Victory in Chicago Federal Court for Manufacturers Consolidating Distribution Systems

    RICHMOND, Va.--Oct. 2, 2001--On behalf of the Volvo Construction Equipment Group, the Franchising & Distribution Practice Group of the law firm of Hunton & Williams has secured an important victory in federal court in Chicago.
    The case involved claims for wrongful termination brought by several former dealers in the case of Cromeens, Holloman, Sibert, Inc., et al. v. AB Volvo, et al. (the "Samsung Dealer Litigation"). The victory came in the form of a grant of summary judgment in favor of Volvo Construction on all counts of the plaintiffs' complaint -- notwithstanding the fact that the dealers were represented by one of the leading plaintiffs' franchisee law firms in the country.
    "The court affirmed that franchise and dealer contracts mean what they say," said Mike Lockerby, the Hunton & Williams partner responsible for representing the Volvo Construction Equipment Group. "The court rejected this latest effort by plaintiffs' lawyers to have juries rewrite contracts after the fact to make them more favorable to the franchisee or dealer."
    "The court also rejected plaintiffs' efforts to get around the plain language of the written contracts by asserting tort claims," Lockerby said. "Rather than waiting until the end of the case to rule, the court allowed Volvo Construction to have these legal issues decided before the cost and burden of lengthy discovery."
    The Samsung Dealer Litigation resulted from the 1998 acquisition by the Volvo Construction Equipment Group of the heavy construction equipment business of Samsung Industries in Korea. Following the acquisition, SAMSUNG excavators underwent a "Volvoization" process whereby the product design was modified to better reflect the Volvo core values of quality, safety, and the environment. At the end of 1999, the manufacture of SAMSUNG brand excavators was discontinued. Thereafter the "Volvoized" excavators were introduced under the VOLVO trademark.
    As part of that "Volvoization" process, Volvo also sought to "rationalize" its distribution network. That process consisted of determining which dealer -- either the preexisting Samsung dealer or the preexisting Volvo Construction dealer -- would best meet the needs of Volvo Construction's customers in the territory.
    The plaintiffs in the Samsung Dealer Litigation were former Samsung dealers from Texas, Maine, Saskatchewan, Alberta, Montana, and New York that had been terminated as part of the rebranding and consolidation. The dealers contended that they were promised by Samsung as follows: "do the job, keep the line." In other words, the Samsung Dealers contended that they were entitled to exclusive distribution rights unless they failed to meet quota or other performance obligations.
    In response to the plaintiffs' arguments, Volvo Construction argued that the written terms of the Samsung Dealer Agreements allowed termination without cause and were non-exclusive. Volvo Construction's argument was complicated by the fact that several of the written contracts had expired before the plaintiffs were sent notice of termination. The plaintiffs thus contended that the parties' relationships were governed not by the written Samsung Dealer Agreements but rather by alleged oral promises and "course of dealing." Nevertheless, the court found that the terms of the written contracts were controlling.
    The plaintiffs had also argued that the written Samsung Dealer Agreements were "trumped" by the implied duty of good faith and fair dealing, various tort claims, and various state franchise and dealership laws. Notwithstanding these efforts, the court granted summary judgment in favor of Volvo Construction on all counts of the plaintiffs' complaint. A copy of the court's ruling is available on the Internet under the heading "Case Decisions" on the web site www.franchisinganddistributionlaw.com. Mr. Lockerby was assisted by associates Kimberley A. Isbell in Richmond and Nash E. Long III in Charlotte.
    Hunton & Williams is a full service international law firm with more than 750 lawyers in 12 offices worldwide. Its technological and other capabilities allow Hunton & Williams to function as a "virtual law firm" wherever franchising and distribution companies and other clients need legal services.