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The Franchise Memorandum

Eighth Circuit Rejects Dealer's Claims for Breach of Distributorship Agreement
Posted in Terminations

In a case that has been in litigation for several years, the Eighth Circuit has ruled in favor of a manufacturer of farm equipment in Cole v. Homier Distributing Co., 599 F.3d 856 (8th Cir. 2010). The background of the case, first reported in Issue 102 of The GPMemorandum, was that plaintiff Cole had entered into an oral agreement with manufacturer Homier under which Cole became a distributor and dealer of Homier’s products. As a result of that agreement, Cole established more than 30 dealerships. The parties later memorialized their agreement through a written distributorship agreement.

Homier later terminated the distributorship agreement, claiming that Cole had failed to develop its territory and sell an adequate amount of products. Cole filed suit, claiming that Homier had breached the parties’ written agreement. Among other things, Cole alleged that Homier had tortiously interfered with Cole’s agreements with the dealerships Cole had established. The court rejected the claim, finding that Cole’s relationship with its own dealers was predicated on its distributorship agreement with Homier. It found that a breach of the distributorship agreement, even if proved, would not support a tortious interference claim.

The court also rejected Cole’s fraud claim, finding that Cole had failed to present any evidence that Homier had intended not to perform under the distributorship agreement at the time it was signed.

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The Franchise Memorandum is a collection of postings on summaries of recent legal developments of interest to franchisors brought to you by Lathrop GPM LLP. 

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