(CN) - Volvo had the right to terminate a franchise agreement because it stopped producing the Samsung excavating equipment described in the agreement, the 7th Circuit ruled.
FMS Inc. was an authorized dealer of Samsung excavating equipment in the state of Maine. When Samsung sold that portion of its business, the new owner, Volvo, took over the contract.
In the next three years, Volvo gradually changed and rebranded the equipment from Samsung to Volvo. The company then terminated its franchise agreement with FMS and other Samsung dealers.
FMS and the dealers sued Volvo for breaching the agreement. The district ruled in favor of FMS and awarded substantial damages.
However, Judge Sykes of the Chicago-based federal appeals court reversed the decision.
"The franchise agreement in question appointed FMS as an authorized dealer of Samsung construction equipment," Sykes wrote. "Under the Maine franchise law, discontinuation of the franchise goods - here, Samsung-brand equipment - is good cause for termination."