Contract – Dealer agreement

Where a plaintiff truck dealership brought a breach of contract action after the defendant manufacturer exercised its discretion to appoint a new dealer in the plaintiff’s designated “Area of Responsibility,” an award of summary judgment in favor of the defendant should be affirmed because the defendant made a “warranted” determination based on contractually proper criteria.

“This dispute arises from the Dealer Agreement between Rhode Island Truck Center, LLC (‘RITC’), a truck dealership, and Daimler Trucks North America, LLC (‘Daimler’), a truck manufacturer that markets and sells trucks in North America. The Dealer Agreement allowed RITC to sell Daimler’s Freightliner brand of trucks in a designated Area of Responsibility (‘AOR’). It also allowed Daimler to add new dealers to RITC’s AOR when Daimler determined in its ‘sole discretion’ that such addition was ‘warranted.’ When Daimler exercised its discretion to appoint a new dealer in RITC’s AOR, RITC sued Daimler for breaching both (1) the terms of the Dealer Agreement, and (2) the implied covenant of good faith and fair dealing under Rhode Island law. The district court granted summary judgment in Daimler’s favor on each claim. For the following reasons, we affirm. …

“… Looking to dictionary definitions, the district court concluded that the Appointment Provision unambiguously ‘allowed Daimler to appoint a new Freightliner dealer in RITC’s AOR when Daimler, in its individual choice or judgment, decided there were grounds for a new dealer.’ RITC takes a narrower view: it argues that, taken in the context of the Dealer Agreement as a whole, the term ‘warranted’ requires a justification that specifically ‘aris[es] from market conditions within the dealer’s territory.’ …

“We conclude that, under the plain language of the contract, Daimler is entitled to judgment as a matter of law. …

“RITC’s restrictive reading of the Appointments Provision — namely, that any reason for appointing a new dealer must ‘aris[e] from market conditions’ within its AOR — does not follow from the contractual language; nothing in that section conditions dealer rights on market conditions. …

“With this construction of the Dealer Agreement in mind, we turn to the issue of breach. RITC argues that a genuine dispute of material fact exists as to whether Daimler breached the Dealer Agreement because ‘a jury could find that … consolidation was the driving force behind ATGR’s appointment’ or that ‘Daimler made no “warranted” determination at all.’ We disagree.

“The evidence shows that Daimler determined that a new dealer was ‘warranted’ for business reasons consistent with the Dealer Agreement. …

“RITC does point to internal records from as early as 2018 showing Daimler’s plan to consolidate its network and suggests that RITC’s divestiture was a ‘foregone conclusion.’ But there is no evidence suggesting that Daimler’s consolidation plan does not itself reflect Daimler’s conclusion that introduction of a new dealer in RITC’s AOR was ‘warranted’ under the Dealer Agreement. Indeed, RITC itself describes Daimler’s consolidation plan as focused on ‘efficiency, streamlining operations, and optimizing resources’ across its network. … Those internal documents, even viewed in RITC’s favor, do not create a genuine dispute of material fact. …

“Reviewing the record as a whole, we conclude that Daimler made a ‘warranted’ determination based on contractually proper criteria. Daimler decided to appoint ATGR in Bristol County due to what Daimler apparently viewed as RITC’s unsatisfactory performance of its obligations under the Dealer Agreement. We conclude that Daimler was entitled to summary judgment on its breach of contract claim. …

“We next consider RITC’s argument that Daimler breached the implied covenant of good faith and fair dealing. …

“We reject RITC’s contention that Daimler violated the implied covenant by ‘using its contractual discretion’ to appoint new dealers ‘as a pretext’ for a ‘predetermined consolidation outcome designed to force RITC out of its territory.’ … Although RITC relies on materials referring to RITC’s possible divestiture, those materials do not permit a reasonable finding that Daimler lacked a business rationale tied to the Dealer Agreement’s objectives. The record supports that Daimler viewed the consolidation plan as a means to bolster sales in areas where existing dealers had underperformed. … Whether or not Daimler’s assessment was correct, the record does not permit a reasonable finding that Daimler acted arbitrarily or in bad faith in making that assessment. …

“Courts applying Rhode Island law have also held that where a party exercises contractual discretion in a manner consistent with fair dealing, it does not breach the implied covenant even if that exercise of discretion disadvantages the other party. … Likewise, here, Daimler fairly exercised its discretion under the Dealer Agreement to appoint a new dealer in Bristol County, even if it caused RITC to lose market share within its AOR. The parties expressly contemplated that possibility when they bestowed on RITC only a ‘nonexclusive’ right to operate within its AOR and conferred on Daimler ‘sole discretion’ to determine that introduction of a new dealer into RITC’s AOR was warranted. …

“Because RITC has failed to show that Daimler breached the implied covenant of good faith and fair dealing under either theory that it asserts, the district court properly granted summary judgment to Daimler. …

“We affirm the district court’s grant of summary judgment on RITC’s claims for breach of contract and breach of the implied covenant of good faith and fair dealing.”

Rhode Island Truck Center, LLC v. Daimler Trucks North America, LLC (Lawyers Weekly No. 01-156-26) (21 pages) (Dunlap, J.) Appealed from a decision by DuBose, J., in the U.S. District Court for the District of Rhode Island. Edward J. Sackman, with whom Hilary Holmes Rheaume, Bernstein, Shur, Sawyer & Nelson., Samira Omerovic and Omerovic Legal, PLLC, were on brief, for the plaintiff-appellant; Nathan D. Imfeld, with whom Natalie F. Pike, Foley & Lardner, Daniel E. Burgoyne and Partridge, Snow, & Hahn were on brief, for the defendant-appellee (Docket No. 25-1781) (July 17, 2026).

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