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River Valley Truck Center, Inc. v. Interstate Companies

May 25, 2004

RIVER VALLEY TRUCK CENTER, INC., APPELLANT,
v.
INTERSTATE COMPANIES, INC., D/B/A INTERSTATE DETROIT DIESEL, RESPONDENT.



Blue Earth County District Court. File No. C703197.

Considered and decided by Peterson, Presiding Judge; Lansing, Judge; and Minge, Judge.

SYLLABUS BY THE COURT

Good cause for non-renewal of a dealership agreement under Minn. Stat. § 325E.0681, subd. 1 (2002), may be based on conduct by a third party that causes a dealer to fail to comply with the dealership agreement.

The opinion of the court was delivered by: Peterson, Judge

Affirmed

OPINION

Appellant River Valley Truck Center, Inc. (River Valley) is a sales/service dealer for trucks manufactured by International Truck and Engine Corporation (International) and for engines produced by Detroit Diesel Corporation (Detroit Diesel). Respondent Interstate Companies, Inc., d/b/a Interstate Detroit Diesel (Interstate), is the distributor of Detroit Diesel engines and parts in and around Minnesota. After International stopped offering Detroit Diesel engines in new International trucks, Interstate notified River Valley that its Detroit Diesel service dealership agreements would not be renewed.

River Valley brought this action under the Minnesota Heavy and Utility Equipment Manufacturers and Dealers Act (HUEMDA), contending that the non-renewal was without good cause in violation of Minn. Stat. § 352E.0681 (2002). In this appeal from a summary judgment for Interstate, River Valley argues that (a) the district court erred because Interstate did not demonstrate it had "good cause" to non-renew the dealerships; and (b) genuine fact issues exist, precluding summary judgment. We affirm.

FACTS

Interstate's principal business is selling and servicing diesel engines manufactured by Detroit Diesel. Jeffrey Caswell, Interstate's president, stated in an affidavit:

3. In the engine business there is both an "on-highway" market and an "off-highway" market. In the on-highway market, engines are typically sold as part of another product - the truck - that is sold by a third party. That third party is either an original equipment manufacturer ("OEM") or its dealer network. In this case International is the OEM and River Valley is part of International's dealer network.

4. Medium duty trucks are your average delivery truck and heavy duty trucks are over-the-road trucks. Historically, medium duty trucks were sold like automobiles, as a complete package, engine included. Heavy duty trucks were more customized. The customer could choose from engines manufactured by as many as three or four different companies. The most common independent engines were those manufactured by Cummins Engine Company, Caterpillar, and Detroit Diesel Corporation. For many years International offered its customers the choice of all three of these engines.

5. In the off-highway market, the engine is typically used in an Industrial application (e.g. mining) at a specific location. Off-highway engines are sold through a mixture of direct sales and by OEM's or a dealer network. This is a much different market environment than exists for on-highway sales.

6. Interstate does not sell new engines at retail, but rather sells to other businesses that either (a) use the engine in specific applications (i.e. transit buses or mining applications) or (b) serve as OEMs for products sold by third parties.

7. Interstate's primary source of revenue is through service work and warranty work done on [Detroit Diesel] engines in all of these applications. Interstate does not do other types of repairs (i.e. body work, brake work, etc.), but limits its activities to the engine and Allison transmissions.

8. As part of its operations Interstate is authorized to establish a dealer network of businesses that can aid in the sales and service of [Detroit Diesel] engines. In the on-highway market, it has been a good business decision to encourage OEM dealers who offer [Detroit Diesel] engines in their product lines to become [Detroit Diesel] dealers. This relationship supports both the continuing sale of [Detroit Diesel] engines and the sale of replacement parts and service for those engines.

Any dealer for an OEM that offers Detroit Diesel engines as an option in its products is eligible to be a Detroit Diesel dealer. River Valley is a dealer for trucks manufactured by International, and, until October 2002, International offered the Detroit Diesel engine as an option in its trucks. River Valley operates International truck dealerships in New Ulm and Mankato, Minnesota. River Valley's Mankato operation has been an authorized overhaul dealer for two series of Detroit Diesel engines since 1994, and its New Ulm operation has been an authorized overhaul dealer for one Detroit Diesel engine series since 1997. An authorized overhaul dealer can perform all types of engine repair work, including replacement of individual internal parts and assemblies or subassemblies, overhauling internal assemblies or subassemblies, and overhauling a complete engine. As a Detroit Diesel dealer, River Valley is authorized to perform warranty work on Detroit Diesel engines and to buy replacement parts at dealer pricing.

River Valley also operates an International truck dealership in Glencoe, Minnesota, and an independent truck service location in Faribault, Minnesota. The Glencoe and Faribault operations have never been authorized Detroit Diesel dealers. River Valley also operates a wholly owned subsidiary, River Valley Truck Rental and Leasing, Inc., that rents and leases a fleet of about 250 to 300 trucks. About 70% of those trucks contain Detroit Diesel engines. River Valley presented evidence that ...


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