Opinion ID: 591166
Heading Depth: 3
Heading Rank: 3

Heading: Delta's Claims Against Case for Breach of the I.H. Dealer Agreement

Text: 45 Delta also alleges that as part of the purchase agreement between Case and IH, Case assumed IH's rights and obligations under the dealer agreements. Section 1.2 of the purchase agreement defines the business acquired by Case as IH's agricultural equipment group [division] which is represented by the Purchased Assets, including ... marketing in North America, through a large dealer organization. (emphasis added). Delta argues that the only assets relating to the dealer organization are the dealer agreements. As Case acquired those dealer agreements and assumed IH's obligations under them, Delta's argument continues, Case is bound by the termination provisions of the dealer agreements; and as Delta was terminated as a dealer in a manner inconsistent with its Dealer Agreement, Case has breached that contract. 46 In further support of its argument that Case assumed IH's obligations under the dealer agreement, Delta cites section 2.1(g) of the purchase agreement, which provides that Case assumed: 47 [a]ll liabilities arising out of any claim against [IH] ... brought by any dealer ... in the United States ... which arises out of termination after the date of this Agreement of the contractual relationship of [IH] ... with such dealer ... (whether by the dealer or ... by [IH] ... or which otherwise results because of this Agreement or the transactions contemplated by this Agreement. 48 The district court rejected this argument because a provision in the purchase agreement listed agreements with dealers as a type of asset excluded from the purchase. The district court held that section 2.1(g) was an indemnity provision, requiring only that Case indemnify IH against claims brought by dealers. The district court concluded that Case could not and therefore did not breach Delta's Dealer Agreement with IH because Case neither assumed nor acquired any of IH's dealer agreements. 49 We recognize that the purchase agreement attempted expressly to exclude IH's dealer agreements from the sale of IH's agricultural equipment business. We find as a matter of law, however, that such language was merely an attempt to mask the reality of the transaction. Under section 5.2 of the purchase agreement, 19 Case had the option to terminate Delta's status as a dealer of IH agricultural equipment. Such a provision, though, is pregnant with its own obverse: If Case could opt to terminate, it could opt--here, through inaction--not to terminate; just another way of saying that Case could elect to retain, and insist upon the dealer's beneficial performance of, any and all dealer agreements. Stated another way, it cannot be that Case could enjoy the power to terminate dealer status, which arose through a Dealer Agreement with IH, without acquiring all of the rights--and obligations--arising under the Dealer Agreement. One of those obligations was not to terminate the dealer without cause. As there is no contention that any of the express conditions justifying termination under the Dealer Agreement were satisfied, Case breached that agreement when it terminated Delta's status as a dealer. 50 Our analysis of the nature of IH's sale of its agricultural equipment business to Case leads inescapably to the conclusion that the parties to that transaction acted in concert and attempted to do indirectly what they could not do directly--terminate IH dealers without cause while avoiding or minimizing any financial responsibility and legal liability for such unlawful terminations. IH and Case knew that the transaction would result in a surfeit of dealers, and also knew that they were stuck with IH dealer agreements that did not allow for termination of IH dealers without cause. In an obvious act of damage control, IH and Case crafted the Purchase Agreement so as to disguise the effect of the transaction and avoid the troublesome provisions of the dealer agreements. The Purchase Agreement stated that Case did not assume or acquire the dealer agreements as part of the purchase; at the same time the Purchase Agreement gave Case the power to terminate former IH dealers. IH could not possibly confer on Case a power greater than IH possessed; Case could not obtain the power to terminate an IH dealer in the absence of some sort of contractual relationship between Case and that dealer. 51 When the Purchase Agreement is viewed in the cold light of reality, it is evident that IH and Case tried to make an end run around the Dealer Agreement between IH and Delta. They failed. We hold that Case is liable for breach of Delta's Dealer Agreement by improper termination. As such, Case and IH are liable in solido (jointly and severally) for breach of that Dealer Agreement. 52