On May 11, 2023, the federal district court in Rapid City, South Dakota, concluded that the South Dakota motor vehicle dealer law did not provide an exclusive list of “good cause” franchise terminations.
Eddie’s Truck Center, Inc. (Floyd’s) and Four Open A Trucks, Inc. (Floyd’s Belgrade) filed a lawsuit against Daimler Vans USA LLC (DVUSA) and Mercedes-Benz USA, LLC (MBUSA). The plaintiffs alleged that DVUSA and MBUSA illegally terminated their franchise and services agreements without good cause under the dealer law when they ended U.S. distribution of their Sprinter model of vans (violating SDCL § 32-6B-45, a South Dakota statute governing franchise terminations for “good cause” and Mont. Code Ann. § 61-4-205(1), a Montana statute that restricts franchise terminations). Subsequently, the defendants moved for judgment on the pleadings, which, as explained below, first judgement on the pleadings as to Floyd’s claim was denied and the defendants’ second motion (as to Floyd’s Belgrade’s claim) for judgement on the pleadings was granted.
Section 32-6B-45 of South Dakota Codified Laws provides a list of eight factors that are grounds for termination of the dealership agreement. The defendants argued that the list was not exclusive and that a line-make discontinuation was “good cause” for termination of the franchise agreement as a matter of law. The court, focusing on statutory construction, found the eight factors listed in SDCL § 32-6B-45 were not exclusive due to three reasons:
- First, the language of the statute did not indicate exclusivity and previous South Dakota court decisions in similar situations supported this interpretation, treating lists of reasons or factors as non-exclusive.
- Second, an interpretation that the list was exclusive would have rendered other statutes, specifically, SDCL § 32-6B-49, redundant. The court reasoned that if the South Dakota legislature had intended that all “good cause” terminations must be among the eight circumstances listed in SDCL § 32-6B-45, a separate statute, SDCL § 32-6B-49, listing examples of when a franchisor could not terminate a dealer agreement, would be superfluous.
- Third, considering the statute as non-exclusive would avoid potential constitutional issues under the dormant commerce clause. Line-make discontinuations were common in the automotive industry and granting protection to South Dakota dealers against out-of-state automotive manufacturers terminating franchises due to line-make discontinuations could impose excessive burdens on the manufacturers, violating the dormant commerce clause.
In addition, neither party informed the court as to the terms of the franchise agreement or the grounds and procedures for termination. Without knowledge of the terms of the contract, the court could not say with certainty that the defendants were entitled to judgment as a matter of law.
As to the Floyd’s Belgrade claim, the court determined that Floyd’s Belgrade did not have a franchise agreement to sell new motor vehicles, as the Montana motor vehicle dealer law required (Mont. Code. Ann. § 61-4-217) to bring suit. Belgrade even conceded it was only authorized to service and sell parts for Sprinters. Belgrade therefore lacked standing to assert a proper claim. The court accordingly dismissed the Belgrade claim without prejudice.
Eddie’s Truck Center, Inc. v. Daimler Vans USA LLC, D.S.D