Giuffre Hyundai, Ltd. v. American

• Decision Date: 25 June 2014
• Docket Number: Docket No. 13–1886.
• Citation: 756 F.3d 204
• Parties: GIUFFRE HYUNDAI, LTD., d/b/a Giuffre Hyundai, Plaintiff–Appellant, v. HYUNDAI MOTOR AMERICA, Defendant–Appellee.
• Court: U.S. Court of Appeals — Second Circuit

756 F.3d 204

GIUFFRE HYUNDAI, LTD., d/b/a Giuffre Hyundai, Plaintiff–Appellant,

v.HYUNDAI MOTOR AMERICA, Defendant–Appellee.

Docket No. 13–1886.

United States Court of Appeals, Second Circuit.

Argued: March 20, 2014.

Decided: June 25, 2014.

Eric L. Chase (Ronald J. Campione, on the brief), Bressler, Amery & Ross, P.C., New York, NY, for Plaintiff–Appellant.

Frederick Liu, Hogan Lovells U.S. LLP, Washington, DC (John J. Sullivan, Hogan Lovells U.S. LLP, New York, NY, on the brief), for Defendant–Appellee.

Before: STRAUB, SACK, and LOHIER, Circuit Judges.

SACK, Circuit Judge:

The plaintiff, Giuffre Hyundai, Ltd. (“Giuffre”), was an authorized dealer of Hyundai automobiles pursuant to a contract with that company's domestic affiliate, Hyundai Motor America (“HMA”). HMA terminated its contract with Giuffre after a New York State court concluded that the dealer had engaged in fraudulent, illegal, and deceptive business practices—a clear breach of the contract terms. Giuffre responded by bringing suit in the United States District Court for the Eastern District of New York seeking to enjoin the termination. Giuffre relied in pertinent part on section 463 of the New York Vehicle and Traffic Law, which provides protections to motor vehicle franchisees in their dealings with automobile manufacturers. Giuffre claimed that section 463 required HMA to provide it with notice of and an opportunity to cure the breach occasioned by the state court's ruling. The district court (Jack B. Weinstein, Judge ) disagreed, concluding that the breach here was incurable and that HMA was therefore entitled to terminate the contract immediately, notwithstanding the terms of the Vehicle and Traffic Law. Because we conclude that section 463 does not abrogate the common law with respect to incurable breaches of contract, we affirm the district court's grant of summary judgment for HMA.

BACKGROUND

Giuffre Hyundai was a franchised Hyundai dealer based in Brooklyn, New York. It sold Hyundai cars pursuant to a Dealer Sales and Service Agreement (“DSSA”) with HMA. That contract included provisions stipulating that “HMA has selected [Giuffre] because of the reputation of its Owner(s) and the General Manager ... for integrity and their commitment to fair dealing.” DSSA 10(C)(2). It required Giuffre to refrain from “engag[ing] in any misrepresentation or unfair or deceptive trade practices.” Id. HMA reserved the right to “terminate [the DSSA] immediately” if

[Giuffre] or any Owner, officer, or General Manager of [Giuffre], is convicted of any felony or for any violation of law which in HMA's sole opinion tends to adversely affect the operation, management, reputation, business or interests of [Giuffre] or HMA, or to impair the good will associated with the Hyundai Marks.¹ Such violations of law may include, without limitation, any finding or adjudication by any court of competent jurisdiction or government agency that [Giuffre] has engaged in any misrepresentation or unfair or deceptive trade practice[.]

Id. 16(B)(1)(b).

Giuffre's Conduct and HMA's Notice of Termination

In December 2010, New York's Attorney General brought a civil suit against Giuffre; its owner, John Giuffre; and three other dealerships he owned, alleging that they had engaged in a pattern of fraudulent and deceptive business practices. See People v. Giuffre Motor Car Co., No. 30163/2010 (N.Y.Sup.Ct.2010).

The New York Supreme Court, Kings County, eventually granted summary judgment for the Attorney General, ruling that the dealerships had “engaged in fraudulent and illegal business practices[,] ... deceptive acts[,] ... and false advertising” in violation of several New York statutes and the federal Truth in Lending Act, 15 U.S.C. § 1601 et seq.See Decision/Order at 7, Giuffre Motor Car Co., No. 30163/2010 (N.Y.Sup.Ct. Dec. 7, 2011). Concluding that the evidence “describe[d] a common practice of strong-arm sales methods and unethical conduct,” id. at 4, the court commented: “The list of grievances is extensive and unsettling. Multiple statutory violations appear in several individual transactions. The Court is struck by the similarity of the claims being made [by the customers] and the brazen nature of the sales persons,” id. at 5. In response to what it called these “credible allegations of deceptive and fraudulent business practices,” the court found that John Giuffre had “offered nothing more than conclusory statements in a general denial which is insufficient to defeat an award of summary judgment.” Id. at 7.

The court enjoined the dealerships from committing further violations and ordered both restitution and civil penalties. See Order, Giuffre Motor Car Co., No. 30163/2010 (N.Y.Sup.Ct. Feb. 22, 2012). The Attorney General eventually agreed to a total payment of $500,000 in satisfaction of the judgment. See Consent Order and Judgment, Giuffre Motor Car Co., No. 30163/2010 (N.Y.Sup.Ct. Sept. 14, 2012).

HMA apparently learned of the Attorney General's suit and the court's decision for the first time from an October 2012 article in the New York Post headlined “Car biz slapped for fraud.” Kevin Sheehan and Mitchel Maddux, Car Biz Slapped for Fraud, N.Y. Post, Oct. 1, 2012. On October 3, 2012, an HMA executive wrote to Giuffre, enclosing a copy of the article. The letter notified Giuffre that the court's findings “are extremely serious and constitute a breach of [the DSSA].” Letter from Ken Bloech, Regional General Manager, Eastern Region, HMA, to John Giuffre (Oct. 3, 2012). Following an exchange of correspondence among counsel, on December 3, 2012, HMA sent Giuffre a letter indicating that it would terminate the DSSA in ninety days. Letter from Ken Bloech, Regional General Manager, Eastern Region, HMA, to John Giuffre (Dec. 3, 2012) (the “Notice of Termination”). The Notice of Termination asserted that “Giuffre Hyundai is in material and incurable breach of its obligations under the [DSSA]. HMA cannot and will not voluntarily allow its products to be sold and marketed by an organization that has been found to have preyed on the consuming public ... in the manner [Giuffre] did.” Id. at 4.

Proceedings Before the District Court

As the termination date approached, Giuffre filed suit in the United States District Court for the Eastern District of New York, seeking, among other things, “to permanently enjoin HMA from terminating [the DSSA]” and “to declare unlawful HMA's Notice of Termination.” Compl., Giuffre Hyundai, Ltd. v. Hyundai Motor Am., No. 13–CV–0520 (E.D.N.Y. Jan. 29, 2013), ECF No. 1. In addition to state and federal statutory and common law claims not relevant here,² Giuffre asserted that HMA violated section 463 of New York's Vehicle and Traffic law by failing to provide it with notice of and an opportunity to cure its breach of the DSSA. Id.

Section 463 requires a motor vehicle franchisor—notwithstanding the terms of any contract—to provide a dealer franchisee written notice “of its intention to terminate ... the franchise of such dealer at least ninety days before the effective date thereof, stating the specific grounds for such termination.” N.Y. Veh. & Traf. Law § 463(2)(d)(i). The franchisee facing termination may then challenge the franchisor's decision by filing suit. Id. § 463(2)(e)(i).

The issues to be determined in [such] an action ... are whether the franchisor's notice of termination was issued with due cause and in good faith. The burden of proof shall be upon the franchisor to prove that due cause and good faith exist. The franchisor shall also have the burden of proving that all portions of its current or proposed sales and service requirements for the protesting franchised new motor vehicle dealer are reasonable.

The determination of due cause shall be that there exists a material breach by a new motor vehicle dealer of a reasonable and necessary provision of a franchise if the breach is not cured within a reasonable time after written notice of the breach has been received from the manufacturer or distributor.

Id. § 463(2)(e)(2).

HMA moved for summary judgment, and Giuffre cross-moved for partial summary judgment on its section 463 claim. The district court granted judgment for HMA. Giuffre Hyundai, Ltd. v. Hyundai Motor Am., No. 13–CV–0520, 2013 WL 1968371, 2013 U.S. Dist. LEXIS 67795 (E.D.N.Y. May 10, 2013). In a discussion confined to Giuffre's section 463 claim, the court found that the Vehicle and Traffic Law “does not modify or displace the state common law principle that a party commits a material breach of its contract with another party when it violates a provision going to the root of their agreement.” Id. at *3, 2013 U.S. Dist. LEXIS 67795, at *7–8. A breach of this kind “is the basis for the aggrieved party to revoke or terminate the agreement without providing the other party an opportunity to cure.” Id. at *4, 2013 U.S. Dist. LEXIS 67795, at *8.

Moreover, the district court reasoned, New York common law does not require a chance to cure “when ‘doing so would amount to a useless gesture.’ ” Id. at *4, 2013 U.S. Dist. LEXIS 67795, at *9 (quoting Grocery Haulers, Inc. v. C & S Wholesale Grocers, Inc., No. 11 Civ. 3130(DLC), 2012 WL 4049955, at *15, 2012 U.S. Dist. LEXIS 131598, at *41 (S.D.N.Y. Sept. 14, 2012) (collecting cases)) (some internal quotation marks omitted). Finding that section 463 did not abrogate the common law in this respect either, the district court concluded that, after Giuffre's “egregious breach, further notice and opportunity to cure were not required because no cure was possible.... Anything less than termination might have frustrated—[HMA] could reasonably conclude—its attempts at rehabilitation of the public's trust in Hyundai, which was essential for a successful vendor of automotive products.” Id. at *4, 2013 U.S. Dist. LEXIS 67795, at *10–11.

On appeal, Giuffre argues that section 463 gives franchisees an absolute right to an opportunity to cure a breach of a motor vehicle dealership franchise...