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S & P Brake Supply, Inc. v. Daimler Trucks North America, LLC

Supreme Court of Montana

February 13, 2018

S & P BRAKE SUPPLY, INC., Petitioner and Appellant,

          Submitted on Briefs: November 15, 2017

         APPEAL FROM: District Court of the Thirteenth Judicial District, In and For the County of Yellowstone, Cause No. DV-15-0788 Honorable Rod Souza, Presiding Judge

          For Appellant: Michael F. McGuinness, Patten, Peterman, Bekkedahl & Green, PLL C;

          For Appellee: Marcia Davenport, Crowley Fleck, PLLP; Helena, Montana

          Roberta F. Howell, Foley & Lardner; Madison, Wisconsin



         ¶1 S & P Brake Supply, Inc. (S&P) appeals from the order upon judicial review entered by the Thirteenth Judicial District Court, Yellowstone County, which affirmed the Final Decision of the Department of Justice that approved, upon good cause, termination of S&P's franchise agreement with Appellee Daimler Trucks North America, LLC (Daimler). We affirm, and address the following issue:

Did the District Court err by affirming the final agency determination of good cause to terminate the franchise agreement?


         ¶2 S&P is a brake remanufacturing business that also sells trailers. In 2000, S&P became an authorized dealer of Western Star Trucks. Western Star is a "high-end" brand of semi-trucks. S&P operated its Western Star franchise under the name Rocky Mountain Western Star, subject to a Dealer Agreement (the Agreement) with Western Star's parent company, Daimler.

         ¶3 Under the Agreement, S&P was authorized to purchase Western Star semi-trucks and their components at a reduced price for resale, and sell and service Western Star products under manufacturer warranty. The Agreement permitted S&P to continue its other business interests, but required S&P to make its best effort as a franchisee to maximize the sale of Western Star trucks in the franchisee's designated area of responsibility (AOR), which was Yellowstone County, Montana. The Agreement was supplemented each year with an Annual Operating Requirement Addendum (AORA), which provided minimum sale and service targets for S&P.

         ¶4 Between 2009 and 2013, S&P sold a total of 11 Western Star trucks and averaged $400, 000 in parts and service sales each year. Only two of the trucks in that period were sold in Yellowstone County. In April 2012, Daimler sent S&P a letter identifying deficiencies under its franchise that needed to be corrected, including failure to adequately promote and sell Western Star trucks, failure to hire necessary personnel, and failure to submit required financial statements.

         ¶5 In September of 2013, Daimler, pursuant to the Montana Dealer Act, served S&P and the Montana Department of Justice, Motor Vehicle Division (Department), with notice of its intention to terminate the Agreement and S&P's franchise. S&P filed an objection with the Department, asserting that Daimler did not have good cause to terminate the franchise, as required by the Act.

         ¶6 In January 2015, a contested case hearing on Daimler's proposed termination of S&P's franchise was conducted before Department Hearing Officer Sarah M. Clerget. Hearing Officer Clerget issued finding of facts, conclusion of laws, and a proposed order that concluded Daimler had good cause to terminate S&P's Western Star franchise. S&P filed exceptions and, after receiving oral arguments from the parties, the Department issued a Final Decision that adopted the proposed order.

         ¶7 S&P filed a petition for judicial review of the Department's decision in the District Court, which affirmed the Department's Final Decision. S&P appeals, arguing that the District Court erred by determining that Daimler met its burden to prove good cause for termination of the franchise agreement.


         ¶8 Pursuant to the Montana Administrative Procedure Act, a district court's review of an agency decision is confined to the record. Section 2-4-704(1), MCA. "The court may not substitute its judgment for that of the agency as to the weight of the evidence on questions of fact." Section 2-4-704(2), MCA. A "court may reverse or modify the decision if substantial rights of the appellant have been prejudiced" because:

(a) the administrative findings, inferences, conclusions, or decisions are:
(i) in violation of constitutional or statutory provisions;
(ii) in excess of the statutory authority of the agency;
(iii) made upon unlawful procedure;
(iv) affected by other error of ...

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