A recent decision by a U.S. District Court judge to dismiss claims asserted under Minnesota’s “Equipment Statutes” provides a detailed look at the application of these laws. Minnesota has two statutes that apply dealers of heavy equipment in contract disputes with manufacturers – the Minnesota Heavy and Utility Equipment Manufacturers and Dealers Act, Minn. Stat. Section 325E.068, et seq. (“MHUEMDA”) and the Minnesota Agricultural Equipment Dealership Act, Minn. Stat. Section 325E.061, et seq. (“MAEDA”). (A third Minnesota statute, the Minnesota Termination of Sales Representatives Act, Minn. Stat. Section 325E.37, applies to independent “sales reps” who help arrange for the sale of consumer goods and other products to retailers and other non-end users on behalf of manufacturers.)
The Minnesota Heavy and Utility Equipment Manufacturers and Dealers Act
The MHUEMDA applies to dealers of heavy equipment, defined to include “excavators, crawler tractors, wheel loaders, compactors, pavers, backhoes, hydraulic hammers, cranes, fork lifts, compressors, [and] generators” as well as trucks and truck parts and equipment used for mining or forestry applications. “Dealer” means anyone who acquires heavy equipment from a manufacturer and re-sells it on a wholesale or retail basis. Among other things, this Act provides that an equipment manufacturer may not “terminate, cancel, fail to renew, or substantially change the competitive circumstances of a dealership agreement” without “good cause.” “Good cause” is specifically defined in the statute and the statute will supersede any written contract between a dealer and manufacturer, thus protecting the dealer from coercive or capricious actions by manufacturers to terminate their dealership or renegotiate onerous terms.
The Minnesota Agricultural Equipment Dealership Act
The MAEDA provides similar protection for dealers of agricultural equipment which is defined to include “tractors, trailers, combines, tillage implements, balers, and skid steer loaders” as well as attachments and repair parts, used in the “planting, cultivating, irrigation, harvesting, and marketing of agricultural products.” Similar to the MHUEMDA, the MAEDA provides that “no farm equipment manufacturer . . . may terminate, cancel, fail to renew, or substantially change the competitive circumstances of a dealership agreement without good cause.”
The Decision in Tri-State Bobcat, Inc. v. Finn Corp.
In Tri-State Bobcat, Inc. v. Finn Corp., 2018 WL 4268898, No. 16-CV-4060 (DWF/SER) (D. Minn. Sept. 6, 2018), the Plaintiff, Tri-State Bobcat (“Tri-State”) was an authorized equipment dealer for several agricultural equipment dealers, including Finn Corporation (“Finn”). In 2016, the parties were unable to come to terms on a new contract to replace the 2015 agreement between them. Tri-State sued Finn for breach of contract and wrongful termination under the equipment dealership statutes. Finn moved for summary judgment to dismiss the claims and the court granted the motion.
The court first noted that Tri-State sold several types of equipment for Finn, including hydroseeders, bark blowers, straw blowers, and krimpers. The court did not specifically determine whether the MAEDA or the MHUEMDA applied, or both. It stated that the “equipment statutes serve the same purpose and provide nearly identical protections to dealers” and that the “purpose of the statutes is to equalize the power of grantors and dealers and not to insulate dealers from all economic reality.” Because both statutes prohibit the same type of conduct, the court considered whether the evidence showed that Finn took improper adverse action against Tri-State under either of them, assuming they applied.
The parties’ dispute originated when Tri-State began talking with another manufacturer, Fecon, Inc. (“Fecon”). Finn considered Fecon to be a competitor because it was a majority owner of a hydroseeder manufacturer subsidiary. As a result, Finn added a non-compete provision to its proposed 2016 distributorship agreement with Tri-State. Tri-State refused to sign the new Finn agreement and proceeded to enter into an agreement with Fecon. Finn then sent a letter to Tri-State explaining that the old 2015 agreement had expired and there was no longer a dealer-manufacturer relationship between the two parties.
Tri-State sued Finn alleging that it failed to provide the proper notice of termination under the Equipment Statutes and that Finn lacked “cause” under the statutes to end the 2015 agreement. Finn claimed that the agreement between them had expired and there was no contract for it to terminate. Tri-State argued that the contract had been extended as an implied contact by the parties’ course of dealing. The court rejected Tri-State’s argument.
Tri-State also asserted that Finn violated the Equipment Statutes’ prohibition on a manufacturer substantially changing the “competitive circumstances” of a dealer agreement without good cause. On this point, the court found that the non-compete provision did not significantly diminish Tri-State’s viability or threaten its ability to maintain a reasonable profit long term.
Finally, the court considered Tri-State’s claim that Finn lacked “good cause” under the Statutes to terminate the contract. Here, the court found unequivocally that Fecon was a competitor and “Finn’s noncompete solution [was] reasonable and essential.”
Although the Equipment Statutes provide powerful protection for dealers who fall within their statutory ambit, the Tri-State decision shows that there are limits to this protection and, in the court’s words, they do not to “insulate dealers from all economic reality.” The case also suggests that manufacturers may have a legitimate interest in requiring dealers to agree to a non-compete and to not sell competitive lines.
If you are a manufacturer or dealer of heavy equipment being sold in Minnesota, and need assistance complying with the MHUEMDA or the MAEDA, contact one of the Minnesota distributor law attorneys of Trepanier MacGillis Battina P.A.
About the Author:
Minnesota distributor 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.