# Wirtgen America, Inc. v. Hayden-Murphy Equipment Company

> District Court, M.D. Tennessee · January 6, 2023

URL: https://www.frixlaw.com/law-library/cases/10438416

## Case

- **Court:** District Court, M.D. Tennessee
- **Decided:** January 6, 2023
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/10438416

## How later opinions describe it (automated extraction)

- stating that the General Assembly is presumed to know the “state of the law”

## Opinion text

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF TENNESSEE
NASHVILLE DIVISION

WIRTGEN AMERICA, INC., )
)
Plaintiff, )
)
v. ) Case No. 3:22-cv-00308
) Judge Aleta A. Trauger
HAYDEN-MURPHY EQUIPMENT )
COMPANY, )
)
Defendant. )

MEMORANDUM

Hayden-Murphy Equipment Company (“Hayden-Murphy”) has filed a Motion to Dismiss
(Doc. No. 24), to which Wirtgen America, Inc. (“Wirtgen”) has filed a Response (Doc. No. 25),
and Hayden-Murphy has filed a Reply (Doc. No. 27). For the reasons set out herein, the motion
will be denied.
I. BACKGROUND1
A. The Parties’ Relationship and Wirtgen’s Desire to End It
Wirtgen is a Tennessee-based supplier of road construction and surface mining equipment.
The end users of Wirtgen’s goods are typically contractors or governments, who buy or rent the
equipment they need through Wirtgen’s network of independent dealers. (Doc. No. 18 ¶¶ 12–14.)
Hayden-Murphy is one such dealer. On January 1, 2010, Wirtgen and Hayden-Murphy entered
into a Distributor Sales and Service Agreement, whereby Hayden-Murphy agreed to be a

1 Unless otherwise indicated, these facts come from Wirtgen’s Amended Complaint for Declaratory
Judgment (Doc. No. 1) and are taken as true for the purposes of the pending motion.
nonexclusive dealer of various lines of Wirtgen products in Minnesota. (Id. ¶¶ 15–16; Doc. No.
18-2.)
In 2017, Wirtgen’s parent company was acquired by John Deere & Co. (“Deere”). (Doc.
No. 18 ¶ 18.) According to Wirtgen, its “dealer network is not fully aligned with Deere’s dealer

network,” and, “[b]ecause of that misalignment, there are many regions of North America where
there is one dealer which sells and services Wirtgen’s products and a separate dealer which sells
and services Deere’s products.” (Id. ¶ 19.) Faced with that reality, Wirtgen decided to begin taking
steps to “align” its dealer network with the Deere network. (Id. § 20.) Wirtgen did not, however,
immediately seek to end its relationship with Hayden-Murphy.
On August 13, 2018, Hayden-Murphy’s then-CEO, Len Kirk, sent Wirtgen a letter,
informing Wirtgen that Hayden-Murphy was in the process of what Wirtgen describes as a
“substantial change in the control of Hayden-Murphy and the loss of managers, officers, and key
employees within Hayden-Murphy, including, but not limited to, [Kirk] himself, who was stepping
down as CEO after 30 years of service.” (Id. ¶ 26.) On September 6, 2018, Kirk met with Wirtgen

President James P. McEvoy and Vice President of Dealer Development Brodie Hutchins to discuss
matters including the turnover in Hayden-Murphy’s leadership. McEvoy and Hutchins expressed
their dismay at the changes and, in particular, at the fact that Wirtgen had not received more
advance notice of the transition. (Id. ¶ 27.) McEvoy and Hutchins informed Kirk that Wirtgen “did
not approve or consent to the changes that were being made.” (Id. ¶ 28.)
In many areas of business, that type of language—involving one company’s refusal to
“consent” to a leadership change at another, wholly independent company—might seem unusual.
Such issues of inter-company consent and agreement, however, have special significance in the
law of distributorships and franchises. Many states have enacted statutory protections designed to
prevent manufacturers and suppliers2 from unilaterally imperiling the financial health of the
companies and individuals who sell their products without good cause. In so doing, those statutes,
by necessity, restrict the parties’ ordinary freedom of contract. For example, Tenn. Code Ann. §
47-25-1302 requires that “[n]o supplier, directly or through an officer, agent or employee, may

terminate, cancel, fail to renew or substantially change the competitive circumstances of a retail
agreement without good cause,” even if the parties’ contract says otherwise. Tenn. Code Ann. §§
47-25-1302(a), -1312. The statute defines “good cause” to refer, first, to any “failure by a retailer
to comply with requirements imposed upon the retailer by the retail agreement if such requirements
are not different from those imposed on other retailers similarly situated in this state.” Id. The
statute then lists a series of additional events that qualify as “good cause” as a matter of law,
including the loss or retirement of “a person with a substantial interest in the ownership or control
of the dealership, including an individual proprietor, partner or major shareholder.” Tenn. Code
Ann. § 47-25-1302(a)(6). Good cause, however, “does not exist if the supplier consents to” the
qualifying change in leadership. Id. The issue of Wirtgen’s consent was therefore potentially

relevant to whether Kirk’s departure gave rise to “good cause” to terminate the parties’ agreement.
After the meeting on September 6, 2018, Hutchins confirmed Wirtgen’s position in a letter
to Kirk dated September 20, 2018. Hutchins wrote:
We have taken some time since our meeting to consider what you said. Even though
you will still be part of the customer relationships during the transition, we
nevertheless have concerns regarding the succession. We are . . . unaware of any
meaningful relationships between [incoming Hayden-Murphy President Don
Knackstedt] and our customer base.

Because of these concerns, we are not presently able to consent to this substantial
change in management and control. We will continue to monitor the situation
between now and your actual retirement. We hope you understand.

2 “Supplier,” in this context, refers to a company that sells goods to distributors, much as a manufacturer
would, but which is not necessarily the entity that actually manufactured those goods. For present purposes,
the distinction between manufacturer and non-manufacturer supplier is of no importance.
(Doc. No. 18-3 at 2.)
Despite the concerns that Wirtgen raised in 2018, the parties’ relationship remained
formally intact for the ensuing few years. However, on April 8, 2022, McEvoy sent Knackstedt a
letter informing him that “Wirtgen strongly believe[d] that the time has come to allow each of [the
two] companies to pursue its business objectives separately.” (Doc. No. 18-4 at 4.) McEvoy
explained:
[W]e think we have the right to terminate the Agreement as a result of the recent
personnel changes Hayden-Murphy has undergone, but we believe there is another
provision of the Agreement that is also applicable to the present situation.

Section 5.01 of the Agreement says that it became effective on January 1, 2010 and
will automatically expire at the end of each calendar year unless both Hayden-
Murphy and Wirtgen consent to renew it. After the Agreement went into effect, it
remained in Wirtgen’s interest to consent to the renewal of the Agreement. With
John Deere & Co.’s acquisition of Wirtgen, however, that is no longer the case. . . .
We’re not saying that Hayden-Murphy was in any way responsible for the
misalignment that now exists in Wirtgen’s and Deere’s dealer networks, nor are we
encouraging Hayden-Murphy to become a Deere dealer. We are saying that the
Agreement, with its automatic, annual expiration provision absent mutual consent,
is designed to accommodate situations like this where it is no longer in one party’s
business interest to remain in business together. And[] we intend to exercise our
right to allow the Agreement to expire at the end of the year, depending upon your
response to this letter.

(Id. at 2.)
Knackstedt sent a letter in response, which Wirtgen received around April 27, 2022. (Doc.
No. 18 ¶ 32; Doc. No. 18-5.) Knackstedt explained that he was “writing to respond to the specifics
of [McEvoy’s] letter and also in hopes that both sides can see that working together . . . makes a
lot more business sense than engaging in a protracted legal battle.” (Doc. No. 18-5 at 2.)
Knackstedt stated that, in Hayden-Murphy’s view, “Wirtgen cannot simply non-renew the
Agreement, and[,] instead, there must be ‘good cause’ to terminate . . . .” (Id. at 2.) Knackstedt
then provided a lengthy argument that Kirk’s departure did not provide Wirtgen with grounds for
terminating the contract and that, in the alternative, if that departure did originally amount to good
cause, then it could no longer do so in light of Wirtgen’s supposed acquiescence to the change.
(Id. at 2–5.) The letter includes references to an unidentified state statute that, according to the
letter, forbids actions such as Wirtgen’s attempt to end the agreement. (Id. at 2, 5.)

B. Relevant Contractual Provisions
The parties’ Distributor Sales and Service Agreement states that it is “renewable annually
upon the consent of both parties.” (Doc. No. 18-2 at 16.) If the parties mutually agree to terminate
the contract, they may do so at any time. (Id.) Otherwise, a decision by one party to terminate the
contract must comply with certain procedures. Under the terms of the contract as written, either
Wirtgen or Hayden-Murphy “may terminate this Agreement at any time, with or without cause,
upon sixty (60) days written notice to the other party.” (Id.) However, the Agreement grants
Wirtgen accelerated termination rights in certain situations. Specifically, there is a list of nine
occurrences that, if they come to pass, grant Wirtgen a right to immediately terminate the
agreement upon written notice, and there is a second list of ten other occurrences that would grant

Wirtgen the “right to terminate this Agreement upon thirty (30) days written notice and opportunity
to cure.” (Id. at 17–18.) Among the events giving rise to a 30-day-notice termination right are the
following:
c. Any dispute, disagreement or controversy between or among the principles,
parties, managers, officers or stockholders of [Hayden-Murphy] or any loss of
managers, officers or key employees through termination of employment or
otherwise, which in the commercially reasonable judgment of [Wirtgen] may
adversely affect the business of [Hayden-Murphy] or [Wirtgen]; . . .

j. A substantial change in the ownership or control of [Hayden-Murphy] without
prior written consent of Wirtgen.

(Id. at 18.)
The contract includes a provision forbidding Hayden-Murphy from selling, assigning,
delegating, or otherwise transferring any of its “rights or obligations” under the agreement. (Id. at
25–26.) Although this case does not involve assignment of Hayden-Murphy’s rights in the ordinary
sense, the language of the provision implicates issues surrounding Kirk’s departure that did arise

between the parties:
[Wirtgen] has entered into this Agreement in reliance upon the representations and
personal abilities of the current owners and managers of [Hayden-Murphy]. The
parties agree that the rights conferred on [Hayden-Murphy] by this Agreement are
contingent upon the continuation of the present owners and managers of [Hayden-
Murphy]. Any merger, consolidation, transfers of assets, event or transaction which
results (whether by operation or law or otherwise) in a change of ownership or
control of [Hayden-Murphy] or [Hayden-Murphy’s] business shall be deemed an
assignment by [Hayden-Murphy] for purposes of this Agreement. This Agreement
shall inure to the benefit of and be binding upon the permitted successors and
assigns of the parties.

(Id. at 26.)
Finally, the contract includes the following choice-of-law provision, which also addresses
the issue of how the contract should be construed if any of its provisions are unlawful:
This Agreement shall be construed, interpreted and enforced in accordance with the
laws of the state of Tennessee. Any action between [Wirtgen] and [Hayden-
Murphy] shall be filed either in the United States District Court for the Middle
District of Tennessee or in the Chancery Court for Davidson County, Tennessee,
and the parties hereby consent to the jurisdiction and venue of the foregoing courts.
If the performance of any obligation or the exercise of any right pursuant to this
Agreement would be unlawful, such performance or exercise shall be modified to
the minimum extent necessary to comply with such law, without invalidating the
remainder of this Agreement.

(Doc. No. 18-2 at 25.)
C. This Case
On April 28, 2022, Wirtgen filed a Complaint for Declaratory Judgment against Hayden-
Murphy in this court. (Doc. No. 1.) That Complaint was superseded by an Amended Complaint on
July 15, 2022. (Doc. No. 18.) Wirtgen asks the court to declare that:
(a) Wirtgen has the right to allow the Agreement to expire at the end of this calendar
year by not consenting to its renewal and (b) Wirtgen has the right to terminate the
Agreement as of the end of this calendar year as a result of (i) a substantial change
in the control of Hayden-Murphy without Wirtgen’s consent, (ii) a change in the
managers of Hayden-Murphy without Wirtgen’s advance approval, and/or (iii) a
loss of managers, officers, or key employees which, in Wirtgen’s commercially
reasonable judgment, may adversely affect the business of Hayden-Murphy or
Wirtgen.

(Doc. No. 18 ¶ 37.)
On July 29, 2022, Hayden-Murphy filed a Motion to Dismiss. (Doc. No. 24.) Hayden-
Murphy argues that the court should dismiss Wirtgen’s claim because, even if the facts are all as
Wirtgen has alleged, Wirtgen does not have a right to terminate or decline to renew the parties’
contract.
II. LEGAL STANDARD
In deciding a motion to dismiss for failure to state a claim under Rule 12(b)(6), the court
will “construe the complaint in the light most favorable to the plaintiff, accept its allegations as
true, and draw all reasonable inferences in favor of the plaintiff.” Directv, Inc. v. Treesh, 487 F.3d
471, 476 (6th Cir. 2007); Inge v. Rock Fin. Corp., 281 F.3d 613, 619 (6th Cir. 2002). The Federal
Rules of Civil Procedure require only that the plaintiff provide “a short and plain statement of the
claim that will give the defendant fair notice of what the plaintiff’s claim is and the grounds upon
which it rests.” Conley v. Gibson, 355 U.S. 41, 47 (1957). The court must determine only whether
“the claimant is entitled to offer evidence to support the claims,” not whether the plaintiff can
ultimately prove the facts alleged. Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quoting
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).
The complaint’s allegations, however, “must be enough to raise a right to relief above the
speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). To establish the “facial
plausibility” required to “unlock the doors of discovery,” the plaintiff cannot rely on “legal
conclusions” or “[t]hreadbare recitals of the elements of a cause of action,” but, instead, the
plaintiff must plead “factual content that allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678–79 (2009).
“[O]nly a complaint that states a plausible claim for relief survives a motion to dismiss.” Id. at

679; Twombly, 550 U.S. at 556.
III. ANALYSIS
A. Choice of Law
This case is in federal court due to the diversity of citizenship between the parties, but the
law at issue is state law. The parties disagree, however, regarding which state’s laws apply—
Tennessee’s (as the parties’ Agreement directs) or Minnesota’s (as Hayden-Murphy argues that
the law requires). Typically, when a federal court hears a diversity action, “the law of the forum
state, including the choice-of-law rules, appl[ies].” Montgomery v. Wyeth, 580 F.3d 455, 459 (6th
Cir. 2009) (citing Uhl v. Komatsu Forklift Co., 512 F.3d 294, 302 (6th Cir. 2008)). This court
therefore must apply Tennessee’s rule that a contract is typically “presumed to be governed by the

law of the jurisdiction in which it was executed” but that the parties can overcome that presumption
by manifesting “a contrary intent.” Vantage Tech v. Cross, 17 S.W. 3d 637, 650 (Tenn. Ct. App.
1999) (citing Ohio Cas. Ins. Co. v. Travelers Indem. Co., 493 S.W.2d 465, 467 (Tenn. 1973)). The
clearest and simplest way to manifest that contrary intent is by including an express choice-of-law
provision, id., as Wirtgen and Hayden-Murphy did.
Under Tennessee choice-of-law principles, when parties manifest an intent to apply the
laws of another jurisdiction by adopting a choice-of-law provision, then that intent will be
honored—if certain requirements are met. Id. Specifically, “[t]he choice of law provision must be
executed in good faith, the chosen jurisdiction must bear a material connection to the transaction,
the basis for the jurisdiction must be reasonable and not a sham, and, finally, the choice of the
jurisdiction must not be contrary to the fundamental policy of a state having a materially greater
interest and whose law would otherwise govern.” Sw. Tex. Inns, Inc. v. Prime Hospitality Corp.,
462 F.3d 666, 672 n.8 (6th Cir. 2006). There is no plausible argument that the Tennessee choice-

of-law provision would fail any of the first three of those requirements. There is no basis for
concluding that the provision was adopted in bad faith, and Tennessee clearly has at least some
material, rational, and non-sham connection to the agreement, given that Wirtgen is a Tennessee
company. That leaves the questions of (1) whether applying Tennessee law would be contrary to
a “fundamental” public policy of Minnesota, (2) whether Minnesota law would “otherwise govern”
the contract, and, (3) if so, whether Minnesota has a greater interest in the parties’ relationship than
Tennessee. The first item on that list overlaps, to some degree, with the first step of performing a
choice-of-law analysis as a more general matter: ascertaining whether there is a material difference
between the laws of the relevant states. See Lemons v. Cloer, 206 S.W.3d 60, 64–65 (Tenn. Ct.
App. 2006) (citing Hataway v. McKinley, 830 S.W.2d 53, 55 (Tenn. 1992)). The difference, if any,

between the state laws under consideration sets the stage for determining whether any such
difference is fundamental.
As the court has discussed, Tennessee law would examine the termination of the parties’
relationship pursuant to the terms of its equipment retail distributorship termination statute, Tenn.
Code Ann. § 47-25-1302, which provides, in relevant part:
(a) No supplier, directly or through an officer, agent or employee, may terminate,
cancel, fail to renew or substantially change the competitive circumstances of a
retail agreement without good cause. “Good cause” means failure by a retailer to
comply with requirements imposed upon the retailer by the retail agreement if such
requirements are not different from those imposed on other retailers similarly
situated in this state. In addition, good cause exists whenever: . . .
(6) The retailer transfers an interest in the dealership, or a person with a
substantial interest in the ownership or control of the dealership, including
an individual proprietor, partner or major shareholder, withdraws from the
dealership or dies, or a substantial reduction occurs in the interest of a
partner or major shareholder in the dealership. However, good cause does
not exist if the supplier consents to an action described in this subsection
(a).

(b) Except as otherwise provided herein, a supplier shall provide a retailer with at
least ninety (90) days’ written notice of termination, cancellation or nonrenewal of
the retail agreement and a sixty-day right to cure the deficiency. If the deficiency is
cured within the allotted time, the notice is void. . . . The notice shall state all
reasons constituting good cause for action. The notice is not required if the reason
for termination, cancellation or nonrenewal is a violation under subsection (a).

Tenn. Code Ann. § 47-25-1302. Minnesota, however, has its own, quite similar but not identical,
statute governing the same subject matter for heavy equipment dealers:
Subdivision 1. Good cause required. No equipment manufacturer, directly or
through an officer, agent, or employee may terminate, cancel, fail to renew, or
substantially change the competitive circumstances of a dealership agreement
without good cause. “Good cause” means failure by an equipment dealer to
substantially comply with essential and reasonable requirements imposed upon the
dealer by the dealership agreement, if the requirements are not different from those
requirements imposed on other similarly situated dealers by their terms. In addition,
good cause exists whenever:

(a) Without the consent of the equipment manufacturer who shall not withhold
consent unreasonably, (1) the equipment dealer has transferred an interest in the
equipment dealership, (2) there has been a withdrawal from the dealership of
an individual proprietor, partner, major shareholder, or the manager of the
dealership, or (3) there has been a substantial reduction in interest of a partner
or major stockholder. . . .

Subd. 2. Notice. Except as otherwise provided in this subdivision, an equipment
manufacturer shall provide an equipment dealer at least 90 days’ prior written
notice of termination, cancellation, or nonrenewal of the dealership agreement. The
notice must state all reasons constituting good cause for the action and must provide
that the dealer has until expiration of the notice period in which to cure a claimed
deficiency. If the deficiency is rectified within the notice period, the notice is void.
The notice and right to cure provisions under this section do not apply if the reason
for termination, cancellation, or nonrenewal is for any reason set forth in
subdivision 1, clauses (a) to (g).
Minn. Stat. Ann. § 325E.0681. Minnesota’s statutes governing the manufacture and sale of heavy
equipment—which, together, make up that state’s Heavy and Utility Equipment Manufacturers
and Dealers Act, or “HUEMDA”—include a provision forbidding certain contractual terms,
including choice-of-law provisions, that would waive rights under those statutes:

A term of a dealership agreement either expressed or implied, including a choice of
law provision, that is inconsistent with the terms of sections 325E.068 to 325E.0684
or that purports to waive an equipment manufacturer’s compliance with sections
325E.068 to 325E.0684 is void and unenforceable and does not waive any rights
that are provided to a person by sections 325E.068 to 325E.0684.

Minn. Stat. Ann. § 325E.0683.
The relevant substantive differences between the Tennessee and Minnesota statutes are
few. Each statute applies to a decision to “terminate, cancel, fail to renew or substantially change”
the parties’ contractual relationship. Each statute requires good cause, which includes failure to
comply with an ordinary condition of the parties’ contract. Each statute recognizes categorical
good cause based on the departure of an “individual proprietor, partner or major shareholder” of
the distributor without the supplier’s consent. The statute’s respective approaches to the departure
of non-owner managers differ somewhat, although it is not clear, from the statutes’ respective
faces, whether that difference is substantive or cosmetic. The Minnesota statute includes, in the
aforementioned list of individuals whose departure may give rise to good cause, “the manager of
the dealership,” and the Tennessee statute does not, at least not so clearly. The relevant Tennessee
provision does, however, include any “person with a substantial interest in the ownership or
control of the dealership,” Tenn. Code Ann. § 47-25-1302(a)(6) (emphasis added), which, though
confusing, seems to contemplate the inclusion of individuals with substantial control over the
business but no equity therein—that is, potentially, high-ranking managers. In any event, the
materials filed with the Amended Complaint confirm that Kirk was both a manager and part owner
of Hayden-Murphy and that his retirement did, in fact, entail the reversion of his 10% ownership
stake in the company to its principal owner, Barbara Lupient. (See Doc. No. 18-5 at 4.)
There is at least one other significant facial difference between the statutes that is
potentially relevant to this particular case. The Minnesota statute expressly states that, in the face

of a proposed change in ownership or control, the “equipment manufacturer . . . shall not withhold
consent unreasonably.” Minn. Stat. Ann. § 325E.0681(1). Tennessee’s statute contains no such
express reasonableness requirement applicable to consent in connection with a change in
ownership or control.3 See Tenn. Code Ann. § 47-25-1302(a)(6). The significance of that
difference to this case, however, is far from established. The issues raised here may be capable of
being considered through the lens of reasonableness—because reasonableness is, after all, a broad
concept—but the ultimate questions at issue fit far more cleanly into more specific concepts like
waiver and implied consent. There is no reason, moreover, to think that Tennessee’s statute ignores
those narrower, more pertinent doctrines; to the contrary, Hayden-Murphy itself asserts repeatedly
that its arguments regarding Wirtgen’s failure to exercise a timely termination right would prevail

under either statute, without any need to rely on an express statutory reference to reasonableness.
Most decisions to terminate distributorships, moreover, presumably reflect exercises in
business judgment—an inherently uncertain task in which reasonableness restrictions, even where
they apply, are relatively modest and permit a “range” of actions. In re Khan, No. 19-04258, 2021
WL 2563017, at *2 (Bankr. W.D. Mich. June 21, 2021); see also In re TIC Memphis RI 13, LLC,
498 B.R. 831, 837 (Bankr. W.D. Tenn. 2013) (“Reasonableness is not judged in hindsight, but
rather at the time the business judgment is exercised.”). The hypothetical set of cases in which the

3 Tennessee’s statute does have an express reasonableness requirement applicable to the withholding of
approval of a new business location. See Tenn. Code Ann. § 47-25-1302(a)(2).
difference between the two statutes would actually be expected to make a difference is, therefore,
likely small and does not fit this case.
Indeed, Hayden-Murphy refuses to commit itself to acknowledging any particular
difference between Tenn. Code Ann. § 47-25-1302 and Minn. Stat. Ann. § 325E.0681. (See Doc.

No. 27 & n.1.) Rather, Hayden-Murphy’s briefing skips over the crucial step of identifying actual
conflicts of law altogether and simply argues that Minnesota law should apply regardless of what
Tennessee law says. Technically, the court might be able to end its choice-of-law analysis there,
with Hayden-Murphy having failed to identify any specific choice that must be made. Because of
the centrality of these statutes to this case, however, the court will go forward with its analysis in
the interest of establishing which state’s statute should govern this dispute.
Wirtgen argues that the court should apply Tennessee law because, among other things,
Tennessee’s statute, even if different from Minnesota’s in some (mostly cosmetic) respects, is not
contrary to a fundamental public policy of Minnesota and was therefore validly selected by the
parties to govern their dealings. Tennessee’s “fundamental policy” rule tracks the Restatement

(Second) of Conflict of Law, which explains that, “[t]o be ‘fundamental,’ a policy must . . . be a
substantial one.” Restatement (Second) of Conflict of Laws § 187. The Tennessee caselaw defining
the term “fundamental policy” for choice-of-law purposes is not particularly robust, but it confirms
that not every difference between jurisdictions rises to the level of implicating that standard. For
example, the Tennessee Court of Appeals, applying North Carolina’s similar choice-of-law rules,
has stated that, for a law to be contrary to the public policy of a state, it “must violate some
prevalent conception of good morals or fundamental principle of natural justice or involve injustice
to the people of the forum state.” Williams v. Smith, 465 S.W.3d 150, 157 (Tenn. Ct. App. 2014)
(quoting Boudreau v. Baughman, 322 N.C. 331, 340, 368 S.E.2d 849, 857 (1988)).
The court cannot conclude that the parties’ choice of law provision is contrary to a
fundamental public policy of Minnesota for the purposes of this case. Hayden-Murphy argues, in
essence, that applying Tennessee’s law must, in and of itself, be against the public policy of
Minnesota, because Minnesota’s equipment distributor statute expressly forbids contractually

waiving its protections. See Minn. Stat. Ann. § 325E.0683. At most, though, that provision only
establishes that waivers of distributors’ statutory rights are impermissible under Minnesota law—
not that any aspect of that arrangement amounts to a “fundamental policy.” In any event, a
Tennessee choice of law provision would only be a waiver of rights under the Minnesota statute
to the extent that the Minnesota statute actually offers rights that Tennessee’s does not. It is not
clear to the court, though, that Minnesota’s statute is actually significantly more protective of
dealers. While there may be, as the court has noted, some differences in language, Hayden-
Murphy, as the party advocating for the application of Minnesota law, has not argued that there is
any meaningful substantive difference between the statutes as applied to this case. Hayden-Murphy
has therefore failed to identify any aspect of the Minnesota statutory scheme that would be

unlawfully waived by a Tennessee choice-of-law provision—let alone that any such provision was
“fundamental.”
Minnesota’s statute does appear to reflect a concern about unequal bargaining power,
which is an important consideration. See Astleford Equip. Co. v. Navistar Int’l Transp. Corp., 632
N.W.2d 182, 191 (Minn. 2001) (“[T]he purpose of [the statute] is to protect the dealer, who is
often in a weaker bargaining position . . . .”). According to the Restatement, a policy is more likely
to be found to be fundamental if a law is “designed to protect a person against the oppressive use
of superior bargaining power,” such as in the case of “[s]tatutes involving the rights of an
individual insured as against an insurance company.” Id. HUEMDA qualifies as such a law. The
importance of that fact, however, is undermined significantly by the fact that Tennessee’s statute
also takes the parties’ unequal bargaining power into account—in much the same way that
Minnesota’s does. Each statute reflects a legislative decision to make it significantly more
demanding for a manufacturer to end a distribution agreement unilaterally, and the states’

respective provisions differ, at most, in the details of how that approach is to be carried out. There
is simply not enough tension between Tennessee’s statute and Minnesota’s to find an issue of
fundamental policy at stake. Indeed, the district court opinion on which Hayden-Murphy most
strongly relies in support of its position tellingly included no “fundamental policy” analysis and
engaged in no comparison between the Minnesota statute and the other state’s laws to determine
the scope and nature of any differences. See Interstate Power Sys., Inc. v. Gen. Elec. Co., No. CIV.
11-2564 DWF/JSM, 2011 WL 5025275, at *2 n.2 (D. Minn. Oct. 21, 2011).
Ultimately, Hayden-Murphy’s argument puts the cart before the horse. Hayden-Murphy
argues that the court should apply Minnesota law because Minnesota law—specifically, the anti-
waiver provision of its equipment distribution statute—says that it should. Minnesota’s laws,

though, are only significant to this court insofar as Tennessee choice-of-law principles say that
they are. No state has the unilateral power to legislatively nullify the choice-of-law principles of
other states. To the contrary, “[t]he only way that the [laws] of any particular state can make a
choice of law clause void is if that particular state’s law applies to the matter before the Court” in
the first place. Momentum Mktg. Sales & Servs., Inc. v. Curves Int’l, Inc., No. W-07-CA-048, 2008
WL 11334569, at *2 (W.D. Tex. Dec. 17, 2008). Minnesota’s anti-waiver statute therefore does
not, and could not, relieve the court of its duty to perform an ordinary choice-of-law analysis,
including the steps that Hayden-Murphy has skipped.
Under Tennessee’s ordinary choice-of-law principles, Minnesota law could only apply
here, if at all, if this case implicated a disjunction between Tennessee law and Minnesota law such
that applying Tennessee law—as the parties agreed, in their contract, that a court hearing a dispute
between them should—would rise to the level of threatening a “fundamental policy” of Minnesota.

Minnesota’s mere preference that its law apply, combined with minor differences between the
statutes that might not even be implicated here, are not enough for the court to disregard the agreed-
upon decision by the parties for their relationship to be governed by Tennessee law. The court
therefore will apply the contract as written and look to the law of the State of Tennessee.
B. Failure to Renew
Wirtgen argues, first, that there is no need to consider whether it had good cause to
terminate the parties’ relationship, because it had an absolute right not to renew their contract for
any reason. According to Wirtgen, its argument poses “a straightforward question of statutory
interpretation: does a supplier ‘fail’ to renew a distributor agreement . . . when it allows the
agreement to expire at the end of its term as expressly permitted by the agreement?” (Doc. No. 25

at 1.). Wirtgen suggests that the answer is “no,” because one can only “fail” to renew a contract if
one has a duty to do so; otherwise, a nonrenewal would just be a nonrenewal—not a “failure to
renew.” Hayden-Murphy also sees the question of construing “fail to renew” as fairly simple—but
with a different answer. According to Hayden-Murphy, “fail to renew” clearly refers to any refusal
to renew a renewable contract. Indeed, Hayden-Murphy argues that Wirtgen’s interpretation of the
statute is “illogical,” because, “[i]f, as Wirtgen suggests, the statute only prevents a failure to renew
when there is [already] an obligation to renew, there would be no need for the statute. Such a
situation would be a breach, and the statute would not protect anything, and would be useless.”
(Doc. No. 27 at 4.)
Under Tennessee law, a court’s “role in statutory interpretation is to carry out legislative
intent without broadening or restricting the statute beyond its intended scope.” New v. Dumitrache,
604 S.W.3d 1, 14 (Tenn. 2020) (quoting State v. L.W., 350 S.W.3d 911, 916 (Tenn. 2011)). In so
doing, the court must be guided by the “plain and ordinary meaning of the statutory language.” Id.

The court’s interpretation of the statute, however, must be performed against a backdrop of
preexisting legal concepts and principles of which the General Assembly is presumed to have been
aware. See Brundage v. Cumberland Cnty., 357 S.W.3d 361, 365 (Tenn. 2011) (stating that the
General Assembly is presumed to know the “state of the law”) (quoting Seals v. H & F, Inc., 301
S.W.3d 237, 242 (Tenn. 2010)). Among those principles is the general rule that, “[u]nder the law,
perpetual obligations are disfavored.” Open Lake Sporting Club v. Lauderdale Haywood Angling
Club, 511 S.W.3d 494, 501 (Tenn. Ct. App. 2015) (quoting Higgins v. Oil, Chem. & Atomic
Workers Int’l Union, Loc. No. 3-677, 811 S.W.2d 875, 881 (Tenn. 1991)). That does not mean that
the General Assembly is powerless to impose such obligations. Rather, the court simply must
construe the statute as written, but with an understanding that, because it represents a departure

from Tennessee’s ordinary policy and the common law, some caution is warranted. See In re Est.
of Starkey, 556 S.W.3d 811, 817 (Tenn. Ct. App. 2018) (“Although the General Assembly has the
constitutional and legislative authority to abrogate the common law, the intention to abrogate must
be clear.”) (citing State v. Howard, 504 S.W.3d 260, 270 (Tenn. 2016)).
The court therefore begins, as it ordinarily would, with the language of the statute. Wirtgen
argues that the dictionary definition of “failure” supports its position that one can only “fail to” do
something if one was required to do it. Accordingly, a failure to renew could only occur if a
supplier/manufacturer was required to renew the contract for some reason other than Tenn. Code
Ann. § 47-25-1302—presumably, some provision of the contract itself creating a renewal
obligation. Aside from a few cherry-picked examples, however, Wirtgen’s assertion that
dictionaries support its narrow reading is simply not true. To the contrary, dictionary entries of the
relevant words are replete with definitions that would support Hayden-Murphy’s position that
“fail” can, in fact, refer to not performing an action, even if there was no duty to perform it. For

example, “[f]ailure” can refer to a “[d]efficiency,” “lack,” or “want” of something or it can refer,
more specifically, to “[a]n omission of an expected action, occurrence, or performance.”
FAILURE, Black’s Law Dictionary. “To fail” can mean “to fall short of achieving something
expected or hoped for,” or “[t]o lapse.” FAIL, Black’s Law Dictionary. Indeed, even many of the
definitions that Wirtgen cites in support of its position do not actually support as narrow a
definition as Wirtgen suggests. For example, one cited definition refers to a failure to “do
something that you should do or are expected to do.” (Doc. No. 25 at 14–15 (quoting Britannica
Dictionary). Another definition cited by Wirtgen refers to the failure to “do[] something that you
must do or are expected to do.” (Id. (quoting Cambridge Dictionary) (emphasis added).) Each of
those definitions expressly reaches some situations other than the failure to do something one had

an actual duty to do.
Admittedly, these dictionary definitions confirm that “fail to” is not simply a value-neutral
synonym for “do not.” Rather, “[i]n its customary and preferred sense, ‘fail’ connotes some
omission, fault, or negligence on the part of the person who has failed to do something.” Williams
v. Taylor, 529 U.S. 420, 431 (2000). “Failure,” in other words, typically implies the existence of
some desired or desirable threshold that was not met—such as in failing to meet a quota or failing
to check the weather before walking out the door. That, though, is a far broader concept than
Wirtgen’s narrow definition of “fail” as referring only to failures associated with actual legal
duties. From the perspective of a distributor that wishes to continue its distributorship, it makes
perfect sense to lament that a manufacturer or supplier “failed” to renew the parties’ agreement—
whether the manufacturer had a contractual duty to do so or not. That is particularly true, given
that Tenn. Code Ann. § 47-25-1302 only forbids nonrenewal that is without good cause and/or
sufficient notice. Ending an important business relationship without good cause or sufficient

warning could fairly be characterized as a “failure” without stretching the definition of that word
at all—whereas defining “failure” to refer only to failure to perform a legal duty would constrict
the definition considerably.
Courts that have considered the same or similar language have generally shared the reading
that “fail to renew” refers simply to a decision not to renew a renewable contract that the other
party to that contract wishes to be renewed. For example, the New Jersey Supreme Court
interpreted a provision making it unlawful for a franchisor to “terminate, cancel or fail to renew a
franchise without good cause” as granting the franchisee the equivalent of an “‘infinite’ franchise”
that “cannot be . . . refused renewal” without a qualifying reason. Dunkin’ Donuts of Am., Inc. v.
Middletown Donut Corp., 495 A.2d 66, 76 (N.J. 1985); accord BP Prod. N. Am., Inc. v. Hillside

Serv., Inc., No. CIV. 9-4210, 2011 WL 4343452, at *3 (D.N.J. Sept. 14, 2011). The Indiana
Supreme Court has construed “fail to renew,” as used in that state’s franchise statute, to mean “not
renew[].” Cont’l Basketball Ass’n, Inc. v. Ellenstein Enters., Inc., 669 N.E.2d 134, 139 (Ind. 1996).
The District Court for the Southern District of Iowa construed Iowa’s own franchise statute—
which, at the time, used “refuse to renew,” 1992 Ia. Legis. Serv. 1134 (H.F. 2362)—in the same
way, McDonald’s Corp. v. Nelson, 822 F. Supp. 597, 604 (S.D. Iowa 1993), and the Eight Circuit
not only affirmed the district court but expressly praised its “detailed and well-considered
opinion,” Holiday Inns Franchising, Inc. v. Branstad, 29 F.3d 383, 384 (8th Cir. 1994). In State
Farm Mutual Auto Insurance Co. v. Brown, 115 Cal. Rptr. 213 (Cal. Ct. App. 1974), the California
Court of Appeal considered the phrase “fail to renew,” as it is used in that state’s insurance laws,
at length and construed it to refer to the insurer’s decision “not to renew.” Id. at 220. The Appellate
Court of Illinois similarly construed “fail to renew,” as used in its insurance statutes, to mean “not
to renew.” Librizzi v. State Farm Fire & Cas. Co., 603 N.E.2d 821, 827 (Ill. App. 1992).

Wirtgen nevertheless cites to various judicial opinions and statutes that have discussed
“failure” in the context of specific legal obligations. (See Doc. No. 25 at 17, 20.) Those citations,
however, do little to support Wirtgen’s position, because no one disputes that failure to comply
with an obligation is one way that a person or entity can “fail.” For Wirtgen to prevail on this
argument, it needs to establish that, in the context of Tenn. Code Ann. § 47-25-1302, failure to
comply with a contractual duty to renew is the only way a party can fail to renew. The ordinary
usage of the word, however, does not support that reading. Indeed, the fact that the cases and
statutes that Wirtgen cites rely on additional language to make clear what type of failure they are
describing—e.g., “fail[ing] to pay an assessment when due,” Tenn. Code Ann. § 56-12-210(b)
(emphasis added)—illustrates the fact that “failure” is a broad, even generic, concept that can be

applied to many types of actions. The action described in Tenn. Code Ann. § 47-25-1302 is failing
to renew a contract, and this court will apply it accordingly, without imposing limitations that
appear nowhere in the text.
That broader reading of “fail to renew” is also more consistent with the overall approach
embodied by Tenn. Code Ann. § 47-25-1302. Wirtgen envisions that statute as only coming into
play in the context of a renewal decision if there is a preexisting contractual duty to renew. But
imposing additional, non-contractual obstacles to ending the relevant parties’ relationship is
precisely what Tenn. Code Ann. § 47-25-1302 is drafted to do. For example, a contract may grant
the manufacturer a unilateral right of termination, but Tenn. Code Ann. § 47-25-1302, by its plain
language, would impede that right by adding additional, non-contractual requirements of good
cause and advance notice. There is, therefore, nothing unusual about the prospect of Tenn. Code
Ann. § 47-25-1302 also imposing additional, non-contractual obstacles to nonrenewal. If anything,
it would be more unusual if the statute abandoned its standard approach to permit parties to, in

effect, contract around its requirements by simply recharacterizing a termination right as a right
not to renew. The reading of Tenn. Code Ann. § 47-25-1302 that is most consistent with the statute
as a whole is therefore the same as the one that is most consistent with the plain language: that
“fail to renew” refers to a decision not to renew a renewable contract, whether or not there would
be a duty to renew in the absence of Tenn. Code Ann. § 47-25-1302—which itself imposes such
an obligation in the absence of good cause.
A final potential complication of applying that definition in this case is the fact that the
renewal provision in these parties’ contract was bilateral, meaning that whether to renew was not
solely Wirtgen’s decision to make. That distinction might be relevant under some facts; for
example, it is difficult to see how a manufacturer or supplier could have an obligation to

demonstrate good cause if it was the distributor itself that wanted to end the parties’ relationship.
In this case, however, Hayden-Murphy did consent to renewal, and Wirtgen therefore faced the
same contractual renewal/nonrenewal decision it would have had under a contract that did not
expressly require the distributor’s consent for renewal. Nothing in the meaning of the phrase “fail
to renew” suggests that it would exclude such a situation. The court therefore concludes that the
notice and good cause requirements of Tenn. Code Ann. § 47-25-1302 would apply to any decision
by Wirtgen not to renew the parties’ contract over Hayden-Murphy’s objection.
C. Good Cause
Wirtgen argues that, if the court holds that the good cause requirement does apply to any
decision by Wirtgen not to renew the parties’ contract, the court should nevertheless permit
Wirtgen’s claim for declaratory relief to proceed because it did, in fact, have good cause based on
a substantial change in the ownership or control of Hayden-Murphy without Wirtgen’s consent.

Specifically, Wirtgen points to the assertion, in its Amended Complaint, that, “[o]n August 13,
2018, Hayden-Murphy’s then CEO, Len Kirk, sent Wirtgen a letter informing Wirtgen of a
substantial change in the control of Hayden-Murphy and the loss of managers, officers, and key
employees within Hayden-Murphy, including, but not limited to, himself, who was stepping down
as CEO after 30 years of service.” (Doc. No. 18 ¶ 26.) Wirtgen also cites its letters to Hayden-
Murphy clearly expressing concern about Kirk’s departure and declining to consent to that change.
Those letters, Wirtgen argues, not only confirm the basis for its good cause but serve as more than
adequate notice, should Wirtgen end the parties’ agreement in the future—which, Wirtgen points
out, it has not yet done.
Hayden-Murphy argues first that Wirtgen has not sufficiently pleaded that the departure of

Kirk and unnamed others actually rose to the level of good cause under Tenn. Code Ann. § 47-25-
1302. That argument, though, hinges on the mistaken assumption that Wirtgen was required to
plead certain magic words about the extent of Kirk’s ownership and/or control of Hayden-Murphy.
Wirtgen’s Complaint clearly alleges that Kirk exercised substantial control over Hayden-Murphy,
and the supporting materials, which are incorporated into the Amended Complaint, confirm that
he was a part owner who relinquished his share of ownership in connection with his retirement.
There may well be room to debate whether Kirk’s ownership or control over Hayden-Murphy was
actually “substantial,” but that is a factual question that the court cannot resolve at this stage.
Wirtgen’s failure to specifically use particular keywords, however, is inconsequential.
Hayden-Murphy argues next that, insofar as Kirk’s departure might have, at one time,
qualified as good cause to terminate or decline to renew the contract, the substantial delay between
that departure and any attempt by Wirtgen to end the relationship renders that good cause no longer
effective, on the ground that Wirtgen either waived its termination/nonrenewal right by delay or

implicitly consented to the change by continuing to do business with Hayden-Murphy—and
renewing the contract for additional terms—long after that change was made. Wirtgen responds
that any such argument is inappropriate for resolution in connection with a motion to dismiss.
“Waiver is an affirmative defense,” and “[a] party who raises the issue of waiver has the
burden of proving it by a preponderance of the evidence. Madden Phillips Const., Inc. v. GGAT
Dev. Corp., 315 S.W.3d 800, 813 (Tenn. Ct. App. 2009) (citing 9 Tenn. R. Civ. P. 8.03; Jenkins
Subway, Inc. v. Jones, 990 S.W.2d 713, 722 (Tenn. Ct. App. 1998)); see also GuestHouse Int’l,
LLC v. Shoney’s N. Am. Corp., 330 S.W.3d 166, 202 (Tenn. Ct. App. 2010) (“[W]aiver is defensive
in nature, in that it is ordinarily raised as a defense . . . .”). “[A] motion under Rule 12(b)(6), which
considers only the allegations in the complaint, is generally an inappropriate vehicle for dismissing

a claim based upon” a defense that hinges on facts that the complaint was not required to plead.
Cataldo v. U.S. Steel Corp., 676 F.3d 542, 547 (6th Cir. 2012). Because this case involves a request
for declaratory judgment, rather than a more straightforward claim for breach of contract, the
question of what qualifies as a “defense” may be somewhat more complex. Abstract issues of
terminology aside, however, the argument that waiver and implied consent are too fact-intensive
and too distinct from Wirtgen’s Rule 8 pleading obligations to consider based on the Amended
Complaint alone is persuasive.
Nothing in the pleaded facts suggests that any express verbal waiver occurred. To the
contrary, the correspondence between the parties suggests that, if anything, Wirtgen took
affirmative steps to avoid the impression that it was waiving its rights through its delay. Any
waiver or implied consent therefore must have been by action and/or inaction. Typically, such a
finding must be based on a showing of “some ‘absolute action or inaction inconsistent with the
claim or right’ waived.’” Old Hickory Coaches, LLC v. Star Coach Rentals, Inc., 652 S.W.3d 802,
819 (Tenn. Ct. App. 2021) (quoting Madden Phillips Const., Inc. v. GGAT Dev. Corp., 315 S.W.3d
800, 813 (Tenn. Ct. App. 2009)). The court cannot decide, from the Amended Complaint, whether
any such absolute action or inaction occurred, because the court is almost entirely lacking in
context regarding the parties’ relationship and the norms of their industry. It might be the case that
declining to terminate (or refuse to renew) the parties’ agreement for the first few years after good
cause allegedly arose did, in context, amount to a clear waiver. The court, however, cannot assume
that that was the case. Certainly, the facts stated in the Amended Complaint do not mandate that
conclusion. Dismissing Wirtgen’s claim at this stage based on the assumption that it waived its
rights would therefore be inappropriate.
IV. CONCLUSION
For the foregoing reasons, Hayden-Murphy’s Motion to Dismiss (Doc. No. 24) will be
denied.
An appropriate order will enter.
bhi
United States District Judge

24

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10438416. Public record. Not legal advice.