Krantz, Inc. v. Nissan North America, Inc.
| Decision Date | 28 December 2005 |
| Docket Number | No. CIV. 05-3018.,No. CIV. 05-1015.,CIV. 05-1015.,CIV. 05-3018. |
| Citation | 408 F.Supp.2d 854 |
| Parties | KRANTZ, INC., a South Dakota Corporation, d/b/a Krantz Buick Olds Nissan, Inc., and Billion Southtown, Inc., a South Dakota Corporation, Plaintiffs, v. NISSAN NORTH AMERICA, INC., a California Corporation, Defendant. Krantz, Inc., a South Dakota corporation, d/b/a Krantz Buick Olds Nissan, Inc., Plaintiff, v. Nissan North America, Inc., a California Corporation, Defendant. |
| Court | U.S. District Court — District of South Dakota |
Michael P. Healy, Healy Law Firm, LLP, Kansas City, MO, William G. Beck, Woods, Fuller, Shultz & Smith, PC, Sioux Falls, SD, for Plaintiffs.
Roy A. Wise, Richardson, Wyly, Wise, Sauck & Heib, Aberdeen, SD, Stephen J. Wells, Dorsey & Whitney LLP, Minneapolis, MN, for Defendants.
[¶ 1] This is a consolidated Order in the two cases described above.
[¶ 2] We have various pending motions. One is a motion for summary judgment. The summary judgment standard is well known and has been set forth by this court in numerous opinions. See Hanson v. North Star Mutual Insurance Co., 1999 DSD 334 ¶ 8, 71 F.Supp.2d 1007, 1009-1010 (D.S.D.1999), Gardner v. Trip County, 1998 DSD 38 ¶ 8, 66 F.Supp.2d 1094, 1098 (D.S.D.1998), Patterson Farm, Inc. v. City of Britton, 1998 DSD 34 ¶ 7, 22 F.Supp.2d 1085, 1088-89 (D.S.D.1998), and Smith v. Horton Industries, 1998 DSD 26 ¶ 2, 17 F.Supp.2d 1094, 1095 (D.S.D.1998). Summary judgment is proper where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R. Civ.P. 56(c); Donaho v. FMC Corp., 74 F.3d 894, 898 (8th Cir.1996). "Where the unresolved issues are primarily legal rather than factual, summary judgment is particularly appropriate." Mansker v. TMG Life Ins. Co., 54 F.3d 1322, 1326 (8th Cir.1995). The evidence must be viewed in the light most favorable to the non-moving parties, here the plaintiffs in CIV. 05-1015.
[¶ 3] Krantz, Inc. ("Krantz") was for many years an automobile dealer in Watertown, S.D., for Nissan North America, Inc. ("Nissan"). Without the knowledge or permission of Nissan, Krantz sold the dealership assets (including all intangible assets and contract rights) to Billion Northtown Inc. ("Billion"). The Billion family has been engaged in automobile dealerships in Sioux Falls, S.D., for many years. The family and the dealerships have an excellent reputation. Members of the Billion family own the stock in a corporation doing business as a Nissan dealer in Sioux Falls. Upon discovering, in part, what Krantz had done, Nissan gave notice to Krantz that Krantz had materially violated the dealership agreement and, as a result, would no longer be a Nissan dealer. Nissan refused to "honor" any transfer of the dealership to Billion.
[¶ 4] Krantz then commenced a civil action against Nissan in state circuit court, Codington County, S.D. Nissan removed the case to the Northern Division of the District of South Dakota and the case became CIV. 05-1015. Krantz sought a temporary restraining order or, in the alternative, a preliminary injunction. Krantz later filed an amended request for such relief. I conducted a rather extensive factual hearing on April 5, 2005, considered the extensive briefs filed, allowed oral argument, examined the exhibits, and issued a written order and opinion denying the request for a preliminary injunction. I denied on the record at the hearing the request for a temporary restraining order.
[¶ 5] It is useful to repeat and supplement portions of the Order which earlier denied the amended request for a preliminary injunction. After oral argument was conducted, certain records of the Department of Revenue and Regulation ("Department") were furnished and examined. Terry Krantz on behalf of Krantz wrote to the Division of Motor Vehicles of the Department on February 8, 2005, stating, inter alia, that Krantz, Inc. was "sold" to Billion Southtown, Inc., that Krantz had entered into a management agreement with Billion, and that Krantz had agreed to let Billion "use our dealer license numbers and act on our behalf until the franchise agreements have been transferred." All such activities clearly violate, in fact and in spirt, the franchise agreement between Krantz and Nissan. The interim management agreement between Krantz and Billion was entered into on January 11 but not furnished to the state agency until February 8, 2005. It was not furnished to Nissan until the court requested it after this lawsuit was in progress.
[¶ 6] Billion applied to the Department on December 24, 2004, for a state license to sell Nissan new cars in Watertown, falsely representing that it held a franchise agreement with Nissan in Watertown. On that basis, the license was issued. The license was later withdrawn or surrendered. There was no evidence that Krantz ever asked Nissan for permission to, in effect, transfer the franchise. Krantz simply presented to Nissan an attempted fait accompli. All the documents of sale and management between Krantz and Billion clearly reflect the same. The sale was specifically not contingent upon a transfer of the Nissan franchise to Billion. Krantz has been paid in full by Billion, something in excess of $3 million. Krantz has surrendered all management responsibilities, obligations, and risks to Billion. As already stated, all of this is clearly in violation of the franchise agreement between Nissan and Krantz. Neither Krantz nor Billion were initially "up front" with Nissan in furnishing all relevant documents. Not until the court requested the documents were all documents furnished. Billion was clearly doing business as a Nissan dealer in Watertown with no franchise and no approved transfer of any kind. Billion had no legal right to a license to sell Nissan products in Watertown. Yet Billion, without authorization, sold Nissan products in Watertown. With the assistance of the Department, Billion and Krantz concocted an affidavit to be attached to each Nissan motor vehicle title actually delivered as part of Nissan sales by Billion in Watertown, stating that the vehicles had been sold by Krantz, something that was not true. The court very frankly takes a dim view of people and state agencies concocting materially false affidavits. Krantz did not apply for a new motor vehicle license for 2005 until February 9, 2005. As shown by exhibit 23 from the evidentiary hearing conducted by this court, Krantz, in 2005, did not possess any motor vehicle dealer's license until March 8, 2005. Thus, from the period of January 1 until March 8, Krantz had no license to sell motor vehicles in Watertown. Krantz did not even apply for a 2005 license until Krantz received a notice from the Department dated February 4, advising that the franchise laws had been violated and that, effective immediately, sales of all new vehicles were to cease. One would wonder how Krantz could have legally sold Nissan vehicles (pursuant to the concocted affidavits) prior to March 8. To make matters worse, Krantz could not have sold motor vehicles at any time in, 2005 since Krantz had sold all its personal property assets to Billion, had leased its real estate to Billion for an initial term of ten years, and had no line of credit. One would also wonder how the Department could have issued any license to Krantz for 2005. It is indeed possible that the Department did not have all the relevant paperwork or know all the facts.
[¶ 7] Krantz was clearly contractually obligated to give Nissan advance notice and a reasonable opportunity to evaluate any proposed transfer. Krantz failed to do so and treated Nissan unfairly. Krantz and Billion would have known that Nissan, on March 20, 2002, had given written notice to Krantz that Krantz could continue to operate the dealership in Watertown but that, upon the death of Krantz or any attempted cessation of business by Krantz, by transfer or otherwise, Nissan no longer wanted to do business in the Watertown market and would not approve any new franchisee. The franchise agreement contemplated and permitted such notice and decision. Whether South Dakota law would have permitted the same had Krantz and Billion acted correctly is not a question that now needs to be addressed. Krantz had clearly stopped doing business in Watertown and had canceled its surety bond and insurance. The cancellation notice from Federated Mutual Insurance Company to Krantz shows cancellation as of January 1, 2005.
[¶ 8] A memorandum dated February 9 from Sherri Miller of the Department to then Secretary Viken and Governor Rounds' office shows what was going on here. She states that she had a conference call with Terry Krantz and two comptrollers, one for Krantz and one for Billion. She states, inter alia: There is another Department memorandum dated February 7, 2005. There would have been no basis at all for either Krantz or Billion to represent to the Department that the Nissan franchise was "on the way." Another memorandum of February 8 reports that Terry Krantz "is in the process of selling his 3 automotive dealerships ...", reporting that the "transaction is not final." Such representations, if made, were obviously false.
[¶ 9] I found that what has occurred here has been a series of shell games. I refused to...
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