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Crossroads Ford Truck Sales, Inc v. Sterling Truck Corporation; Daimler Trucks North America

November 23, 2010

CROSSROADS FORD TRUCK SALES, INC.,
PLAINTIFF-APPELLANT,
v.
STERLING TRUCK CORPORATION; DAIMLER TRUCKS NORTH AMERICA, LLC,
D/B/A FREIGHTLINER TRUCKS AND WESTERN STAR; AND CHRIS PATTERSON, DEFENDANTS-APPELLEES.



Appeal from Circuit Court of Sangamon County No. 09L60 Honorable Patrick W. Kelley,Judge Presiding.

The opinion of the court was delivered by: Justice Turner

JUSTICE TURNER delivered the opinion of the court: In October 2009, plaintiff, Crossroads Ford Truck Sales, Inc. (Crossroads), filed a second-amended complaint against defendants, Sterling Truck Corporation (Sterling), Daimler Trucks North America, LLC (Daimler Trucks), and Chris Patterson. In December 2009, defendants filed a motion to dismiss. In February 2010, the circuit court granted the motion to dismiss in part.

On appeal, Crossroads argues the circuit court erred in dismissing portions of its second-amended complaint. We affirm.

I. BACKGROUND

Daimler Trucks is a Delaware limited-liability company and a wholly owned subsidiary of Daimler AG. Daimler Trucks is the largest heavy-duty truck manufacturer in North America and manufactures various brands of trucks including Freightliner, Western Star, and Sterling. Sterling is a Delaware corporation licensed to do business in Illinois and a wholly owned subsidiary of Daimler Trucks. Chris Patterson is the chief executive officer of Daimler Trucks and president of Sterling. Detroit Diesel Corporation (Detroit Diesel) is a subsidiary of Daimler AG and engaged in the business of manufacturing engines and parts installed in Sterling, Freightliner, and Western Star trucks.

Crossroads is a motor vehicle dealer and has been a Sterling dealer since 1998. Sterling and Crossroads entered into a sales and service agreement on August 20, 2005. Under the agreement, Crossroads was granted the right to purchase Sterling trucks and vehicle parts. Sterling "reserve[d] the right to discontinue at any time the manufacture or sale of any or all Sterling Trucks Products or to change the design or specification for Sterling Trucks Products without prior notice to [Crossroads]." The agreement was to continue in effect until December 31, 2009.

In February 2009, Crossroads filed a complaint against defendants, alleging, inter alia, violations of the Motor Vehicle Franchise Act (Franchise Act) (815 ILCS 710/1 through 32 (West 2008)), fraud, and tortious interference with contract. In April 2009, defendants filed a motion to dismiss pursuant to section 2-615 of the Code of Civil Procedure (Procedure Code) (735 ILCS 5/2-615 (West 2008)). In June 2009, the circuit court ordered the complaint stricken and granted Crossroads 30 days to file an amended complaint.

In July 2009, Crossroads filed a first-amended complaint setting forth the same or similar issues. In August 2009, defendants filed a section 2-615 motion to dismiss. In September 2009, the circuit court granted the motion in part and allowed Crossroads to file a second-amended complaint.

In October 2009, Crossroads filed a 14-count second-amended complaint against defendants. In count I, Crossroads alleged Sterling violated various sections of the Franchise Act. Crossroads alleged Patterson notified it in an October 14, 2008, letter that Daimler Trucks was announcing a "two brand strategy" with the discontinuation of production of Sterling trucks. The letter to Sterling dealers stated, in part, as follows:

"The Sterling Trucks Brand and product line will be discontinued due to overlap with offerings in the other [Daimler Trucks] product lines and low market penetration. Dealers may continue to accept orders for new Sterling Trucks until January 15, 2009[,] with requested delivery no later than Friday[,] March 31, 2009. The last day of production will be March 26, 2009.

The Sterling dealer network will continue to perform warranty repairs and maintenance, and continue to supply parts and technical support to Sterling customers."

To continue as a Sterling service-only dealership, the letter set forth a transition program that provided, in part, as follows:

"[Daimler Trucks] will offer you the opportunity to continue on as a Sterling service dealership under a new Sterling Service Dealer Agreement. This new Service Dealer Agreement will replace the existing Sterling Dealer Sales and Service Agreement. As part of the transition process you will receive a formal notice of termination of your Sales and Service Agreement in the coming weeks.

As an added incentive to stay with

Daimler Trucks as a service dealer, and in recognition of your past commitment, Sterling is offering substantial transition payments to those current Sterling dealers who sign on to become authorized Sterling Service Dealers."

If Crossroads accepted the offer to participate in the transition bonus program, it was required to sign a release of liability. Daimler Trucks offered Crossroads $203,000 as a transition bonus.

If Crossroads chose not to participate in the transition bonus program and thereby not continue as a service dealer, it would be offered repurchase assistance. The letter also provided as follows:

"Following termination of the Sales and Service Agreement, if you do not otherwise sell new OEM product with Detroit Diesel engines, you will not be entitled to a re- newal of your Detroit Diesel Direct Dealer Agreement, which is currently set to expire on December 31, 2008."

Also on October 24, 2008, Daimler Trucks filed an announcement with the Securities and Exchange Commission noting the discontinuation of the Sterling trucks product line.

"The Sterling Trucks brand will be discontinued effective in March 2009. Additions to the Freightliner and Western Star product ranges will be made to address market segments that have been served exclusively by Sterling offers in the [Daimler Trucks] stable."

On November 24, 2008, Daimler Trucks sent the following letter to Crossroads:

"As stated in the October 14, 2008[,] communications, this letter is your formal notice that [Sterling] is exercising its rights pursuant to [s]section IX.B of your Sterling Trucks Dealer Sales and Service Agreement (the 'Dealer Agreement') to discontinue the manufacture of Sterling Truck vehicles.

As we have previously communicated, [Sterling] will continue to manufacture new Sterling vehicles until March 2009 and we expect the last day to place an order for a new Sterling Truck to be built will be January 15, 2009. However, Sterling trucks will continue to be marketed and sold for so long as new Sterling vehicles are available.

You have been provided an opportunity to transition from your Dealer Agreement to a new Service Agreement. In the event you do not accept this opportunity, your current Sales and Service Agreement remains in effect.

This notice does not constitute a notice of termination or modification of your Dealer Agreement, because you may elect to continue operating under your current Dealer Agreement.

While we believe no formal notice is required under your state's dealer laws, if you feel otherwise, please consider this that notice. Likewise no notice is required to be sent to your state's licensing department, but they have also been copied on this letter to ensure total communication."

Crossroads alleged the October and November 2008 letters amounted to a constructive notice of impending termination or non-renewal of its franchise "at an unspecified date in the future when Crossroads would be unable to acquire new Sterling trucks." Crossroads alleged this violated the Franchise Act, including section 4(b) (815 ILCS 710/4(b) (West 2008)), because Sterling's conduct was in bad faith and caused damages; section 4(d)(6) (815 ILCS 710/4(d)(6) (West 2008)), because Sterling caused the termination or non-renewal of the franchise without good cause; section 4(d)(1) (815 ILCS 710/4(d)(1) (West 2008)), because Sterling arbitrarily or capriciously modified the plan of allocation of new Sterling trucks to Crossroads causing it damages; section 4(d)(6)(A) (815 ILCS 710/4(d)(6)(A) (West 2008)), because Sterling without good cause failed to provide Crossroads with statutory notice of termination or non-renewal; and section 9 (815 ILCS 710/9 (West 2008)), because Sterling has terminated or failed to renew the franchise without paying fair and reasonable compensation to Crossroads for the value of the business and franchise.

Count II alleged Daimler Trucks violated various sections of the Franchise Act, including sections 4(b), 4(d)(6), 4(d)(1), 4(d)(6)(A), and 9. Count III alleged Patterson violated section 4(d)(6) of the Franchise Act for terminating the franchise without good cause.

Count IV alleged Daimler Trucks violated section 4(b) of the Franchise Act by intentionally requiring Crossroads to invest in Sterling products at a time when Daimler Trucks personnel knew it planned to discontinue the manufacture of new Sterling-type trucks under the Sterling brand.

Count V alleged Daimler Trucks tortiously interfered with Crossroads' business relationship with Sterling. Crossroads alleged its franchise and section 4(d)(6) of the Franchise Act created a reasonable expectation of a continuing valid business relationship between it and Sterling that would not be terminated absent good cause. Count V alleged the October 2008 letter interfered with and caused the termination and/or non-renewal of the franchise with Sterling without good cause resulting in damages to Crossroads through the loss of the franchise and loss of business and reputation.

Count VI alleged Daimler Trucks violated sections 4(d)(6), 4(b), and 4(d)(4) of the Franchise Act as a result of the non-renewal of Crossroads' Detroit Diesel direct dealer agreement. Crossroads alleged the dealer agreement allowed it to purchase parts needed in the warranty work and nonwarranty repair and maintenance of ...


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