What is the Minnesota Agricultural Equipment Dealership Act?
The Minnesota legislature has adopted the Minnesota Agricultural Equipment Dealership Act, Minn. Stat. § 325E.061, et seq. (the “Act” or “MAEDA”), which provides special legal protections to dealers of agricultural equipment. Under the Act, dealers may bring legal action against a manufacturer that violates the Act’s provisions.
Who is Covered by the Minnesota Agricultural Equipment Dealership Act?
The Act is tailored to provide statutory protections to farm equipment dealers, who purchase farm equipment from a farm equipment manufacturer. Under the Act, “farm equipment dealer” and “farm equipment dealership,” means a person, partnership, corporation, association, or other form of business enterprise engaged in acquiring farm equipment from a manufacturer and reselling the farm equipment at wholesale or retail.
Under the Act, a “farm equipment manufacturer” means a person, partnership, corporation, association, or other form of business enterprise engaged in the manufacturing, assembly, or wholesale distribution of farm equipment.
The Act applies to dealers who sell “farm equipment,” which is defined to mean equipment and parts for equipment, including but not limited to:
Tractors, trailers, combines, tillage implements, balers, skid steer loaders, attachments and repair parts for them, and other equipment, including attachments and repair parts, used in the planting, cultivating, irrigation, harvesting, and marketing of agricultural products, excluding self-propelled machines designed primarily for the transportation of persons or property on a street or highway.
What Types of Agreements Are Covered by the Minnesota Agricultural Equipment Dealership Act?
The Act applies to contracts between a dealer and manufacturer for the purchase or sale of farm equipment. The Act refers to a contract between a dealer and manufacturer as a “dealership agreement.” The Act defines dealership agreements to mean the following:
“Dealership agreement” means an oral or written agreement of definite or indefinite duration between a farm equipment manufacturer and a farm equipment dealer which enables the dealer to purchase equipment from the manufacturer and provides for the rights and obligations of the parties with respect to the purchase or sale of farm equipment.
Does the Minnesota Agricultural Equipment Dealership Act Apply to Verbal or “Handshake” Dealership Agreements?
The Act applies to a wide variety of dealership agreements in many different forms, not just written agreements. The statute covers both oral and written agreements, regardless of their duration. Additionally, the Act supersedes any written contract between a farm equipment dealer and farm equipment manufacturer, thus protecting the dealer from coercive or capricious actions by manufacturers to terminate their dealership agreement or renegotiate onerous terms.
Does the Minnesota Agricultural Equipment Dealership Act Limit When a Dealership Agreement Can Be Terminated?
The Act prohibits any manufacturer, directly or through an officer, agent, or employee, from terminating, canceling, failing to renew, or substantially changing the competitive circumstances of a dealership agreement without good cause.
In addition to showing good cause (discussed further, below) the manufacturer must provide the dealer with written notice of termination, cancellation, or nonrenewal of the dealership agreement at least 90 days in advance. The dealer then has 60 days to cure any claimed deficiency.
Except as otherwise provided in this subdivision, a farm equipment manufacturer shall provide a farm equipment dealer at least 90 days’ prior written notice of termination, cancellation, or nonrenewal of the dealership agreement. The notice shall state all reasons constituting good cause for the action and shall provide that the dealer has 60 days in which to cure any claimed deficiency. If the deficiency is rectified within 60 days, the notice is void.
What is “Good Cause” Under the Minnesota Agricultural Equipment Dealership Act?
“Good cause” is defined by the statute as failure by a farm equipment dealer to substantially comply with essential and reasonable requirements imposed upon the dealer by the dealership agreement, if the requirements are not different from those requirements imposed on other similarly situated dealers by their terms. In addition, good cause exists whenever:
(1) without the consent of the farm equipment manufacturer who shall not withhold consent unreasonably, (a) the farm equipment dealer has transferred an interest in the farm equipment dealership, or (b) there has been a withdrawal from the dealership of an individual proprietor, partner, major shareholder, or the manager of the dealership, or (c) there has been a substantial reduction in interest of a partner or major stockholder;
(2) the farm equipment dealer has filed a voluntary petition in bankruptcy or has had an involuntary petition in bankruptcy filed against it which has not been discharged within 30 days after the filing, or there has been a closeout or sale of a substantial part of the dealer’s assets related to the farm equipment business, or there has been a commencement of dissolution or liquidation of the dealer;
(3) there has been a change, without the prior written approval of the manufacturer, in the location of the dealer’s principal place of business under the dealership agreement;
(4) the farm equipment dealer has defaulted under a chattel mortgage or other security agreement between the dealer and the farm equipment manufacturer, or there has been a revocation or discontinuance of a guarantee of the dealer’s present or future obligations to the farm equipment manufacturer;
(5) the farm equipment dealer has failed to operate in the normal course of business for seven consecutive days or has otherwise abandoned the business;
(6) the farm equipment dealer has pleaded guilty to or has been convicted of a felony affecting the relationship between the dealer and manufacturer;
(7) the dealer has engaged in conduct which is injurious or detrimental to the dealer’s customers or to the public welfare; or
(8) the farm equipment dealer, after receiving notice from the manufacturer of its requirements for reasonable market penetration based on the manufacturer’s experience in other comparable marketing areas, consistently fails to meet the manufacturer’s market penetration requirements.
Is it Proper to Terminate a Dealership Agreement Immediately and Without Prior Written Notice?
There are circumstances in which immediate termination of the dealership agreement is proper. The Act provides that the 90-day advance notice and 60-day cure period do not apply “if the reason for termination, cancellation, or nonrenewal is for any reason set forth in subdivision 1, clauses (1) to (7),” listed above.
What if the Dealership Agreement Allows Termination “At Will”?
The Act overrides any contrary provision of the dealership agreement. Therefore, even if the dealership agreement itself states that a manufacturer can terminate a dealer for any reason (at will), or authorizes termination, cancellation, nonrenewal, or substantial change on less than 90-days’ notice, or does not grant a 60-day cure period to the dealer, the equipment manufacturer may be violating Minnesota law by enforcing these contractual provisions. See Minn. Stat. § 325E.064 (providing that a term of a dealership agreement which is inconsistent with the Act is void and unenforceable).
Does the Minnesota Agricultural Equipment Dealership Act Regulate the Non-Renewal of Agreements?
In addition to limiting the termination of a dealership agreement, the Act provides that unless the failure to renew a dealership agreement is for good cause, the manufacturer provided the dealer with 90 days’ notice to not renew and the dealer failed to cure within the 60-day period, the equipment manufacturer may not fail to renew a dealership agreement. The exception to requiring the manufacturer not to fail to renew, can be exercised where the manufacturer can point to one or more of the circumstances listed above in § 325E.062, subdivision 1, clauses (1) to (7).
What Additional Protections Does the Minnesota Agricultural Equipment Dealership Act Provide?
In addition to substantially limiting when a manufacturer may terminate, cancel, fail to renew, or substantially change the competitive circumstances of a dealership agreement, the Act provides that it shall be a violation for a manufacturer to coerce a dealer into taking delivery of farm equipment, which the dealer has not voluntarily ordered:
It is a violation of sections 325E.061 to 325E.065 for a farm equipment manufacturer to:
(1) condition or attempt to condition the sale of farm equipment on a requirement that the farm equipment dealer also purchase other goods or services; except that a farm equipment manufacturer may require the dealer to purchase all parts reasonably necessary to maintain the quality of operation in the field of any farm equipment used in the trade area and telecommunication necessary to communicate with the farm equipment manufacturer;
(2) coerce a farm equipment dealer into a refusal to purchase the farm equipment manufactured by another farm equipment manufacturer;
(3) discriminate in the prices charged for farm equipment of like grade and quality sold by the farm equipment manufacturer to similarly situated farm equipment dealers. The clause does not prevent the use of differentials which make only due allowance for difference in the cost of manufacture, sale, or delivery or for the differing methods or quantities in which the farm equipment is sold or delivered, by the farm equipment manufacturer; or
(4) attempt or threaten to terminate, cancel, fail to renew, or substantially change the competitive circumstances of the dealership agreement if the attempt or threat is based on the results of a natural disaster, including a sustained drought in the dealership market area, a labor dispute, or other circumstance beyond the dealer’s control.
Does the Minnesota Agricultural Equipment Dealership Act Govern Warranty Claims?
The Act also governs the actions that must be taken by a manufacturer in response to a warranty claim from a dealer. The requirements of this section apply to all warranty claims submitted by a dealer to a farm equipment manufacturer in which the farm equipment dealer has complied with the reasonable policies and procedures contained in the farm equipment manufacturer’s warranty. The Act provides the following:
Subd. 2. Prompt payment. Claims filed for payment under warranty agreements must be approved or disapproved within 30 days of receipt by the farm equipment manufacturer. Unless the farm equipment dealer agrees to a later date, approved claims for payment must be paid within 30 days of their approval. When a claim is disapproved, the farm equipment manufacturer shall notify the dealer within the 30-day period stating the specific grounds on which the disapproval is based. Any claim not specifically disapproved within 30 days of receipt is deemed approved and must be paid within 30 days.
Subd. 3. Posttermination claims. If, after termination of a contract, a dealer submits a warranty claim for warranty work performed before the effective date of the termination, the farm equipment manufacturer shall approve or disapprove the claim within 30 days of receipt.
Subd. 4. Compensation for warranty work. Warranty work performed by the dealer must be compensated in accordance with the reasonable and customary amount of time required to complete the work, expressed in hours and fractions of hours multiplied by the dealer’s established customer hourly retail labor rate, which the dealer shall communicate to the farm equipment manufacturer before performing the warranty work.
Subd. 5. Expenses. Expenses expressly excluded under the farm equipment manufacturer’s warranty to the customer must not be included in claims and are not required to be paid on requests for compensation from the dealer for warranty work performed.
Subd. 6. Compensation for parts. All parts used by the dealer in performing warranty work must be paid to the dealer in the amount equal to the dealer’s net price for the parts, plus a minimum of 15 percent to reimburse the dealer for reasonable costs of doing business in performing warranty service on the farm equipment manufacturer’s behalf, including but not limited to freight and handling costs.
Subd. 7. Adjustment for errors. The farm equipment manufacturer may adjust for errors discovered during audit, and if necessary, to adjust claims paid in error.
Subd. 8. Alternate terms and conditions. A dealer may choose to accept alternate reimbursement terms and conditions in lieu of the requirements of subdivisions 2 to 7, provided there is a written dealer agreement between the farm equipment manufacturer and the dealer providing for compensation to the dealer for warranty labor costs either as: (1) a discount in the pricing of the equipment to the dealer; or (2) a lump-sum payment to the dealer. The discount or lump sum must be no less than five percent of the suggested retail price of the equipment. If the requirements of this subdivision are met and alternate terms and conditions are in place, subdivisions 2 to 7 do not apply and the alternate terms and conditions are enforceable.
What Remedies Are Available Under the Minnesota Agricultural Equipment Dealership Act?
The Act expressly provides that where a manufacturer has violated sections 325E.061 to 325E.065, a dealer may bring an action against the manufacturer in a court of competent jurisdiction for damages sustained by the dealer as a consequence of the manufacturer’s violations. The Act also provides that the dealer may also seek damages for the actual costs of the action, including reasonable attorney’s fees, and the dealer also may be granted injunctive relief against unlawful termination, cancelation, nonrenewal, or substantial change of competitive circumstances. The remedies in this section are in addition to any other remedies permitted by law.
Are Choice of Law Provisions in a Dealership Agreement Enforceable?
Often dealership agreements include a choice of law provision that selects the law of a state other than Minnesota to govern the agreement. For example, in a dealership agreement drafted by a manufacturer headquartered in Connecticut, the manufacturer may specify that the agreement will be governed by Connecticut law. The Act, however, provides that any dealership agreement including a choice of law provision selecting the laws of a state other than Minnesota is void:
A term of a dealership agreement either expressed or implied, including a choice of law provision, which is inconsistent with the terms of sections 325E.061 to 325E.065 or that purports to waive a farm equipment manufacturer’s compliance with sections 325E.061 to 325E.065 is void and unenforceable and does not waive any rights which are provided to a person by sections 325E.061 to 325E.065.
Are Venue Provisions in a Dealership Agreement Enforceable?
As discussed above, a dealership agreement including a choice of law provision selecting the law of another jurisdiction is void. Nothing in the Act, however, invalidates “choice of venue” provisions which are often found in many commercial contracts. A venue clause typically states that the parties agree to bring all legal disputes in a specified venue or jurisdiction. Whereas a choice of law provision dictates what state’s law will apply, venue provisions specify where, geographically, the parties must bring their legal dispute.
Minnesota courts generally enforce a venue provision unless the party seeking to avoid the contractual forum shows that the agreement is unfair and unreasonable because: (1) the chosen forum is a “seriously inconvenient” place for trial; (2) the agreement containing the venue provision is a contract of adhesion; or (3) the agreement is “otherwise unreasonable.” Generally, a venue is “seriously inconvenient” if, by litigating there, one party would be deprived of their meaningful day in court. Location and convenience of witnesses, however, are generally not considered a serious inconvenience. Therefore, venue provisions contained in Minnesota dealer agreements will often be enforceable.
Where Can I Get More Information About the Minnesota Agricultural Equipment Dealership Act?
This is just a brief overview of the Minnesota laws governing agricultural equipment dealership agreements. Each situation is unique and must be evaluated based on its own specific facts.
If you are a manufacturer or dealer of farm equipment being sold in Minnesota, and need assistance complying with the MAEDA, contact one of the Minnesota distributorship law attorneys of Trepanier MacGillis Battina P.A.
About the Author:
Minnesota distributorship law attorney Craig W. Trepanier has experience litigating claims under Minnesota’s equipment statutes as well as the Minnesota Termination of Sales Representative Act. Craig may be reached at 612.455.0502 or firstname.lastname@example.org. Trepanier MacGillis Battina P.A. is a Minnesota sales rep law firm located in Minneapolis, Minnesota.