Anchorage Chrysler v. Daimlerchrysler

• Decision Date: 24 February 2006
• Docket Number: No. S-11421.,S-11421.
• Citation: 129 P.3d 905
• Parties: ANCHORAGE CHRYSLER CENTER, INC., Appellant, v. DAIMLERCHRYSLER CORPORATION, Appellee.
• Court: Alaska Supreme Court

129 P.3d 905

ANCHORAGE CHRYSLER CENTER, INC., Appellant, v. DAIMLERCHRYSLER CORPORATION, Appellee.

No. S-11421.

Supreme Court of Alaska.

February 24, 2006.

Randall Simpson, Blair M. Christensen, Jermain, Dunnagan & Owens, P.C., Anchorage, for Appellant.

Jeffrey M. Feldman, Ruth Botstein, Feldman & Orlansky, Anchorage, and Mark F. Kennedy, Mark T. Clouatre, Wheeler Trigg

Kennedy LLP, Denver, Colorado, for Appellee.

Before: BRYNER, Chief Justice, MATTHEWS, EASTAUGH, and CARPENETI, Justices.

OPINION

MATTHEWS, Justice.

I. INTRODUCTION

This appeal arises out of a dispute between an automobile manufacturer and one of its dealers in Anchorage. The dealer and the manufacturer entered into a short letter agreement that required (among other things) the dealer to make certain changes to its facilities in return for the right to open a new dealership in Wasilla. The parties' relationship deteriorated: the dealer refused to remodel its dealership as the manufacturer wanted, and the manufacturer ended up opening a competing dealership in Anchorage. The car dealership sued the manufacturer, alleging breach of contract, misrepresentation, and breach of the covenant of good faith and fair dealing. After a bench trial, the superior court made findings of facts and conclusions of law, and entered judgment in favor of the manufacturer on all claims. We believe the superior court erred in failing to consider (1) the dealer's entitlement to declaratory relief on what facility changes the agreement required, notwithstanding the dealer's failure to attempt such changes; (2) whether alleged half-truths about the manufacturer's plans to open a new dealership amounted to a misrepresentation by the manufacturer; (3) whether the manufacturer failed to supply a letter of intent authorizing the dealer to open a store in Wasilla, as the agreement required; and (4) whether the manufacturer breached the covenant of good faith and fair dealing. We vacate the superior court's judgment and remand the case for further consideration.

II. BACKGROUND

The account below is drawn primarily from the superior court opinion, which has not been overtly challenged as wrong on the facts.

During the period relevant to this dispute, plaintiff Anchorage Chrysler Center (ACC) operated a dealership selling Chrysler, Plymouth, and Dodge vehicles, all of which were distributed to ACC by defendant DaimlerChrysler Motors Company, LLC (DCMC) (formerly known as DaimlerChrysler Motors Corporation). ACC sold the vehicles out of two adjacent buildings on Fifth Avenue: Plymouths and Chryslers were sold out of one building, and Dodges out of the other. ACC operated the dealership pursuant to "Sales and Service Agreements" between ACC and DCMC.

These sales and service agreements gave DCMC the right to authorize other dealers to sell the same cars in the same locality as DCMC "determines to be appropriate." The other DCMC dealer in Anchorage was Johnson Jeep. The only DCMC models Johnson Jeep carried were Jeep and Eagle.

In the mid-1990s, DCMC developed a merchandise strategy it called Project 2000. Dealers were encouraged to sell Dodge vehicles in facilities that were separate from the facilities used to sell Chrysler, Plymouth, Jeep, and Eagle vehicles. DCMC, ACC, and Johnson Jeep entered into discussions about how to achieve Project 2000's goal of the same dealer selling the Chrysler, Plymouth, Jeep, and Eagle lines. DCMC and ACC began to negotiate what would eventually become a letter agreement between ACC and DCMC under which ACC would not object to Johnson Jeep's selling Chryslers and Plymouths. As part of this letter agreement, DCMC required ACC to rearrange its showrooms so that Dodges would be sold in what had been the Chrysler/Plymouth showroom, with the other lines (including a new Jeep line) moving to the former Dodge showroom. As part of the deal DCMC would also agree to authorize ACC to open a Dodge dealership in Wasilla.

Getting this letter agreement signed involved a long period of negotiation, extending over several years and involving some false starts. One source of contention was the Wasilla part of the deal, which ultimately took the form of a letter of intent that DCMC was required to provide as one of its obligations under the letter agreement. Another concern ACC had (though the degree to which this concern was reflected in the parties' deal is disputed on this appeal) was whether DCMC would establish another Dodge dealership in Anchorage to compete against ACC's lucrative Dodge franchise. In March 1999, as the negotiations began to enter the home stretch, DCMC's in-house lawyer David King sent an email to ACC's lawyer, attaching a rough draft of a Wasilla letter of intent. Under this draft of the letter of intent, ACC could get a dealership in Wasilla if it began constructing the dealership over time periods to be determined (i.e., the draft had blanks for all the milestones). This letter of intent draft also addressed the issue of other Dodge stores in Alaska, by obligating ACC not to protest if DCMC established another dealer selling the same lines as ACC. The cover memo by DCMC's lawyer explained to ACC's lawyer that any disagreement over this language "should be resolved as a result of the understandings already reached. My clients have not informed me of any plans for additional dealerships in Alaska." Later, after DCMC had announced that it would open another Dodge dealership in south Anchorage, this statement became one basis of ACC's claim that DCMC had promised or represented not to open another Dodge store.

ACC responded by proposing revised language for the letter agreement. The letter agreement proposed by ACC deleted all references to DCMC's providing a letter of intent and required ACC to "commit" to a new Wasilla dealership within five years.¹ ACC also proposed new language that would commit the parties to the proposition that the Project 2000 agreements between ACC, DCMC, and Johnson Jeep "does not include the Dodge franchise"—language apparently intended to insure that Johnson would not get Dodge. On May 21, 1999, DCMC responded with a letter from Carl Fleck, DCMC's regional manager. DCMC said it was unnecessary to add language to the agreement precluding DCMC from giving Johnson Jeep a Dodge dealership: "As to awarding a Dodge Sales and Service agreement to Johnson Jeep, I can confirm that DaimlerChrysler has no plan to add Dodge to this dealership." This would become another statement used to support ACC's claim that DCMC had at least implicitly promised or represented not to start a new Dodge dealership in Anchorage.

The May 21 DCMC letter also seemed to reject ACC's Wasilla proposal. Fleck enclosed another draft of the letter of intent, which was not signed by DCMC but looked ready to be signed by both parties. Under this version of the letter of intent, DCMC promised to award ACC a Wasilla dealership for Dodge and all other DCMC vehicles, provided ACC met certain milestones. Under this draft of the letter of intent, the first milestone—proposal of a suitable site for the dealership—needed to be met by June 2002 (a little more than three years) and ACC had to finish the dealership by July 2004 (a little more than five years).² One of the issues in this appeal is whether this May 21 letter of intent was in form and substance the letter of intent contemplated by the letter agreement that was concluded a few days later.

On May 28, 1999, ACC and DCMC had a conference call, attended by Fleck on DCMC's side and by several managers on ACC's side. What happened on the call was disputed at trial. First, ACC asked about the letter agreement's requirement that ACC establish "separate" and "complete" showrooms for Dodge on the one hand and for Chrysler/Plymouth/Jeep on the other. According to the superior court's findings, Fleck told ACC that because ACC already had two showrooms and combined service and parts facilities and staff, the changes needed would be minor. ACC also asked Fleck about Dodge. What was said on this point was hotly disputed at trial. ACC witnesses testified that Fleck responded by promising not to put a new Dodge dealership of any kind in Anchorage. But the superior court found (based on Fleck's testimony) that Fleck made only a "brief reference to Dodge" and "only in the context of what [Johnson Jeep] was to get (or rather to confirm what [Johnson Jeep] would not get)."

The letter agreement giving rise to this litigation is dated May 26, 1999. ACC signed the agreement on May 28, 1999, after the parties' conference call; DCMC signed it on June 1, 1999.³ The letter contains three bullet points. The first bullet bestows a Jeep dealership on ACC, contingent on ACC's establishment of "separate" and "complete" facilities. The second bullet says that ACC will not object to DCMC's giving Johnson Jeep the Chrysler and Plymouth franchises (no mention is made of Dodge). The third bullet says DCMC "will provide" ACC with "its standard five year Letter of Intent." Altogether, the three bullets read as follows:

• Subject to [ACC's] meeting [DCMC's] qualification requirements, DCMC will enter into its standard Jeep Sales and Service Agreements with ACC. As a part of meeting DCMC's qualification requirements ACC will establish a complete Chrysler, Plymouth, Jeep ("CPJ") operation in ACC's current Dodge dealership facilities. As a result, ACC will establish a separate Dodge dealership operation with a separate dealer code in ACC's current Chrysler Plymouth dealership facility. ACC may choose to set up a separate legal entity under which the Dodge dealership will operate or ACC may operate each of the two dealerships under ACC's existing corporate entity with separate d/b/a names for the CPJ and Dodge operations.

• ACC understands and agrees that subject to Johnson Jeep meeting DCMC's qualification requirements, DCMC will enter into its standard Chrysler and Plymouth Sales and Service Agreements with Johnson...