A recent arbitration decision highlights the legal protections available to independent dealers and challenges the practices of major manufacturers. NHADA member James R. Rosencrantz & Sons, Inc. ("JRS"), a family-owned equipment dealership based in New Hampshire, successfully challenged John Deere Company’s performance standards and geographic market allocations, securing a landmark ruling in its favor.
Background of the Dispute
The case centered on John Deere’s 2021 changes to its methodology for assigning geographic areas of responsibility (AOR) and setting dealer performance standards. Under the new system, John Deere redefined how market penetration obligations were calculated, shifting from a geographic-based model to a corporate ownership group (COG)-based model. This change disproportionately favored larger, consolidated dealerships over smaller, independent ones. JRS, which has been a John Deere dealer since 1958, argued that these changes violated the New Hampshire Dealer Bill of Rights (R.S.A. 357-C).
Represented by Hilary Holmes Rheaume and Ned Sackman of NHADA partner Bernstein Shur, JRS contended that John Deere’s new policies unfairly increased its performance obligations while simultaneously reducing its ability to compete effectively. The dealership also alleged that Deere’s conduct—including efforts to pressure JRS into selling to a larger consolidated dealer, United Ag & Turf Northeast (UAT-NE)—was arbitrary, in bad faith, and unconscionable.
Key Findings by the Arbitration Panel
After three days of hearings and extensive evidence, the arbitration panel issued a ruling overwhelmingly in favor of JRS. The panel’s key findings included:
- Violation of Performance Standards: The panel determined that Deere’s 2021 performance standards violated R.S.A. 357-C:3(III)(v), which requires performance standards to be fair, reasonable, equitable, and uniformly applied to similarly situated dealers. The new standards disproportionately favored consolidated dealerships like UAT-NE, which operates multiple locations, over smaller dealers like JRS with a single agricultural contract location.
- Bad Faith Conduct: The panel found that Deere’s actions violated R.S.A. 357-C:3(I), which prohibits manufacturers from engaging in arbitrary, bad faith, or unconscionable conduct. Deere’s use of termination threats and its exclusion of JRS from critical business discussions were deemed to be part of a broader strategy to pressure JRS into selling to UAT-NE.
- Invalid Methodology: The panel concluded that Deere’s changes to the AOR calculation—such as automatically assigning counties to dealers regardless of geographic or economic factors—lacked fairness and equity. These changes were declared null and void under New Hampshire law.
The Award and Remedies
The arbitration panel granted several remedies to JRS:
- Nullification of 2021 Standards: Deere’s 2021 performance standards were declared null and void. The previous 2015 standards will remain in effect unless Deere develops a new methodology that complies with New Hampshire law.
- Injunction Against Termination: Deere was enjoined from issuing any termination notices to JRS for three years based on its performance standards.
- Legal Costs: The panel confirmed that JRS is entitled to petition the Superior Court for attorneys’ fees and costs under R.S.A. 357-C.
Implications for the Industry
This decision has significant implications for both equipment dealerships and manufacturers:
- Empowering Independent Dealers: The ruling reinforces the legal protections afforded to independent dealerships under state franchise laws. It highlights the importance of equitable treatment in manufacturer-dealer relationships and sends a clear message that manufacturers cannot unilaterally impose standards that disadvantage smaller dealers.
- Challenging Consolidation Trends: The case underscores the growing tension between manufacturers’ efforts to consolidate dealer networks and the rights of independent businesses.
- Legal Precedent: This ruling could serve as a precedent for similar disputes in other states with dealer protection laws. Dealers facing similar issues may feel emboldened to challenge manufacturers’ practices, particularly where those practices undermine fair competition.
- Reevaluation of Performance Standards: Manufacturers may need to reassess their performance metrics and geographic allocations to ensure compliance with state laws. The decision highlights the importance of using transparent, equitable methodologies that consider local market conditions.
About the Representing Law Firm
This case was won by NHADA Silver Partner, Bernstein, Shur, Sawyer & Nelson, P.A., a full-service law firm who believes providing great legal and business counsel means providing solutions that their clients can understand and that meet their unique needs. Learn more