The Franchise Memorandum

The United States Court of Appeals for the Third Circuit has affirmed a district court’s grant of summary judgment in favor of Terex, a manufacturer of heavy equipment and parts. TL of Fla., Inc. v. Terex Corp, 2017 WL 3722718 (3d Cir. Aug. 29, 2017). TL, a nonexclusive distributor of Terex parts, alleged that Terex fraudulently induced it into entering into the parties’ distribution agreement by failing to disclose, among other things, that TL’s territory in Florida was surrounded by other authorized sellers of Terex parts called “CPEX Accounts.” TL claimed that these CPEX Accounts could sell parts at a lower price because, unlike TL, they were not required to maintain a costly inventory of heavy equipment. Upon a motion by Terex, the district court held that TL had not provided sufficient evidence in support of its proffered theory of lost profit damages and, therefore, granted summary judgment in favor of Terex.

Agreeing with the district court, the Third Circuit held that TL could not sustain its burden to survive summary judgment. TL argued that it was entitled to lost profits from sales it could have made to the customers of the CPEX Accounts had they not been in competition. Unconvinced, the Third Circuit explained that there was no evidence suggesting that the CPEX Accounts sold parts within TL’s territory, nor was there any dispute that the CPEX Accounts were established to serve international customers. TL also argued that because Terex sold parts to the CPEX Accounts in Florida, Terex displaced sales that otherwise would have gone to TL. The Third Circuit affirmed the lower court’s determination that this second theory was “untimely” because it was a new damages theory that had not been advanced until after discovery in the case had closed. Finding no plausible theory of damages, the Third Circuit affirmed the district court’s grant of summary judgment in favor of Terex.