Coffee v. General Motors Acceptance Corp.

• Decision Date: 16 December 1998
• Docket Number: No. CV-396-019.,CV-396-019.
• Citation: 30 F.Supp.2d 1376
• Parties: L. Mitchell COFFEE, Jr. and Lmc Motors, Inc., Plaintiffs, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Georgia

30 F.Supp.2d 1376

L. Mitchell COFFEE, Jr. and Lmc Motors, Inc., Plaintiffs, v. GENERAL MOTORS ACCEPTANCE CORPORATION, Defendant.

No. CV-396-019.

United States District Court, S.D. Georgia, Dublin Division.

December 16, 1998.

Donald Walker Gillis, Dublin, Joseph J. Burton, Jr., M. Susan Taylor, Burton & Anderson, LLP, Rosemary S. Armstrong, Atlanta, GA, for L. Mitchell Coffee, Jr., Lmc Motors, Inc. plaintiffs.

Dwight J. Davis, Barry Goheen, King & Spalding, Atlanta, Hugh B. McNatt, McNatt, Greene & Thompson, Vidalia, M. Graham Loomis, King & Spalding, Atlanta, GA, for General Motors Acceptance Corporation, defendant.

ORDER

BOWEN, Chief Judge.

In the above-captioned case, Defendant has filed a Motion for Partial Summary Judgment on Plaintiffs' fraud and negligent misrepresentation claims. Upon consideration of the briefs submitted by counsel, Defendant's Motion for Partial Summary Judgment on Plaintiffs' fraud and negligent misrepresentation claims is hereby GRANTED for the reasons set forth below.

I. BACKGROUND

This case arises out of an inventory financing arrangement between Plaintiff LMC Motors, Inc. (LMC), which operated a General Motors (GM) dealership in Eastman, Georgia, and Defendant General Motors Acceptance Corporation (GMAC), a wholly owned subsidiary of GM. Plaintiff L. Mitchell Coffee, Jr. (Coffee) is the president and sole shareholder of LMC. Coffee first became involved in the automobile business during the late 1980s, when he acquired 49% of the stock in Hilliard, Inc., which at the time operated the GM dealership in Eastman. Coffee made this investment at the request of his friend Zack Hilliard, the dealership's owner. Coffee purchased the remaining stock from Mr. Hilliard in August 1989, and in December of that year GM approved Coffee as a dealer. Coffee operated the dealership under its former name until December 1990, when he changed the corporation's name to LMC Motors, Inc.¹ Hilliard, Inc. had previously entered into an inventory financing arrangement with GMAC — sometimes referred to as a "floor plan" financing arrangement — which the parties continued following Coffee's acquisition of the dealership. In this type of arrangement, the lender (GMAC) provides a line of credit to the dealership (Hilliard/LMC), which the dealership uses to finance the purchase of vehicles from the manufacturer (GM). On December 27, 1990, Coffee executed several agreements on behalf of LMC in connection with this inventory financing arrangement: (1) a Promissory Note, (2) a Loan Agreement, (3) a Wholesale Security Agreement, (4) an Amendment to the Wholesale Security Agreement, (5) a Guaranty Agreement, and (6) a Security Agreement.² In general terms, GMAC extended a $1.5 million line of credit to LMC, which the parties agree was intended to permit LMC to finance up to eighty vehicles. GMAC, however, frequently adjusted the number of vehicles it would finance — and hence the amount it would advance on LMC's behalf — based upon a sixty-day supply of vehicles. That is, GMAC would allow LMC to purchase only the number of vehicles that the dealership was likely to sell in a two-month period. According to GMAC, this "sixty-day-supply" rule is standard company policy and is also an accepted guideline within the automobile industry.

Plaintiffs detail several instances in which they allege that GMAC restricted and adjusted LMC's credit limit.³ While GMAC contests some of these allegations, it admits that it "periodically adjusted LMC's credit limit based on LMC's sales rate and other financial criteria, such as liquidity and capitalization." (Def.'s Am. Brief in Support of its Mot. for Summ. J. at 4). Furthermore, GMAC admits that it "suspended"⁴ LMC's line of credit on two different occasions: once from February to September 1990, and again from March to July 1993. According to GMAC, the 1990 suspension was initiated at Coffee's request after it was discovered that LMC had $650,000.00 in previously undisclosed off-balance sheet debt;⁵ according to Plaintiffs, however, GMAC refused to "reinstate" the line of credit until Coffee made an additional $100,000.00 capital contribution to LMC. The 1993 suspension, on the other hand, was initiated by GMAC because a check from LMC to GMAC had been returned for insufficient funds.⁶ GMAC conditioned reinstatement of the credit line upon satisfaction of several financial criteria, including an additional capital contribution by Coffee.

On April 5, 1994, GMAC advised LMC that it intended to terminate their inventory financing arrangement and that it would make a formal demand for payment in ninety days. Therefore, on July 5, 1994, GMAC demanded payment of the principal amount outstanding on the line of credit, plus the accrued interest on that amount.⁷ At about the same time, Coffee entered into negotiations with two individuals — Frank Andrews and Woody Butts — regarding their potential investment in LMC. Andrews, Butts, and Coffee subsequently formed ABC Motors in July 1994, and ABC Motors in turn executed an asset purchase agreement with LMC. GMAC currently provides floor plan financing to ABC Motors.

It is undisputed and notable that LMC timely paid all amounts owed to GMAC under the terms of the agreement. It also is undisputed that LMC incurred substantial operating losses during its existence.⁸ Plaintiffs allege that LMC's losses were precipitated by GMAC's repeated and unjustified reductions in LMC's credit limit and by GMAC's consequent refusal to finance the purchase of new vehicles at certain critical times.⁹ GMAC, on the other hand, attributes LMC's losses to poor management, and it further claims that it was justified — and in fact authorized under the agreement — in adjusting LMC's credit limit and in terminating their financing relationship.

Plaintiffs commenced the instant lawsuit in March 1996, asserting no less than eight claims against GMAC: (1) violation of the Automobile Dealers' Day in Court Act, 15 U.S.C. § 1221 et seq.; (2) violation of the Georgia Motor Vehicle Franchise Practices Act, O.C.G.A. § 10-1-620 et seq.; (3) breach of contract; (4) promissory estoppel; (5) fraud; (6) negligent misrepresentation; (7) tortious interference with business relations; and (8) tortious interference with contractual relations. GMAC filed a Motion for Summary Judgment on all of Plaintiffs' claims, and Plaintiffs sought summary judgment on the sole issue of GMAC's liability for breach of contract.

In this Court's May 19, 1998 Order, several claims against GMAC were dismissed. Accordingly, only Plaintiffs' following claims remain prior to this Motion for Partial Summary Judgment: (1) violation of the Automobile Dealers' Day in Court Act, 15 U.S.C. § 1221 et seq.; (2) breach of contract; (3) fraud; and (4) negligent misrepresentation. During a telephonic conference on July 6, 1998, the Court granted Defendant permission to file a Motion for Partial Summary Judgment addressing whether Plaintiffs' claims of fraud and negligent misrepresentation were barred by the statute of limitations. This Motion is currently before the court.

II. REQUIREMENTS FOR SUMMARY JUDGMENT

The Court should grant summary judgment only if "there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The applicable substantive law identifies which facts are material in the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).

"The moving party bears the initial burden to show the district court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial." Clark v. Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir.1991). When the moving party has the burden of proof at trial, that party must carry the burden at summary judgment by presenting evidence affirmatively showing that, "on all the essential elements of its case ..., no reasonable jury could find for the non-moving party." United States v. Four Parcels of Real Property, 941 F.2d 1428, 1438 (11th Cir.1991) (en banc). When the non-moving party has the burden of proof at trial, the moving party may carry the burden at summary judgment either by presenting evidence negating an essential element of the non-moving party's claim or by pointing to specific portions of the record which demonstrate that the non-moving party cannot meet the burden of proof at trial, see Clark, 929 F.2d at 606-608 (explaining Adickes v. S.H. Kress & Co., 398 U.S. 144, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970) and Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)); merely stating that the non-moving party cannot meet the burden at trial is not sufficient, Clark, 929 F.2d at 608. Any evidence presented by the movant must be viewed in the light most favorable to the non-moving party. Adickes, 398 U.S. at 157, 90 S.Ct. 1598.

If — and only if — the moving party carries the initial burden, then the burden shifts to the non-moving party "to demonstrate that there is indeed a material issue of fact that precludes summary judgment." Clark, 929 F.2d at 608. The non-moving party cannot carry the burden by relying on the pleadings or by repeating conclusory allegations contained in the complaint. Morris v. Ross, 663 F.2d 1032, 1033-34 (11th Cir.1981), cert. denied, 456 U.S. 1010, 102 S.Ct. 2303, 73 L.Ed.2d 1306 (1982). Rather, the non-moving party must respond by affidavits or as otherwise provided in Fed.R.Civ.P. 56. "[T]he evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson, 477 U.S. at 255, 106 S.Ct. 2505. A genuine issue of material fact will be said to exist "if the evidence is such that a reasonable jury could return a verdict for the non-moving party." Id. at 248, 106 S.Ct. 2505.

The clerk has given the non-moving party notice of the summary judgment motion, the right to file affidavits or other...