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Feco, Ltd., Force Unlimited, LLC, and Stan Duncalf v. Highway Equipment Co.

January 9, 2013


Appeal from the Iowa District Court for Fayette County, Richard D. Stochl, Judge.

The opinion of the court was delivered by: Potterfield, P.J.

FECO, Ltd.; Force Unlimited, LLC; and Stan Duncalf appeal from the district court's determination of damages, costs, and attorney fees following a bench trial against Highway Equipment Co., Inc. AFFIRMED.

Heard by Potterfield, P.J., and Tabor, J., and Huitink, S.J.*fn1

FECO, LTD. ("FECO"); Force Unlimited, LLC; and Stan Duncalf appeal from the judgment entered after a bench trial to determine damages for the wrongful termination of their contract with Highway Equipment Co., Inc. ("Highway Equipment"). In a consolidated appeal, FECO appeals from the order denying attorney fees and costs.

FECO contends the district court's failure to award damages and its calculations in support of that decision were improper in seven ways: first, the award was based on a clearly erroneous finding of fact; second, the trial court considered improper evidence in its award of damages; third, the trial court improperly placed the burden of proving mitigation on FECO and applied an incorrect methodology; fourth, the trial court erred in failing to apply the methodology used by FECO's expert for calculating damages; fifth, the trial court erred in determining FECO had not established a reasonable basis for its damages; sixth, in failing to make an independent determination of the damages; and seventh, in failing to award FECO its costs of mitigation. In its consolidated appeal, FECO contends the district court erred in failing to award it costs and attorney fees under Iowa Code section 322F.8(1) (2001).*fn2

We affirm, finding substantial evidence supports the district court's determination regarding damages and that the district court properly interpreted section 322F.8(1) to require a finding of damages before allowing costs and attorney fees.

I. Background Facts and Proceedings.

FECO (Fertilizer Equipment Company) located in Oelwein, Iowa, and its owner, Stan Duncalf, entered into an agricultural equipment dealership agreement with Highway Equipment for the sale of its chassis and spreaders, including Highway Equipment's New Leader line of fertilizer spinner spreaders. This dealership agreement was terminated by Highway Equipment, and litigation ensued. This is the second time we have heard this case on appeal. See FECO v. Highway Equip. Co., No. 10-0614, 2010 WL 5394727 (Iowa Ct. App. Dec. 22, 2010).*fn3 We incorporate the facts as laid forth in that opinion here:

For many years, FECO was an agricultural equipment dealer for Highway Equipment. The October 1, 1996 agreement between Highway Equipment, as supplier, and FECO, as dealer, constitutes a "dealership agreement" as defined by Iowa Code section 322F.1(3) (2003). . . .

By letter dated September 16, 2002, Highway Equipment cancelled its agricultural dealership agreement with FECO. Highway Equipment admits it did not have good cause, as defined by Chapter 322F, for terminating its dealership agreement with FECO. See Iowa Code § 322F.1(5) (2003). Highway Equipment also admits it did not provide FECO with the notice of termination required by Iowa law. See id. § 322F.2 (2001).

In December 2006, FECO filed suit against Highway Equipment seeking monetary damages under Chapter 322F for wrongful termination of the dealership agreement. Highway Equipment moved for summary judgment arguing Chapter 322F does not provide for monetary damages as a remedy for termination without proper notice and/or good cause. In March 2007, the district court denied Highway Equipment's motion.

After an April 2009 bench trial, in March 2010, the district court noted:

The legislative purpose of 322F.2 [notice of termination] is clear. . . . [T]he act is intended to protect farm dealers, who are generally small business people, from losing the value of their business if the manufacturer cuts them off for no reason or for a bad reason.

The court, however, ruled "money damages for termination without good cause or termination without proper notice are not available to FECO under Iowa Code Chapter 322F." FECO appeals.

Id. at *1 (footnotes omitted). We reversed the district court and remanded for determination of damages based on the record, finding money damages were proper under Iowa Code chapter 322F. Id. at *2. This appeal arises out of the proceedings on remand to determine damages.

After the termination of its contract with Highway Equipment, FECO began selling its own proprietary line of spreaders boxes, the Force line, which FECO's owner Stan Duncalf reported were extremely successful, taking over most of the spreader market. It began development of these spreaders during its contract with Highway Equipment.*fn4

On November 21, 2011, the district court issued its order declining to award damages as it found FECO had fully mitigated any potential loss incurred by Highway Equipment's improper termination of their agreements. The district court also declined to grant costs and attorney fees to FECO. In determining FECO had not sustained damages, the court considered expert testimony presented by both parties during the original three-day trial in April of 2009, and found FECO's expert to be less credible than the expert opinion presented by Highway Equipment.

FECO's expert, Frederick Lieber, used a calculation he described as the "present value of lost cash flow." Highway Equipment's expert, Shannon Shaw, used a calculation described as "before and after." Lieber's calculations led to a conclusion that FECO had sustained $4,768,578 ...

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