Louis DeGidio, Inc. v. Industrial Combustion, LLC, No. 22-1209 (8th Cir. 2023)
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Louis DeGidio, the father of Plaintiffs, began purchasing, distributing, and servicing Industrial Combustion, LLC’s (“IC”) burners for institutional boiler systems in a sales area including most of Minnesota. IC’s non-exclusive distributors are responsible for installing and servicing the IC burners they sell. In 1996, the family incorporated Louis DeGidio, Inc. (“LDI”) and Louis DeGidio Services, Inc. (“LDSI”). LDI continued purchasing burners from IC. LDSI installed and serviced the burners LDI sold, purchasing replacement parts from IC. The two corporations shared the same location, officers, and shareholders. Plaintiffs were joint 50% shareholders and key officers of both. Whatever written agreement was then in effect is not in the record, but it is undisputed that LDI was the distributor. At issue is whether a manufacturer collects an indirect “franchise fee” within the meaning of the Minnesota Franchise Act if it charges the distributor a price based on the retail price the manufacturer paid a third-party vendor for the parts.
The Eighth Circuit affirmed and agreed with the district court the answer is clearly no, and therefore, the distributorship agreement here at issue was not a franchise. The court further agreed that the manufacturer did not breach an oral implied-in-fact contract and was not barred by promissory estoppel when it terminated the DeGidio sales representative without cause. Applying Minnesota law and reviewing de novo, the court affirmed the grant of summary judgment in favor of IC and its parent company, Cleaver-Brooks, Inc.
Court Description: [Loken, Author, with Erickson and Kobes, Circuit Judges] Civil case - Franchise law. When a manufacturer sells replacement parts to a distributor to repair products the distributor sold, the manufacturer does not collect an indirect franchise fee within the meaning of the Minnesota Franchise Act if it charges the distributor a price based on the retail price the manufacturer paid a third party vendor for the parts; as a result, the distributorship agreement at issue here was not a franchise; further, the manufacturer did not breach an oral implied-in-fact contract, and was not bound by promissory estoppel, when it terminated plaintiff sales representative without cause.
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