Hubbard Chevrolet Co. v. General Motors Corp.

• Decision Date: 01 October 1987
• Docket Number: Civ. A. No. J85-1178(L).
• Citation: 682 F. Supp. 873
• Parties: HUBBARD CHEVROLET COMPANY, Plaintiff, v. GENERAL MOTORS CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of Mississippi

682 F. Supp. 873

HUBBARD CHEVROLET COMPANY, Plaintiff, v. GENERAL MOTORS CORPORATION, Defendant.

Civ. A. No. J85-1178(L).

United States District Court, S.D. Mississippi, Jackson Division.

October 1, 1987.

Kenneth A. Rutherford, Thomas, Price, Alston, Jones & Davis, Jackson, Miss., for plaintiff.

Natie P. Caraway and Joseph P. Wise, Wise, Carter, Child & Caraway, P.A., Jackson, Miss., Edward C. Wolfe, Sr. Counsel, General Motors Corp., Detroit, Mich., for defendant.

MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

This cause is before the court on the motion of defendant General Motors Corporation (GM) for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Plaintiff has timely responded to the motion and upon consideration of the memoranda along with attachments submitted by the parties, the court is of the opinion that the motion should be granted in part and denied in part.¹

Plaintiff, Hubbard Chevrolet Company (Hubbard), has been in existence as a Chevrolet dealership in Utica, Mississippi since 1927. The president, owner and operator of that establishment is Shelby McKee. During their relationship, the parties have operated under a series of dealer agreements. The agreement in effect at the time relevant to the lawsuit was executed on November 1, 1980 and was for a term of five years. In 1984, Hubbard executed a new agreement, and a new five-year agreement was signed on November 1, 1985. Each of the agreements specifies Utica as the dealership location.

Although Hubbard was generally profitable in the 1970s and sold more new vehicles than the planning potential² established by GM, the population of Utica began to decline while the population increased in another town in Hubbard's area of primary responsibility,³ Raymond, Mississippi. Commencing in 1980, Hubbard unsuccessfully sought GM's permission to relocate Hubbard's dealership premises from Utica to Raymond. Then in 1984, GM, through its Chevrolet Division, reduced Hubbard's dealership area of primary responsibility by removing Raymond from the area and assigning it to the Jackson area, and also reduced Hubbard's planning potential by more than fifty percent. According to the allegations of the complaint, GM's refusal to allow the relocation of Hubbard's business premises, coupled with its reduction of Hubbard's area of responsibility and planning potential, have made it impossible for Hubbard to continue as a viable Chevrolet dealership.⁴ Plaintiff has alleged several claims against GM; specifically, plaintiff avers that GM's actions constituted a violation of the Automobile Dealer's Day in Court Act (DDCA), 15 U.S.C. § 1221-1225, that GM violated the analogous Mississippi Act, Miss.Code Ann. § 63-17-73 (1972), and that GM is liable for breach of fiduciary duty, breach of the covenant of good faith and fair dealing and interference with prospective business relations. GM has moved for summary judgment on all counts of the complaint.

The Automobile Dealer's Day in Court Act provides that an automobile dealer may bring suit against an automobile manufacturer to

recover the damages by him sustained ... by reason of the failure of said automobile manufacturer ... to act in good faith in performing or complying with any of the terms and provisions of the franchise or in terminating, canceling, or not renewing the franchise with said dealer: Provided, That in any such suit the manufacturer shall not be barred from asserting in defense of any such action the failure of the dealer to act in good faith.

15 U.S.C. § 1222. Good faith, as that term is defined under the DDCA, is the

duty of each party ... to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party: Provided, That recommendation, endorsement, exposition, persuasion, urging or argument shall not be deemed to constitute a lack of good faith.

15 U.S.C. § 1221(e). Courts construing an automobile manufacturer's "good faith" duty under the DDCA have consistently held that failure to exercise good faith has a limited and restricted meaning and is not to be construed liberally. Autohaus Brugger, Inc. v. Saab Motors, Inc., 567 F.2d 901, 911 (9th Cir.), cert. denied, 436 U.S. 946, 98 S.Ct. 2848, 56 L.Ed.2d 787 (1978). Under the Act, good faith is more limited than a general good faith standard, In re Frank Meador Buick, Inc., 13 B.R. 841, 844 (Bankr.W.D.Va.1981), and mere arbitrariness or bad faith, as that term is generally understood, by the automobile manufacturer is not enough to constitute a violation of the DDCA. Sink v. Ford Motor Co., 549 F.Supp. 245 (E.D.Mich.1982). The question then is not whether the manufacturer acted unfairly or inequitably in its business relations with the dealer, but whether the manufacturer failed to act in good faith. Southern Rambler Sales, Inc. v. American Motors Corp., 375 F.2d 932 (5th Cir.), cert. denied, 389 U.S. 832, 88 S.Ct. 105, 19 L.Ed.2d 92 (1967). To establish a lack of good faith and consequent violation of the Act, the dealer must show that the manufacturer coerced or intimidated the dealer and that the coercion was intended to achieve an objective that was improper or wrongful. Quarles v. General Motors Corp. (Motors Holding Division), 597 F.Supp. 1037 (D.C.N.Y.1984), aff'd, 758 F.2d 839 (2nd Cir.1985). "Coercion" or "intimidation" requires a wrongful demand which will result in sanctions if it is not complied with. Fray Chevrolet Sales, Inc. v. General Motors Corp., 536 F.2d 683, 685 (6th Cir.1976). In fact, in the absence of a claim that the manufacturer warned the dealer to do or not do a particular act or face termination, there is no "either-or" attempt at coercion or intimidation and hence there can be no recovery under the DDCA, even if the dealer felt that he was being coerced. Id.

In the present case, plaintiff claims that GM's course of conduct toward it amounted to lack of good faith as that term is defined under the DDCA. Plaintiff contends that GM's refusal to allow Hubbard to relocate, along with its refusal to approve a successor dealer in Utica, constitutes constructive termination of its dealership, without cause, with coercion and without good faith on the part of GM.

The "General Motors Dealer Agreement," which purports to control the relationship between the parties, designates "105 White Oak Street, Utica, Mississippi" as the location at which Hubbard may sell Chevrolet products. It further specifies that Hubbard may not sell Chevrolet products at any other location without the permission of GM.⁵ Hubbard states that it is well known that if a dealer violates this provision, he can be terminated by GM. In essence, plaintiff reasons that when defendant refused permission to relocate the dealership to Raymond or, according to plaintiff, to any other location where Hubbard could achieve sufficient sales to survive as a dealership, the threat of termination if Hubbard relocated without approval was well known to Hubbard; thus, the refusal of GM to allow Hubbard to move was absolute and "went beyond mere intimidation to the final act of coercion itself." Additionally, plaintiff alleges that GM in fact terminated Hubbard's dealership by advising that GM would not approve a dealer/operator in Utica after McKee since GM did not plan to continue Chevrolet dealer representation in Utica. Hubbard claims that it is therefore not free to sell its assets or even attempt to find a buyer since GM will not approve a future dealer in Utica. This, it contends, amounts to a "shutting down the dealership point" effective at a future date, which is "the ultimate act of coercion against the dealer."

In the opinion of the court, the conduct complained of by plaintiff does not amount to a lack of good faith by GM under the DDCA. It is essential to Hubbard's claim that it be able to demonstrate either actual or threatened coercion or intimidation. In McDaniel v. General Motors Corp., 480 F.Supp. 666 (E.D.N.Y.1979), aff'd, 628 F.2d 1345 (2nd Cir.1980), the court observed that without proof of lack of good faith within the meaning of the DDCA, "there can be no relief under the Act ... even for arbitrary decisions with respect to termination of a dealership...." McDaniel, 480 F.Supp. at 676 (citations omitted). Moreover, the DDCA does not protect automobile dealers against "arbitrary" business decisions by an automobile manufacturer in respect of relocation or termination of a dealership. Unionvale Sales Ltd. v. World-Wide Volkswagen Corp., 299 F.Supp. 1365 (D.C.N.Y.1969). And, absent coercion, automobile dealers are not protected under the DDCA against arbitrary refusals of automobile manufacturers to renew franchises. See Berry Brothers Buick, Inc. v. General Motors Corp. (Buick Motor Division), 257 F.Supp. 542 (D.C.Pa.1966), aff'd, 377 F.2d 552 (3rd Cir. 1967). In the court's opinion, Hubbard has failed to allege conduct by defendant which amounts to coercion or intimidation. Therefore, plaintiff cannot maintain a claim under the DDCA and summary judgment is proper in favor of defendant GM.

The Mississippi statute analogous to the DDCA, Miss.Code Ann. § 63-17-73 (1972), addresses essentially the same conduct as the DDCA⁶ and defines good faith precisely the same as does the federal act.⁷ Unlike the federal act, however, the Mississippi version goes on to define "coerce" as

the failure to act in good faith in performing or complying with any terms or provisions of the franchise or agreement. However, recommendation, exposition, urging or argument shall not be deemed to constitute a lack of good faith.

Miss.Code Ann. § 63-17-55(17). Hubbard contends that the statute's definition of coercion as lack of good faith in effect reverts the term good faith to its customary common law meaning of imposing a duty of good faith and fair dealing. The court is not persuaded by this argument. The...