Background
Denis McCormick operated Farm2Day, LLC, selling Merlo telehandlers through a dealer network in the Midwest. Initially, McCormick worked under an agreement with Applied Machinery Rentals, LLC, the exclusive distributor. When Merlo terminated its relationship with the distributor and established its own American subsidiary, Merlo representatives assured McCormick he would continue working with them. However, Merlo later cut McCormick out of the supply chain, fulfilling orders directly with dealers and refusing to repurchase inventory or pay commissions. McCormick sued for tortious interference and violation of the Michigan Farm and Utility Equipment Act. The district court dismissed both claims, finding no agreement existed between McCormick and Merlo under the Act and that the tort claim lacked sufficient allegations of illegal conduct.
The court’s reasoning
The court applied de novo review to the motion to dismiss. Regarding the statutory claim, the court held that McCormick’s complaint did not allege sufficient facts to establish a direct agreement between him and Merlo, as the original agreement was with the distributor, not the manufacturer. Consequently, the statutory claim was properly dismissed. However, for the tortious interference claim, the court found that McCormick plausibly alleged Merlo engaged in fraudulent or unethical behavior by inducing reliance through assurances and then abruptly cutting him out of the supply chain without notice or compensation. This conduct, if proven, could constitute tortious interference with a business relationship or expectancy.
We reverse the dismissal of his tortious-interference claim but affirm the rest.
Opinion at 2
What it means going forward
Independent equipment representatives may now pursue tort claims against manufacturers for abrupt termination of supply chains even if they do not qualify as statutory dealers, provided they can allege fraudulent or unethical conduct.
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