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Scholl's 4 Season Motor Sports, Inc., An Illinois Corporation v. Illinois Motor Vehicle Review Board

September 8, 2011

SCHOLL'S 4 SEASON MOTOR SPORTS, INC., AN ILLINOIS CORPORATION,
PLAINTIFF-APPELLANT,
v.
ILLINOIS MOTOR VEHICLE REVIEW BOARD;
TERRENCE M. O'BRIEN, CHAIRPERSON OF MOTOR VEHICLE REVIEW BOARD; ARCTIC CAT SALES, INC., A MINNESOTA CORPORATION, DEFENDANTS-APPELLEES.



Appeal from the Circuit Court of Cook County No. 10 CH 11682 Honorable Sophia H. Hall, Judge Presiding.

The opinion of the court was delivered by: Justice Sterba

JUSTICE STERBA delivered the judgment of the court, with opinion.

Presiding Justice Lavin and Justice Salone concurred in the judgment and opinion.

OPINION

¶ 1 The instant appeal arises from the termination of two franchise dealership agreements between Arctic Cat Sales, Inc. (Arctic Cat), a manufacturer of all-terrain vehicles (ATVs) and snowmobiles, and Scholl's 4 Season Motor Sports, Inc. (Scholl's), a franchise dealer which exclusively sold Arctic Cat-brand ATVs, snowmobiles, parts, clothing and accessories. After receiving a notice of termination letter from Arctic Cat, Scholl's timely filed a notice of protest with the Illinois Motor Vehicle Board (Board), alleging termination would violate sections 4(d)(6) and 10.1 of the Illinois Motor Vehicle Franchise Act (815 ILCS 710/4(d)(6) (West 2008)). In response, Arctic Cat moved to dismiss Scholl's notice of protest. A Board hearing officer issued a proposed decision granting Arctic Cat's motion. The Board confirmed the hearing officer's decision. Scholl's then filed a complaint for administrative review with the circuit court of Cook County, which affirmed the Board's final order. For the following reasons, we affirm.

¶ 2 I. BACKGROUND

¶ 3 Scholl's, an Illinois corporation, and Arctic Cat, a Minnesota corporation, began their business relationship in 1982. Scholl's sold Arctic Cat ATVs and snowmobiles pursuant to two separate dealer agreements for the two vehicle types. Scholl's and Arctic Cat executed the most recent ATV dealer agreement on August 1, 2006. The termination provision stated that the agreement "may be terminated at any time" by Arctic Cat, "upon 10 days written notice to Dealer in the event any sums owed [Arctic Cat] are not paid by Dealer when due, provided that all such sums are not paid to [Arctic Cat] within this 10 day period." Arctic Cat and Scholl's executed a similar agreement for snowmobiles on July 7, 2007, which included an identical termination provision.

¶ 4 An ongoing dispute between Scholl's and Arctic Cat arose regarding Arctic Cat's discount program. Scholl's maintained that the discount program was impracticable. On the one hand, Scholl's needed to participate in the discount program to offer competitive prices, but on the other hand, the terms of the program resulted in onerous interest charges that precluded Scholl's from profitably selling Arctic Cat's products.

¶ 5 On July 18, 2008, counsel for Scholl's sent a correspondence to Christopher Twomey, chairman and chief executive officer of Arctic Cat, stating that Scholl's "is laden with more than twice as much inventory as it can handle; and the floor plan interest is literally driving this dealer out of business." In addition, the correspondence stated, "[i]f this results in closing the doors, I have been authorized to take all necessary legal action to recover the tremendous losses my client has and will suffer based on your company's representatives' misrepresentations both verbal and in writing; discrimination amongst dealers, violations of the [Motor Vehicle Franchise Act] and the possible misrepresentation of sales to coax dealers into purchasing more product, all of which inures Arctic Cat and the finance company, and leaves the dealer in the hole." The correspondence also stated that "it would be mutually beneficial to find a solution, rather than engage in protracted litigation."

¶ 6 By its counsel, Arctic Cat sent a response correspondence on August 14, 2008, stating that it "disagrees with most of the statements made in that letter" and that "Arctic Cat did pick up 28 snowmobiles in November or December 2007." The correspondence stated that, since then, Arctic Cat "has continued to encourage [Scholl's] to increase its efforts to retail product." The correspondence further stated that, "[i]n response, [Scholl's] has requested that Arctic Cat either discount the product or pick up more product, which Arctic Cat has repeatedly not agreed to do." The correspondence stated that, "[e]ach dealer makes its own determinations of the number of Arctic Cat units it orders" and that "[e]ach dealer is responsible for the retail of its product." In addition, the correspondence stated that, "Arctic Cat remains willing to work with Scholl's on programs to assist with the retail of the product."

¶ 7 On August 18, 2009, Ann Joppru, credit manager for Arctic Cat, sent a notice of termination letter to Scholl's, which stated as follows:

"A review of your file indicates that you are indebted to Arctic Cat Sales, Inc. in the sum of $75,073.03. Arctic Cat Sales, Inc. has attempted to collect a sum from you for quite some time.

Pursuant to your Arctic Cat Sales, Inc. Dealer Agreement, we hereby notifying [sic] you that you have ten (10) days in which to pay all sums due Arctic Cat in full. If you fail to make the payment due within ten (10) days, Arctic Cat Sales, Inc. Dealer Agreement will terminate as of that time."

¶ 8 In response, Scholl's filed a notice of protest with the Board on August 27, 2009, within 10 days of receiving Arctic Cat's notice of intent to terminate. The form provided by the Illinois Secretary of State's office for the notice of protest provides that the only violations to be heard by the Board are those specified and marked by the party filing the notice of protest. Scholl's specified that Arctic Cat committed alleged violations of section 4(d)(6) of the Motor Vehicle Franchise Act (815 ILCS 710/4(d)(6) (West 2008)), as permitted by section 10.1(d) of the Motor Vehicle Franchise Act (815 ILCS 710/10.1(d) (West 2008)). Section 4(d)(6) of the Motor Vehicle Franchise Act requires 60 days notice prior to termination of a dealer agreement. Section 10.1(d) of the Motor Vehicle Franchise Act states that "[t]he filing of a timely protest by a motorcycle franchise before the [Board] as prescribed by Sections 12 and 29 of this Act, shall stay the effective date of a *** termination." 815 ILCS 710/10.1(d) (West 2008). The record is devoid of evidence that the Board issued a stay of the effective termination date pursuant to section 10.1(d) of the Motor Vehicle Franchise Act and the Board concedes in its response brief that it did not issue an order staying the effective termination date of the franchise agreement.

According to Scholl's, within days of filing its notice of protest, its dealer agreements with Arctic Cat were terminated.

¶ 9 Scholl's requested a hearing under sections 12 (815 ILCS 710/12 (West 2008)) and 29 (815 ILCS 710/29 (West 2008)) of the Motor Vehicle Franchise Act. In a correspondence addressed to Secretary of State Jesse White, Scholl's alleged that Arctic Cat's termination was premature and in bad faith.

¶ 10 On September 2, 2009, the Board notified Arctic Cat that Scholl's had filed a notice of protest. The correspondence stated that the documentation relevant to the notice of protest was forwarded to the chairman of the Board for his disposition and that, if the chairman agreed the matter should be scheduled for hearing, Arctic Cat would be notified of said hearing.

¶ 11 Arctic Cat moved to dismiss Scholl's notice of protest on October 13, 2009. In its motion, Arctic Cat noted that, in the notice of protest, Scholl's marked the box on the form that alleged a violation of section 10.1 of the Motor Vehicle Franchise Act. Arctic Cat argued that section 10.1 extends the protections of the Motor Vehicle Franchise Act to motorcycle dealerships and, therefore, Scholl's was seeking relief under the Motor Vehicle Franchise Act as a motorcycle dealer. Arctic Cat's motion provided the definition of "motorcycles" under the Motor Vehicle Franchise Act:

"As used in this Section, 'motorcycle' means every motor vehicle having a seat or saddle for the use of the rider and designed to travel with 3 or less wheels in contact with the ground, excluding farm, garden, and lawn equipment, and ...


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