Giuffre Motor Car Co. v. Kia Motors Am., Inc.

Decision Date29 September 2016
Docket Number15-CV-4514 (MKB)
PartiesGIUFFRE MOTOR CAR CO., LLC d/b/a GIUFFRE KIA, GIUFFRE HYUNDAI, LTD. and JOHN GIUFFRE, Plaintiffs, v. KIA MOTORS AMERICA, INC., HYUNDAI MOTOR AMERICA and HYUNDAI CAPITAL AMERICA, INC., Defendants.
CourtU.S. District Court — Eastern District of New York
MEMORANDUM & ORDER

MARGO K. BRODIE, United States District Judge:

Plaintiffs Giuffre Motor Car Co., LLC, doing business as Giuffre Kia ("Giuffre Kia"), Giuffre Hyundai, Ltd. ("Giuffre Hyundai") and John Giuffre commenced this action on March 12, 2015, against Defendants Kia Motors America, Inc. ("Kia"), Hyundai Motor America ("Hyundai") and Hyundai Capital America, Inc. ("Hyundai Capital") in the Supreme Court of the State of New York, Kings County. (Notice of Removal ¶ 1, Docket Entry No. 1). Plaintiffs alleged several claims arising from Kia's termination of its franchise agreement with Giuffre Kia and from Hyundai's termination of its franchise agreement with Giuffre Hyundai. (Compl., Docket Entry No. 8.) On August 3, 2015, Defendants removed the action from the New York Supreme Court, Kings County, to the United States District Court for the Eastern District of New York on the basis of both federal question and diversity jurisdiction.1 (Notice of Removal ¶¶ 5-8.)

On November 4, 2015, Plaintiffs filed an Amended Complaint asserting thirteen claims, consisting of two claims against Hyundai, ten claims against Kia and one claim against Hyundai Capital. (Am. Compl., Docket Entry No. 21.) Plaintiffs sue Hyundai for price discrimination in violation of the Robinson-Patman Act, 15 U.S.C. § 13, and the New York Franchised Motor Vehicle Dealer Act, N.Y. Veh. & Traf. Law § 460 et. seq. (the "New York Dealer Act"), and for failure to repurchase inventory at fair and reasonable compensation in violation of the New York Dealer Act. (Id. ¶¶ 53-79.) Plaintiffs sue Kia for unreasonably withholding consent to the sale of Giuffre Kia's motor vehicle dealership in violation of the New York Dealer Act and in violation of the California Vehicle Code, Cal. Veh. Code § 11713.3 et. seq.; for imposing a contractual term that is contrary to public policy in violation of the California Civil Code, Cal. Civ. Code § 1668; for imposing unreasonable restrictions on the sale of Giuffre Kia's motor vehicle dealership in violation of the New York Dealer Act and in violation of the California Vehicle Code; for failing to repurchase inventory at fair and reasonable compensation in violation of the New York Dealer Act; for failing to comply with the terms of its franchise agreement in good faith in violation of the Automobile Dealer's Day in Court Act, 15 U.S.C. § 1221 et seq. ("ADDCA"); and for fraudulent inducement, tortious interference with contract, and breach of the implied covenant of good faith and faith dealing. (Id. ¶¶ 80-281, 293-296.) Plaintiffs sue Hyundai Capital for failure to repossess and sell inventory in a commercially reasonable manner. (Id. ¶¶ 282-92.)

Hyundai moves to dismiss Plaintiffs' price-discrimination claims, and Kia moves to dismiss all claims asserted against it for failure to state a claim pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.2 (Kia and Hyundai Mot. to Dismiss ("Defs. Mot."), DocketEntry No. 26.) For the reasons discussed below, the Court grants the motions to dismiss and dismisses Plaintiffs' price-discrimination claims against Hyundai and all claims against Kia.

I. Background
a. The parties

Kia and Hyundai are California corporations that manufacture, distribute and sell vehicles to franchised vehicle dealerships. (Am. Compl. ¶¶ 5-6, 8, 15.) Hyundai Capital is a California corporation that provides financing to Kia and Hyundai dealerships. (Id. ¶¶ 7, 26.) Giuffre Kia and Giuffre Hyundai are New York limited liability companies (Id. ¶¶ 2-3.) John Giuffre is the principal and sole member of Giuffre Hyundai and Giuffre Kia. (Id.¶¶ 40, 43-44.) In September of 1998, Giuffre Hyundai and Hyundai entered into a franchise agreement (the "Hyundai Franchise Agreement"), which granted Giuffre Hyundai the right to operate a Hyundai franchise and sell Hyundai vehicles. (Id. ¶ 37.) In or about 2006, Giuffre Kia and Kia entered into a franchise agreement (the "Kia Franchise Agreement"), which granted Giuffre Kia the right to operate a Kia franchise and sell Kia vehicles. (Id. ¶ 41.) Hyundai Capital provided financing to Giuffre Kia, contingent upon Giuffre Kia continuing to operate a Kia dealership, and also provided financing to Giuffre Hyundai, contingent upon Giuffre Hyundai continuing to operate a Hyundai dealership. (Id. ¶¶ 47, 65, 95.)

b. Hyundai subsidies to competing franchisees

In 2010, Giuffre Hyundai learned that Hyundai was providing advertising subsidies to competing Hyundai franchisees. (Id. ¶ 54.) Plaintiffs allege that the subsidies gave the competing Hyundai franchisees a competitive advantage over Giuffre Hyundai. (Id. ¶ 55.) Giuffre Hyundai threatened to sue Hyundai for violating the Robinson-Patman Act and the New York Dealer Act. (Id. ¶¶ 56-58.) On December 15, 2010, Giuffre Hyundai and Hyundai agreedin writing to settle these advertising subsidy claims (the "Advertising Settlement Agreement").3 (Id. ¶ 60; Exs. 2-4, annexed to Decl. of Marcus Kim Bucci ("Bucci Decl."), Docket Entry No. 26-2.) Hyundai paid Giuffre Hyundai $600,000 (the "Settlement Funds"). (Am. Compl. ¶ 58.) The parties agreed in the Advertising Settlement Agreement that the Settlement Funds "were subject to reversal if the Hyundai Franchise Agreement were to be terminated." (Id. ¶ 63.)

In December of 2012, two years after they entered into the Advertising Settlement Agreement, Hyundai served Giuffre Hyundai with a notice of termination of the Hyundai Franchise Agreement, to become effective as of March of 2013. (Id. ¶ 64.) As a result of thetermination of the Hyundai Franchise Agreement, Hyundai "withdrew $600,000.00 from Giuffre Hyundai's open parts account" as repayment of the Settlement Funds. (Id. ¶ 67.)

c. Termination of the Kia franchise agreement

On or about July 3, 2014, over a year after the termination of the Hyundai Franchise Agreement, Kia served Giuffre Kia with a notice of termination of the Kia Franchise Agreement, to become effective ninety days thereafter, on October 4, 2014 (the "Termination Notice"). (Id. ¶ 87.) Hyundai Capital subsequently notified Giuffre Kia that it would immediately terminate its "regularly ongoing financing" for the operation of Giuffre Kia's dealership and declare all debts owed to Hyundai Capital due on the effective date of the termination of Giuffre Kia's dealership. (Id. ¶¶ 96, 98.) According to Plaintiffs, Hyundai Capital's threatened actions would have had the practical effect of closing Giuffre Kia's dealership before the Termination Notice became effective. (Id. ¶ 97.)

d. Settlement agreement with Hyundai Capital

Giuffre Kia did not challenge the Termination Notice pursuant to the New York Dealer Act. (See id. ¶ 100.) Instead, on or about July 30, 2014, Giuffre Kia entered into a settlement agreement with Hyundai Capital for debts owed to Hyundai Capital (the "Hyundai Capital Settlement Agreement"). (Id. ¶ 103.) Pursuant to the Hyundai Capital Settlement Agreement, Plaintiffs made an initial payment of $1,250,000 to Hyundai Capital and agreed to sell Giuffre Kia's dealership and to use the proceeds of the sale to satisfy the remaining debts owed to Hyundai Capital. (Id. ¶¶ 105, 108.) In exchange, Hyundai Capital agreed to forgo collection of Plaintiffs' debts while Plaintiffs attempted to sell Giuffre Kia's dealership. (Id. ¶ 105.) Hyundai Capital also agreed that if Plaintiffs successfully sold Giuffre Kia's dealership, Hyundai Capital would accept a "discounted amount" in satisfaction of the debts owed to it by Giuffre Kia and John Giuffre. (Id.) If, however, Plaintiffs failed to sell Giuffre Kia's dealership before anagreed-upon deadline, Hyundai Capital would no longer be required to accept the discounted payment and could seek a judgment for the full amount owed to it by Giuffre Hyundai and John Giuffre. (Id. ¶ 107.)

e. Sale agreement for Giuffre Kia's dealership

On or about September 12, 2014, Giuffre Kia agreed to sell its dealership to 1626 86th Street Auto LLC (the "Purchaser") and entered into an asset purchase agreement with the Purchaser (the "Sale Agreement"). (Id. ¶ 111.) According to Plaintiffs, the Purchaser's principal, Joshua Aronson, was a "well-qualified buyer" and had previously operated both Kia and Hyundai dealerships. (Id. ¶¶ 113-14.) Giuffre Kia sent a copy of the Sale Agreement to Kia for its approval pursuant to the terms of the Kia Franchise Agreement. (Id. ¶¶ 115-16.) However, because Kia had already notified Giuffre Kia that it would terminate the Kia Franchise Agreement pursuant to the Termination Notice, Kia told Giuffre Kia that it was not required to review or consider the Sale Agreement. (Id. ¶¶ 117-125.)

f. The interim settlement agreement

On October 1, 2014, Giuffre Kia, John Giuffre and Kia entered into an "interim settlement and extension agreement" (the "Interim Agreement").4 (Id. ¶ 122; Interim Agreement, Docket Entry No. 26-11.) The Interim Agreement provides that "[e]xcept as expressly set forth herein, [Kia] has no obligation to review the [Sale Agreement]." (Interim Agreement 2.) Pursuant to the Interim Agreement, Kia extended the effective date of theTermination Notice for the termination of Giuffre Kia's franchise to December 4, 2014, and agreed to consider the Sale Agreement. (Am. Compl. ¶ 124.) For their part, Giuffre Kia and John Giuffre agreed that they would not challenge Kia's decision even if Kia declined to approve the Sale Agreement, (Interim Agreement 2). The Interim Agreement provides in pertinent part that:

[I]n the event that [Kia] declines or otherwise fails to approve the [Sale Agreement] (a "Turndown"), the Dealership shall not file any claim, action, protest, proceeding or other challenge with respect to such
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