Maple Shade Motor Corp. v. Kia Motors of America
| Decision Date | 26 August 2005 |
| Docket Number | Civil No. 04-2224(JEI). |
| Citation | 384 F.Supp.2d 770 |
| Parties | MAPLE SHADE MOTOR CORP., Plaintiff, v. KIA MOTORS OF AMERICA, INC., Defendants. |
| Court | U.S. District Court — District of New Jersey |
Bressler, Amery & Ross, P.C., by Eric L. Chase, Esq., Genevieve K. LaRobardier, Esq., Jason M. Schoenberg, Esq. Morristown, NJ, for Plaintiff.
Kirkpatrick & Lockhart LLP, by Anthony P. La Rocco, Esq., Thomas C. Weisert, Esq., Newark, NJ, by Carl J. Chiappa, Esq., Jason P. Isralowitz, Esq., New York, NY, for Defendant.
The instant action arises from the termination of a franchise agreement between Defendant Kia Motors of America, Inc. ("KMA"), and Plaintiff Maple Shade Motor Corporation ("Maple Shade"), by KMA. Presently before the Court are the motions of Maple Shade and KMA for partial summary judgment on Count One of Maple Shade's Complaint, regarding the legality of KMA's termination of the franchise under the New Jersey Franchise Practices Act.1
Maple Shade was originally established as a Mazda dealership in 1972, and opened its Turnersville, New Jersey, facility in 1986. Robert Dimmerman ("Dimmerman") is the sole shareholder of Maple Shade. In 1997, Maple Shade and KMA entered into negotiations for a franchise agreement that would grant Maple Shade the right to operate a Kia dealership in Turnersville. During the negotiations, the parties discussed the construction of a separate Kia showroom at the Turnersville facility, although the substance of those discussions is now in dispute.
In or about May, 1997, KMA sent Dimmerman a standard Kia Sales and Service Agreement ("the Agreement") for his signature. The Agreement included various provisions outlining the rights and responsibilities of the proposed franchise relationship between KMA and Maple Shade. The Agreement also included an addendum amending the provisions relating to the dealership facilities ("the Addendum").
The Addendum specifically provided that Maple Shade would build a separate 1,900 square foot showroom at the Turnersville site for the Kia franchise. The Addendum also included a time table for the completion of the project, requiring Maple Shade to submit plans for the showroom to KMA by July 1, 1997, acquire the necessary permits by October 1, 1997, and complete construction by November 1, 1998.
Dimmerman signed the Agreement and Addendum, without alteration, on October 13, 1997. KMA signed the Agreement and Addendum on November 4, 1997. Maple Shade began selling and servicing Kia vehicles at its Turnersville location shortly thereafter. It did not construct a separate showroom for Kia, but instead displayed Kia vehicles in the same showroom as its Mazda models.
Relations between Maple Shade and KMA significantly deteriorated throughout the course of their six and a half year association, culminating in KMA's termination of Maple Shade's Kia franchise.2 (March 17, 2004, S. Pickard Letter, Schoenberg Cert., Ex. U.) In a series of letters and meetings starting in the spring of 1999, the parties disagreed on the adequacy of Maple Shade's sales performance and commitment to the Kia franchise, as well as whether Maple Shade was contractually obligated to build a separate showroom.
KMA expressed its displeasure at what it perceived to be Maple Shade's poor sales performance, twice sending Maple Shade Notices to Cure and giving the dealership probationary periods to improve its sales. Maple Shade repeatedly contested the methods by which KMA measured sales performance, and argued that problems with the quality and supply of Kia vehicles undercut its sales efforts.
On many occasions, KMA also pressed Maple Shade to fulfill its agreement to build a separate Kia showroom in Turnersville. Although Maple Shade submitted a proposal for a showroom in 2001 which was approved by KMA, it continued to maintain that it was not contractually obligated to build the showroom. Instead, Maple Shade claimed that it received an oral assurance from a KMA representative at the time it entered into the Agreement that it would not have to build a separate showroom unless Mazda refused to allow the display of Kia vehicles in the existing showroom or business justified the expansion. Maple Shade also maintained that its existing facilities were more than adequate and KMA had acquiesced to its continued display of Kia vehicles in the shared showroom. KMA denied that such an agreement was made or that it consented to the shared showroom.
Beginning in June, 1999, KMA's letters also warned Maple Shade that it would consider terminating the franchise if the dealership did not fulfill its obligations under the Agreement. Maple Shade objected to what it characterized as KMA's threats and unreasonable standards, and repeatedly invoked the provisions of the New Jersey Franchise Practices Act.
The March 17, 2004, franchise termination letter outlined a series of areas in which KMA asserted that Maple Shade was not in compliance with its obligations under the Agreement. (March 17, 2004, S. Pickard letter, Schoenberg Cert., Ex. U.) First, KMA asserted that Maple Shade's sales performance fell far below average standards. (Id.) Relying on a measurement called the Kia Sales Proficiency index ("KSP"), KMA claimed that Maple Shade's sales record for 2003 was only 17.72% of the dealer average for the region, and noted that Maple Shade sold only 88 Kias during the year.3 (Id.) KMA concluded that this poor sales performance was a breach of Maple Shade's contractual obligation to "vigorously and aggressively sell and promote Kia products." (Id.)
KMA attributed Maple Shade's poor sales record to a range of deficiencies, including the failure to build a separate Kia showroom. (Id.) KMA stated that Maple Shade agreed to build the showroom when it became a Kia dealer, and noted that it had repeatedly complained about Maple Shade's failure to fulfill this obligation. (Id.) KMA also expressed its displeasure with Maple Shade's failure to maintain an adequate Kia sales staff, stock and market the full Kia product line, or generally devote substantial effort to the Kia dealership. (Id.)
On May 17, 2004, Maple Shade filed a Complaint in the District of New Jersey seeking a permanent injunction against the termination, as well as equitable and declaratory relief, and compensatory and punitive damages. The Complaint includes eight counts alleging: (1) violation of New Jersey Franchise Practices Act ("NJFPA"), N.J.S.A. § 56:10-5; (2) violation of NJFPA, N.J.S.A. § 56:10-7(e); (3) violation of NJFPA, N.J.S.A. §§ 56:10-7.4(a), (d), (g), (h); (4) violation of the public policy of the State of New Jersey; (5) violation of the Automobile Dealers Day in Court Act, 15 U.S.C. §§ 1221-1226; (6) violation of New Jersey Uniform Commercial Code, N.J.S.A. § 12A:2-306, 12A:1-203; (7) breach of contract; and (8) breach of the implied covenant of good faith and fair dealing. The parties have filed cross-motions for partial summary judgment as to the first count only.
Under Fed.R.Civ.P. 56(c) a court may grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The non-moving party may not simply rest on its pleadings to oppose a summary judgment motion but must affirmatively come forward with admissible evidence establishing a genuine issue of fact. Id.
In deciding a motion for summary judgment, the court must construe the facts and inferences in a light most favorable to the non-moving party. Pollock v. American Tel. & Tel. Long Lines, 794 F.2d 860, 864 (3d Cir.1986). The role of the court is not to "weigh the evidence and determine the truth of the matter, but to determine whether there is a genuine issue for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
Count One of the Complaint alleges that KMA's termination of Maple Shade's Kia franchise violated the NJFPA. The NJFPA's purpose is "the protection of franchisees who have conscientiously striven to carry out their obligations under the franchise agreement ..." and not "to prevent the severance of those who deliberately disregard reasonable requirements contained in their contract with the franchise." Amerada Hess Corp. v. Quinn, 143 N.J.Super. 237, 254, 362 A.2d 1258 (Law Div.1976). See also Dunkin' Donuts of Am., Inc., v. Middletown Donut Corp., 100 N.J. 166, 178, 495 A.2d 66 (1985)("[The NJFPA] ... does not compensate those franchisees who have lost their franchises as a result of their own neglect or misconduct.").
The New Jersey Franchise Practices Act ("the Act") provides that a franchisor may not terminate a franchise unless it has good cause to do so. N.J.S.A. § 56:10-5 (1971). Good cause is defined as "limited to failure by the franchisee to substantially comply with those requirements imposed upon him by the franchise."4 N.J.S.A. § 56:10-5.
"`[S]ubstantial compliance' is surely something less than absolute adherence to every nuanced term of an agreement, but substantial compliance — at a minimum — requires that the franchisee refrain from acting in direct defiance of a term of the Agreement." Gen. Motors Corp. v. New A.C. Chevrolet, Inc., 91 F.Supp.2d 733, 740 (D.N.J.2000). Courts have held that a franchisee was not in substantial compliance with the terms of the franchise agreement when it operated a franchise of another automobile manufacturer without the prior consent of the franchisor, id.; violated federal gas pricing regulations by overcharging its customers, Amerada Hess, 143 N.J.Super. at 254-55, 362 A.2d 1258; and underreported sales to the franchisor in order to avoid paying fees and taxes, Dunkin' Donuts, 100...
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...Sun Microsystems, Inc., 146 N.J. 176, 680 A.2d 618, 628 (1996) (citing N.J.S.A. 56:10–7 )); see also Maple Shade Motor Corp. v. Kia Motors of Am., Inc., 384 F.Supp.2d 770, 774 (D.N.J.2005) (citations omitted) (same), aff'd sub nom., 260 Fed.Appx. 517 (3d Cir.2008). Against those purposes, t......