[SOLVED] S&P Brake Supply, Inc. v. Daimler

S&P Brake Supply, Inc. v. Daimler Trucks North America, LLC
Montana Supreme Court, 2018 MT 25, 390 Mont. 243, 411 P.3d 1264 (2018).
Background and Facts S&P Brake Supply, Inc., was the sole authorized dealer for Western Star Trucks in Yellowstone County, Montana. S&P operated its franchise under an agreement with Daimler Trucks North America, LLC. The agreement required that S&P sell a certain number of trucks in its area of responsibility (Yellowstone County). Over a three-year period, S&P sold only two trucks. Daimler advised its franchisee to use more effective marketing strategies and to hire more sales staff, among other things. The next year, primarily because of S&P’s failure to meet its sales goals, Daimler notified S&P that the franchise was being terminated. S&P objected, but the Montana Department of Justice, Motor Vehicle Division, ruled in Daimler’s favor, and a state court upheld the department’s decision. S&P appealed to the Montana Supreme Court.
In the Language of the Court
Justice Jim RICE delivered the Opinion of the Court.
S&P argues the [lower] court erred in its assessment of the [Montana Department of Justice, Motor Vehicle Division’s] determination. S&P argues that an analysis of its sales performance [should have been] restricted to evidence related to Yellowstone County.
Daimler established that S&P had failed to meet new truck sales objectives, which are set for all Western Star dealers using an algorithm that considers market factors and the population of a dealer’s area of responsibility. * * * Daimler offered its analysis of S&P’s “dealer market share,” which compared how many trucks S&P sold in its AOR [area of responsibility] to how many Western Star trucks were annually registered in Yellowstone County, to measure how well S&P was reaching and serving local customers. Of the seven Western Star trucks registered in Yellowstone County [during the last four years of S&P’s franchise,] only two had been sold by S&P, an indicator to Daimler that S&P was not well serving its market, as the majority of customers were purchasing their Western Star trucks elsewhere.
This evidence was premised upon S&P’s performance in Yellowstone County. Daimler also argued S&P’s “dealer market share” was low compared to Western Star’s “regional market share,” a factor which is compiled from national truck registration data to compare S&P’s sales performance in its AOR with Western Star’s regional performance.
While this assessment included evidence from outside the Yellowstone County franchise location, the [lower] court properly noted that limiting the evidence to only Yellowstone County would not allow a comparison to other dealers where there is only one dealer in a county, reasoning that “when only one franchisee exists in a market, expanded data must be considered. Otherwise, a lone franchisee could never be terminated.” [Emphasis added.] * * * The Department found, “The bottom line is that S&P’s sales were deficient no matter which way one analyzed the data,” and this determination was supported by substantial evidence.
Decision and Remedy; The Montana Supreme Court affirmed the judgment of the lower court. The court concluded, “The evidence focused on S&P’s performance in Yellowstone County and was properly considered.” Thus, Daimler had the grounds to terminate S&P’s franchise.
Critical Thinking
• Legal Environment: Considering that S&P was the only Western Star truck dealer in Yellowstone County, did discontinuing the franchise injure the public interest? Explain.
• Economic: The department concluded that S&P’s failure to use more effective marketing strategies and to hire more sales staff breached the franchise agreement. S&P argued that these were not material breaches because the agreement’s fundamental purpose was to sell trucks. Is S&P correct? Discuss.

Question: S&P Brake Supply, Inc. v. Daimler