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Black Hills Truck & Trailer, Inc. v. MAC Trailer Manufacturing, Inc.

United States District Court, D. South Dakota, Southern Division

September 22, 2017

BLACK HILLS TRUCK & TRAILER, INC., Plaintiff,
v.
MAC TRAILER MANUFACTURING, INC., and SIOUXLAND TRAILER SALES, INC., Defendants.

          ORDER GRANTING SUMMARY JUDGMENT IN PART AND DENYING IN PART AND DENYING MOTION TO AMEND

          KAREN E. SCHREIER UNITED STATES DISTRICT JUDGE

         Plaintiff, Black Hills Truck & Trailer, brought this action naming MAC Trailer Manufacturing, Inc. and Siouxland Trailer Sales, Inc., as defendants. Black Hills alleges a violation of SDCL § 32-6B-45, a violation of the Robinson-Patman Act, breach of contract, breach of good faith and fair dealing, and deceit against MAC. Docket 46. MAC moves for summary judgment on all claims with Siouxland joining in the motion. Docket 90; Docket 99. And Black Hills filed a cross motion for partial summary judgment on its claim for a violation of SDCL § 32-6B-45. Docket 94. MAC also moves to amend its answer. Docket 122.

         FACTUAL BACKGROUND

         The undisputed facts are:

         Black Hills is a truck and trailer dealership located in Rapid City, South Dakota. Black Hills is a subsidiary of North American Truck & Trailer, Inc., (NATT), which is owned by the Rush family in Sioux Falls, South Dakota. NATT has dealer or service locations in various cities[1] across South Dakota, Nebraska, and Iowa. MAC is a trailer manufacturer with distribution agreements covering seventy-five percent of the states in the United States. Mike Conny is the owner, CEO, and President of MAC. Siouxland is located in Sioux City, Iowa, and sells trailers from four different manufacturers including MAC. Gary March is the owner of Siouxland.

         Siouxland and MAC entered into a Distributor Selling Agreement (dealer agreement) on November 22, 2010. Docket 98-2. The dealer agreement provided Siouxland with an Area of Responsibility (AOR) of the western two-thirds of Iowa and did not make any reference to an AOR in South Dakota or Nebraska. Id. Black Hills and MAC entered into a dealer agreement on September 26, 2012, that provided Black Hills with an AOR including seven South Dakota counties, twelve Nebraska counties, and a dealer location in Rapid City. Docket 93-1. On December 26, 2012, March sent an email to Steve Hallas, Vice President of Sales for MAC Trailer Manufacturing, expressing his displeasure with MAC's decision to set up Bill Rush, President of NATT, with a dealership and stated, “If I see he has taken us out of one deal I will find a new supplier [sic] Do not take this as a threat it is a promise.” Docket 98-3. On January 9, 2013, March sent another email to Hallas informing Hallas that the Rush family was suing another manufacturer and provided Hallas with contact information for a person at that manufacturer. Docket 98-4.

         On May 28 or 29 of 2013, March informed Hallas that Black Hills was stocking five MAC trailers within Siouxland's AOR. Docket 95 at 3. Hallas then contacted Mike Rush, Vice President of NATT, and in response to March's complaint, agreed to amend the dealer agreement between MAC and Black Hills. Docket 91 at 3. The parties dispute what Hallas and Mike Rush agreed to during that conversation. See Docket 91 at 3; Docket 110 at 8-9. On May 30, 2013, March sent Hallas another email stating “let me give some insight why I have trouble with Rush Companies” and then detailed several reasons March has trouble with Rush companies. Docket 98-6. The final reason stated, “Now MAC trailers are showing up in Sioux Falls.” Id. Hallas then responded “It was made very clear to Mike Rush that he couldn't do what has happened. Mike Conny and I have talked briefly yesterday and we both feel that Black hills [sic] should be canceled for doing what they did.” Id. And March replied stating, “Do not cancel Rush wait till his year runs out he will sue you I am sure of that, I don't want MAC hurt.” Id.

         A few days later, Hallas sent Mike Rush an addendum stating that MAC would like to issue an amended dealer agreement to Black Hills under several conditions. Docket 97-2. The conditions were: Black Hills would be permitted to sell only dump and flatbed trailers; Black Hills could only stock trailers at the Rapid City location; Black Hills would not be permitted to stock trailers in any other location for any reason; Black Hills would not be permitted to advertise the MAC product line in any advertisement other than the Rapid City advertisements; and Black Hills could only sell out of the Rapid City location and north or south of Rapid City but not east of Rapid City. Id. In reference to the five restrictions, the addendum also stated, “In the event that any of this happens your dealer agreement with Mac Trailer will be cancelled. If you understand and agree with this please sign and return.” Id. The addendum also included the amended dealer agreement dated June 3, 2013 and signed by Mike Conny. Id. The amended dealer agreement provided that Black Hills would forfeit its twelve-county AOR in Nebraska. Id.

         On June 24, 2013, Hallas sent Mike Rush a letter stating, “MAC Trailer will not be able to accept any orders placed by Black Hills Truck and Trailer until the adjusted dealer agreement and addendum sheet is signed and received by MAC Trailer.” Docket 93-8. On June 26, 2013, Hallas emailed Tom LaGiglio, an employee of MAC, directing him not to build any trailers for Black Hills because Hallas had not received the signed amended dealer agreement and addendum, and he did not want to sell Black Hills any more product until Black Hills signed the new agreement. Docket 98-7. On June 27, 2013, Mike Rush sent an email to Hallas and LaGiglio confirming that Black Hills had received the amended dealer agreement and addendum but that Black Hills was not going to sign the agreement and was “going to stick with the current dealer agreement.” Docket 98-8. LaGiglio then emailed Hallas stating, “How do you want to handle this clown?” Id.

         On July 2, 2013, Black Hills's attorney sent a letter to Hallas. The letter stated that Hallas's June 24, 2013 letter constituted an “immediate termination of the [dealer agreement] without notice and good cause, and is prohibited by South Dakota law.” Docket 93-9. The letter then stated Black Hills would not agree to the new terms demanded by MAC and that the agreement must be enforced according to its original terms including allowing Black Hills to “sell tank-type trailers to customers that desire such products, or other MAC trailer models as requested by customers.” Id. The letter then explained that if MAC would not agree, Black Hills would file a civil action. Id. On July 19, 2013, MAC's attorney sent a letter to Black Hills's attorney in response to the July 2, 2013 letter. Docket 93-10. The letter stated it served “as notice that MAC will not renew the Dealer Agreement for calendar year 2014, beginning January 1, 2014, and any year thereafter.” Id.

         DISCUSSION

         “One of the principal purposes of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses[.]” Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986). Summary judgment is proper “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); Celotex Corp., 477 U.S. at 323 (“[A] party seeking summary judgment always bears the initial responsibility of . . . demonstrat[ing] the absence of a genuine issue of material fact.” (internal quotations omitted)). The moving party must inform the court of the basis for its motion and also identify the portion of the record that shows there is no genuine issue in dispute. Hartnagel v. Norman, 953 F.2d 394, 395 (8th Cir. 1992) (citation omitted).

         Once the moving party meets its initial burden, the nonmoving party must establish “that a fact . . . is genuinely disputed” either by “citing to particular parts of materials in the record, ” or by “showing that the materials cited do not establish the absence . . . of a genuine dispute.” Fed.R.Civ.P. 56(c). “The nonmoving party may not ‘rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial.' ” Mosley v. City of Northwoods, 415 F.3d 908, 910 (8th Cir. 2005) (quoting Krenik v. Cty. of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995)). For purposes of summary judgment, the facts and inferences drawn from those facts are “viewed in the light most favorable to the party opposing the motion.” Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (quoting United States v. Diebold, Inc., 369 U.S. 654, 655 (1962)).[2]

         This court previously determined the applicable law that applies to the claims brought by Black Hills against MAC. Docket 44. Thus, South Dakota law applies to Black Hills's cause of action for violation of SDCL § 32-6B-45, Ohio law applies to Black Hills's causes of action for breach of contract, breach of good faith and fair dealing, and deceit, and federal law will apply to Black Hills's claim for violation of the Robinson-Patman Act. Id. at 12.

         I. MAC's Motion to Amend its Answer

         MAC moves under Federal Rule of Civil Procedure 15(a)(2) to amend its answer. Docket 122. The proposed amended answer includes a counterclaim against Black Hills under SDCL § 53-11-2 seeking rescission of its contract. Docket 122-1. Under Federal Rule of Civil Procedure 15(a)(2), “the court should freely give leave when justice so requires.” Fed.R.Civ.P. 15(a)(2). “The Eighth Circuit takes a ‘liberal viewpoint towards leave to amend' and leave ‘should normally be granted absent good reason for a denial.' ” Libertarian Party of S.D. v. Krebs, 312 F.R.D. 523, 525 (D.S.D. 2016) (quoting Popp Telcom v. Am. Sharecom, Inc., 210 F.3d 928, 943 (8th Cir. 2000)). Leave to amend may be withheld, however, if “there are compelling reasons such as undue delay, bad faith, or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the non-moving party, or futility of the amendment.” Sherman v. Winco Fireworks, Inc., 532 F.3d 709, 715 (8th Cir. 2008). When a party moves to amend its pleadings outside the deadline established by the court's Rule 16 scheduling order, the moving party must show good cause. Id. at 716. “The primary measure of good cause is the movant's diligence in attempting to meet the order's requirements.” Id. (quoting Rahn v. Hawkins, 464 F.3d 813, 822 (8th Cir. 2006)).

         MAC has known since December 9, 2015, that South Dakota franchise laws apply. Docket 44. And MAC became aware of facts giving rise to its rescission claim in December of 2016. Docket 128 at 3. The discovery deadline was not until April 28, 2017, and the motions deadline was not until May 31, 2017. Docket 63. But MAC waited until July 18, 2017 to move to amend its answer-eight months after learning of facts giving rise to the claim and after the discovery and motions deadlines had passed. Thus, the court finds that MAC engaged in undue delay and as a result has not shown good cause to amend its answer. Additionally, the court finds that granting MAC's motion to amend would cause undue delay and prejudice to Black Hills because the discovery and motions deadlines have both passed. Thus, MAC's motion to amend its answer is denied.

         Also, MAC argues that it is entitled to summary judgment because mistake of law is a complete defense to Black Hills's claim under SDCL § 32-6B-45. Rule 8(c) of the Federal Rules of Civil Procedure requires a party to affirmatively set forth certain defenses and “any other matter constituting an avoidance or affirmative defense.” Fed.R.Civ.P. 8(c). Generally speaking, “an avoidance or affirmative defense” encompasses defenses that admit the allegations in the complaint but suggest that there is some other reason why there should be no recovery. See 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1271 (3d. 1998). Under South Dakota law, mistake of law under SDCL § 32-6B-45 allows for rescission of a contract even where a party breached the contract, and thus, is an affirmative defense. Failure to plead an affirmative defense results in the waiver of that defense. 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1278. Because the court denies MAC's motion to amend its answer, MAC is also not entitled to summary judgment on Black Hills's claim under SDCL § 32-6B for mistake of law because MAC waived that defense.

         II. Black Hills's Claim Under SDCL § 32-6B

         Both MAC and Black Hills move for summary judgment on Black Hills's claim under SDCL § 32-6B. “[A]ny vehicle dealer whose business or property is injured, or is about to be injured, by any violation of §§ 32-6B-45 to 32-6B-83, inclusive, may bring a civil action to enjoin any such violation, without having to prove irreparable injury, and to recover actual damages sustained . . . .” SDCL § 32-6B-85. Under SDCL § 32-6B-45, a franchisor may not terminate or fail to renew a dealer agreement without good cause. SDCL § 32-6B-45. Good cause is defined as “failure by a vehicle dealer to substantially comply with essential and reasonable requirements imposed upon the vehicle dealer by the vehicle dealership agreement.” SDCL § 32-6B-45. In addition, the statute also sets out eight subdivisions describing good cause.[3] Finally, the manufacturer must provide the dealer with at least ninety days written notice of termination, cancellation, or nonrenewal. Id. And the notice “shall state all reasons constituting good cause for the action and shall provide that the dealer has sixty days in which to cure any claimed deficiency.” Id. But the manufacturer does not have to provide notice and right to cure “if the reason for termination, cancellation, or nonrenewal is for any reason set forth in subdivisions (1) to (7).” Id.

         A. Whether MAC had Good Cause to Terminate or Non-Renew Black Hills's Dealer Agreement and Provided Black Hills with the Required Opportunity to Cure

         Black Hills and MAC differ on their interpretations of what SDCL § 32-6B-45 requires. “Statutory interpretation and application are questions of law.” Lewis & Clark Rural Water Sys., Inc. v. Seeba, 709 N.W.2d 824, 830 (S.D. 2006) (quoting Block v. Drake, 681 N.W.2d 460, 463 (S.D. 2004)). The court looks to the plain language of the statute “to discover the true intent of the legislature.” Id. (quoting Sanford v. Sanford, 694 N.W.2d 283, 287 (S.D. 2005)). Under SDCL § 32-6B-45, a manufacturer will provide a dealer with ninety-day written notice of termination or nonrenewal of the dealer agreement. “The notice shall state all reasons constituting good cause for the action and shall provide that the dealer has sixty days in which to cure any claimed deficiency.” Id. But the notice and right to cure provision does not apply if the reason for termination or nonrenewal is for any reason set forth in subdivisions (1)-(7). Id.

         MAC contends that it complied with the statute because its letter providing notice was sent on July 19, 2013, and the agreement did not end until December 31, 2013, so it provided Black Hills with ninety-day written notice. Docket 106 at 11-12. MAC also contends that it did not need to provide Black Hills with notice of its opportunity to cure until October 2, 2013-sixty days prior to December 31, 2013. Id. at 11. But that is not what the plain language of the statute requires. The statute clearly states that a manufacturer must give the dealer ninety-day written notice of the termination, and “[t]he notice shall state all reasons constituting good cause for the action and shall provide that the dealer has sixty days in which to cure any claimed deficiency.” SDCL § 32-6B-45. The court finds that the plain language of the statute requires a ninety-day written notice and that the same notice must include the reasons for the action and sixty days to cure. It does not allow for the manufacturer to give the dealer ninety-day notice with no explanation of the reasons for the action and then send a second notice several months later informing the dealer of the claimed deficiencies and its right to cure. The only exception to this requirement is if the reason for termination is one of the reasons listed in subdivisions (1)-(7). It is undisputed that MAC failed to ...


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