Carolina Trucks & Equip. v. Volvo Trucks, N. Amer.

• Decision Date: 06 July 2007
• Docket Number: No. 06-1263.,No. 06-1321.,06-1263.,06-1321.
• Citation: 492 F.3d 484
• Parties: CAROLINA TRUCKS & EQUIPMENT, INCORPORATED, Plaintiff-Appellee, v. VOLVO TRUCKS OF NORTH AMERICA, INCORPORATED, Defendant-Appellant. Carolina Trucks & Equipment, Incorporated, Plaintiff-Appellant, v. Volvo Trucks of North America, Incorporated, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

492 F.3d 484

CAROLINA TRUCKS & EQUIPMENT, INCORPORATED, Plaintiff-Appellee, v. VOLVO TRUCKS OF NORTH AMERICA, INCORPORATED, Defendant-Appellant.

Carolina Trucks & Equipment, Incorporated, Plaintiff-Appellant, v. Volvo Trucks of North America, Incorporated, Defendant-Appellee.

No. 06-1263.

No. 06-1321.

United States Court of Appeals, Fourth Circuit.

Argued: May 24, 2007.

Decided: July 6, 2007.

ARGUED: Clarence Davis, Nelson, Mullins, Riley & Scarborough, L.L.P., Columbia, South Carolina, for Appellant/Cross-Appellee. Marcus Angelo Manos, Nexsen Pruet, Columbia, South Carolina, for Appellee/Cross-Appellant. ON BRIEF: William H. Latham, Nelson, Mullins, Riley & Scarborough, L.L.P., Columbia, South Carolina, for Appellant/Cross-Appellee. Manton M. Grier, Jr., Nexsen Pruet, Columbia, South Carolina, for Appellee/Cross-Appellant.

Before WILKINSON, MOTZ, and TRAXLER, Circuit Judges.

Affirmed in part, reversed in part, and remanded by published opinion. Judge WILKINSON wrote the opinion, in which Judge MOTZ and Judge TRAXLER joined.

OPINION

WILKINSON, Circuit Judge:

This case explores the extent to which a state has regulated — or may regulate — the auto dealer/manufacturer relationship beyond its own borders. The question is whether a South Carolina statute providing that a vehicle manufacturer generally "may not sell, directly or indirectly, a motor vehicle to a consumer in this State," except through its authorized franchises, forbade sales to South Carolina consumers by an out-of-state manufacturer that were consummated in Georgia. S.C.Code Ann. § 56-15-45(D) (2006). Plaintiff Carolina Trucks & Equipment, Inc. argues that the South Carolina law did forbid the Georgia sales. We disagree, and reverse the judgment in Carolina Trucks' favor, because the language of the South Carolina act will not support the broad extraterritorial scope that plaintiff would give to it. We also reject plaintiff's cross-appeal, and affirm the determination that Volvo did not breach its contract with Carolina Trucks.

I.

Plaintiff Carolina Trucks & Equipment, Inc. was a dealer of Volvo trucks in South Carolina from 1987 until November of 2002. Defendant Volvo Trucks of North America, Inc. ("Volvo") is a Delaware corporation that manufactures trucks and tractors. Its headquarters is in Greensboro, North Carolina.

A.

This appeal is from a judgment against Volvo under the South Carolina Regulation of Manufacturers, Distributors and Dealers Act ("Dealers Act"). It concerns the activities of Arrow Trucks, a used truck distributor that is a Volvo subsidiary. Arrow Trucks had no locations in South Carolina. However, Arrow had a branch in Atlanta, Georgia, which sold used trucks, including Volvo models.

Arrow's Atlanta location had some contacts within South Carolina. The company placed an advertisement for its Atlanta branch in the Columbia, South Carolina phone book. In addition, Arrow advertised in regional trade publications, at least one of which was sent into South Carolina. Carolina Trucks' principal Robert Beatty said that he received a brochure for Arrow Trucks with an industry monthly mailed to Beatty's South Carolina address. Beatty also testified without objection that some customers of Carolina Trucks told him that they had seen Arrow advertising.

From 1998 until 2002 — a period throughout which Carolina Trucks' profits from used truck sales fell — Arrow's Atlanta location sold seventy-eight trucks to consumers who listed residential addresses in South Carolina. Carolina Trucks presented evidence that fifty-four of those sales were to customers who resided in counties designated as Carolina Trucks' "exclusive" dealership area in the agreement between Carolina Trucks and Volvo.

Carolina Trucks does not allege that Arrow employees traveled to South Carolina to make these sales or that the sales were consummated at a location other than Arrow's Atlanta lot. In fact, Robert Beatty testified at trial that he had no evidence that any of Arrow's sales to South Carolina residents were made outside Atlanta. Carolina Trucks also presented no direct evidence that any of the South Carolina consumers who purchased trucks from Arrow saw the company's advertisement in the Columbia phone book or saw Arrow advertisements that were mailed into South Carolina. Nor did it present direct evidence that any consumers would have purchased trucks from plaintiff if they had not purchased them from Arrow in Atlanta.

B.

Carolina Trucks filed suit against Volvo on August 5, 2002 in the District of South Carolina, raising eleven claims under state and federal law. With the exception of one claim under the Dealers Act, the claims were either rejected as a matter of law by the district court, voluntarily dismissed, or rejected by the jury. The jury found in favor of Carolina Trucks, however, on plaintiff's claim that Volvo violated the provision of the Dealers Act prohibiting manufacturers from directly or indirectly selling motor vehicles to South Carolina customers except through a dealer licensed in South Carolina. It awarded a total of $583,245 in lost profits, statutory damages, and punitive damages to Carolina Trucks.

Volvo now challenges this verdict. It argues that South Carolina law did not apply to the sales by Arrow Trucks that formed the basis for the jury's verdict, because there was no evidence that those sales occurred within South Carolina. Volvo argues that as a result, the district court should have granted it judgment as a matter of law on this claim.

Carolina Trucks cross-appeals the disposition of two claims that were rejected by the jury: its claim of breach of contract and its claim of breach of contract accompanied by a fraudulent act. It argues that the district court should have entered judgment for it on the first claim, and ordered a new trial on the second.

We review de novo the denial of a motion for judgment as a matter of law. In re Wildewood Litig., 52 F.3d 499, 502 (4th Cir.1995). We examine "whether there is substantial evidence in the record" upon which the jury could find for the prevailing party, viewing the evidence in the light most favorable to that party. Id. We review the denial of a motion for a new trial for clear abuse of discretion. Bristol Steel & Iron Works, Inc. v. Bethlehem Steel Corp., 41 F.3d 182, 186 (4th Cir.1994).

II.

We turn first to Volvo's appeal of the judgment against it under South Carolina's Dealers Act. The Dealers Act limits competition with local vehicle dealerships from both manufacturers and other dealers. See S.C.Code Ann. §§ 56-15-45. It provides that except under circumstances not relevant here, manufacturers may not themselves "own, operate, or control" a new motor vehicle dealer in South Carolina, id. § 56-15-45(A), and "may not sell, directly or indirectly, a motor vehicle to a consumer in this State, except through a new motor vehicle dealer holding a franchise for the line make that includes the motor vehicle," id. § 56-15-45(D).

Volvo argues as a matter of law that it did not violate this provision. It contends that while its Atlanta subsidiary, Arrow Trucks, sold vehicles to South Carolina consumers, there was no evidence that any of these sales took place in South Carolina, or at any location other than Arrow's Atlanta sales lot. Carolina Trucks does not dispute the state of the evidence, but argues that even if the South Carolina customers traveled to Atlanta to buy their vehicles, the resulting sales ran afoul of South Carolina law. It advances two theories to this effect. First, it argues that the Dealers Act should be read to prohibit sales to South Carolina residents regardless of where the sales occur. Second, it argues that the sales to South Carolina consumers occurred in part within South Carolina, and were forbidden by the state statute, because Arrow Trucks advertised in South Carolina. We take each theory in turn.

A.

Carolina Trucks first argues that Arrow's sales to South Carolina residents in Georgia were unlawful, because the Dealers Act prohibits manufacturer-to-consumer sales to South Carolina buyers without regard to the state in which the sales took place. Carolina Trucks argues that this is the best reading of statutory language providing that a manufacturer "may not sell, directly or indirectly, a motor vehicle to a consumer in this State" except through the franchises that manufacturers are generally prohibited from owning themselves. S.C.Code Ann. § 56-15-45(D). In particular, plaintiff claims, the modifier "in this State" must be taken to refer to the "consumer," not the entire sale that the statute proscribes. "In other words, the statute prohibits sales to South Carolina consumers."

We cannot agree that this result is compelled by the text. Carolina Trucks' broad reading is certainly not the only — and probably not the best — interpretation of the statutory language. The statute is ambiguous as to what "in this State" modifies. Carolina Trucks observes that if the legislature had meant for "in this State" to refer to the entire sales transaction, it could have made this clearer by prohibiting, for example, "sales in South Carolina." But the legislature could also have spoken more clearly if it intended the statute to have the broader meaning Carolina Trucks advances, by prohibiting, for example, "sales to consumers who reside in South Carolina." That the statute does not specify whether "in this State" refers to the consumer or the transaction does not favor one reading over another.

We find it more revealing that even if "in this State" modifies "consumer," the most natural reading of the phrase would not reach sales outside South Carolina's borders. A "consumer in the State" is not the same as a "consumer of the State" or "consumer from the State." Once a South Carolinian travels to Georgia, he is no longer a "consumer in the State," and thus appears not to be a person to whom vehicle manufacturers are forbidden to make sales. At a...