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The Franchise Memorandum

Wisconsin Federal Court Enforces Broad Release Language to All Agreements Between Manufacturer and Dealership
Posted in Contracts

A federal court in Wisconsin granted summary judgment to a manufacturer on claims brought against it by its former dealer, holding the claims to be barred by the release language in an assignment agreement the dealer executed when it sold the dealership. Seattle Powersports, LLC v. Harley-Davidson Motor Co., 2020 WL 5531565 (E.D. Wis. Sept. 15, 2020). Plaintiff Seattle Powersports, a former Harley-Davidson dealer, sued Harley for breach of contract and good faith and fair dealing based upon its dissatisfaction with the amount of inventory it was allocated. In response to the lawsuit, Harley contended, among other things, that the release language contained in the assignment agreement executed by the dealer barred the dealer’s claims. The agreement, to which Harley was not itself a party, transferred the dealer’s rights and obligations under financing agreements, gap insurance policies, and servicing plans it had sold to its customers so that the dealership could be sold without these encumbrances. It also released the dealer’s claims against Harley-Davidson Credit Corp. and its affiliates, including those related to the agreement itself “or any other documents” or “related . . . relationships.” The dealer contended that this language did not apply to claims brought under the dealer contract. In the alternative, it argued that the release’s ambiguity required discovery to access the extrinsic evidence necessary to determine its reach.

The court rejected each of the dealer’s arguments. The court held that the release unambiguously applied to claims brought under the dealer contract, as Harley-Davidson Credit Corp. is clearly a Harley affiliate and the dealer contract is closely related to — indeed, a prerequisite for — the assignment agreement. The court found the dealer’s interpretation insufficient to show any ambiguity because, if the release were limited to the assignment agreement, the language extending the release to “any other documents” or “related . . . relationships” would have no effect. The court noted that the dealer contract was as closely related to the assignment as any other document or relationship could be. Accordingly, the court granted summary judgment in favor of Harley and denied the dealer’s motion for additional discovery.

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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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