Tractor & Farm Supply, Inc. v. Ford New Holland, Inc.

898 F. Supp. 1198, 1995 U.S. Dist. LEXIS 13296, 1995 WL 545263
CourtDistrict Court, W.D. Kentucky
DecidedMarch 15, 1995
DocketCiv. A. C-94-0046-BG(H)
StatusPublished
Cited by19 cases

This text of 898 F. Supp. 1198 (Tractor & Farm Supply, Inc. v. Ford New Holland, Inc.) is published on Counsel Stack Legal Research, covering District Court, W.D. Kentucky primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Tractor & Farm Supply, Inc. v. Ford New Holland, Inc., 898 F. Supp. 1198, 1995 U.S. Dist. LEXIS 13296, 1995 WL 545263 (W.D. Ky. 1995).

Opinion

MEMORANDUM OPINION

HEYBURN, District Judge.

This matter is before the Court on Defendant’s motion for summary judgment which requires the Court to consider delicate choice of law issues. Plaintiffs seek compensatory and punitive damages for Defendant’s wrongful termination of its dealership agreement with Plaintiff. Plaintiffs’ claims consist of the following: (1) breach of contract, (2) vio *1201 lation of the Michigan Franchise Investment Law, (3) fraud and misrepresentation, (4) estoppel, (5) unjust enrichment, (6) tortious interference with contract and prospective economic advantage, (7) recoupment, and (8) punitive damages. The Court will sustain Defendant’s motion in part.

I.

For twenty-five years, Plaintiff, Tractor and Farm Supply, served as a New Holland dealership in Glasgow, Kentucky. In 1985, the Ford Motor Company bought New Holland and continues to operate it as Ford New Holland, a Delaware corporation.

On May 21, 1987, Laura Vance, the President and sole shareholder of Tractor and Farm Supply, entered into a written dealership agreement with Defendant Ford New Holland. According to Ms. Vance, Defendant’s zone manager for her area assured her at this time that the written agreement was a mere formality and that their business relationship would be a continuing one. Nevertheless, the agreement that the parties signed provided for a three-year extension, unless either party gave six months notice of an intention not to renew the agreement. The agreement also provided that either party could elect, without cause, not to renew it. Because neither party elected not to renew the agreement at the expiration of its first term in 1990, it extended through December 21, 1993. 1

Sometime during the second term of the agreement, Defendant decided that it was “not in its best business interests” to continue its business relationship with Plaintiffs and, by letter dated June 9, 1993, Defendant notified Plaintiffs that it intended not to renew the dealership agreement. Shortly thereafter, the Ford dealership in the Glasgow area, Ben and Elmer Tractor Company, which had been selling New Holland equipment at reduced rates since 1992, hired several of Plaintiffs’ employees. Plaintiffs assert that these employees reported that Ben and Elmer’s management induced them to leave their jobs by telling them that Ben and Elmer’s would soon be the new New Holland dealer in the trade area and Plaintiffs would be forced to reduce staff without the New Holland line. 2 Immediately after the effective date of the termination of Plaintiffs’ agreement with Defendant, Ben and Elmer’s officially became the New Holland dealership in the Glasgow area.

II.

Some of Plaintiffs’ claims are properly analyzed according to the principles of contract law, others according to tort law. Because the dealership agreement contains a choice of law provision, the Court must decide whether to apply Michigan or Kentucky law for each individual claim.

A.

The franchise agreement between Ford New Holland, Inc. and Tractor and Farm Supply contains a provision stipulating that the “agreement shall be governed by and interpreted in accordance with the laws of the State of Michigan.” See Dealer Agreement, ¶ 29. Defendant is incorporated in Delaware and headquartered in Pennsylvania, but conducts business through several branch sales offices in other states. The branch office with which Plaintiffs’ consistently dealt, and with whom they dealt at the time the written agreement was executed and signed, was located in Michigan. It has since relocated to Georgia. Plaintiffs always have conducted business in Kentucky. Oddly enough, Defendant urges the Court to ignore the choice of law provision in the agreement that it drafted and to apply Kentucky law *1202 when deciding this matter. Plaintiffs contend that the Court must apply Michigan law in accordance with the agreement.

In a diversity action, the Court must follow the choice of law principles enunciated by the highest court of the state in which the Court sits. National Union Fire Ins. Co. v. Watts, 963 F.2d 148, 150 (6th Cir.1992); Bailey v. V & 0 Press Co., Inc., 770 F.2d 601, 604 (6th Cir.1985) (“If the highest court has not spoken, the federal court must ascertain from all available data what the state law is and apply it.”). Unfortunately, no Kentucky court has decided whether or not to uphold a choice of law provision contained in a franchise agreement between a Kentucky company and an out of state business.

The closest analogous situation in Kentucky case law involves an insurance company’s contract of adhesion, which contained a provision that the contract was to be governed by the law of the state of the delivery of the policy. Breeding v. Massachusetts Indem. & Life Ins. Co., 633 S.W.2d 717 (Ky.1982). In Breeding, the court applied the logic of interest analysis and Restatement 2d, Conflict of Laws, § 187 and § 187, comment d, to apply Kentucky law to the substantive issues in the case. In doing so, the court wrote: “Justice, fairness and the best practical result may best be achieved by giving controlling effect to the law of the jurisdiction which, because of its relationship or contact with the occurrence of the parties, has the greatest concern with the specific issue raised in the litigation.” Id. at 719.

The Breeding decision would seem to indicate that “Kentucky law will apply to a contract issue if there are sufficient contacts and no overwhelming interests to the contrary, even if the parties have voluntarily agreed to apply the law of a different state,” Harris Corp. v. Comair, Inc., 712 F.2d 1069, 1071 (6th Cir.1983). However, this is not our case. First, Breeding involved a relatively nonspecific designation of the applicable substantive law (“contract to be governed by the law of the state of the delivery of the policy”). Breeding, 633 S.W.2d at 719. The company, therefore, did not have a valid claim that it would be deprived of clearly ascertained and bargained-for rights if the forum state’s law were applied, since the company conducted business and delivered policies in Kentucky. Second, the insurance contract was a contract of adhesion, and a decision to apply its choice of law provision would have resulted in a substantial injustice to the insured, in direct contravention to the advice contained in Rest.2d, Conflict of Laws, § 187, comment b, which the court had already announced that it found persuasive. Finally, unlike the case at bar, the drafter of the contract in Breeding was urging the court to apply the choice of law provision, and not the law of the forum state.

Another analogous situation was described in Paine v.

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Bluebook (online)
898 F. Supp. 1198, 1995 U.S. Dist. LEXIS 13296, 1995 WL 545263, Counsel Stack Legal Research, https://law.counselstack.com/opinion/tractor-farm-supply-inc-v-ford-new-holland-inc-kywd-1995.