Hyundai Constr. Equip. Am's. v. S. Lift Trucks, LLC

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Hyundai Construction Equipment Americas, Inc., and Hyundai Heavy Industries Co., Ltd. v. Southern Lift Trucks, LLC

Hyundai Construction Equipment Americas, Inc., and Hyundai Heavy Industries Co., Ltd. v. Southern Lift Trucks, LLC

Nos. SC-2022-0675, SC-2022-0676

Supreme Court of Alabama

May 12, 2023

Appeal from Washington Circuit Court (CV-22-900029)

COOK JUSTICE.

These consolidated appeals arise out of a commercial dispute between Southern Lift Trucks, LLC ("Southern"), and Hyundai Construction Equipment Americas, Inc. ("Hyundai Construction") -- an alleged subsidiary of Hyundai Heavy Industries Co., Ltd. ("Hyundai Heavy Industries").^[1] Southern is a heavy-equipment dealer for Hyundai Construction. Southern filed suit against Hyundai Construction and Hyundai Heavy Industries (collectively referred to as "Hyundai") asserting various claims including claims under the Alabama Heavy Equipment Dealer Act ("the AHEDA"), § 8-21B-1 et seq., Ala. Code 1975.

Southern also sought a preliminary injunction to prevent Hyundai (1) from unlawfully terminating one of the dealer agreements at issue in these appeals and (2) from unlawfully adding a second dealer in the territory that was covered under another dealer agreement at issue. In response, Hyundai moved to compel arbitration. The Washington Circuit Court granted Southern's request for a preliminary injunction and denied Hyundai's motion to compel arbitration.

In appeal no. SC-2022-0675, Hyundai appeals the trial court's order granting Southern's request for a preliminary injunction. For the reasons provided herein, we affirm in part and reverse in part the trial court's order and remand the cause for the trial court to enter an order consistent with this opinion.

In appeal no. SC-2022-0676, Hyundai appeals the trial court's order denying its motion to compel arbitration. For the reasons provided herein, we affirm in part and reverse in part the trial court's order and remand the cause for the trial court to enter an order consistent with this opinion.

Facts and Procedural History

Southern is a heavy-equipment dealer based in Mobile. In 2019, it entered into a dealer agreement with Hyundai Construction to serve as a dealer of lift trucks manufactured by Hyundai Construction ("the forklift agreement"). A year later, in 2020, it entered into a second dealer agreement to serve as a dealer of construction equipment manufactured by Hyundai Construction ("the construction-equipment agreement").

Among other things, the forklift agreement covered the sales service, and distribution of forklifts and other "lift trucks." The construction-equipment agreement covered the sales, service, and rental of the provision of parts for and warranties regarding earth-moving equipment used in the construction industry, such as excavators, wheel loaders rollers, and breakers.

The territories covered by the dealer agreements overlapped, but were not identical. Specifically, the territory covered under the forklift agreement included Washington, Clarke, Choctaw, Sumter, Marengo, Wilcox, Baldwin, Conecuh, Escambia, Mobile, and Monroe Counties in Alabama, as well as certain counties in Mississippi and Florida. The territory covered under the construction-equipment agreement included only Washington, Choctaw, Clarke, Baldwin, Conecuh, Escambia, Mobile, and Monroe Counties in Alabama.

When the parties entered into the dealer agreements, Southern was the only dealer of lift trucks and construction equipment for Hyundai Construction within those territories. However, neither agreement was exclusive by its terms.

According to Southern, since entering into the dealer agreements, it has incurred significant expenditures building its business location, acquiring inventory and hiring and training full-time sales and mechanic staff to promote, sell, and service Hyundai Construction's products in the territories covered by the agreements. Southern provided evidence indicating that it employed 6 salespeople (including 1 customer-service specialist) -- having an average of 35 years' experience -- to handle Hyundai Construction's products. In addition, Southern provided evidence indicating that it maintained, on a full-time basis, approximately 3 road and shop technicians, each with 10-20 years' experience, who have been "Hyundai Factory Trained" to service Hyundai Construction's product.

In both dealer agreements, Southern agreed to arbitrate any and all disputes that it had with Hyundai Construction. For example, in the forklift agreement, the parties agreed to the following:

"In order to effectively resolve disputes between the parties efficiently and at the least cost and inconvenience, the parties agree to resolve their disputes pursuant to the terms set forth in this Section 25. All disputes between the parties relating to or arising out of this Agreement or the making, performance or breach thereof, or the subject matter hereof, shall be resolved by arbitration in the following manner:

"(a) The arbitration shall be conducted in accordance with the American Arbitration Association arbitration rules as in force on the date this agreement is executed. The parties hereby submit to the exclusive personal jurisdiction of such arbitrators for all matters unless such matters are required by law to be submitted to a court or other venue; provided that either party may apply to any court of competent jurisdiction to seek an order compelling arbitration or a declaratory judgment with respect to the enforceability of any provision of this Agreement.

"(b) The arbitration tribunal shall be formed of three arbitrators. The arbitrators shall be persons who are familiar with the commercial and manufacturing practices of heavy construction equipment business. In the event of incapacity, death or resignation of an arbitrator during the course of the arbitration proceedings, a substitute arbitrator shall be appointed or chosen pursuant to procedures set forth above.

"(c) The arbitration shall take place in Gwinnett County, Georgia or at such other location as the parties may agree and shall be conducted in the English language.

"(d) The arbitration award shall be final, binding on the parties, not subject to any appeal and shall deal with question of cost of arbitration and all matters related thereto.

"(e) Judgment upon the award rendered may be entered by any court having jurisdiction, or application may be made to such court for a judicial recognition of the award or any order of enforcement thereof."

(Emphasis added.) Likewise, the construction-equipment agreement contained a virtually identical arbitration provision.

Immediately after Southern entered into the constructionequipment agreement in 2020, Southern sold four pieces of construction equipment. However, Southern made no sales of construction equipment in 2021 or in 2022.

According to Southern, in August of 2021, Hyundai began efforts to "oust Southern as a dealer," including by threatening to reduce Southern's line of credit unless it agreed to stock a large inventory of equipment that it was not contractually required to stock. Southern claims that this was part of a plan to "create an environment in which it would not be feasible for Southern to continue as a Hyundai dealer so Hyundai could 'push out' Southern and install other dealers." Southern's brief at 11. However, Hyundai explained that its offer was intended as an effort to help rectify Southern's lack of construction-equipment sales and noted that, despite factory supply shortages and supply-chain delays, its other construction-equipment dealers across the country were recording record sales and profits. In the end, Southern did not agree with Hyundai's demands.

On March 2, 2022, Hyundai Construction notified Southern of its intent to terminate the construction-equipment agreement. Hyundai Construction's correspondence to Southern informed Southern that it had a cure period of 90 days from the date of the notice and that, if it did not make corrective efforts during that cure period, the constructionequipment agreement would officially terminate on June 30, 2022 -- or 120 days from the date of its March 2, 2022, notice.

Southern responded to the termination notice on March 5, 2022, requesting information regarding Hyundai Construction's inventory of construction equipment and sales of construction equipment in Southern's territory before the construction-equipment agreement was entered into.

In response to Southern's request, on March 8, 2022, Hyundai Construction informed Southern that it was being terminated as a dealer because Southern had failed to adequately stock construction equipment and had failed to take advantage of opportunities to place stock orders to build an inventory. Southern disputes both of these justifications and points to documents and testimony of Hyundai witnesses that cast doubt on these proffered reasons.

That same day, Hyundai Construction granted a portion of Southern's territory under the construction-equipment agreement to another dealer located in southern Alabama -- Taylor Machine Works, Inc., d/b/a Taylor Construction Equipment ("Taylor"). A few weeks later, Hyundai Construction issued a press release stating that its construction equipment was now being offered by Taylor through new "Hyundai-authorized" locations in Southern's territory. Hyundai Construction then listed Taylor as a dealer in that territory on its Web site. Likewise, Taylor issued an advertisement announcing that it was proud to be a dealer of construction equipment manufactured by Hyundai Construction.

Hyundai Construction's actions, however, were not limited solely to its construction equipment. On April 11, 2022, Hyundai Construction sent a correspondence to...