Resolving Disputes between Manufacturers and Distributors/Dealers

Since at least the last half of the 20th century, manufacturers of consumer goods typically have gotten their products to the end user in the U.S. via independent distributors and dealers or franchisees. Usually the manufacturers are larger companies while the others are smaller entities. They all have a community of interest in promoting the sales of the products at the highest prices with the greatest profits. But there also is a constant tension and friction between them and the potential for disputes. This is at its worst when the manufacturer terminates the distributor or dealer or franchisee.

I frequently was the attorney for the manufacturer in such termination cases. I successfully represented Chrysler Motors Corporation against a terminated Duluth dealer and Benjamin Moore & Company against a terminated St. Paul distributor.[1] I also was able to obtain judicial reduction of adverse results against a manufacturer and a franchisor that had been represented by other counsel.[2] Three of these four cases started in Minnesota’s federal court (Post: Minnesota’s Federal Court (June 28, 2011).

In addition, I helped to settle other such cases. One was for a Canadian manufacturer of snowmobiles. Another, for a U.S. manufacturer of farm equipment. Both of these cases were in Minnesota’s federal court.

Another type of dispute erupted between Chrysler and its Dodge dealer in St. Paul over the planned relocation of another Dodge dealer from East Lake Street in Minneapolis (the automobile row of the early 20th century) to Roseville, a suburb between the Twin Cities. Under a Minnesota statute that sought to protect existing dealers, the St. Paul dealer sued to block the relocation. The trial court, however, decided in favor of Chrysler, and the appellate court affirmed that result.[3]

Because of the costs and risks of such litigation and because of my interest in Alternative Dispute Resolution, I helped other lawyers in the firm draft dispute resolution provisions for various agreements, including distribution agreements.

Often such provisions would first call for mediation where a neutral third-party assists the disputants in trying to settle their disputes. This was my preferred dispute resolution method because it empowered the parties themselves to settle their disputes, because it opened the way for creative solutions that were not possible in court or in arbitration and because it was the least expensive option. Only if mediation failed, would such a contractual provision call for submitting the dispute to arbitration under one of several general sets of arbitration rules where the arbitrator resolves the dispute. Arbitration was preferred to court litigation because the former eliminated the expensive pre-trial discovery and other processes of the latter and because the parties participated in selecting the arbitrator who was seen as a safer decider than an unknown judge or jury.

From the outside these disputes took the form of a large corporation versus a small corporation. But human beings were involved on both sides. The executives of the manufacturer had made decisions they thought were fully justified, and their careers and compensation conceivably could be affected by the resolution of the conflict. The same was true of those on the other side. Moreover, emotions often were intense in such quasi-divorce situations. In one case, the owner of the dealership sued his own lawyer over the settlement of his case against the manufacturer. Later that owner killed his girl friend and was acquitted on the grounds of insanity. I was worried because he might view me as part of the conspiracy against him.


[1] Piccard Motor Co. v. Chrysler Motors Corp., 940 F.2d 1163 (8th Cir. 1991)(held Minnesota statute requiring manufacturer to pay terminated dealer one-year’s fair rental value of facilities did not apply to dealer that owned the facilities); Elvgren Paint Supply Co. v. Benjamin Moore & Co., 948 F.2d 1082 (8th Cir. 1991)(affirmance of summary judgment for manufacturer’s termination of an at-will distributor).

[2] W.K.T. Distributing Co. v. Sharp Electronics Corp., 746 F.2d 1333 (8th Cir. 1984)(remand to trial court to reconsider award of $300,000 damages); W.K.T. Distributing Co. v. Sharp Electronics Corp., 786 F.2d 898 (8th Cir. 1986)(noting trial court’s reduction of damages from $300,000 to $85,000 after remand, but refusing to make further reduction); Team Central, Inc. v. Teamco, Inc., 271 N.W.2d 914 (Iowa Sup. Ct. 1978)(en banc reduction of adverse judgment from $2,550,000 to $1,500,000).

[3] Wilkins Dodge, Inc. v. Chrysler Corp., 426 N.W.2d 903 (Minn. Ct. App.), pet. for review denied (Minn. Sup. Ct. 1988).

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As a retired lawyer and adjunct law professor, Duane W. Krohnke has developed strong interests in U.S. and international law, politics and history. He also is a Christian and an active member of Minneapolis’ Westminster Presbyterian Church. His blog draws from these and other interests. He delights in the writing freedom of blogging that does not follow a preordained logical structure. The ex post facto logical organization of the posts and comments is set forth in the continually being revised “List of Posts and Comments–Topical” in the Pages section on the right side of the blog.

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