Northgate Motors, Inc. v. General Motors Corp.

• Decision Date: 22 August 2000
• Docket Number: No. 99-C-0900.,99-C-0900.
• Citation: 111 F.Supp.2d 1071
• Parties: NORTHGATE MOTORS, INC., Gateway Chevrolet-Cadillac, Inc. and William Kopecko, Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant.
• Court: U.S. District Court — Eastern District of Wisconsin

111 F.Supp.2d 1071

NORTHGATE MOTORS, INC., Gateway Chevrolet-Cadillac, Inc. and William Kopecko, Plaintiffs, v. GENERAL MOTORS CORPORATION, Defendant.

No. 99-C-0900.

United States District Court, E.D. Wisconsin.

August 22, 2000.

COPYRIGHT MATERIAL OMITTED

Erie T. Raskopf, Oconomowoc, WI, Stanley Morganstern, Cleveland, OH, for Plaintiffs.

Roberta F. Howell, Madison, WI, for Defendant.

DECISION AND ORDER

ADELMAN, District Judge.

Plaintiffs Northgate Motors, Inc. ("Northgate"), Gateway Chevrolet-Cadillac, Inc. ("Gateway") and William Kopecko sue defendant General Motors Corporation ("GM") alleging that GM treated them inequitably in the course of negotiating and executing dealership agreements. Plaintiffs allege that GM violated a federal statute and a state statute, as well as duties imposed by common law. This court has jurisdiction based both on the existence of a federal question and diversity of citizenship. GM moved to dismiss the complaint under Fed.R.Civ.P. 12(b)(6) whereupon plaintiffs filed an amended complaint adding additional material to their allegations. The parties stipulated that defendant's original motion to dismiss would be deemed a response to the amended complaint. I now address the motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

Plaintiffs Northgate and Gateway are corporations and GM dealers in Rhinelander, Wisconsin. Plaintiff Kopecko is the sole shareholder and president of both dealerships. Kopecko also owns interests in dealerships that sell Toyota, Honda and Nissan vehicles in the Rhinelander area. In 1995 Kopecko, who then owned fifty percent of Gateway, asked GM for permission to buy the fifty percent that William Browne held. GM rejected the request based on Northgate's poor sales performance under Kopecko's ownership. GM also advised Kopecko that it intended to terminate the Gateway franchise because of poor performance. Subsequently, Northgate asked GM if it could relocate to premises at 1911 North Stevens Street owned by Kopecko.

The parties entered into negotiations and reached an agreement. GM agreed to approve Kopecko's buy-out of Browne's interest in Gateway and Northgate's request to relocate to 1911 North Stevens Street. Plaintiffs agreed to realign the Northgate and Gateway franchises pursuant to GM's Year 2000 Plan¹ so that Northgate would become a Pontiac-Buick-GMC dealer and Gateway a Chevrolet-Oldsmobile-Cadillac dealer. Plaintiffs also agreed that Gateway and Northgate would operate out of separate facilities and that Gateway would construct a new facility at 1935 North Stevens Street and remove its Honda franchise from that location. On September 18, 1996, the parties executed Dealer Sales and Service Agreements incorporating these terms.

In May 1997, prior to having fully complied with the agreements, Gateway and Northgate asked GM for permission to relocate the Northgate franchise to the Gateway facility, or alternatively, to permit Gateway to sell Toyotas and Northgate to sell Hondas and Nissans. GM denied their requests. Pursuant to the Wisconsin Motor Vehicle Dealer Law ("WMVDL"), Wis. Stat. §§ 218.0101-0172,² Gateway and Northgate then asked the Wisconsin Division of Hearings and Appeals to grant them a hearing to determine whether GM had good cause for refusing the request. Wis. Stat. § 218.0134(2)(c) (formerly § 218.01(3x)(b)(3)). GM objected and argued that by entering into the agreements Gateway and Northgate had waived their right to a good cause hearing. The parties then litigated the matter before the administrative agency. GM moved for summary judgment, and an administrative law judge (ALJ) recommended certain factual findings and that GM be granted summary judgment. Subsequently, the agency issued a final ruling that adopted the ALJ's findings of fact and granted the motion for summary judgment.

Gateway and Northgate appealed the agency's decision to the Oneida County Circuit Court and also filed the present suit. The circuit court reversed the agency's ruling that the dealerships were not entitled to a good cause hearing and remanded the case for such a hearing but expressly left undisturbed the agency's findings of fact. GM appealed the circuit court's decision to the state court of appeals where the matter is pending.³

II. MOTION TO DISMISS STANDARD

GM moves to dismiss arguing that Kopecko lacks standing to sue, that a substantial number of plaintiffs' claims are barred by issue or claim preclusion and that plaintiffs fail to state claims upon which relief may be granted. A complaint, or portion thereof, must be dismissed if it appears beyond doubt that the plaintiff cannot adduce facts that would entitle him to relief. See Hishon v. King & Spalding, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984) (citing Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). In reviewing a complaint under this standard, the court accepts as true the plaintiff's allegations, Hospital Bldg. Co. v. Trustees of Rex Hospital, 425 U.S. 738, 740, 96 S.Ct. 1848, 48 L.Ed.2d 338 (1976), and construes the pleadings in the light most favorable to the plaintiff, resolving all doubts in the plaintiff's favor. Jenkins v. McKeithen, 395 U.S. 411, 421, 89 S.Ct. 1843, 23 L.Ed.2d 404 (1969).

III. DISCUSSION

Plaintiffs allege that GM: (1) violated the federal Automobile Dealers Day In Court Act ("ADDICA"); (2) violated the WMVDL; (3) breached its contractual duty of good faith and fair dealing; and (4) fraudulently induced plaintiffs to enter into a contract. The majority of plaintiffs' claims are based on plaintiffs' contention that GM coerced, intimidated or manipulated them into the agreements. I now turn to plaintiffs' specific claims.

A. Kopecko's Claims

1. ADDICA Claims

The ADDICA, 15 U.S.C. §§ 1221-25, gives automobile dealers a right of action to redress unfair actions in connection with a franchise agreement. An "automobile dealer" is defined as "any person, partnership, corporation, association, or other form of business enterprise ... operating under the terms of a franchise and engaged in the sale or distribution of passenger cars, trucks, or station wagons." 15 U.S.C. § 1221(c). In the present case the automobile dealers are Northgate and Gateway, both corporations. Where dealers are corporations the right of action provided by the ADDICA belongs to the corporation. Vincel v. White Motor Corp., 521 F.2d 1113 (2d Cir.1975). Kopecko is a shareholder and officer of the corporate dealerships and thus would not appear to possess any rights under the ADDICA.

Kopecko makes several arguments to try to get around this problem. Relying on DeValk Lincoln Mercury, Inc. v. Ford Motor Co., 550 F.Supp. 1199, 1203-04 (1982), he argues that I should decide the issue of his standing only on a fully developed evidentiary record. However, plaintiffs attached a copy of the franchise agreement to their complaint, and it is thus before me. See Fed.R.Civ.P. 10(c). Moreover, GM has moved to dismiss. I have no choice but to decide the motion applying, of course, the appropriate standard of review.

Kopecko also argues that he is a party to the franchise agreements. However, the agreements make clear that Kopecko signed them as a representative of the dealerships not as a dealer himself. The first line of each dealership agreement states that it "is entered into by" GM and either Gateway, Inc. or Northgate, Inc. (Am. Compl. Ex. 1 at 1.) The execution section states that the agreement is valid only if signed "on behalf of dealer by its duly authorized representative ... its Dealer Operator." (Id. at 5.) Kopecko signed as Dealer/Operator. Similarly, the Multiple Dealer Operator Addendum is signed by Kopecko on behalf of the corporate dealerships.

Kopecko points to the franchise agreements' third paragraph, each of which provides:

This Dealer Agreement is a personal service agreement entered into in reliance of the qualifications of the Dealer Operator named below, William Kopecko, and on Dealer's assurance that Dealer Operator will provide personal service by exercising full managerial authority over Dealership Operations. Dealer Operator must also meet all other requirements set forth in Article 2 of the Standard Provisions.

(Id. at 2.) This paragraph, however, is a representation by the dealer that Kopecko is a qualified manager. It does not make Kopecko a dealer.

Kopecko also cites Kavanaugh v. Ford Motor Co., 353 F.2d 710 (7th Cir.1965). In Kavanaugh, the dealer was a corporation in which Ford had an eighty percent interest and Kavanaugh, who managed the dealership, a twenty percent interest. When a dispute arose between Kavanaugh and Ford the court permitted Kavanaugh to assert the dealer's claims under the ADDICA reasoning that the dealer would not assert a claim because of Ford's majority stock interest. The court determined that unless Kavanaugh was permitted to sue, the purpose of the ADDICA would be subverted. By contrast, here no obstacle prevents the dealers from asserting the ADDICA claims and they have, in fact, asserted such claims. Thus, the purpose of the ADDICA will not be frustrated by adhering to the general rule that ADDICA claims belong only to dealerships. See also Conroy Datsun Ltd. v. Nissan Motor Corp. in U.S.A., 506 F.Supp. 1051 (1980) (distinguishing Kavanaugh because dealer fully able to assert claim); Moorehead v. General Motors Corp., 442 F.Supp. 873, 879 (E.D.Pa.1977) (where corporate dealer not prevented from asserting its own claim under the ADDICA individual shareholder could not); Rodrigue v. Chrysler Corp., 421 F.Supp. 903, 908 (E.D.La.1976) (same); Olson Motor Co. v. General Motors Corp., 703 F.2d 284, 290 (8th Cir.1983) (same).

Kopecko points to Rea v. Ford Motor Co., 497 F.2d 577 (3d Cir.1974), Rea v. Ford Motor Co., 560 F.2d 554 (3d Cir.1977) and York Chrysler-Plymouth, Inc. v. Chrysler Credit Corp., 447 F.2d 786 (5th Cir.1971), in support of his argument that he may bring an ADDICA claim in his own right. In...