Blog Banner Image

The Franchise Memorandum

Wisconsin Federal Court Upholds Jury Verdict for Dealer on Claim for Breach of the Implied Covenant of Good Faith and Fair Dealing

A court has denied a manufacturer's motions for judgment as a matter of law and for a new trial after a jury awarded one of its dealers nearly half a million dollars on his claim that his distribution agreement was constructively terminated, resulting in a breach of the implied covenant of good faith and fair dealing. Tilstra v. Bou-Matic, LLC, 2014 U.S. Dist. LEXIS 131531 (W.D. Wis. Sept. 19, 2014). Although the parties' agreement expressly allowed the manufacturer, Bou-Matic, to alter the territory of its dealer, Tilstra, in its sole discretion, it also required good cause for termination or a substantial change in competitive circumstances. The court held that the jury reasonably concluded that Bou-Matic evaded the spirit of the termination clause by eliminating all of Tilstra's territory without making a showing of good cause. Although Tilstra was still able to use Bou-Matic's trademarks and hold itself out as a Bou-Matic dealer, taking away its territory ended the commercially meaningful aspects of the parties' contractual relationship, the court found.

The court also rejected Bou-Matic's argument that Tilstra's damages must be reduced because the distribution agreement expressly disallowed compensation for goodwill. The court observed that the contract only excluded compensation for goodwill upon proper termination of the dealership agreement—in other words, when and if Bou-Matic provided ninety days' written notice and good cause. The contract said nothing about limitations on damages in cases in which a breach occurs.

Email LinkedIn Twitter Facebook

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


















Blog Authors