The Franchise Memorandum

A federal court in Oklahoma recently granted in part and denied in part a motion to dismiss brought by an equipment distributor. Charles Mach. Works, Inc. v. Valley Ditch Witch, Inc., 2014 U.S. Dist. LEXIS 60522 (W.D. Okla. May 1, 2014). Oklahoma-based tractor parts and equipment manufacturer Charles Machine Works brought suit against one of its Texas distributors, Valley Ditch Witch, seeking a judgment declaring the validity of its nonrenewal of the parties' dealership agreement. Valley Ditch Witch moved to dismiss the suit on its merits and on procedural grounds, including lack of personal jurisdiction and improper venue. The court granted in part and denied in part the motion as it related to the merits, and denied the motion as it related to the procedural arguments.

Addressing the merits of the claims, the court held that Charles Machine Works adequately pled a claim for declaratory relief because it alleged that it had good cause for not renewing the dealership agreement. The court, however, dismissed the portion of its claims asserting that Oklahoma law did not require cause for nonrenewal. Oklahoma's Fair Practices of Equipment Manufacturers, Distributors, Wholesalers and Dealers Act in effect at the time plainly required cause for the termination or nonrenewal of a dealership agreement, the court noted. Furthermore, the statute prohibited language in the dealership agreement that purported to waive compliance with the law. In rejecting Valley Ditch Witch's personal jurisdiction argument, the court held that Valley Ditch Witch's decades of business with the Oklahoma-based Charles Machine Works established sufficient contact with the state for the court to exercise personal jurisdiction over Valley Ditch Witch.