March 12, 2010 – The Wisconsin Supreme Court, in Volvo Trucks North America v. Wausau Truck Center, Inc., 2008AP1385 (March 11, 2010), provided clarity to the meaning of the word “cure” under Wis. Stats. §218.0101-.0172, the motor vehicle dealer statutes, and found that a dealer had cured a breach of its dealer agreement in the requisite period of time.
In this case, Volvo Trucks North America (Volvo) issued a notice to Wausau Truck Center (Wausau Truck), terminating their dealer franchise. As a result, Wausau filed a complaint of unfair cancellation under Wis. Stat. § 218.0114(7)(d). Under this statute, the Division of Hearings and Appeals (Division) is charged with hearing such a dispute, and it issued an order requiring Volvo to rescind its termination notice. Volvo appealed.
The issue the court was asked to review was whether Wausau Truck cured its breach within the “cure period,” which in turn presented two questions: (1) the meaning of the word “cure” in Wis. Stat. § 218.0116(1)(i)1.b; and (2) after being given notice by Volvo, did Wausau Truck cure its breach of the dealer agreement? See Id. ¶ 5.
The facts of the case
Wausau Truck is a dealer for both Volvo and Peterbilt trucks, and the relationship between Volvo and Wausau Truck is governed by their dealer agreement. In 2001, Wausau Truck decided it would sell its Volvo dealership and focus exclusively on Peterbilt trucks. To accomplish this goal, Wausau Truck developed what it called the “Volvo Elimination Plan,” which included a series of actions intended to promote the sale of Peterbilt trucks at the expense of Volvo trucks.
Some of the actions Wausau Truck implemented under the Volvo Elimination Plan included changing the business name to “Peterbilt Wisconsin-Wausau,” not using the Volvo logo on business cards, attempting to convince longtime Volvo customers to switch to Peterbilt, giving Volvo quotes only upon request, requiring all Volvo quotes be accompanied by a Peterbilt quote, and focusing marketing efforts on Peterbilt only. See Id. ¶ 21.
However, by the end of 2002, Wausau Truck decided not to sell its Volvo franchise and ended the actions it was taking under the elimination plan, although the dealer’s sales of Volvo products for 2002 had declined dramatically. It was this decrease, along with the actions taken by Wausau Truck, that led Volvo to send the notice of breach on May 20, 2003.
Requirement for “just provocation”
Under Wisconsin’s dealership statutes, a notice of breach is not sufficient to cancel a dealer agreement. Volvo had to demonstrate “just provocation,” which would exist if the “breach [was] not cured within a reasonable time” after Wausau Truck received written notice of the breach from Volvo. See Id. ¶ 25.
Volvo had originally given Wausau Truck 60 days to cure the breach, but had extended the period to cure to the end of 2003 after subsequent discussions. On Jan. 30, 2004, Volvo issued a notice of termination based on its determination that Wausau Truck had not cured its breach. In response, Wausau Truck filed a complaint alleging unfair cancellation. See Id. ¶¶ 27-28.
The dispute then centered on whether Wausau Truck’s conduct after Volvo’s notice of the breach cured the breach by Dec. 31, 2003.
At the hearing, the Division found that Wausau Truck’s actions under the Volvo Elimination Plan were a material breach of the dealer agreement but that Wausau Truck had cured the breach. It determined that “the most egregious elements of the Volvo Elimination Plan were abandoned prior to the issuance of the Notice of Breach, and except for a few minor examples … the remaining components of the Volvo Elimination Plan were abandoned during the cure period.” See Id. ¶ 28.
When is a breach “cured”?
Under Wis. Stat. § 218.0116(1)(i)1.b, once the Division found that Wausau Truck had materially breached the agreement, it had to determine whether Wausau Truck cured the breach. If the breach was cured, then Volvo lacked “just provocation” to cancel the dealer agreement. The statute does not define the word “cured.”
Volvo argued for a dictionary definition of cure, which is that “cure” means to restore matters to the way they were before the breach. They argued that Wausau Truck continued to use the name Peterbilt in its corporate name and that it had failed to re-establish communication with some customers who had previously purchased Volvo trucks. As a result, they contended that Wausau Truck had not cured the breach. See Id. ¶ 34.
Wausau Truck argued that the term “cured” should be defined according to its usage in contract law, an argument with which the court agreed. “Technical words or phrases in a statute should be given their technical or specialized meaning.” See Id. ¶ 36. “In this regulatory context, it would make little sense to use the ‘common and ordinary’ meaning of ‘cured,’” the court added. “It makes more sense to refer to terms and concepts established in contract law when we interpret the meaning of “cured” in [the statute] which governs breach of a contract.” See Id. ¶ 38.
Contract law generally holds that a breach can be cured by substantially correcting the deficiency in performance. “Perfect performance is not required to effectuate a cure.” See Id. ¶ 45. The court then considered that the meaning of “cured” focuses on the performance of the breaching party, rather than on matters beyond the control of the breaching party, “such as the conduct of third parties or on the effects of an economic recession.” The court therefore rejected the argument that to cure a material breach the breaching party must not only stop the offending conduct but must also “repair the harm done by the breach.” See Id. ¶ 46.
In this case, the Division found that Wausau Truck took several actions to demonstrate its recommitment to Volvo and cure the breach. In January 2003 it sent a postcard to all its Volvo customers intended to counter rumors that Wausau Truck no longer wanted to be a Volvo dealer. It participated in a Volvo demo program and in a special Volvo sales program, and conducted a “ride and drive” demonstration of new Volvo models. In addition, Wausau Truck used the name “Wausau Truck Center” instead of “Peterbilt Wisconsin-Wausau” when dealing with Volvo customers. It also ended its policy requiring sales representatives to provide Peterbilt quotes with every Volvo quote, and implemented a number of other measures to support Volvo. See Id. ¶ 55.
The Division therefore found that Wausau Truck, while it had breached the agreement, did cure the breach in the requisite period of time, and the court held that the Division did not err either in making its factual findings or in its conclusion that Wausau Truck cured the breach. It affirmed the decision of the court of appeals that affirmed the Division’s order requiring Volvo to rescind the termination notice it issued to Wausau Truck.
