Federal Court Dismisses a Dealer’s Suit for Violation of the Kentucky Retail Sales of Equipment Act

01 August 2022 Legal News: Distribution & Franchise Publication
Author(s): Peter Loh

In Central Jersey Construction Equipment Sales, LLC v. LBX Company, the U.S. District Court for the Eastern District of Kentucky recently dismissed a lawsuit based largely upon a plaintiff’s allegations of violation of the Kentucky Retail Sales of Equipment Act. The Court ruled the complaint lacked the necessary factual allegations concerning the alleged inventory at issue.

LBX Company was a manufacturer of hydraulic excavators and scrap- and material-handling equipment. Central Jersey Construction Equipment Sales, LLC independently sold and repaired LBX products but wanted to become a contracted dealer. In 2005, Central and LBX entered a dealer agreement that renewed automatically each year. In 2011, LBX asked Central to open a new location and stated Central would receive a new dealer agreement upon opening the facility. Between 2011 and 2017, Central asked LBX for the new dealer agreement multiple times but never received one. Then, in July 2019 LBX informed Central that it would not renew the dealer agreement and did not provide a reason for nonrenewal.

Central sued LBX, claiming LBX violated the Inventory Repurchase provision of the Kentucky Retail Sales of Equipment Act (KRSEA) when it failed to repurchase inventory after termination of the parties’ agreement. Central also brought claims for common law breach of contract and promissory estoppel.

The Court noted a condition precedent for bringing a failure to repurchase claim under the KRSEA was a plaintiff’s actual shipment of inventory to a defendant. Here, Central failed to explain whether it had, in fact, shipped any inventory to LBX. Central also failed to allege other crucial facts such as what LBX owed to Central and why. Therefore, Central did not present enough evidence to “allow a plausible inference of liability from the face of its pleading,” and the Court dismissed Central’s inventory repurchase claim.

In addition to the inventory repurchase claim, Central alleged LBX breached the KRSEA when LBX terminated the dealer agreement and asked that LBX be estopped from terminating the Agreement. The Court held that because the dealer agreement contained a one-year limitation period that was both reasonable and valid under the statute, Central’s failure to bring the claim within the limitation period barred recovery. The Court also declined to allow Central’s estoppel claim preventing LBX from terminating the dealer agreement because Central’s complaint again lacked adequate factual allegations regarding the alleged promises LBX made. Further, Kentucky law bars estoppel claims in cases where the dispute implicates a valid, enforceable contract. Additionally, Central could not reasonably have relied on any promises LBX made because Kentucky law does not enforce promises to contract in the future.

Ultimately, the Court dismissed all of Central’s claims with prejudice.

When bringing any claim, parties should review pleading standards and ensure they have enough facts to allow courts to plausibly infer liability on the part of the adverse party. Furthermore, courts will typically give deference to the unambiguous intent of a statute and penalize a plaintiff for not complying with its requirements.

This article was written with the assistance of summer associate Anna M. Busse.

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