The Franchise Memorandum

The United States District Court for the Southern District of Indiana recently ruled that an integration clause barred certain claims by a dealer that were premised on an alleged preagreement misrepresentation by the supplier/distributor. Volvo Trucks N. Am. v. Andy Mohr Truck Ctr., 2013 U.S. Dist. LEXIS 83881 (S.D. Ind. June 14, 2013). Mohr Truck alleged that it entered into a dealer agreement with Volvo in reliance on a preagreement oral representation by Volvo that Volvo would also grant Mohr Truck a separate Mack Truck dealership, which Volvo never awarded. Citing the alleged misrepresentation, Mohr Truck asserted claims for breach of an oral contract, promissory estoppel, and violation of Indiana’s Franchise Disclosure, Unfair Practices, and Crime Victims’ Acts.

Upon Volvo’s motion for judgment on the pleadings, the court found that the dealer agreement’s integration clause barred those claims that required a showing of reasonable reliance on the alleged misrepresentation, while claims that did not require reasonable reliance survived. Specifically, the court rejected Mohr Truck’s oral contract and promissory estoppel claims, concluding that the promise underlying the misrepresentation, as pleaded, would merely have been consideration for the Volvo dealer agreement and not an independent promise. Because that term was not included in the dealer agreement, the agreement’s integration clause precluded the dealer from reasonably relying on it. The court also found that the integration clause barred Mohr Truck’s Indiana Franchise Disclosure Act claim because, as interpreted by previous cases, the portion of the IFDA cited by the dealer requires reasonable reliance on a misrepresentation made by the franchisor. (For reasons not addressed in the decision, Volvo did not argue that the relationship with Mohr Truck was not a “franchise” under the Indiana statute.) Mohr Truck’s claims under the Indiana Unfair Practices Act and Indiana Crime Victims’ Act, on the other hand, did not require reasonable reliance. As a result, the court declined to dismiss those claims.

In a separate opinion in the same case, the court also dismissed Volvo’s claims for breach of contract and violation of the IFDA. Volvo Trucks N. Am. v. Andy Mohr Truck Ctr., 2013 U.S. Dist. LEXIS 83835 (S.D. Ind. June 14, 2013). Volvo claimed that Andy Mohr had not satisfied several promises and representations relating to sales performance that it made in its application for the franchise and alleged that its failure to fulfill those promises constituted a breach of the agreement between the parties. Volvo further alleged that Andy Mohr had engaged in fraud in connection with the purchase of the franchise in violation of the IFDA, and sought a declaratory judgment to enforce the termination of the dealership agreement and to confirm that Andy Mohr was not entitled to a Mack Truck dealership. As with Andy Mohr’s claims, the court dismissed Volvo’s breach of contract claim and IFDA fraud claim because the integration clause rendered Volvo’s alleged reliance on Andy Mohr’s promises in its application unreasonable as a matter of law. The court also concluded that there was no need to separately assess Volvo’s request for a declaratory judgment as to the Mack Truck dealership because its claim would be resolved as part of the counterclaims filed by Andy Mohr. The court left in place Volvo’s request for a declaration that it had good cause to terminate the dealership agreement, reasoning that in its motion for judgment on the pleadings, Volvo was entitled to have its allegation that Andy Mohr misrepresented a material fact in its application taken as true.