United States District Court, W.D. Washington, Seattle
ORDER GRANTING PARTIAL SUMMARY JUDGMENT
JAMES L. ROBART, District Judge.
This matter comes before the court on Plaintiff Volvo Construction Equipment North America, LLC's ("Volvo") motion for partial summary judgment. ( See Mot. (Dkt. # 40).) This case arises from Volvo's termination of its construction equipment dealer, Defendant Clyde/West, Inc. ("Clyde"). Having considered the submissions of the parties, the balance of the record, and the relevant law, and no party having requested oral argument, the court GRANTS Volvo's motion for partial summary judgment.
Clyde has been a dealer of Volvo's heavy construction equipment in Washington, Oregon, and Idaho since 2002. (Gibson Decl. (Dkt. # 41) ¶ 2.) In general, there are three segments of heavy construction equipment: general purpose production equipment; road equipment; and compact equipment. (Tuholsky Dep. 1 (Dkt. # 68-4) 49:16-23.) Originally, Clyde sold only Volvo's general purpose production and compact equipment; today, it sells all three categories. (McConnell Decl. (Dkt. # 69) ¶ 6.) As such, Clyde's inventory includes equipment such as backhoe loaders, excavators, motor graders, pipe layers, and pavers. ( See Gibson Decl. ¶ 7.)
Beginning in 2005, Volvo grew increasingly concerned that Clyde's share in the Washington market for construction equipment was inadequate and that Clyde was undercapitalized. ( See Volvo 2005 Emails (Dkt. ## 72-1, 72-2); Tuholsky Dep. 2 (Dkt. # 73-1) 62:6-64:10.) Based on these concerns, in 2007, Volvo asked Clyde to sell its dealership. (McConnell Decl. ¶ 14.) Clyde contends that this request was unwarranted because it had increased revenues substantially since becoming a Volvo dealer. ( Id. ¶ 11.) Nonetheless, from 2007 through 2009, Clyde engaged in negotiations with various entities, including Volvo's Alaska dealer, to arrange a sale. ( Id. ¶ 15; see also Resp. at 6.) Even with Volvo's assistance, however, Clyde was unable to finalize a sale. ( See McConnel Decl. ¶¶ 15-20, Exs. G-J (emails between the parties to the negotiation).)
Accordingly, in 2010, Volvo and Clyde entered into a revised franchise agreement for each of Clyde's Washington, Oregon, and Idaho territories. (McConnell Decl. ¶ 22.) Overall, this transaction granted Clyde the right to sell road equipment, consummated Clyde's acquisition of certain road equipment assets, and mutually settled and released the parties' claims. ( Id. ¶ 22, Ex. N ("Asset Purchase Agreement"), Ex. P (settlement and release of claims).) Because Volvo had complained about Clyde's market share in the past, Clyde endeavored to insert into the agreements limitations on the way Volvo would impose its market share requirements going forward. (McConnell Decl. ¶ 22; see also Asset Purchase Agreement ¶ 3.18.)
The revised Washington agreement ("Agreement") contains a series of termination provisions that are applicable in different situations. ( See Agreement (Dkt. # 41-1) ¶¶ 7.1, 22.) First, Section 7.1 provides that either party may terminate the Agreement with 180 days notice:
This Agreement shall become effective on the date first set forth above (the Effective Date") and, unless sooner terminated by either party as provided herein, shall continue for an indefinite period, provided that the Agreement may be terminated by either party during such indefinite period upon one hundred and eighty (180) days advance written notice.
( Id. ¶ 7.1.)
Next, Section 22 sets forth the parties' options for terminating the Agreement when a breach has occurred. In general, Section 22.1 provides that, if either party breaches the Agreement, the other party "may" give the breaching party written notice and 60 days to cure, at the end of which time, the non-breaching party may terminate the contract immediately. ( Id. ¶ 22.1) Certain breaches, however, are exempt from Section 22.1. ( Id. ) Specifically, Section 22.2 applies when the dealer fails to maintain the market shares specified in the Agreement. ( Id. ¶ 22.2). Section 22.2 provides in relevant part:
[B]y giving written notice to Dealer, Volvo may terminate this Agreement should the Dealer (i) fail to achieve and maintain the market shares referred to in Section 6; or (ii) consistently fail to order to stock sufficient inventory to achieve such market shares... and the Dealer shall have failed to remedy either default within one hundred eighty (180) days after written notice from Volvo, or a second such default shall have occurred within a one (1) year period.
( Id. ¶ 22.2).
In October 2012, Volvo sent Clyde a notice terminating the Agreement pursuant to Section 7.1. (Term. Letter (Dkt. # 41-2) ("Pursuant to paragraph 7.1 of the March 12, 2010 Dealer Agreement... you are hereby notified that Volvo is exercising its right to terminate the Agreement effective 180 days from the date of this ...