Iowa Supreme Court Rules In Peterbilt Franchise Dispute
A franchise dispute in Northern Iowa was taken to the Iowa Supreme Court after the Polk County District Court ruled in favor of the Department of Transportation.
Peterbilt was approved by the Iowa DOT to open a dealership in Clear Lake. The owners of Sioux City Truck Sales sued claiming Clear Lake is within its 71-county “community” that is protected by the state’s franchise law.
Sioux City Truck Sales entered a franchise agreement with Peterbilt Motors Company to establish parts and service dealerships for customers within assigned areas of responsibility. SCTS has owned five dealerships in Iowa and Nebraska since 2013. Under their franchise agreement, SCTS has full-service facilities in Sioux City; Council Bluffs; Altoona; and Norfolk, Nebraska, as well as a parts-only store in Lincoln, Nebraska.
In Spring 2014, Peterbilt approached SCTS with a proposal to open a full-service dealership in Clear Lake or Mason City saying the location was the ideal place for growth. However, SCTS showed no interest in the new location.
After pushing for two years, Peterbilt pursued the location without SCTS. According to the ruling PDF, when Peterbilt gave SCTS a written notice of intent, SCTS President Brad Wilson replied
We have been looking for a location in Clear Lake for some time now and are currently reviewing a lease opportunity on a 6000 sqft building. Your letter concerns me that you may authorize another dealer there even if we have a location.
A few weeks later, Wilson sent Peterbilt a new site proposal for a parts-only store and Peterbilt rejected the parts-only offer. Three months later, they discovered that SCTS opened a parts-only store without authorization, an action Peterbilt called “a material breach” of the franchise.
They threatened to sue for trademark infringement.
In 2017 Peterbilt applied for an additional dealer franchisee to the Department of Transportation for the Clear Lake area, which was approved.
After appealing the DOT and the District Court, the Iowa Supreme Court ruled 4-3 that the Clear Lake franchise is far enough away to not be included in the Sioux City dealership’s “community,” meaning its approval is being upheld.