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Miller Construction Equipment Sales, Inc. v. Clark Equipment Co.

United States District Court, D. Alaska

May 6, 2016

MILLER CONSTRUCTION EQUIPMENT SALES, INC., Plaintiff,
v.
CLARK EQUIPMENT COMPANY, d/b/a DOOSAN INFRACORE CONSTRUCTION EQUIPMENT OF AMERICA, Defendant.

ORDER

H. Russel Holland United States District Judge

Motion for Partial Summary Judgment

Plaintiff moves for partial summary judgment.[1] This motion is opposed.[2] Oral argument was requested and has been heard.

Facts

Plaintiff is Miller Construction Equipment Sales, Inc. Defendant is Clark Equipment Company d/b/a Doosan Infracore Construction Equipment America.

Plaintiff was an authorized dealer of Doosan equipment from 2006 through 2014 pursuant to a series of agreements entered into on an annual basis. The Sales Agreement precluded plaintiff from selling any products “which in the reasonable commercial judgment of DOOSAN” would compete with Doosan’s products unless plaintiff was already selling those products “as of the Effective Date” of the Sales Agreement.[3]

In June 2013, plaintiff advised defendant that it was “looking in to the JCB line to coexist with our Doosan line” and that it would “not be bringing in any JCB products that compete directly with any products in the Doosan line.”[4] Plaintiff advised defendant that it was considering adding the JCB line of “mini” or “compact” equipment.[5] Although defendant also owns the Bobcat equipment line, which manufactures and sells compact equipment, plaintiff was never a Bobcat dealer. Brady Seavert, defendant’s director of sales for the Western Region, advised Andrew Miller, plaintiff’s general manager, that “[b]ased off your email I don’t see a problem, ” but Seavert wanted to call Miller to discuss the issue.[6]Andrew Miller avers that Seavert “never called to ask any additional questions and we understood that to mean there was no problem.”[7] Andrew Miller avers that plaintiff signed an agreement with “JCB on October 29, 2013 ..... ”[8] Miller further avers that while plaintiff was a Doosan dealer, it “only sold one piece of JCB equipment, an 8 ton Compact Excavator, that is competitive with one of Doosan’s smaller excavators. The particular customer specially ordered the equipment.”[9] Miller also avers that there are at least four other dealers in the United States “that represent both Doosan and JCB.”[10]

The parties met on February 27, 2014, to discuss the 2014 Sales Agreement. Defendant contends that it was the parties’ practice not to meet to negotiate a new sales agreement until after the prior sales agreement had expired on its own terms. Seavert avers that “[f]ollowing the expiration date” of an annual sales agreement, “the parties’ prior course of dealing was to continue doing business pursuant to the terms of the expired agreement while they negotiated and agreed to sales commitments and other elements of the Dealer Sales & Marketing Action Plan for the year.”[11]

Andrew Miller avers that defendant did not “raise[] any issue about [plaintiff] representing JCB” at the February 27, 2014 meeting.[12] Seavert, however, avers that he “raised the issue that customers had reported that [plaintiff] could sell the JCB® line of heavy equipment.”[13] Seavert further avers that Andrew Miller “assured [Seavert] that [plaintiff] was not stocking JCB® heavy equipment comparable to or competitive with any of the Doosan® products for which [plaintiff] was an authorized dealer.”[14] Seavert further avers that Andrew “Miller stated that [plaintiff] had the contractual right to sell JCB® heavy equipment if a customer specifically requested it but led me to believe that [plaintiff] would devote ‘best efforts’ to the Doosan® product line notwithstanding the fact that [plaintiff] had become a JCB® dealer in the fall of 2013.”[15]

The parties reached an agreement as to a sales contract for 2014 at the February 27, 2014 meeting. The 2014 Sales Agreement had an effective date of January 1, 2014 and expired by its own terms on December 31, 2014.[16] The 2014 Sales Agreement assigned the following “areas of primary responsibility (APR) to plaintiff: “Anchorage Municipality, Bristol Bay Borough, Haines, Juneau, Kenai Peninsula Borough, Ketchikan Gateway, Kodiak Island Borough, Lake and Peninsula Borough, Matanuska-Susitna Borough, Prince of Wales-Outer Ketchikan, Sitka, Skagway-Yakutat-Angoon, Valdez Cordova Borough and Wrangell-Petersburg.”[17]

Section 3 of the 2014 Sales Agreement was entitled “Use of Trademarks.”[18] Section 3.1 provided that “[d]uring the term of this Agreement (and during such term only), DEALER may indicate on its letterhead, on signs, on service trucks, and in connection with its use of any other methods of identifying itself to the public, that DEALER is an authorized DEALER in PRODUCTS and PARTS merchandised by DOOSAN.”[19]

Section 5 of the 2014 Sales Agreement was entitled “Sales and Service Responsibil-ity.”[20] Section 5.I provided that

[b]ecause of the importance to the sales of PRODUCTS and PARTS and customer goodwill of timely and adequate performance of sales and service responsibilities outlined in this Section 5 and because of the absence of any means to assure that such responsibilities are properly performed with respect to sales and leases abroad, it shall be a breach of this Agreement for DEALER to sell or lease any new PRODUCT (“new PRODUCT” for the purposes of Section 5.I is defined as any PRODUCT that has less than 300 hours of operation and for which less than twelve months have elapsed since the PRODUCT was first used by an end user in actual commercial use or first placed into DEALER’s rental fleet) ... exclusively used in any country other than that in which the DEALER’s above identified place of business is located.[21]

Section 5.K provides that “DEALER will not advertise prices for new PRODUCTS (PRODUCTS with less than 300 hours of operation and for which less than six months have elapsed since the PRODUCT was first used by an end user in actual commercial use or first placed into DEALER’s rental fleet) and PARTS on an internet site ... except as otherwise agreed to by DOOSAN in writing.”[22]

Section 6 of the 2014 Sales Agreement provided that plaintiff was to

use its best efforts to promote the sale of and sell PRODUCTS and PARTS within its APR ... and ... maintain a level of sales of PRODUCTS and PARTS satisfactory to DOOSAN. In determining whether DEALER’s level of sales has been satisfactory during any period, DOOSAN may consider DEALER’s performance in meeting DEALER’s volume and market penetration commitments for sales of PRODUCTS and PARTS as established from time to time jointly by DEALER and DOOSAN including those set forth in the Dealer Sales & Marketing Action Plan. DEALER will maintain a suitable place of business and an adequate stock of PRODUCTS and PARTS, and solicit all actual and potential customers within its APR ... or trade area as described in the Dealer Sales and Marketing Action Plan regularly and frequently.[23]

Section 19.2 of the 2014 Sales Agreement provided that “DOOSAN may terminate the Agreement by giving DEALER not less than ninety (90) days prior written notice of termination” if the Dealer failed “to maintain a level of sales of PRODUCTS and PARTS or to perform in accordance with the Dealer Sales and Marketing Action Plan as provided in Section 6" or if the Dealer failed “to perform any of the promises given or obligations undertaken in th[e] Agreement[.]”[24] Section 19.2 also provided that if any of the failures can be cured, defendant was to give the dealer “sixty (60) days ... to effect such cure.[25]

Section 20.2 of the 2014 Sales Agreement provided:

Upon termination of this Agreement, DOOSAN shall repurchase at DEALER’s net cost, and DEALER shall sell, all of DEALER’s inventory of new and unused PRODUCTS and PARTS not previously sold or rented by DEALER which are in good and usable condition and not obsolete. New PRODUCTS more than twelve (12) months old shall be considered obsolete. DOOSAN shall have the option, but no obligation, to repurchase other PRODUCTS of DOOSAN at fair wholesale market value. There shall be deducted from the repurchase price a charge to cover handling, freight and restocking equal to at least ten percent (10%) of the repurchase price.[26]

During 2014, plaintiff forecasted that it would sell 7 HEX units, 5 WL units, and 2 ADT units.[27] Plaintiff actually “sold or placed into its rental fleet eight HEX units, ... five WL units, and no ADT units.”[28]

During 2014, plaintiff also committed to “stock a minimum of 3 new LX and 3 new WL at all times”, “to improve [its] stock order ratio to 60% by Dec. 15, 2014[, ]” to increase [its] dealer evaluation score to great[er] than 75% overall by the end of the 2nd Qtr 2014[, ]” and to “identify 2 high profile customers in [its] territory that use competitive equipment in the construction market ... and develop a plan on how to gain th[ose] customers[’] business.”[29] Defendant contends that plaintiff failed to accomplish any of these commit-ments.[30]

Andrew Miller avers that during 2014, “Doosan never raised any issue ... about [plaintiff’s] sales performance....”[31] Seavert, however, avers that at plaintiff’s mid-year review on August 5, 2014, “Doosan raised a number of issues regarding [plaintiff’s] performance” including plaintiff’s “failure to pay its bills, it lack of demonstrated commitment to the Doosan® product line, and its lack of an adequate facility in Wasilla.”[32]Seavert avers that nonetheless the meeting “ended on a positive note[, ]” but shortly thereafter, plaintiff “stopped purchasing Doosan® equipment altogether. Doosan’s records show that [plaintiff’s] last purchase of Doosan® equipment took place on August 20, 2014.”[33] Miller avers that this “was not unusual” because plaintiff “for business reasons does not typically increase its inventory during the last quarter of the year.”[34]

In a September 3, 2014 press release, JCB announced that plaintiff had become a JCB dealership. The press release stated that “[t]hree JCB-dedicated salespersons and seven service technicians will ensure customers receive knowledgeable and one-on-one attention at each location.”[35] Seavert avers that he did not become aware of this press release “until after this litigation was underway.”[36]

In 2014, Craig Taylor Equipment (CTE), which is headquartered in Fairbanks, Alaska, but also has locations in Anchorage, Wasilla, and Soldotna, became a Doosan dealer. Plaintiff contends that defendant was allowing CTE to carry and promote Doosan products at locations within plaintiff’s APR. Defendant contends that CTE was only authorized to sell Doosan products in areas outside of plaintiff’s APR, but that CTE was allowed to purchase Doosan equipment for rental in plaintiff’s APR pursuant to Doosan’s National ...


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