Manufacturer cancels dealer franchise: Violation of dealer protection statute: Lost business profits: Verdict: Punitive damages

Law Reporter, Apr 2003

Diesel Mach., Inc. v. BR. Lee Indus., Inc., U.S. Dist. Ct., D.S.D., No. CIV 01-4178, Nov. 12, 2002.

Diesel Machinery, Inc. (DMI), is a dealer of heavy construction equipment. B.R Lee Industries (LeeBoy) manufactures asphalt paving equipment. In November 2000, DMI and LeBoy entered into an agreement under which DMI would sell LeeBoy's equipment. Within the first several months of the agreement, DMI sold two LeeBoy pavers-more than the previous dealer had sold in a fiveyear period. In July 2002, LeeBoy canceled DMI's franchise without giving notice.

DMI sued LeeBoy under South Dakota's dealer protection law, S.D. Codified Laws 37-5-3-under which a manufacturer's cancellation of a franchise without just cause is a misdemeanor-and 37-5-4, which provides a civil remedy for unjust cancellation. Plaintiff claimed about $1.3 million in lost profits over a 10-year projection period.

Defendant contended that plaintiff had failed to mitigate when it declined an offer of reinstatement tendered approximately two months after the termination, and when it failed to find a replacement supplier of equipment. Defendant also claimed that plaintiff's ten-year projection period was too long, and that plaintiff had incorrectly calculated and overstated damages.

A jury awarded a verdict of $5 million. Of this amount, $665,000 was for lost profits and almost $4.34 million was for punitive damages. Defendant has filed a motion for a new trial and a notice of appeal.

Defendant's expert on lost profits/mitigation of damages was Bruce W. Burton, Chicago, Ill.

Plaintiffs Counsel

*Michael P. Healy, Kansas City, Mo.

Documents in this case are available through the Court Document Sets section in the back of this issue, courtesy of Mr. Healy.