Source: https://casetext.com/case/cromeens-holloman-sibert-inc-v-ab-volvo
Timestamp: 2019-03-23 04:52:09
Document Index: 46772277

Matched Legal Cases: ['§ 19', '§ 19', '§ 30', '§ 30', '§ 1363', '§ 1363']

Cromeens, Holloman, Sibert, Inc. v. AB Volvo, 349 F.3d 376 | Casetext
Cromeens, Holloman, Sibert, Inc. v. AB Volvo
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Cromeens, Holloman, Sibert, Inc.v.AB Volvo
United States Court of Appeals, Seventh CircuitNov 7, 2003
Decided November 7, 2003. Rehearing Denied December 17, 2003.
W. Michael Garner (argued), Ronald K. Gardner, Dady Garner, Minneapolis, MN, for Plaintiffs-Appellants.
Michael J. Lockerby (argued), Hunton Williams, Richmond, VA, for Defendants-Appellees.
The Samsung Dealers took exception to the terminations, claiming that they had been promised they would not be terminated so long as they were performing adequately. They sued Volvo in Arkansas state court claiming: (1) breach of contract; (2) breach of the covenant of good faith and fair dealing; (3) violations of the Illinois Franchise Disclosure Act (all of the Dealer Agreements contained an Illinois choice-of-law provision); (4) violations of the Arkansas Franchise Practices Act; (5) violation of the Texas Farm, Industrial and Outdoor Power Equipment Dealer Act; (6) violation of the Texas Deceptive Trade Practices — Consumer Protection Act; (7) violations of the Maine Franchise Law for Power Equipment Machinery and Appliances; (8) violations of a Montana statute that prohibits grantors from terminating dealership agreements without good cause; (9) tortious interference with contractual relations and prospective economic advantage; (10) misappropriation; (11) unjust enrichment; (12) estoppel; and, for good measure, (13) recoupment. Volvo settled with the only non-diverse plaintiff and then removed the case to the United States District Court for the Eastern District of Arkansas. The district court then granted Volvo's motion to transfer the case to the United States District Court for the Northern District of Illinois. Volvo subsequently moved for summary judgment.
We agree with Volvo that the commentary to section 187(3) does not exclude territorial limitations from its definition of local law; rather, the commentary excludes only choice-of-law rules from local law. A number of courts have held that a state's territorial limitations apply even when that state's law is selected for application by a choice-of-law provision. For example, the Sixth Circuit considered the applicability of the IFDA to a contract between an Illinois franchisor and an Ohio franchisee. Highway Equip. Co. v. Caterpillar Inc., 908 F.2d 60 (6th Cir. 1990). The agreement in that case designated Illinois law as the parties' law of choice. The court noted that the Illinois Supreme Court had stated it would not give extraterritorial effect to Illinois statutes unless the legislature expressly directed it to do so. Graham v. General U.S. Grant Post No. 2665, V.F.W., 43 Ill.2d 1, 6-8, 248 N.E.2d 657, 660-61 (1969). When the Illinois legislature re-enacted the IFDA in 1988, it added a provision limiting application of the law to franchises located within Illinois. The Sixth Circuit understood that amendment as confirmation that the legislature intended to protect Illinois residents only and therefore declined to apply the IFDA extraterritorially even to an agreement requiring the application of Illinois law. Caterpillar, 908 F.2d at 63-64.
Similarly, the Fourth Circuit refused to apply New York regulatory law to a distributor agreement that contained a New York choice-of-law provision. Peugeot Motors of America, Inc. v. Eastern Auto Distributors, Inc., 892 F.2d 355 (4th Cir. 1989), cert. denied, 497 U.S. 1005, 110 S.Ct. 3242, 111 L.Ed.2d 752 (1990). The regulatory law was limited by its own terms to distributors who "sell or distribute in this state." 892 F.2d at 358. The distributor had never done business in New York. The court concluded that the regulations could not be applied to the distributor contract even though the agreement specified that New York law would apply. Instead the court turned to New York common law to interpret the contract at issue. 892 F.2d at 358.
We faced a similar issue regarding the application of Wisconsin's Fair Dealership Law ("WFDL") to a contract that prohibited product sales in Wisconsin. Generac Corp. v. Caterpillar Inc., 172 F.3d 971, 973 (7th Cir. 1999). The contract contained a choice-of-law clause providing that it "shall be governed by and construed in accordance with the internal laws of the State of Illinois." 172 F.3d at 973. The company producing the products was based in Wisconsin and had made substantial investments in Wisconsin to allow it to manufacture products for sale and distribution elsewhere. Although the company had invested in infrastructure in Wisconsin, a quirk in the contract prohibited sales in Wisconsin. The company nonetheless sought to bring a case under the WFDL. In deciding that case, we remarked:
Certain of the Samsung Dealers claim additional protections from the franchise laws of the states in which they are located. Texas, Maine and Montana prohibit in-state dealers from waiving those states' statutory protections against termination without cause. Citing section 187 of the Restatement (Second) of Conflict of Laws, the Samsung Dealers argue that a party's choice of a certain state's law does not preclude the application of statutory protections within that party's own state if enforcement of the chosen state's law would be contrary to the express public policy of the state's law that would otherwise apply. We considered a similar claim in Wright-Moore Corp. v. Ricoh Corp., 908 F.2d 128, 132 (7th Cir. 1990). Wright-Moore was an Indiana company that entered into a franchise agreement with a franchisor incorporated in New York with its principal place of business in New Jersey. The contract specified that New York law would govern the agreement. When Ricoh refused to renew the agreement after it expired by its own terms, Wright-Moore brought a claim under the Indiana franchise laws. Indiana law, like Illinois law, prohibits terminations without good cause, and also prohibits waiver of its protections. Indeed, the Indiana statute prohibits "limiting litigation brought for breach of the [franchise] agreement in any manner whatsoever." 908 F.2d at 132. Ricoh claimed economic self-interest as the "good cause" required by the statute, and also argued that New York rather than Indiana law should apply under the contractual choice-of-law provision.
The Texas statute in question is titled "Farm, Industrial, and Outdoor Power Equipment Dealer Agreements." Texas Bus. Com. Code Ann. § 19.01 (Vernon 1996). The law specifies in relevant part:
Texas Bus. Com. Code Ann. §§ 19.01(8) (10) (Vernon 1996). Three of the Samsung Dealers are Texas corporations with their principal places of business in Texas. They are Cromeens, Holloman, Sibert, Inc. d/b/a Cisco Ford Equipment ("Cisco"); Con-Equip, Inc. ("Con-Equip"); and Con-Equipment, Inc. ("Con-Equipment"). Cisco's Dealer Agreement with Samsung specifies the products covered by the agreement as "Cr. Excavators," "Wheel Loaders," and "Crawler Dozers." Both Con-Equip's and Con-Equipment's Dealer Agreements cover "Samsung Construction Equipment for sale in North America." When we compare the products listed in the contracts with the equipment covered by the statute, we must conclude that the Texas statute was not intended to apply to the types of dealerships held by the Samsung Dealers in Texas. The contracted-for products are clearly construction equipment and not the farm equipment contemplated by the Texas statute. We conclude that the Texas Samsung dealers were not entitled to the protections of the Texas law. For that reason, we need not engage in the conflict-of-law analysis set forth in Ricoh for the Texas dealers.
We turn next to Montana. The statute there is titled "Termination, Cancellation, Nonrenewal, or Substantial Alteration of Farm Implements Dealership Agreements." Mont. Code Ann. § 30-11-801 (2001). On reviewing the title, it should be no surprise that the statute covers dealership agreements for farm implements:
Mont. Code Ann. § 30-11-801(7). Only one of the Samsung Dealers is a Montana corporation, Performance Machinery Company ("PMC"). PMC's Dealer Agreement specifies that the products covered by the agreement are "Samsung Heavy Equipment." The Samsung Dealers maintain that some of the products that PMC purchased from Samsung were sold to farmers and/or other agricultural operators for the exclusive use of digging irrigation ditches in farming fields, and for use in platting land for agricultural use. They maintain that these sales bring the equipment within the definition of "farm implement" in the Montana statute. We agree with Volvo that the use by some farmers of some of the equipment cannot convert construction equipment into farm implements. The statute specifies that the equipment must be designed and used exclusively for agricultural operations. At best, the Samsung Dealers claim only that some of the construction equipment was used incidentally for farming purposes. Because the Montana statute does not apply to PMC's Dealer Agreement, we once again forego the Ricoh conflict of law analysis.
Recall that Volvo failed to raise its claim that the Maine statute did not apply to the equipment at issue in the court below until its reply brief on summary judgment. Instead, Volvo argued that, even if the Maine law applied, it had good cause to terminate the agreement. The Samsung Dealers contend that Volvo has waived the issue on appeal, citing Schoenfeld v. Apfel, 237 F.3d 788, 793 (7th Cir. 2001). There we held that issues not raised before the district court are waived on appeal. But Volvo did not completely fail to raise the issue; it merely raised it late. Because Volvo raised the applicability of the Maine statute in its reply brief, the district court was entitled to find that Volvo waived the issue. As we noted previously, for reasons not apparent from the record, the district court never ruled on the applicability of the Texas, Montana and Maine statutes. On appeal, the Samsung Dealers raised the applicability of the Maine law in their opening brief. Although the district court was entitled to deem the issue waived below, the Samsung Dealers have waived waiver by raising the issue here and addressing it substantively. Riemer v. Illinois Dept. of Transp., 148 F.3d 800, 805 (7th Cir. 1998). Volvo is therefore entitled to respond at this stage of the proceedings.
The very materials upon which Volvo relies support the Samsung Dealers' position. Both the legislative history of the Maine statute and the single case cited by Volvo acknowledge that, although the law was initially written to protect snowmobile dealers, the legislature greatly expanded the statute to protect franchisees selling any electric or gas-powered equipment, machinery or appliance (with an exception not relevant here). See Rolec, Inc. v. Finlay Hydrascreen USA, Inc., 917 F.Supp. 67, 68 (D.Me. 1996); 116th Maine Legislature, 1st Reg. Session, L.S. 364, Comm. Amend. A, at 7. The Maine statute is broad enough to encompass Samsung construction equipment for sale in North America. Therefore, we must address the conflict of law question and determine whether Maine has articulated a strong public policy against allowing choice-of-law provisions to prevail over state statutes, and whether Maine's public policy interest is substantially greater than Illinois' interest in the outcome of the case. If we answer both of those question in the affirmative, we must consider whether there is a genuine issue of material fact regarding Volvo's argument that it terminated the FMS dealership for good cause.
Maine's public policy can best be determined "not by the varying opinions of laymen, lawyers, or judges as to the demands of the interest of the public, but rather, by its constitution and statutes, and, when cases arise concerning a matter upon which they are silent, by its judicial decisions and the constant practice of the government officials. The policy must be well defined and dominant and may not be gleaned from general consideration of supposed public interests." American Home Assurance Co. v. Stone, 61 F.3d 1321, 1324 (7th Cir. 1995) (citations and internal quote marks omitted). The State of Maine has rendered this task exceedingly easy for us. One section of the Maine franchise law is titled "Public Policy."
10 M.R.S.A. § 1363.
1. Delivery. Be sent by registered, certified or other receipted mail, delivered by telegram or personally delivered to the distributor or dealer; and
2. Statement of intent. Contain a statement of intent to terminate or not renew the franchise together with the reasons for termination or nonrenewal and the effective date of the termination, nonrenewal or expiration.
The Maine statute thus evidences a strong public policy against contracts that violate the franchise law generally. When we review the franchise law, we find that manufacturers may not terminate or fail to renew without good cause "notwithstanding the terms, provisions or conditions of an agreement or franchise or the terms or provisions of a waiver." 10 M.R.S.A. §§ 1363(B) (C). We read this to mean that Maine law applies even when contracts purport to waive its protections. Maine has thus expressed a strong public policy against allowing choice-of-law provisions to prevail over state statutes, and we must determine whether Maine's public policy interest is substantially greater than Illinois' interest in the outcome of the case. Again, this is not a difficult assessment. Samsung, an original party to the contracts, was located in Illinois. Samsung transferred all of its interests to Volvo. None of the plaintiffs or defendants are citizens of Illinois and none of the franchises are located here. Maine's public policy therefore exceeds Illinois' interest in the outcome of the case.
R. 32, Ex. 1, ¶ 22.3. The Samsung Dealers do not argue that this paragraph is ambiguous. Rather, they insist that it must be read in conjunction with Samsung's oral assurances that the company would not use this clause unless a dealer was failing to perform adequately. This is a curious position for the Samsung Dealers to adopt because the next paragraph gives Samsung the option to terminate immediately, without notice, if the Dealers fail to pay Samsung in a timely fashion, or if there are changes in control at the dealerships, or if the Dealers breach their obligations to maintain insurance, among other things. The paragraph after that allows the company to unilaterally terminate the agreement on thirty days' notice if the Dealers fail to meet sales objectives, fail to maintain inventory and services up to Samsung's expectations, or fail to perform their obligations and duties to customers. R. 32, Ex. 1, ¶¶ 22.4 22.5. These paragraphs thus address the right of Samsung to terminate if the Dealers are failing to perform adequately. The termination without cause provision would thus be meaningless under the Dealers' reading.
Western Illinois Oil Co. v. Thompson, 186 N.E.2d 285 (Ill. 1962). The only exception to this rule is for ambiguous contracts. Pioneer Trust Sav. Bank v. Lucky Stores, Inc., 91 Ill.App.3d 573, 47 Ill.Dec. 36, 414 N.E.2d 1152, 1154 (1980). Extrinsic evidence is admissible to show the true meaning of an ambiguous contract. Id. Determining whether a contract is ambiguous in the first place is a question of law. "A contract is ambiguous only if the language employed is susceptible of different constructions when read in its plain and ordinary meaning." Althoff Indust., Inc. v. Elgin Med. Ctr., Inc., 95 Ill.App.3d 517, 51 Ill.Dec. 386, 420 N.E.2d 800, 803 (1981). Thus, before we may consider the Samsung Dealers' extrinsic evidence, we must determine whether the contracts are ambiguous.
Post-signing conduct does not move the Dealers any closer to rewriting the Dealer Agreements. Again, the contract itself contains a waiver clause providing that a failure or delay in exercising a right will not operate as a waiver. That Samsung had never terminated a Dealer without cause did not preclude Volvo from using that provision later. Nor does the sale of products to the Dealers after some of the Dealer Agreements had expired by their own terms indicate that the Dealers would never be terminated except for cause. Again, the contracts provided for the possibility of transactions occurring after expiration, and specified that post-termination transactions would be governed by the applicable provisions of the Dealer Agreement but would not be construed as reviving the Agreement or modifying the effectiveness of the termination. The Samsung Dealers' citation to Maher Assoc. v. Quality Cabinets, 267 Ill.App.3d 69, 203 Ill.Dec. 850, 640 N.E.2d 1000 (1994), is unavailing. That case holds that a contract may be validly modified if the party that did not propose the changes is shown to acquiesce in the modification through a course of conduct consistent with acceptance. 203 Ill.Dec. 850, 640 N.E.2d at 1007. Here the alleged "change" to the agreements was that they could not be terminated without cause. The change was allegedly brought about by Samsung's failure to ever terminate a Dealer without cause and by Samsung's continued transactions with Dealers after the expiration of some of the Agreements. But both of these occurrences were contemplated by the contract and Samsung never had a chance to acquiesce to different terms. The change was never proposed by the Samsung Dealers, and the change contradicted the written contracts. Termination without cause was an event that could happen only once for each Dealer and thus there could be no course of conduct. Samsung was also following the terms of the written agreements when it engaged in post-termination transactions with the Dealers. On some occasions, Samsung signed new agreements with certain Dealers when it intended to reinstate a fixed-term relationship. Samsung's conduct could not reasonably be interpreted as acquiescence under these circumstances. In sum, we reject the Samsung Dealers' invitation to rewrite the contracts with extrinsic evidence because the contracts are unambiguous.
As we discussed above, the contracts very clearly give the right to terminate without cause on sixty days' notice to both parties. There is no ambiguity and the provision does not vest a single party with discretion but rather grants both parties the unfettered right to terminate. Illinois law holds that parties to a contract are entitled to enforce the terms to the letter and an implied covenant of good faith cannot overrule or modify the express terms of a contract. Northern Trust, 212 Ill.Dec. 750, 657 N.E.2d at 1104; Jespersen v. Minnesota Mining Mfg. Co., 288 Ill.App.3d 889, 224 Ill.Dec. 85, 681 N.E.2d 67, 71 (1997). "[T]he duty of good faith and fair dealing does not override the clear right to terminate at will, since no obligation can be implied which would be inconsistent with and destructive of the unfettered right to terminate at will." Jespersen, 224 Ill.Dec. 85, 681 N.E.2d at 71.
The district court granted summary judgment on the Samsung Dealers' claims for unjust enrichment and recoupment on the grounds that, in Illinois, quasi-contractual relief is available only where there is no express contract between the parties. We agree. "Quasi-contractual relief is available when one party has benefitted from the services of another under circumstances in which, according to the dictates of equity and good conscience, he ought not to retain such benefit." Barry Mogul Assoc., Inc. v. Terrestris Dev. Co., 267 Ill.App.3d 742, 205 Ill.Dec. 294, 643 N.E.2d 245, 251 (1994). But a plaintiff may not pursue a quasi-contractual claim where there is an enforceable, express contract between the parties. Id.; Wagner Excello Foods, Inc. v. Fearn Int'l, Inc., 235 Ill.App.3d 224, 176 Ill.Dec. 258, 601 N.E.2d 956, 964 (1992) (promissory estoppel not available when parties have entered a binding contract on the same subject matter). "Quasi-contract is not a means for shifting a risk one has assumed under a contract." Barry Mogul, 205 Ill.Dec. 294, 643 N.E.2d at 251-52 (quoting Industrial Lift Truck Serv. Corp. v. Mitsubishi Int'l Corp., 104 Ill.App.3d 357, 60 Ill.Dec. 100, 432 N.E.2d 999, 1002 (1982)). The Samsung Dealers signed an unambiguous contract that gave both parties the right to terminate without cause on sixty days' notice. They cannot now use quasi-contractual theories to shift the risk that they knowingly assumed. They misconstrue the doctrine of pleading in the alternative. Under that doctrine, a party is allowed to plead breach of contract, or if the court finds no contract was formed, to plead for quasi-contractual relief in the alternative. Once a valid contract is found to exist, quasi-contractual relief is no longer available.
Second, they argue that the termination of the Dealer Agreements constituted tortious interference with the contractual relationships between Volvo and each of the Dealers. This latter argument is easily addressed. A party may not be charged with tortious interference with respect to its own contract. That is, termination of the Dealer Agreements by Volvo cannot constitute tortious interference by Volvo because Volvo is a party to those contracts. See Douglas Theater Corp. v. Chicago Title Trust Co., 288 Ill.App.3d 880, 224 Ill.Dec. 249, 681 N.E.2d 564, 567 (1997) ("a party cannot tortiously interfere with his own contract; the tortfeasor must be a third party to the contractual relationship").
Volvo counters with two arguments. First, Volvo maintains that the Samsung Dealers' claims are barred by the Illinois economic loss rule, sometimes called the Moorman doctrine. See Moorman Mfg. Co. v. National Tank Co., 91 Ill.2d 69, 61 Ill.Dec. 746, 435 N.E.2d 443, 453 (1982) (a plaintiff may not recover for solely economic loss under the tort theories of strict liability, negligence and innocent misrepresentation). We can dispense with this argument easily. The Moorman doctrine does not apply to actions for intentional interference with contract or intentional interference with prospective business advantage. See 2314 Lincoln Park West Condo. Assoc. v. Mann, Gin, Ebel Frazier, Ltd., 136 Ill.2d 302, 144 Ill.Dec. 227, 555 N.E.2d 346, 352 (1990) (collecting cases).