Chrysler Motors Corp. v. Thomas Auto Co., Inc.

• Citation: 939 F.2d 538
• Decision Date: 16 July 1991
• Docket Number: 90-2428,Nos. 90-2400,s. 90-2400
• Parties: CHRYSLER MOTORS CORPORATION, Appellee, v. THOMAS AUTO COMPANY, INC., Appellant, Arkansas Motor Vehicle Commission, Intervenor-Defendant. CHRYSLER MOTORS CORPORATION, Appellee, v. THOMAS AUTO COMPANY, INC., Arkansas Motor Vehicle Commission, Appellant.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

Page 538

939 F.2d 538

CHRYSLER MOTORS CORPORATION, Appellee, v. THOMAS AUTO COMPANY, INC., Appellant, Arkansas Motor Vehicle Commission, Intervenor-Defendant.

CHRYSLER MOTORS CORPORATION, Appellee, v. THOMAS AUTO COMPANY, INC., Arkansas Motor Vehicle Commission, Appellant.

Nos. 90-2400, 90-2428.

United States Court of Appeals Eighth Circuit.

Submitted April 10, 1991.

Decided July 16, 1991.

Michael G. Smith, Little Rock, Ark., for appellant.

Patrick J. Goss (argued), Little Rock, Ark., Allan M. Huss and Mary Waldrup, Highland Park, Mich., and H. Keith Morrison and Patrick J. Goss, Little Rock, Ark., on the brief, for appellee.

Before BOWMAN, Circuit Judge, and HENLEY and FRIEDMAN, ^* Senior Circuit Judges.

FRIEDMAN, Senior Circuit Judge.

This is an appeal from a judgment of the United States District Court for the Eastern District of Arkansas (Judge Elsijane T. Roy) dismissing the claims by a former Chrysler automobile dealer that Chrysler's termination of the dealer's franchise violated two Arkansas statutes governing relationships between automobile manufacturers and their dealers and between franchisors and franchisees generally. The district court held that neither statute covers this case. Chrysler Motors Corp. v. Thomas Auto Co., No. LR-C-88-718 (E.D.Ark. Jul. 16, 1990) (order granting partial summary judgment). We affirm.

I.

A. In 1969, the appellant, Thomas Auto Company, Inc. (Thomas), and the appellee, Chrysler Motors Corporation (Chrysler), entered into an agreement authorizing Thomas to sell at retail Chrysler automobiles and automotive products (the Dealer Agreement). Thomas and Chrysler also entered into what Thomas describes as "essentially identical" franchise agreements covering Dodge and Plymouth automobiles and we, therefore, base our decision here on the main Dealer Agreement.

The Dealer Agreement had no expiration date. It described in considerable detail the respective rights and duties of Thomas and Chrysler. Thomas could terminate the agreement on 30-days written notice and Chrysler could terminate on 90-days written notice for five specified reasons. Chrysler had "the right to amend this agreement to the extent that CHRYSLER deems advisable, provided that CHRYSLER makes the same amendment in Chrysler Direct Dealer Agreements generally." The pertinent provisions of the Dealer Agreement are further described and discussed in Part II of this opinion.

In 1975, several years after the Dealer Agreement was executed, Arkansas enacted the Arkansas Motor Vehicle Commission Act (the Motor Vehicle Act), Ark.Stat.Ann. Sec. 23-112-101 et seq. The Act established a licensing system for automobile manufacturers and dealers, regulated in detail the relationship between manufacturers and dealers, prescribed standards of conduct for the retail automobile business, and created the Arkansas Motor Vehicle Commission to administer the Act. The pertinent provisions of that statute also are described in detail in Part II of this opinion.

B. Chrysler filed its complaint against Thomas in October 1988. It asserted that, based on an audit of Thomas it conducted in August 1985, Thomas had committed specified "acts and practices" that "constitute material breaches" of the Dealer Agreement. It sought a declaratory judgment that those acts and practices constituted (1) "grounds for the termination in good faith" of the Dealer Agreement and (2) "good cause for termination" under the Arkansas Motor Vehicle Act to the extent, if at all, that Act applied to the Dealer Agreement. Alternatively, Chrysler contended that the Arkansas Motor Vehicle Act did not apply to the Dealer Agreement because such application would constitute an impairment of contract invalid under Article 1, Section 10, of the United States Constitution.

The Arkansas Motor Vehicle Commission intervened to defend the constitutionality of the Arkansas Motor Vehicle Commission Act.

Thomas filed an answer denying the charges and a counterclaim. Count I of the counterclaim alleged that Chrysler had violated the Federal Automobile Dealers Franchise Act, 15 U.S.C. Sec. 1221 et seq. (1988), and sought compensatory damages of 2 million dollars and punitive damages of 25 million dollars. Counts II and III asserted that Chrysler had violated the Arkansas Motor Vehicle Commission Act and the Arkansas Franchise Practices Act (the Franchise Act), Ark.Stat.Ann. Sec. 4-72-201 et seq., respectively.

Chrysler moved for partial summary judgment with respect to Counts II and III of the counterclaim and the claim for punitive damages under Count I. The district court granted the motions.

The court held that "the Arkansas Motor Vehicle Commission Act should only be applied prospectively and it is, thus, inapplicable to agreements between plaintiff and defendant. The Court finds that plaintiff is entitled to judgment as a matter of law upon the claim set out in Count II of defendant's counterclaim." Chrysler Motors Corp. v. Thomas Auto Co., No. LR-C-88-718 (E.D.Ark. Jul. 16, 1990) (order granting partial summary judgment). The court further held that the "defendant has no claim against plaintiff under the Arkansas Franchise Practices Act" because the Dealer Agreement did not give Thomas an exclusive franchise in its territory, which was necessary for the Arkansas Franchise Act to apply. Id. Finally, the court held that an automobile dealer was not entitled to punitive damages under the federal statute. Id. Thomas has not challenged the latter ruling in this appeal.

Following the granting of the motion for partial summary judgment, the court, on the parties' joint motion to dismiss and stipulation of dismissal filed pursuant to Fed.R.Civ.P. 41, dismissed without prejudice the remainder of the case. Chrysler Motors Corp. v. Thomas Auto Co., No. LR-C-88-718 (E.D.Ark. Jul. 25, 1990) (order of dismissal). The effect of that action was to make the judgment granting partial summary judgment a final judgment for purposes of appeal, even though the district court had not so certified under Fed.R.Civ.P. 54(b). Merchants & Planters Bank v. Smith, 516 F.2d 355, 356 n. 3 (8th Cir.1975).

At oral argument, Chrysler stated that it had terminated Thomas' franchise and that Thomas had filed a new suit that is pending in the district court, which raises the breach of contract and Federal Automobile Dealers' Franchise Act claims asserted in this case.

II.

A. Under Arkansas law, there is "a presumption against the retroactive application of a legislative act. Legislation will not be construed as retroactive when it may reasonably be construed otherwise." Lucas v. Handcock, 266 Ark. 142, 152, 583 S.W.2d 491, 496 (1979) (citations omitted.) "The operation of a statute must be prospective only, 'unless the words are so clear, strong and imperative as to have no other meaning.' " Arkansas Rural Medical Practice Student Loan & Scholarship Bd. v. Luter, 292 Ark. 259, 729 S.W.2d 402, 403 (1987) (quoting with approval United States Fidelity & Guaranty Co. v. Struthers Wells Co., 209 U.S. 306, 314, 28 S.Ct. 537, 539, 52 L.Ed. 804 (1908)). "The presumption is very strong that a statute was not meant to act retrospectively, and it ought never to receive such a construction if it is susceptible of any other." United States Fidelity & Guaranty Co., 209 U.S. at 314, 28 S.Ct. at 539 (quoted with approval in Abrego v. United Peoples Federal Savings and Loan Ass'n, 281 Ark. 308, 664 S.W.2d 858, 861 (1984)).

The Motor Vehicle Act in terms does not apply retroactively, i.e., its provisions are not stated to cover automobile dealer franchise agreements executed before its effective date. Thomas argues, however, that the statutory scheme and some of its provisions require interpreting it as having that effect.

Thomas relies upon the preamble to the Act that "enunciates the purpose of the Act as the protection of the economy of this state, the public interest, and the public welfare," the comprehensive character of the regulatory scheme the Act provides the requirement that dealers file existing franchise agreements in connection with their license applications, and the Act's provision of criminal penalties for violations. We do not think, however, that these conditions would lead the Supreme Court of Arkansas to conclude that the Arkansas legislature intended the Motor Vehicle Act to have retroactive effect. None of these provisions, individually or collectively, suffice to overcome the presumption that statutes ordinarily are prospective in operation.

B. The remaining question, therefore, is whether the application of the Motor Vehicle Act to Chrysler's termination of its Dealer Agreement with Thomas, executed several years before the effective date of the Act, would constitute a retroactive application of the Act.

As Thomas apparently recognizes, the touchstone for determining that question is whether the statute would "disturb vested rights, or create new obligations" rather than, as Thomas contends it does, merely provide a new procedure or method for enforcing existing rights. See Harrison v. Matthews, 235 Ark. 915, 362 S.W.2d 704, 705 (1962); Alexander v. Lee Way Motor Freight, 15 Ark.App. 41, 689 S.W.2d 3, 5 (1985); Aluminum Company of America v. Neal, 4 Ark.App. 11, 626 S.W.2d 620, 622 (1982). Application of this test requires a more detailed statement of Chrysler's rights under the Dealer Agreement and various provisions of Arkansas law.

Chrysler's right to terminate the Dealer Agreement--which is the central substantive issue the parties dispute--is set forth in paragraph 21 of the Agreement as follows:

CHRYSLER may terminate this agreement on not less than ninety (90) days' written notice on (1) the failure of DIRECT DEALER to perform fully any of DIRECT DEALER'S undertakings and obligations in Paragraphs 7 through 10 and Paragraph 14 of this agreement, or (2) the death of any person listed in Paragraph 2 of this agreement, other than the death of DIRECT DEALER if he is an...