Reliable Tractor, Inc. v. John Deere Construction & Forestry Company

Filing 47

ORDER granting 6 Plaintiff's Motion for Summary Judgment; denying 12 Defendant's Motion to Dismiss. Ordered by Judge Hugh Lawson on 06/09/2009. (dhc)

IN THE UNITED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF GEORGIA V AL D O S TA DIVISION R E L IAB L E TRACTOR, INC., a G e o rg ia corporation, d/b/a S TAF F O R D P l a i n t if f , v. J O H N DEERE CONSTRUCTION & F O R E S T R Y COMPANY, a Delaware c o r p o r a tio n , as successor to JOHN D E E R E INDUSTRIAL EQUIPMENT C O M P AN Y , D e fe n d a n t. : : : : : : : : : : : : : : : :

C ivil Action No. 7 :0 7 - C V - 0 0 0 4 3 - H L

ORDER T hi s matter is before the Court on Plaintiff Reliable Tractor, Inc.'s Motion for S um m a ry Judgment (Doc. 6) and Defendant John Deere Construction & Forestry C o m p a ny 's Motion to Dismiss (Doc. 12). For the following reasons, Reliable's M o ti o n for Summary Judgment is granted and Deere's Motion to Dismiss is denied. I. B AC K G R O U N D O n February 20, 1984, Reliable Tractor, Inc. and John Deere Construction & F o re s try Company executed two dealer agreements. One agreement appointed R e l ia b l e as an authorized dealer of Deere's line of utility equipment, and the other a p p o i nte d Reliable as an authorized dealer of Deere's line of forestry equipment. 1

T he terms of appointment in the two agreements are identical.

The

a g re e m e nts do not contain a definite term of duration, and both contain a provision a t paragraph 3(b) that allows either party to terminate the agreements without cause o n 120 days notice. Paragraph 2 allows for immediate termination for cause, and c o nta i ns a list of five circumstances that would constitute cause for termination. A m o ng others, grounds for termination include a change in the location of the d e a le r's principal place of business without the prior consent of the company, or a "[w ]i thd ra w a l of an individual proprietor, partner, major shareholder, or the manager o f the dealership or substantial reduction in interest of a partner or major s ha re ho l d e r, without the prior written consent." The agreements provide that they s ha l l be effective upon execution by Deere, and both state that they were accepted b y Deere's Vice President and General Manager in Timonium, Maryland. At the time the parties entered into the dealer agreements, Maryland did not have any law that p ro hi b ite d the termination of a dealer agreement without cause. In 1987, Maryland enacted the Equipment Dealer Contract Act (the "EDA"). S e e Md. Code Ann., Com. Law §§ 19-101 to 19-305. In 1998, the Maryland

L e g i s l a ture amended the EDA to provide that equipment suppliers, such as John D e e r e , cannot terminate a dealer agreement "without good cause" (the "good cause p ro v i s i o n"). See Md. Code Ann., Com. Law § 19-103. From the execution of the 1 9 8 4 agreements until March 2007, both parties continued to perform under the a g re e m e nts , and neither party attempted to terminate them. 2

O n March 27, 2007, Deere issued a notice of termination to Plaintiff, stating tha t it was going to terminate the dealer agreements in 120 days. The notice does no t purport to terminate the agreements for good cause, and the letter expressly i nv o k e s paragraph 3(b) of the original agreements in notifying Reliable of the d e c i s i o n to terminate. The letter does not contain a single mention of paragraph 2. O n May 10, 2007, Reliable filed suit in this Court against Deere. In its Verified C o m p l a i nt, Reliable asserts a claim for breach of contract under the EDA's good c a us e provision (Count I), a claim for a declaratory judgment that Deere's attempted te rm i na ti o n is unlawful under the EDA (Count II), a claim for preliminary and p e rm a ne nt injunctive relief preventing Deere from terminating the agreements (Count III), a claim for breach of contract based on the allegation that it is implied that the a g r e e m e nts themselves required good cause for termination (Count IV), and a claim fo r recoupment (Count V). On May 31, 2007, Reliable filed the Motion for Summary Judgment that is c urre ntl y before the Court. In its Motion, Reliable seeks summary judgment on C o unt II of its Complaint. Deere responded to Reliable's Motion by filing a Deere

c o nso li d a te d Response and Motion to Dismiss Amended 1 Complaint.

c o nte nd s that Reliable's Complaint should be dismissed because it is premised on

On May 18, 2007, Reliable filed an Amended Complaint (Doc. 5) that simply restated the jurisdictional statement in paragraph 7 of the original Complaint. The amendment did not change any other aspects of the Complaint. 3

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the EDA's good cause provision, and for several reasons that statute does not apply to the agreements at issue. First, under Georgia's choice of law analysis, Georgia l a w , not Maryland law, applies to the 1984 agreements. Second, even if Maryland l a w applies, the good cause statute only applies to contracts entered into after the e ffe c ti v e date of the statute; it does not apply to contracts entered into before that d a te . Third, even if the good cause statute does apply, such an application violates the Contracts Clause of the United States Constitution. Fourth, even if the good c a us e statute's application is constitutional, there are genuine issues of material fact a s to whether under the EDA Deere did in fact have good cause to terminate the a g re e m e nts , or at a minimum, Deere should be allowed to engage in discovery to d e te r m i ne whether good cause exists.2 A p p l y i ng Georgia's choice of law rules, the Court determined that Maryland l a w applied because the agreements were entered into there. As a result, on D e c e m b e r 21, 2007, this Court entered an Order (Doc. 33) certifying to the Maryland C o urt of Appeals the following question: "W he the r the Maryland Equipment Dealer A c t's good cause provision applies to the termination of a dealer agreement where the dealer agreement was entered into before the good cause provision was enacted

Deere also argued that Reliable's Motion should be denied because it was based on inadmissible evidence. Specifically, Reliable's Motion relied on its Verified Complaint. Deere argued that the Complaint was not properly verified because the verification was not based on personal knowledge. Reliable promptly remedied this defect by filing the Declarations of Denean Stafford (Doc. 17) and John Wall (Doc. 19). 4

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b ut the alleged without cause termination occurred after the good cause provision w a s enacted?" On September 15, 2008, the Maryland Court of Appeals issued its Opinion (D o c . 37) answering the certified question. The Court of Appeals held that the EDA's g o o d cause provision did apply to the agreements, and that applying the law to the a g re e m e nts was a prospective, rather than a retroactive, application of the law. B a s e d on the open ended nature of the agreements and the 120 day notice of te rm i na ti o n period, the Court of Appeals reasoned that the agreements were a series o f 120 day agreements that continued to automatically renew by the failure of either p a rty to give notice. Because Deere did not give notice of termination within 120 d a y s of the passage of the EDA's good cause provision, the Court of Appeals held tha t after the provision was enacted "the parties effectively renewed their contracts c o nsi s tent with the applicable law in effect at the time." (Doc. 37 at 8.) After the Maryland court's decision, this Court held a telephone conference to d e te rm i ne the current positions of the parties in light of the decision. Deere informed the Court that it would like to file a supplemental brief, and the Court granted Deere's re q ue s t. On December 1, 2008, Deere filed its Supplemental Memorandum of Law. D e e re 's Supplemental Memorandum raises three new arguments. First, applying the doctrine of lex loci contractus, Deere argues that Maryland law does not apply to the contracts that were renewed after Deere relocated its headquarters from M a ry l a nd to Illinois in 1991. Deere contends that once it left Maryland, the contracts 5

w e re renewed in a state other than Maryland, and thus some other state's law a p p l i e s . Second, applying Maryland law to agreements renewed after Deere left M a ry l a nd would result in an unconstitutional extraterritorial application of Maryland l a w . In particular, application would violate the United States Constitution's Full F a i th and Credit Clause and the Due Process Clause of the Fourteenth Amendment. T hi rd , the Maryland Court of Appeals's decision struck paragraph 3(b) of the a g r e e m e n ts , rending the agreements too indefinite to enforce. Even if the

a g r e e m e nts are not too indefinite, it contends that the Court must supply a re a s o na b l e duration "short of infinite." O n May 19, 2009, the Court held oral argument on the pending Motions. This O rd e r disposes of the pending Motions and holds that Reliable is entitled to s um m a ry judgment on Count II of its Complaint. II. D IS C U S S I O N A. R e lia b le 's Motion for Summary Judgment

S um m a ry judgment must be granted if "the pleadings, the discovery and d i s c l o s ure materials on file, and any affidavits show that there is no genuine issue a s to any material facts and that the movant is entitled to judgment as a matter of l a w ." Fed. R. Civ. P. 56(c). A genuine issue of material fact arises only when "the e v i d e nc e is such that a reasonable jury could return a verdict for the nonmoving p a r ty ." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). W he n

c o ns i d e ri ng a motion for summary judgment, the court must evaluate all of the 6

e v i d e nc e , together with any logical inferences, in the light most favorable to the n o n m o v i n g party. Id. at 254-55. The court may not, however, make credibility d e te rm i na ti o ns or weigh the evidence. Id. at 255; see also Reeves v. Sanderson P lum b ing Prods., Inc., 530 U.S. 133, 150 (2000). T he moving party "always bears the initial responsibility of informing the d i s tri c t court of the basis for its motion, and identifying those portions of the p l e a d i ng s , depositions, answers to interrogatories, and admissions on file, together w i th the affidavits, if any, which it believes demonstrate the absence of a genuine i s s ue of material fact." Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (internal q uo t a t i o n marks omitted). If the moving party meets this burden, the burden then s hi fts to the nonmoving party to go beyond the pleadings and present specific e v i d e nc e showing that there is a genuine issue of material fact, or that the no nm o v i ng party is not entitled to a judgment as a matter of law. Id. at 324-26. This e v i d e n c e must consist of more than mere conclusory allegations. See Avirgan v. H ul l , 932 F.2d 1572, 1577 (11th Cir. 1991). Under this scheme, summary judgment m us t be entered "against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party w i l l bear the burden of proof at trial." Celotex, 477 U.S. at 322. 1. M a ryla n d law applies to the 1984 agreements, as well as all s u b s e q u e n t "renewals"

W he n subject matter jurisdiction is premised on diversity of citizenship, the

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s ub s ta nti v e law of the forum state applies. Erie R. Co. v. Tompkins, 304 U.S. 64, 7 8 (1938). The substantive law of the forum state includes that state's choice of law rul e s . Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 491 (1941). The forum s ta te in this case is Georgia. In contracts cases, Georgia follows the rule of lex loci c o ntra c tus in determining which state's law applies to the contracts at issue. C o nv e r g y s Corp. v. Kenner, 276 Ga. 808, 812, 582 S.E.2d 84, 87 (2003); Gen. Tel. C o . of Se. v. Trimm, 252 Ga. 95, 96, 311 S.E.2d 460, 462 (1984). Under the lex loci c o n t r a c tus rule, contracts "`are to be governed as to their nature, validity, and i nte r p r e ta ti o n by the law of the place where they were made, except where it a p p e a rs from the contract itself that it is to be performed in a State other than that i n which it was made, in which case ... the laws of that sister State will be applied.'" C o nv e rg y s Corp., 276 Ga. at 811 n.1, 582 S.E.2d at 86 n.1(quoting Trimm, 252 Ga. a t 95, 311 S.E.2d at 461). A contract is considered to be made in the state where the last act necessary for formation of the contract occurred. Trimm, 252 Ga. at 95, 3 1 1 S.E.2d at 461. In this case, the last act necessary for formation of the 1984 agreements o c c urre d in Maryland. The agreements state that they "shall be effective upon e xe c uti o n by the Company," and then recite that the agreements are "[r]eceived, s ub j e c t to acceptance at the Company's office in Baltimore." (Pla.'s Compl., Exs. A & B) (emphasis in originals). The agreements both expressly state that they were a c c e p te d and signed by Deere's Vice-President and General Manager in Maryland. 8

A s a result, the contracts were entered into in Maryland. D e e r e does not dispute that the contracts were made in Maryland. Rather, it c o nte nd s that an exception to the lex loci rule applies because it appears from the a g re e m e nts themselves that they were to be performed in Georgia, not Maryland. D e e re 's argument might hold water if the agreements demonstrated that both parties w e re to perform their obligations in Georgia, but the only thing that is clear from the a g re e m e nts is that Reliable was to perform in Georgia through the operation of its d e a l e rs hi p . The agreement is silent on where Deere was to perform. Presumably, D e e r e would perform some, if not all, of its obligations in Maryland because that is w he re Deere's company offices were at the time. In a case such as this where the c o ntra c ts only demonstrate that one of the parties is to perform in a state other than the state where the contract was made, this Court thinks that the state of contracting c o ntro l s . W e re this Court to accept Deere's argument, the exception would swallow the rule because the place of performance would always control; the state of c o ntra c ting' s law would apply only if it was the same state where both parties were to perform. Because the agreements were entered into in Maryland and it is not c l e a r from the agreements themselves that the agreements were to be performed i n a state other than Maryland, this Court holds that Maryland law applies to the 1984 a g r e e m e nts .3

It is worth noting that in a different case in another jurisdiction Deere argued that under Virginia's choice of law rules Maryland law applied to a dealer agreement. See John Deere 9

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M a ry l a nd law also applies to all subsequent "renewals." Deere contends that e v e n assuming Maryland law applies to the original agreements, it cannot apply to a g re e m e n t s that were renewed after Deere moved its offices from Maryland to Il l i no i s . Deere's argument is based on the Maryland Court of Appeals's holding that t h e open-ended nature of the agreements, coupled with the 120 day termination p e ri o d , created a series of 120 day perpetually renewing contracts that continued to re ne w until one of the parties gave notice of termination. According to Deere, M a ry l a nd law cannot apply to agreements renewed after Deere left Maryland in 1991 b e c a us e after it left the state the agreements could not have been renewed there. D e e re 's argument might make sense if the parties actually executed a formal re ne w a l agreement in a state other than Maryland, but they did not. Instead, the M a ry l a nd court utilized a legal fiction to hold that the open-ended duration of the a g r e e m e n t s and the 120 day termination period created a series of perpetually re new ing agreements that automatically renewed on their own terms by the failure

Const. Equipment Co. v. Wright Equipment Co., Inc., 118 F. Supp. 2d 689 (W.D. Va. 2000). Similar to Georgia law, Virginia law provides that "the nature, validity, and interpretation of a contract is governed by the law of the place where it was made, unless there is an express intention to the contrary." Id. at 692. The only difference between this rule and Georgia's is that Georgia's exception to the lex loci rule is phrased slightly differently, stating that the law of the state of contracting controls unless it appears from the contract itself that it is to be performed in a different state. In the Wright case, Deere prevailed in persuading the district court that Maryland law applied to contracts that were entered into in Maryland by Deere and a Virginia dealer. Reliable argues that Deere's position in that case estops it from arguing in this case that Maryland law does not apply. Because Virginia's choice of law rule is phrased differently than Georgia's, the Court does not believe that Deere is estopped from taking its current position, though it is certainly a close call. 10

o f either party to give notice. Georgia's lex loci rule provides that the state of c o ntra c ti ng is the state where the last act necessary for formation of the contract o c c urre d . Trimm, 252 Ga. at 95, 311 S.E.2d at 461. The last act necessary for the fo rm a ti o n of the agreements in this case occurred in Maryland in 1984. Once the a g re e m e nts were executed in Maryland in 1984, the agreements continued to a uto m a ti c a l l y renew by their own terms until one of the parties gave notice of te rm i na ti o n. No further acts were necessary to form a new or renewed contract. T hus , contrary to Deere's assertion, the state of contracting is not the state where the parties "renewed" their agreements by failing to give notice of termination. Under G e o r g i a 's choice of law rules, Maryland is the state of contracting, the Maryland c o urt's legal fiction notwithstanding.4 2. T h e EDA's good cause provision applies to the agreements

T he Maryland Court of Appeals held that EDA's good cause provision applies to the agreements. As this is the highest court in the state of Maryland, Md. Code A nn., Cts. & Jud. Proc. § 1-301, this Court is bound to follow its decision. Veale v. C i ti b a nk , F.S.B., 85 F.3d 577, 580 (11th Cir. 1996) ("In matters of state law, federal This is not to mention that Deere's position would frustrate the policy behind the Georgia Supreme Court's decision to continue to adhere to the lex loci rule. In Trimm the Georgia Supreme Court rejected the adoption of a different choice of law rule in contracts cases because the other approaches were "neither less confusing nor more certain than our traditional approach." Trimm, 252 Ga. at 96, 311 S.E.2d at 462. Deere's position invites confusion and uncertainty. Acceptance of Deere's argument would require a determination of where each party failed to give notice. Not only would the Court have to determine where each of these omissions occurred, but, unless both parties' omissions occurred in the same state, the Court would then have to determine which party's omission dictates which state's law applies. 11
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c o urts are bound by the rulings of the state's highest court."). 3. Ap p lic a tio n of the u n c o n s t itu t io n a l good cause provision is not

D e e re argues that application of the EDA's good cause provision violates the C o ntra c ts Clause, the Due Process Clause of the Fourteenth Amendment, and the F ul l Faith and Credit Clause. The Court will address each of these arguments in turn. T he Contracts Clause of the United States Constitution states, "No State s ha l l...p a s s any...Law impairing the Obligation of Contracts." U.S. Const. art. I, § 10, c l . 1. In determining whether a law violates the Contracts Clause, the first inquiry is w he the r the law operates as a substantial impairment to an existing contractual re l a ti o ns hi p . Energy Reserves Group, Inc. v. Kansas Power and Light Co., 459 U.S. 4 0 0 , 411 (1983). Resolution of this threshold issue requires an analysis of three e l e m e nts : (1) whether there is a contractual relationship; (2) whether a change in law i m p a i r s that contractual relationship; and (3) whether the impairment is substantial. G e nera l Motors Corp. v. Romein, 503 U.S. 181, 186 (1992). In this case, the Contracts Clause is not implicated because the law at issue i n this case is being applied prospectively, not retroactively. Under Maryland law, the dealer agreements were a "succession of renewable contracts lasting 120 days." (D o c . 37 at 10.) Neither party in this case attempted to terminate the agreements w i thi n 120 days of the law's enactment. As a result, the dealer agreements

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a uto m a ti c a l l y renewed after the law was passed. Applying the law to agreements tha t the were renewed after the law was passed does not impair an existing c o ntra c tua l relationship. See Northshore Cycles, Inc. v. Yamaha Motor Corp., U .S .A ., 919 F.2d 1041, 1043 (5th Cir. 1990) (observing that the Contracts Clause w o ul d not be violated by applying a law to agreements that existed at the time the la w was passed but were subsequently renewed after the law was enacted). A c c o r d i ng l y , application of the good cause provision to the dealer agreements in this c a s e does not violate the Contracts Clause. N e xt, Deere argues that applying Maryland law to dealer agreements that w e re renewed after Deere moved its offices from Maryland constitutes an e xtra te r ri to r i a l application of Maryland law and thus violates the Full Faith and Credit C l a us e and the Due Process Clause of the Fourteenth Amendment. This argument i s premised on Deere's contention that the parties renewed or re-executed the a g r e e m e n t s outside the state of Maryland. This premise is flawed. The parties ne v e r affirmatively renewed or re-executed the agreements; the agreements a uto m a ti c a l l y renewed without the necessity of any action from either party. The o nl y affirmative act of contract execution that took place in this case occurred in M a r y l a nd in 1984. The Court fails to see how the automatic renewal of those c o ntra c ts after Deere left the state of Maryland renders the application of Maryland l a w extraterritorial.

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4.

Th e re are no genuine issues of material fact that warrant the d e n ia l of summary judgment

D e e re argues that there are two genuine issues of material fact that prevent the entry of summary judgment. First, there is an issue as to where the agreements w e re to be performed, and thus it would be inappropriate at this stage to conclude tha t Maryland law applies. Second, there is an issue as to whether Deere

p o s s e s s e d good cause to terminate the agreements. Each of these arguments is w i tho ut merit. G e o rg i a 's lex loci rule provides that the governing law is the state of c o ntra c ti ng , unless "it appears from the contract itself that it is to be performed in a S ta te other than that in which it was made, in which case ... the laws of that sister S ta te will be applied.'" Convergys Corp., 276 Ga. at 811 n.1, 582 S.E.2d at 86 n.1 (q uo ti ng Trimm, 252 Ga. at 95, 311 S.E.2d at 461). Deere looks beyond the four c o r ne r s of the dealer agreements in an attempt to persuade the Court that there is a genuine issue of material fact as to where the agreements are to be performed. T ho s e extraneous facts are irrelevant to the choice of law analysis. In determining w he t h e r the agreements are to be performed in a state other than Maryland, this C o urt is limited to a review of the face of the dealer agreements. As stated above i n the choice of law analysis, it is not apparent from the agreements themselves that the y were to performed in a state other than Maryland. T he r e is no issue of material fact as to whether Deere possessed good cause

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to terminate the agreements. The termination letter that Deere issued to Reliable o n March 27, 2007, explicitly stated that Deere was terminating the agreements "p urs ua nt to paragraph 3(b)" of the agreements. (Pla.'s Compl, Ex. C at 2.)

P a ra g ra p h 3(b) of the dealer agreements is the provision that allows either party to te rm i na te the agreements without cause, and it is the same contractual provision that the Maryland court declared invalid. In addition, in its Verified Complaint,5 Plaintiff a s s e rts that at the time the Deere representatives delivered the termination letter, the representatives stated that the termination was "dictated by a purported business m o d e l under which Deere deals only with businesses that sell John Deere products e xc l us i v e l y ." (Pla.'s Compl. ¶ 35.) This justification does not constitute good cause und e r the EDA, and the EDA expressly prohibits suppliers from "coerc[ing] a dealer i nto refusing to purchase equipment manufactured by another supplier." Md. Code A nn., Com. Law § 19-301(3). Reliable has carried its initial burden of establishing the absence of a genuine i s s ue of material fact that Deere's attempted termination was without cause. The b urd e n thus shifts to Deere to go beyond the pleadings and point to something in the

Deere originally objected to consideration of the Verified Complaint as summary judgment material because the verification was not based on personal knowledge. As stated, supra note 2, Reliable subsequently remedied that defect. Thus, the Verified Complaint can be considered in ruling on Reliable's Motion for Summary Judgment. See Fowler v. S. Bell Tel. & Tel. Co., 343 F.2d 150, 154 (5th Cir. 1965) (holding that verified pleadings are appropriate summary judgment material if the pleadings satisfy the standards for affidavits set forth in Rule 56(e)). 15

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re c o rd that establishes a genuine issue of material fact." Celotex Corp., 477 U.S. a t 324-26. Deere has not carried this burden. D e e re contends that the record demonstrates that it had two reasons to te rm i na te the agreements for cause. Deere first points to the portion of the

te rm i na t i o n letter that references the fact that Reliable acquired another company tha t operates a dealership in Virginia. Deere contends that Reliable's acquisition of the Virginia dealership breached the dealer agreements because Reliable did not o b ta i n Deere's prior consent as required by the paragraph of the agreements that s ta te s Deere's prior consent is required before Reliable operates "a facility at any o the r location for displaying, selling, renting, leasing, or servicing of new or used g o o d s ." (Pla.'s Compl., Exs. A & B at 4, ¶ 1(j)) (emphasis added). The EDA defines "g o o d cause" as the failure of a dealer to "comply with requirements imposed on the d e a l e r by a contract if the requirements are not different from requirements imposed o n other dealers similarly situated in the State." Md. Code Ann., Com. Law § 191 0 1 (g ). Deere contends that Reliable's acquisition of the Virginia dealership violated the agreements and thus gave rise to good cause for termination of the agreements. D e e re 's argument is without merit for at least two reasons. First, Deere has not pointed to anything in the record that demonstrates that the alleged failure of Reliable to obtain its prior approval was an actual justification fo r the termination of the agreements. Deere relies solely on the termination letter i n arguing that a genuine issue of material fact exists as to whether it terminated the 16

a g re e m e nts because of Reliable's acquisition of the Virginia company without its p ri o r approval. That termination letter, however, only makes reference to the

a c q ui s i ti o n and states that "John Deere has serious concerns about continuing its d e a l e r relationship with any dealer where John Deere plays a decreasing, rather tha n increasing, role in the overall business of the dealership." (Pla.'s Compl., Ex. C at 1.) Nowhere in the letter does Deere state that it was terminating the

a g re e m e nts based on Reliable's failure to obtain its pre-approval for the acquisition, a nd nowhere does it invoke the for cause termination provisions of the agreements. R a the r, the letter simply mirrors the allegation in Plaintiff's Verified Complaint that D e e re representatives stated that its termination decision was based on Deere's d e c is io n to shift to a business model where dealers sell exclusively John Deere p ro d uc ts . Deere's attempt to now assert that Reliable's failure to obtain its prior a p p ro v a l for the acquisition of the Virginia company was the reason for its te rm i na ti o n decision is simply a post hoc justification for its termination decision, and d o e s nothing to explain its conduct at the time it made the termination decision. Second, the agreements state that Reliable only has to obtain Deere's consent p ri o r to establishing, maintaining, or operating a facility that deals in "new or used g o o d s ." (emphasis added). The agreements expressly define "Goods," with a c a p i ta l "G," as John Deere equipment. Deere seeks to avoid this definition by a rg ui ng that the provision of the agreements that Reliable allegedly violated use the term "goods" with a lower-case "g." According to Deere, "goods" includes every 17

c o nc e i v a b l e good, not just Deere equipment.

The Court rejects Deere's

i nte r p r e ta ti o n. Notably, the first page of text for each of the agreements expressly s ta te s that "this Agreement pertains only to Goods." (Pla.'s Compl., Exs. A & B at 2 .) Giving "goods" the expansive meaning that Deere advocates seems to be in c l e a r conflict with this express limitation that the agreements only pertain to "Goods." A t a minimum, the meaning of "goods" is ambiguous. W he r e language in a contract i s ambiguous, the language must be construed against the drafter, which in this case i s Deere.6 Canaras v. Lift Truck Svcs, Inc., 272 Md. 337, 356, 322 A.2d 866, 8768 7 7 (1974). Construing the ambiguity against Deere, this Court finds that the term "g o o d s " in the provision at issue has the same meaning as "Goods." As such, R e l i a b l e was not required to obtain Deere's approval before acquiring a Virginia d e a l e rs hi p that does not deal in Deere equipment. Deere's second asserted "good cause" justification for termination is Reliable's m e rg e r with Stafford Tractor Company, "which, depending on the effect of the m e rg e r on the ownership of Reliable stock, could have involved a substantial re d uc ti o n in the interest of a major shareholder of Reliable." (Deere's Resp. Br. at 1 5 ) (emphasis added). The EDA defines good cause as "a substantial reduction in i nte re s t of a partner or major shareholder, without the prior written consent of the s upp li e r." Md. Code Ann., Com. Law § 19-102(7). By its own admission, however,

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The agreements in this case are form contracts bearing the John Deere logo. 18

D e e re does not know whether Reliable's merger with Stafford resulted in the s ub s ta nti a l reduction in interest of a major shareholder; it simply states that it "could ha v e ." If Deere does not know whether this is true, then this newly 7 asserted j us ti fi c a ti o n clearly could not have served as a basis for its termination decision. D e e re is again simply engaging in post hoc justifications in an attempt to meet the g o o d cause standard. The purpose of this litigation is not to see how creative Deere c a n be in concocting these explanations; rather, the purpose is to determine whether D e e re did in fact attempt to terminate the agreements for good cause. As Deere has n o t pointed to anything in the record that demonstrates that its actual termination d e c i s i o n was based on good cause, Reliable is entitled to summary judgment. 5. D e n ia l of Reliable's Motion is not warranted by the fact that d is c o ve ry has not commenced

D e e re argues that summary judgment should be denied because discovery has not commenced. There is no "blanket prohibition on the granting of summary j ud g m e nt motions before discovery." Reflectone, Inc. v. Farrand Optical Co., 862 F .2 d 841, 843 (11th Cir. 1989). Federal Rule of Civil Procedure 56(f) allows a party o p p o s i ng summary judgment prior to discovery to move the court for an order p e rm itting discovery necessary to oppose the motion. Id. However,

Nowhere it the termination letter, which is the only document Deere relies on in making this argument, does Deere assert that its decision is based on this reason. The letter simply references the merger. 19

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the party seeking to use Rule 56(f) may not simply rely on vague a s s e rti o ns that additional discovery will produce needed, but uns p e c i fi e d , facts, but rather he must specifically demonstrate how p o s tp o ne m e nt of a ruling on the motion will enable him, by discovery or o the r means, to rebut the movant's showing of the absence of a g e nui ne issue of fact. Id. (internal quotations omitted). In this case, Deere, again overlooking the fact that the relevant inquiry is into the actual basis for its termination decision, asks that the Court deny summary j ud g m e nt so that discovery can commence, at which point it might be able to unc o v e r some factual basis for a finding of good cause. Specifically, Deere asserts tha t discovery is needed to determine whether Reliable's merger with Stafford re s ul te d in a substantial reduction in the interest of a major shareholder in the d e a l e rs hi p . As noted in the previous subsection of this Order, Deere admits that it d o e s not know whether the merger resulted in such a reduction in the interest of a s ha r e ho l d e r. It is apparent that this unknown fact could not have served as the basis fo r its termination decision. Allowing Deere to engage in a fishing expedition in an a tte m p t to provide support for its post hoc justifications will do nothing to address the i s s ue of Deere's actual justification for its termination decision. Deere's Rule 56(f) re q ue s t is denied.

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6.

Th e Maryland Court of Appeals's decision does not render th e agreements too indefinite to be enforced

L a s t, Deere argues that the Maryland court's decision renders the agreements to o indefinite to be enforced. According to Deere, paragraph 3(b) of the agreements s up p l i e d the duration of the contracts by allowing either party to terminate the a g re e m e nts on 120 days notice. Deere contends that the Maryland court struck that p a ra g ra p h from the agreements, leaving the contracts without a definite term of d ura ti o n and thus too indefinite to be enforced. T hi s Court is bound by the Maryland court's determination that the agreements a re not too indefinite to be enforced. Deere raised this argument in a Motion for R e c o ns i d e ra ti o n before the Maryland Court of Appeals after the court issued its d e c i s i o n. On October 31, 2008, the Maryland Court of Appeals issued a brief order s ta ti ng that it had considered Deere's Motion and that it was denied. As previously s ta te d , on questions of Maryland law this Court is bound by the decision of M a ry l a nd 's highest court. The Maryland Court of Appeals, the state's highest court, ha s already determined that the agreements are not too indefinite to be enforced. T hi s Court does not have the authority to disturb that ruling. E v e n if the Court did have the ability to consider Deere's argument, the Court w o ul d reject it. The agreements are not too indefinite to be enforced under Maryland l a w . The EDA supplies the reasonable duration for these agreements, as it does for a l l dealer agreements to which it applies, by providing that the agreements must

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c o nti nue until both parties terminate them by mutual agreement or one of the s ta tuto ri l y enumerated good cause events occurs. See Md. Code Ann., Com. Law § 19-103(a) ("A supplier may not...terminate, cancel, fail to renew, or substantially c ha ng e the competitive circumstances of a contract without good cause."). B. D e e re 's Motion to Dismiss

D e e re 's Motion to Dismiss is premised on its assertion that the EDA does not a p p l y to the agreements. This Court has already rejected this assertion and granted s um m a ry judgment for Reliable. As a result, Deere's Motion to Dismiss is denied. III. C O N C L U S IO N F o r the foregoing reasons, Reliable's Motion for Summary Judgment on Count II of its Verified Complaint is granted. Deere's attempt to terminate the dealer a g re e m e nts is unlawful, and its attempted termination is void and of no effect. D e e re 's Motion to Dismiss is denied.

S O ORDERED, this the

9th

day of June, 2009

s/Hugh Lawson HUGH LAWSON, Judge
d hc

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