Retailer says exclusive deal was wrongfully terminated

Where the exclusive dealer for wood-chipping equipment in Virginia alleged it was terminated without a reasonable opportunity to cure the alleged performance deficiencies and for reasons beyond its control, its statutory and breach of contract claims survived the manufacturer’s motion to dismiss.

Background

Since 2013, Chipper Pro was the exclusive Virginia dealer of Bandit Industries Inc.’s wood-chipping equipment. But in 2020, its inventory of Bandit’s equipment began to decline, because of Bandit, according to Chipper Pro.

In early 2021, Bandit notified Chipper Pro of its intent terminate its status as Bandit’s dealer for failing to maintain sufficient inventory. While the notice gave Chipper Pro 60 days to cure the alleged deficiencies, Chipper Pro alleges that within 30 days Bandit already had contacted all of Chipper Pro’s customers to tell them that Leslie Equipment Company was its new exclusive dealer in Virginia.

Chipper Pro filed this suit against Bandit and Leslie, both of which have filed motions to dismiss.

Heavy Equipment Dealers Act

Bandit has moved to dismiss Chipper Pro’s Heavy Equipment Dealers Act, or HEDA, claim, arguing that it failed to plead facts sufficient to establish that Chipper Pro is a “dealer” under the statute. That requires Chipper Pro to plead that it “customarily maintains a total inventory, valued at over $250,000, of new heavy equipment and attachments and repair parts therefor.”

In the three years preceding Bandit’s termination of the agreement, over half the time Chipper Pro maintained over $400,000 in inventory. While Bandit argues that Chipper Pro’s inventory levels from recent years should weigh more heavily in considering whether Chipper Pro “customarily” had over $250,000 in total inventory, Chipper Pro has alleged that Bandit effectively caused Chipper Pro’s lack of inventory in 2020. HEDA’s statutory scheme would be undermined if a supplier could render a dealer unable to invoke its protections by cutting off the regular sale of equipment.

At bottom, Chipper Pro included substantial, detailed factual allegations on this issue, supported by tables and evidence showing precise monthly inventory levels over multiple years, many of which were for well above the $250,000 floor.

Equipment Dealers Protection Act

Bandit has moved to dismiss Chipper Pro’s claim under Virginia’s Equipment Dealers Protection Act, or EDPA. First, Bandit argues that Chipper Pro has failed to sufficiently allege the existence of an “agreement” under EDPA. Under the EDPA, however, an agreement can be an “oral contract or agreement between a dealer and a … manufacturer.” That is just what Chipper Pro alleged here.

Bandit further contends that Chipper Pro has failed to allege that the termination of their agreement was “without good cause” under the EDPA. The court disagrees. Chipper Pro alleged that it was fulfilling its obligations under their agreement, but nonetheless, Bandit sought to make certain “dealership/territory changes,” reasonably indicating that a decision had already been made at that point to change to Leslie as the new, exclusive distributor of Bandit machinery and acting on that decision even before the end of the right to cure period.

Bandit’s argument that Chipper Pro “has not alleged facts to support the allegation that Bandit violated the EDPA’s notice and right to cure requirements” is similarly unpersuasive. Finally, Bandit argues that Chipper Pro has not adequately pleaded that Bandit terminated their agreement based on “circumstances beyond Chipper Pro’s control.” But allegations in the complaint concerning the conduct underlying Bandit’s decision to terminate Chipper Pro plausibly establish this element.

Breach of contract

Bandit’s arguments that Chipper Pro has not stated a claim for breach of contract largely track its arguments whether Chipper Pro sufficiently pleaded an agreement under the EDPA. They are denied for the same reasons.

Civil conspiracy

The court grants Bandit and Leslie’s motion to dismiss the civil conspiracy claim. Chipper Pro has not alleged facts that would establish that Bandit and Leslie “combined together to effect a preconceived plan and unity of design and purpose” and did so with legal malice.

Tortious interference

The allegations Chipper Pro included to claim Leslie intentionally interfered with or induced a breach in Bandit’s contract with Chipper Pro are based on nothing more than conclusions and conjecture. Accordingly, Chipper Pro’s tortious interference with contract claim against Leslie will also be dismissed.

Bandit’s motion to dismiss granted in part, denied in part. Leslie’s motion to dismiss granted.

Chipper Pro LLC v. Bandit Industries Inc., Case No. 3:21-cv-00049, July 21, 2022. WDVA at Charlottesville (Moon). VLW 022-3-313. 18 pp.