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Doggett Co., LLC v. Thermo King Corp.

United States District Court, S.D. Texas, Houston Division

August 1, 2017

Doggett Company, LLC, Plaintiff,
Thermo King Corporation, Defendant.


          Stephen Wm Smith United States Magistrate Judge.

         This dispute is before the court on cross motions for summary judgment (Dkt. 50, 66).[1] Having considered the parties' submissions, argument of counsel at a hearing on June 29, 2017 and the law, defendant's motion is granted and plaintiff's motion is denied.[2]


         Defendant Thermo King manufactures transport temperature control products and sells them through a network of dealerships. Thermo King has the right under its dealership contracts to approve or deny any proposed sale of the dealerships. In 2016, Thermo King refused to approve a proposed acquisition by plaintiff Doggett Company, LLC of two Thermo King dealerships operated by Kirby Corporation in Texas.[3] According to Thermo King, Doggett would not have been a suitable dealer due to its existing business relationship with a Freightliner truck dealership.[4]

         Doggett claims that Thermo King's refusal to approve the sale violates Texas law, primarily the Fair Practices of Equipment Manufacturers, Distributors, Wholesalers, and Dealers Act (the “Dealership Act”), which limits a supplier's discretion to veto such a sale. See Tex. Bus. & Comm. Code Ann. § 57.102(d). Doggett also brings related claims for declaratory judgment, tortious interference, and injunctive relief, all of which hinge on the alleged Dealership Act violation, and a claim for state law antitrust violations.

         Summary Judgment Standards

         Summary judgment is appropriate if no genuine issues of material fact exist, and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The party moving for summary judgment has the initial burden to prove there are no genuine issues of material fact for trial. Provident Life & Accident Ins. Co. v. Goel, 274 F.3d 984, 991 (5th Cir. 2001). Dispute about a material fact is “genuine” if the evidence could lead a reasonable jury to find for the nonmoving party. In re Segerstrom, 247 F.3d 218, 223 (5th Cir. 2001). “An issue is material if its resolution could affect the outcome of the action.” Terrebonne Parish Sch. Bd. v. Columbia Gulf Transmission Co., 290 F.3d 303, 310 (5th Cir. 2002).

         A summary judgment movant who bears the burden of proof on a claim must establish each element of the claim as a matter of law. Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986). If the movant meets this burden, “the nonmovant must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial.” Littlefield v. Forney Indep. Sch. Dist., 268 F.3d 275, 282 (5th Cir. 2001) (quoting Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir. 1995)).

         If the evidence presented to rebut the summary judgment is not significantly probative, summary judgment should be granted. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50 (1986). In determining whether a genuine issue of material fact exists, the court views the evidence and draws inferences in the light most favorable to the nonmoving party. Id. at 255.

         Factual Background[5]

         In early 2016, Doggett approached Kirby about purchasing its two Texas Thermo King dealerships (the “Kirby Dealerships”).[6] On April 13, 2016, Kirby Corporation, the parent company that owns the Kirby Dealerships, signed a non-binding letter of intent providing for exclusive negotiations with Doggett.[7] The letter of intent recognized that any transaction would have to be memorialized by a definitive agreement and then approved by Thermo King. Shortly after signing the letter of intent, Doggett sent Kirby a draft Asset Purchase Agreement, but never received written comments back from Kirby and an Asset Purchase Agreement was never signed.[8]

         On May 11, 2016, Jason Robison, the Kirby Vice President in charge of dealership operations, sent an email to Dane Tiaval, a Vice President of Thermo King, advising that Kirby had been approached by a “potential buyer” and asking to set up a meeting to discuss “the potential impact on the business.”[9] Shortly thereafter, Robison informed Tiaval in a phone call that there were concerns regarding Doggett's affiliation with Freightliner.[10]Robison was aware that Thermo King's dealer agreements prohibit a dealer from having any affiliation with “(a) any trucking business; (b) any refrigerated truck or trailer body manufacturer; or (c) any refrigerated truck or trailer leasing company.”[11] Tiaval was new to Thermo King at the time and needed to speak with his boss, Ray Pittard, Thermo King President for North America and Europe, to learn more about the OEM policy.[12]

         Robison followed up with a May 18, 2016 email to Tiaval saying “Have you been able to connect with Ray on our Doggett deal?”[13] Having discussed the matter with Pittard, Tiaval told Robison on May 19 approval was not likely, but Pittard “did not draw an absolute line in the sand and say no.”[14] Robison pressed the matter on May 23 because he felt “the sooner we address any concerns TK Corp has, the better for all involved.”[15] Thermo King confirmed to Kirby on or about May 31, 2016, that Doggett could not qualify as a Thermo King dealer because of its existing Freightliner dealership.[16]

         After Thermo King and Kirby informed Doggett of Thermo King's position, Doggett refused to accept it. Doggett sent a letter on June 9, 2016 to Ray Pittard and Dane Tiaval.[17]The letter provides some self-serving general background on Leslie Doggett and his companies, but was not supported by any documentation. The letter also, without citation to any authority or explanation, says that refusing to approve a sale “in situations like this” is contrary to Texas law. The letter was signed only by Leslie Doggett, but was copied to Joe Reniers of Kirby.

         Thermo King eventually agreed to a “meet and greet” with Doggett on July 28, 2016 in North Carolina.[18] Doggett presented some additional information at the July 28 meeting, [19]but nothing that changed Thermo King's mind.[20] On August 15, 2016, Kirby told Doggett “we have no choice but to walk away from the sale of the business.”[21] On that same day counsel for Doggett sent a demand letter to Thermo King citing the Dealership Act and threatening to sue if Thermo King did not change its position.[22] Thermo King did not change its position, and this lawsuit ensued.


         A. Dealership Act Claim

         Resolution of this state-law claim requires interpretation of a statute enacted by the Texas legislature in 2011. Due to the Act's recent vintage, the Court has not found nor have the parties cited any Texas appellate court decision applying its provisions. Accordingly, this court must make an “Erie guess” and “determine as best [we] can” what the Texas Supreme Court would decide. Harris County v. MERSCORP Inc., 791 F.3d 545, 551 (5th Cir. 2015). The court's analysis is guided by general principles of statutory interpretation and common sense. See Beeman v. Livingston, 468 S.W.3d 534, 538 (Tex. 2015) (the plain meaning of the text is controlling unless a different meaning is supplied by the statutory definition, is apparent from the context, or doing so would lead to an absurd or nonsensical result).

         The overall tenor of the Dealership Act is unmistakable - equipment dealers are granted certain non-negotiable statutory rights in their relationship with suppliers. Section 1 declares that state regulation of the business relationship between independent dealers and equipment suppliers is necessary because it “vitally affect[s] the general economy of this state, the public interest, and the public welfare.” Section 1 of Acts 2011, 82nd Leg., ch. 1039 (H.B. 3079). Various subchapters of the Act address different aspects of the supplier- dealer relationship, including sale or transfer of dealerships, termination of dealership agreements, warranty claims, coerced orders, refusals to purchase, price discrimination, repurchases following cancellation or non-renewal, actions and remedies. In each instance the Act provides substantive protections to the dealer rather than the supplier, and these protections are binding and not subject to waiver. Tex. Bus. & Comm. Code Ann. § 57.003. This dealer orientation is epitomized by Subchapter I, Actions and Remedies, which authorizes a civil action by a dealer against the supplier for damages caused by the supplier's violation of the Act, but not vice versa. See Id. at § 57.401(a) (emphasis added). Nor is this statutory cause of action the dealer's exclusive remedy - the provisions of the Act “are supplemental to any dealer agreement between the dealer and the supplier that provides the dealer with greater protection.” Id. at § 57.402.

         Doggett claims that Thermo King's refusal to approve Doggett's purchase of the Kirby Dealerships violated § 57.102. In particular, Doggett claims that the basis for Thermo King's denial, i.e., that Doggett's affiliation with another trucking company violated Thermo King's OEM policy, was not a “reasonable requirement consistently imposed by the supplier” in similar dealership transactions. See § 57.102(d). Doggett points to two recent transactions in which Thermo King apparently made an exception to its OEM policy.

         While Thermo King denies that its OEM policy has been inconsistently applied, its main argument is that a condition precedent to the application of § 57.102 - a written request by the dealer - was never satisfied. The relevant portion of the Dealership Act, § 57.102(b), reads as follows:

If a supplier has contractual authority to approve or deny a request for the sale or transfer of a dealer's business or an equity ownership interest in the dealer's business, a dealer may request that the supplier approve or deny a request for the sale or transfer of a dealer's business or an equity ownership interest in the dealer's business to a proposed buyer or transferee. The dealer's request must be in writing and must include character references and reasonable financial, personal background, and work history information with respect to the proposed buyer or transferee.

(Emphasis added). If a dealer does make such a request, the supplier has 60 days to make a decision, and can deny the request only pursuant to reasonable requirements for the prospective transferee that are consistently applied. Id. at §§ 57.102(c), (d). Thermo King contends that its dealer, Kirby, never made a qualifying request for approval of the sale, and therefore the “consistently imposed requirements” provision of § 57.102(d) was never triggered.

         Doggett makes three arguments in response: (1) Section 57.102(b) allows Doggett, as a dealer and prospective transferee, to make the triggering request to the supplier; (2) Kirby satisfied the dealer request requirement by a series of May 18 emails, supplemented by Doggett's June 9 letter as well as Doggett's presentation on July 28; and/or (3) Doggett satisfied the dealer request requirement as Kirby's agent. As explained below, none of these arguments are persuasive.

         1. Request by Proposed Buyer

         This argument founders on the plain language of the Act. Section 57.102(b) plainly negates the possibility that the prospective transferee can make the triggering request for approval. The statute says that “a dealer may request that the supplier approve . . . a request for the sale or transfer of a dealer's business . . . to a proposed buyer or transferee.” (emphasis added). The syntax of this sentence is a bit unusual, but it is not ambiguous. It describes two requests: [1] “a dealer may request that the supplier approve. . . [2] a request for the sale or transfer of a dealer's business to a proposed buyer.” Request #2 could presumably be made by either the selling dealer or the prospective buyer, but that request does not trigger the statutory protection. Only Request #1 can do that, and it can only be made by a dealer, not the prospective buyer. To hold otherwise would effectively rewrite the statute.

         Doggett argues that, as the proposed transferee, it nonetheless qualifies as “a dealer” under this section because it operates dealerships with suppliers other than Thermo King, such as Freightliner. This argument does violence to the plain meaning of the Act. Read in context with the first sentence of § 57.102(b), a qualifying request can be made only by the selling dealer, that is, the dealer whose supplier has a contractual veto over any proposed sale of the dealership.[23] Because Thermo King is the only supplier whose approval is necessary for the proposed transfer of the Kirby dealerships, Kirby is the only dealer eligible to make a qualifying request. Doggett has no existing relationship with Thermo King, and whatever relationship Doggett may have with other suppliers is immaterial under the Act.[24]

         2. Kirby's ...

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