Following a bench trial, a federal court in Wisconsin last month awarded lost profits for the breach of an exclusive distributorship contract. Sanchelima Int’l, Inc. v. Walker Stainless Equip. Co., 2018 WL 1401195 (W.D. Wis. Mar. 19, 2018). Defendant Walker manufactures dairy silos, and plaintiff Sanchelima was Walker’s exclusive distributor of dairy silos in 13 Latin American countries, including Mexico. Sanchelima alleged that Walker breached its distribution agreement by making five direct sales (and attempting a sixth) to Mexico, and sued Walker for profits lost on those sales.
The primary issue concerned the scope of Sanchelima’s exclusivity. While one section of the distribution agreement granted Sanchelima the exclusive right to sell “Products to Persons in the Dairy Industry,” the next restricted Walker from selling any “Products within the Territory.” The agreement’s definition of “Products” included various sorts of dairy and nondairy equipment. The court held the agreement ambiguous and turned to extrinsic evidence to resolve this ambiguity. It noted that all of Walker’s marketing in Mexico ran through Sanchelima. Further, in negotiating the agreement, Walker requested and Sanchelima rejected exceptions to the exclusivity provision permitting Walker to sell directly to specific companies. Finally, the testimony of a Walker representative and Walker’s website each used the term “dairy silo” to describe a particular vessel design, rather than a dairy-specific use for the equipment. Consequently, the court concluded that the agreement barred Walker from making any direct sales within Sanchelima’s territory and awarded Sanchelima its profits lost on four of the sales Walker made and the one it attempted.
Maisa Frank represents clients in a variety of litigation matters. Whether conducting pre-dispute investigations, navigating litigation, or negotiating resolutions, Maisa’s advice and strategy is vital to clients facing ...
The information contained in this post is provided to alert you to legal developments and should not be considered legal advice. It is not intended to and does not create an attorney-client relationship. Specific questions about how this information affects your particular situation should be addressed to one of the individuals listed. No representations or warranties are made with respect to this information, including, without limitation, as to its completeness, timeliness, or accuracy, and Lathrop GPM shall not be liable for any decision made in connection with the information. The choice of a lawyer is an important decision and should not be based solely on advertisements.
About this Publication
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.
To subscribe to monthly emails for The Franchise Memorandum, please click here.