannella. 

BouMatic points out that Sciannella did not attempt to verify 

Tilstra’s financial statements prepared in the ordinary course 

of business (that is, unrelated to the litigation) by outside accountants. But an expert witness is not required to verify all 

the facts on which he relies; he can rely on hearsay (in this 

case, what the accountants stated in the financial statements) 

provided that such reliance is an accepted practice in his 

profession, as it is. Fed. R. Evid. 703. BouMatic also points to 

a provision in its dealership agreement with Tilstra that “regardless of which party terminates this Agreement, Dealer 

shall not be entitled to any termination compensation or to 

any compensation for goodwill.” But the section of the 

agreement in which this provision appears conditions BouMatic’s right to terminate a dealer on good cause and 90-day 

written notice, and BouMatic did not comply with those 

conditions and so cannot rely on the provision we quoted. It 

Case: 14-3333 Document: 31 Filed: 06/30/2015 Pages: 8
No. 14-3333 7 

broke its contract with Tilstra, thereby exposing itself to a 

liability that would have been excluded only if BouMatic 

had terminated Tilstra’s dealership for good cause. 

BouMatic objects that the expert assumed that had Tilstra 

not been terminated, his dealership would have remained as 

valuable as it had been in recent years, and BouMatic regards this as mere speculation. But the damages calculated 

by the expert under the rubric of “goodwill” were the sum of 

the discounted future earnings of the dealership based on 

that assumption, and that is a standard method of business 

valuation, known as the “capitalized earnings” approach. 

 BouMatic points out that even if it couldn’t lawfully 

shrink Tilstra’s territory to zero, it could shrink it some, and 

that would reduce Tilstra’s dealership profits. But the jury 

was entitled to find that any shrinkage attempted by BouMatic would have been a further attempt to transfer the 

dealership to Dortmans without complying with the contractual provisions governing termination or with the duty of 

good faith performance imposed by contract law. BouMatic 

also argues that Tilstra could have obtained a comparable 

dealership from another supplier of milking-parlor equipment, or remained independent. But there was evidence that 

it is difficult to secure a new dealership and that a dealership 

is necessary to remain competitive—indeed, without a dealership and thus an assured source of supply of milkingparlor equipment, Tilstra might be relegated to manufacturing its own such equipment, which would hardly be a realistic option. 

BouMatic has other complaints about Sciannella as well, 

but they too go not to the admissibility of Sciannella’s testimony but to its weight. BouMatic had the opportunity to 

Case: 14-3333 Document: 31 Filed: 06/30/2015 Pages: 8
8 No. 14-3333 

discredit Sciannella’s testimony before the jury, tried to do 

so, and succeeded in persuading it to award Tilstra only 

about half the damages calculated by Sciannella. 

The judgment of the district court is 

AFFIRMED. 

Case: 14-3333 Document: 31 Filed: 06/30/2015 Pages: 8