Edwards v. Kia Motors of America, Inc.

• Decision Date: 16 May 2008
• Docket Number: 1061167.
• Citation: 8 So.3d 277
• Parties: Edwin L. EDWARDS, individually, and ELL 12, LLC, d/b/a Huntsville Kia v. KIA MOTORS OF AMERICA, INC.
• Court: Alabama Supreme Court

8 So.3d 277

Edwin L. EDWARDS, individually, and ELL 12, LLC, d/b/a Huntsville Kia v. KIA MOTORS OF AMERICA, INC.

1061167.

Supreme Court of Alabama.

May 16, 2008.

Rehearing Denied October 24, 2008.

Thomas E. Baddley, Jr., Jeffrey P. Mauro, and M. Jay Rhodes of Baddley & Mauro, LLC, Birmingham, for plaintiffs.

Fournier J. Gale III and John A. Smyth III of Maynard Cooper & Gale, P.C., Birmingham, for defendant.

Robert A. Huffaker and R. Austin Huffaker, Jr., of Rushton, Stakely, Johnston & Garrett, P.A., Montgomery, for amici curiae Automobile Dealers Association of Alabama, Inc., and National Automobile Dealers Association, in support of the plaintiffs.

SEE, Justice.

This case is before us on a certified question from the United States Court of Appeals for the Eleventh Circuit. Edwin L. Edwards, individually, and ELL 12, LLC, d/b/a Huntsville Kia (hereinafter referred to collectively as "Edwards"), sued Kia Motors of America, Inc. ("KMA"), in federal court, alleging violations of the Alabama Motor Vehicle Franchise Act, § 8-20-1 et seq., Ala.Code 1975 ("the Franchise Act"). Pursuant to Rule 18, Ala. R.App. P., the federal court has certified the following question to this Court:

"[W]hether the Franchise Act permits an automobile dealer to bring a claim under the Act, despite the fact that both parties already executed a mutual release agreement in which the dealer relinquished all existing legal claims against the manufacturer in exchange for valid consideration."

We answer that question in the negative.

Facts and Procedural History

In 2002, Edwards purchased a struggling Kia dealership in Huntsville, with the understanding that KMA would later award Edwards a dealership franchise in Opelika and find a buyer for the Huntsville dealership. However, over the next two years, contractual disputes developed between Edwards and KMA regarding inventory shipments and payments for warranty services and dealer incentives. The Huntsville dealership continued to lose money, and, with no indication that KMA would award Edwards the Opelika dealership, Edwards sought a buyer for the Huntsville dealership. In 2004, Edwards, who had suffered continued losses, found a potential buyer for the Huntsville dealership. Pursuant to the dealership agreement between Edwards and KMA, Edwards was required to secure KMA's approval before transferring the dealership to any buyer. When Edwards asked for KMA's approval for the sale, KMA asked Edwards to sign a "Mutual Release Agreement," which provided that the parties agreed to

"release, acquit and forever discharge one another of and from all claims which have arisen or may ever arise, demands and causes of action arising from, related to, or in any manner connected with the sale and service of Kia Products, including, without limitation, the Dealer Agreement, and from any and all claims for damages, related to or in any manner connected with the Dealer Agreement or the parties' business relationship...."

Edwards states that, with the deadline for closing the sale of the Huntsville dealership approaching, Edwards was afraid that KMA would not approve the sale if Edwards refused to sign the release. In December 2004, Edwards signed the release and, thereafter, completed the sale of the Huntsville dealership.

In July 2005, Edwards brought the underlying action in the federal district court, alleging violations of the Franchise Act and asserting other common-law claims. KMA moved for a partial summary judgment on those claims KMA argued were barred by the release. The court entered a summary judgment in favor of KMA on those claims, and Edwards appealed to the United States Court of Appeals for the Eleventh Circuit. The Eleventh Circuit affirmed the judgment in part and then certified to this Court this question of statutory interpretation of the Franchise Act.

Analysis

The sole issue before us is whether the language of § 8-20-11, Ala.Code 1975, and the remedial purpose of the Franchise Act permit automobile dealers to bring claims under the Franchise Act against automobile manufacturers after they have executed a mutual release of, among other claims, those then existing claims.¹ Section 8-20-11 reads as follows:

"Notwithstanding the terms, provisions, or conditions of any dealer agreement or franchise or the terms or provisions of any waiver, and notwithstanding any other legal remedies available, any person who is injured in his business or property by a violation of this chapter by the commission of any unfair and deceptive trade practices, or because he refuses to accede to a proposal for an arrangement which, if consummated, would be in violation of this chapter, may bring a civil action in a court of competent jurisdiction in this state to enjoin further violations, to recover the damages sustained by him together with the costs of the suit, including a reasonable attorney's fee."

Edwards argues that § 8-20-11 is a remedial statute that must be interpreted broadly and that the release agreement Edwards and KMA signed thus falls within the statutory meaning of "any waiver." Edwards further argues that a broad interpretation of the phrase "any waiver" creates an exception for both prospective releases—those dealing with issues that have not arisen at the time the release is executed—and retrospective releases— those dealing with issues known or accrued at the time the release is executed. Therefore, Edwards argues, it should be able to bring its claims notwithstanding the mutual release agreement it entered into with KMA.²

KMA argues in response that retrospective releases are favored under general Alabama law and under the Franchise Act in particular.³ KMA further asserts that § 8-20-11, Ala.Code 1975, does not encompass retrospective releases of existing claims and alleges that a construction of the Franchise Act that allows parties to bring an action under the Act despite having executed a mutual retrospective release would foster an absurd result.

After a review of the question certified to us by the United States Court of Appeals for the Eleventh Circuit and an examination of the arguments of the parties, it appears that the dispositive issue is whether the legislature intended the term "any waiver" in § 8-20-11, Ala.Code 1975, to apply to the type of mutual release agreement at issue here, or, in other words, whether the legislature intended § 8-20-11 to apply so broadly as to preclude parties subject to the Franchise Act from reaching any form of binding agreement by which then existing, ripe claims could be mutually settled without resort to a judicial determination of the claim.⁴

"This Court has held that the fundamental rule of statutory construction is to ascertain and give effect to the intent of the Legislature in enacting a statute.... If possible, a court should gather the legislative intent from the language of the statute itself.... The legislative intent may be gleaned from the language used, the reason and necessity for the act, and the purpose sought to be obtained by its passage."

Norfolk S. Ry. v. Johnson, 740 So.2d 392, 396 (Ala.1999). We first look to the language of the statute. Although the Franchise Act, in § 8-20-3, Ala.Code 1975, defines 13 terms, neither "waiver"⁵ nor "release"⁶ appears in that definitional section.

In § 8-20-2, Ala.Code 1975, the legislature expressed its intent in enacting the Franchise Act:

"The legislature finds and declares that the distribution and sale of motor vehicles within this state vitally affect the general economy of the state and the public interest and the public welfare, and that in order to promote the public interest and the public welfare, and in the exercise of its police power, it is necessary to regulate motor vehicle manufacturers, distributors, dealers, and their representatives and to regulate the dealings between manufacturers and distributors or wholesalers and their dealers in order to prevent fraud and other abuses upon the citizens of this state and to protect and preserve the investments and properties of the citizens of this state."

"The purpose of the [Franchise] Act is clear. It is to protect the state's citizens from abuses by motor vehicle manufacturers and dealers, and, to that end, to regulate manufacturers and dealers and the dealings between manufacturers and their dealers." Sutherlin Toyota, Inc. v. Toyota Motor Sales USA, Inc., 549 So.2d 460, 461 (1989). We have stated that the purpose of the Franchise Act is "to give balance to the inequality of bargaining power between individual dealers and their manufacturers." Tittle v. Steel City Oldsmobile GMC Truck, Inc., 544 So.2d 883, 887 (1989). The Franchise Act proscribes certain practices, such as persuading dealers to absolve the manufacturer from liability arising from the unfair trade practices enumerated in the Franchise Act. However, there is no indication of a legislative intent to prohibit the parties to an automobile-dealership franchise agreement from reaching a good-faith settlement of existing claims after those claims arise and entering into a binding settlement agreement.

Section 8-20-11, Ala.Code 1975, authorizes the dealer or the manufacturer to bring a civil action notwithstanding the terms of the dealership agreements, franchise agreements, or waivers, and notwithstanding the availability of other legal remedies. However, there is no indication that § 8-20-11 does or was intended to prohibit the settlement of known claims as an alternative to taking them to trial and ultimately to judgment. If the legislature had wished to include the settlement and release of known claims in the language of § 8-20-11, Ala.Code 1975, it knew how to do so. The legislature lists prospective releases and waivers in describing specific unfair trade practices under the Franchise Act:

"[T]he following acts or conduct shall constitute unfair and deceptive trade practices:

"....

"(3) For any manufacturer, factory branch,...