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North Star International Trucks, Inc. D/B/A Astleford International v. Navistar

April 8, 2013

NORTH STAR INTERNATIONAL TRUCKS, INC. D/B/A ASTLEFORD INTERNATIONAL TRUCKS, ET AL., APPELLANTS,
v.
NAVISTAR, INC., RESPONDENT,
BOYER FORD TRUCKS, INC., RESPONDENT.



Hennepin County District Court File No. 27-CV-10-511

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

This opinion will be unpublished and may not be cited except as provided by Minn. Stat. § 480A.08, subd. 3 (2012).

Affirmed

Considered and decided by Peterson, Presiding Judge; Ross, Judge; and Chutich, Judge.

UNPUBLISHED OPINION PETERSON, Judge

This appeal is from a judgment following a jury and court trial of appellant-dealerships' claims against respondent-manufacturer for breach of the dealership agreements and violations of the Minnesota Motor Vehicle Sale and Distribution Act (MVSDA), Minn. Stat. §§ 80E.01-.18 (2012), and the Minnesota Heavy and Utility Equipment Manufacturer and Dealers Act (HUEMDA), Minn. Stat. §§ 325E.068-0684 (2012). Appellants assert that the district court erred by denying their requests for judgment as a matter of law, injunctive relief, and a new trial. We affirm.

FACTS

Appellants North Star International Trucks, Inc. and Astleford Equipment Co., Inc. are franchised dealers of the International line-make of trucks manufactured by respondent Navistar, Inc. Each of the dealerships has a dealer sales/maintenance agreement (DSM) with Navistar. The DSMs assign each dealer a nonexclusive territory called an area of responsibility (AOR).

H. Scott Dawson owns*fn1 and is the dealer-principal for both of the dealerships. The Astleford dealership, located in Burnsville, has been owned by Dawson's family since 1965; there has been a history of conflict between Astleford and Navistar. See Astleford Equip. Co. v. Navistar Int'l Transp. Co., 632 N.W.2d 182, 183-84 (Minn. 2001) (describing history of litigation between the parties). The relationship between the parties improved after Dawson took over as dealer-principal for Astleford in 2000; in late 2003, Dawson took over as manager of Minneapolis-based North Star, which was then owned by Navistar, and in 2006, Dawson acquired North Star from Navistar. During the following years, however, the parties' relationship soured.

Beginning in early 2007, Navistar became concerned about the dealerships' performance. Together, the dealerships' AORs comprised most of the Twin Cities area, and Navistar was concerned that the dealerships were not maximizing sales. Navistar representatives met regularly with Dawson and dealership employees to discuss business plans. Concerns also arose over morale, customer complaints, and the manner in which Dawson interacted with Navistar's representatives.

In November 2007, after discovering some irregularities, Navistar initiated a 12-month audit of North Star's warranty claims. The audit ultimately found deficiencies in North Star's procedures for processing warranty claims and $67,313 in claims without proper substantiation. Navistar agreed to allow the claims if North Star could demonstrate an improvement to its procedures. When North Star failed to do so to Navistar's satisfaction, Navistar notified North Star that it would go ahead with charging back the claims.

In October 2008, Navistar representatives met with Dawson to conduct a performance review. Aida Tanaka and Mike Green, members of Navistar's dealer-operations team, told the dealerships that they were not meeting performance expectations. Tanaka followed up with a November 5 letter that summarized Navistar's concerns, seeking to set up a meeting in Chicago on November 12, 2008, between Dawson and Navistar executives, including Tanaka and John Whitnell, Navistar's vice president for dealer operations.

Dawson replied to the November 5, 2008, letter with an e-mail that asked for the data to support Tanaka's performance statistics and stated that Dawson was not available to meet on November 12. The meeting was rescheduled for December 16, 2008, but was canceled because weather prevented Dawson from flying to Chicago. Dawson did, however, send Tanaka an e-mail on December 16, disputing the methods used in the November 5 letter to measure the dealerships' performance. Over the next two days, Whitnell and Dawson exchanged a series of increasingly hostile e-mails that defended their respective positions and proposed meetings in their own locations. The December 16 meeting was never rescheduled.

On January 7, 2009, Navistar sent a letter to North Star announcing Navistar's intent to remove 51 zip-codes from North Star's AOR, effective February 23, 2009. North Star did not respond to the letter. On April 27, 2009, Whitnell sent an e-mail to Dawson advising him that "the open point in the Minnesota AOR has been filled" and that Navistar had executed a DSM with respondent Boyer Ford Trucks, Inc. for a dealership in Rogers, where Boyer had sold a competing line of trucks until the manufacturer discontinued the line in October 2008. Whitnell concluded his e-mail: "I am available to come to Minnesota to meet with you if you are so inclined. Please let [me know] of your interest and potential dates that are available." Dawson did not respond.

Both Whitnell and Tanaka made additional unsuccessful attempts to communicate with Dawson during the first half of 2009, and they characterized Dawson as having gone "radio silent." Navistar received two letters from North Star during this period. On January 30, 2009, Dawson sent a letter objecting to Navistar's intent to charge back the $67,313 for unsubstantiated warranty payments, but that letter did not include any objection to the removal of the zip-codes. On June 11, 2009, counsel for the dealerships sent a letter to Navistar's counsel asserting that Navistar had violated Minn. Stat. § 80E.14 by establishing a new dealership within .2 miles of North Star's location, based on a website listing of the Minneapolis Boyer Ford location as a Navistar dealer. (Navistar's counsel responded that Boyer's only authorized location was in Rogers and that the website listing was a technical error and would be corrected.) The June 11 letter from the dealerships' counsel did not object to the removal of the zip-codes or to Navistar's entry into a franchise agreement with Boyer for its Rogers location.

In August 2009, Tanaka had a meeting with Dawson, at which they discussed Navistar's ongoing concerns about performance and Dawson's failure to communicate with Navistar. Tanaka suggested that attending an upcoming dealer meeting would help repair the parties' relationship. Dawson did not attend that meeting.

On November 13, 2009, Tanaka sent Dawson a notice that the dealerships were in breach of the DSMs, citing the dealerships' failures to achieve a reasonable share of the market, to aggressively market the product, to investigate and resolve all customer complaints, to attend company-sponsored meetings, and to furnish financial information in the required format. The letter concluded that "[u]nless [the dealerships have] taken appropriate corrective steps by April 30, 2010, Navistar shall consider itself entitled to serve notice to terminate."

The dealerships responded by bringing this suit, initially asserting nine claims against Navistar.*fn2 The district court entered a temporary injunction, which this court affirmed. N. Star Int'l Trucks, Inc. v. Navistar, Inc., No. A10-864, 2011 WL 9173 (Minn. App. Jan. 4, 2011). Following discovery and dispositive motions, eight of the claims against Navistar were tried, some to the court and some to a jury. The district court determined that the dealerships' claim for bad-faith threatened termination of franchises (Count I) was premature and dismissed that claim. The jury found in favor of Navistar on the dealerships' claims for (a) breach of warranty obligations under the MVSDA (Count II); (b) modification of North Star's franchise in violation of the MVSDA (Count III); (c) breach of the implied covenant of good faith and fair dealing in the stock-redemption agreement entered into when Dawson purchased North Star (Count IV); (d) establishment of a new dealership in violation of the MVSDA (Count VII); and (e) change in competitive circumstances in violation of the MVSDA (Count VIII). The jury found in favor of North Star on its claim for breach of the implied covenant of good faith and fair dealing in the DSMs (Count V), but found insufficient evidence to assess damages, and the district court denied injunctive relief on that claim. The district court found in ...


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