Reed Auto of Overland Park, LLC v. Landers McLarty Olathe KS, LLC
| Docket Number | 21-3225,22-3043 |
| Decision Date | 24 August 2023 |
| Parties | REED AUTO OF OVERLAND PARK, LLC, Plaintiff - Appellant/Cross- Appellee, v. LANDERS MCLARTY OLATHE KS, LLC, Defendant-Appellee/Cross- Appellant. and REED AUTOMOTIVE GROUP, INC., Plaintiff - Cross-Appellee, |
| Court | U.S. Court of Appeals — Tenth Circuit |
(D.C. No. 2:19-CV-02510-HLT) (D. Kan.)
Before BACHARACH, PHILLIPS, and EID, Circuit Judges.
Reed Auto of Overland Park, LLC sued fellow vehicle dealer Landers McLarty Olathe KS, LLC for allegedly breaching a contract to which Reed Auto was not a party. Reed Auto alleged it was either a third-party beneficiary of the contract or a successor to an original signatory of the contract. The district court granted summary judgment to Landers McLarty on the third-party beneficiary claims. Following a bench trial it resolved the remaining claim in favor of Landers McLarty. It then denied Landers McLarty's motion for attorneys' fees. Reed Auto appeals the grant of summary judgment and the trial judgment, and Landers McLarty appeals the denial of its motion for attorneys' fees. We have subject matter jurisdiction under 28 U.S.C. § 1332(a)[1] and appellate jurisdiction under 28 U.S.C § 1291. For the reasons stated below, we affirm on all counts.
The parties here are competing Kansas Jeep Chrysler Dodge Ram ("JCDR") vehicle dealers and their owners. Kansas law and their contracts with JCDR manufacturer Fiat Chrysler Automotive ("FCA")[2] control where and how the dealers can locate and relocate their dealerships. As relevant here, FCA assigns each franchisee a geographic sales area. The franchisee has exclusive rights to sell vehicles and perform warranty work in that sales area. The franchisee is free to open a dealership anywhere in the sales area, to relocate anywhere in the sales area, and to consolidate its dealerships within the sales area. However, if the dealer wants to open a new dealership or move or consolidate existing dealerships, the change is subject to Kansas law. The dealer must file a petition with the Kansas Department of Revenue director of vehicles "giv[ing] written notice of its intention [to add, relocate, or consolidate dealerships]" and "establish[ing] good cause for adding or relocating [the dealership]." Kan. Stat. § 8-2430(a). The director of vehicles publishes a notice of the petition in the Kansas Register. Then any new vehicle dealer that "has a franchise agreement for the same line-make vehicle as that which is to be sold . . . by the proposed additional or relocated new vehicle dealer" and is physically located within a specified distance (here, ten miles) of the proposed new location may file a protest to block the proposed move. Id. § 8-2430(b), (c), (e)(2)(A).
Overland Park Jeep ("OPJ")[3] and Landers McLarty were two DaimlerChrysler dealers in the Kansas City area. OPJ sold vehicles out of the Overland Park sales area, and Landers McLarty sold vehicles out of the Olathe sales area. Around 2007, Landers McLarty sought to move its dealership to a more desirable location within the Olathe sales area. The new location was within ten miles of an OPJ dealership. Worse from OPJ's perspective, Landers McLarty's new proposed location was within ten miles of almost the entire OPJ Overland Park sales area. Thus, if it relocated, Landers McLarty would have been able to file a protest and prevent OPJ from relocating or consolidating its dealerships almost anywhere within OPJ's own sales area. Accordingly, OPJ filed a protest to prevent the move.
The two dealers reached a compromise. In a 2007 Settlement Agreement and Release (the "Settlement Agreement"), OPJ promised to dismiss its protest against Landers McLarty, allowing it to move to the new location. In return, Landers McLarty "agree[d] not to protest or otherwise challenge any relocation or establishment of any DaimlerChrysler vehicle lines into the Overland Park sales area . . . for a period of 15 years from the date of the execution of the agreement." App'x Vol. I at 160 (the "No Future Protest" provision). It thus freed OPJ to establish or relocate dealerships within its sales area. The promise extended to the parties' successors and assigns:
This Agreement shall inure to the benefit of and be binding on the successors, assigns, heirs, and legal representatives of the Parties to this Agreement. In the event Landers McLarty enters into any agreement to sell or transfer all or any portion of its stock or assets, then Landers McLarty is required to include in the terms of any such agreement the terms of this Agreement and that the buyer is bound by the terms of this agreement.
Id. at 163 (the "Successors and Assigns" provision). OPJ and Landers McLarty agreed that, if there was a dispute about the Settlement Agreement which required litigation, the prevailing party would be entitled to recover reasonable attorneys' fees from the non-prevailing party. Then-manufacturer DaimlerChrysler was also a party to the Settlement Agreement. Other than OPJ, Landers McLarty, and DaimlerChrysler, no one else was a party to the Settlement Agreement, and the Settlement Agreement did not specifically provide for any third-party beneficiaries.
Several years later, the owner of OPJ sold his business to Reed Auto of Overland Park, LLC[4] and its owner, the Reed Automotive Group, Inc. (together, "Reed Auto"). The Asset Purchase Agreement (the "Purchase Agreement") between OPJ and Reed Auto spelled out the terms of the sale. Reed Auto purchased specified assets from OPJ, including products, inventory, equipment, fixtures, customer lists, websites, retail orders, and instructional material. The Purchase Agreement also stated Reed Auto would assume OPJ's rights and liabilities under specified contracts (the "Assumed Contracts"). The Assumed Contracts included those with service, parts, and equipment providers, and the dealership's building lease. Reed Auto only assumed liability for "those liabilities, obligations, and duties of [OPJ] arising on and after the Closing Date with respect to the Assumed Contracts and the liabilities and obligations under unfilled retail orders being purchased by [Reed Auto]." App'x Vol. III at 408-09. The Purchase Agreement also included a list of contracts for which Reed Auto explicitly did not assume liability (the "Excluded Liabilities"). In addition to the contracts specifically included on the list of Excluded Liabilities, OPJ's "[l]iabilities under all agreements other than 'Assumed Contracts' [were] considered Excluded Liabilities." Id. The Settlement Agreement was not included in either Assumed Contracts or on the list of Excluded Liabilities and was never mentioned in the Purchase Agreement.
Finally-and most importantly-Reed Auto purchased the ability to become the JCDR franchisee in the Overland Park sales area. While the franchise rights were "by far the largest asset of the agreement," App'x Vol. IV at 725, they did not come directly from OPJ. FCA conditionally approved the purchase before the Purchase Agreement was signed, but Reed Auto was later required to execute a separate franchise agreement with FCA. In addition to securing its own franchise rights from FCA, Reed Auto also separately obtained permission from the state to operate the dealership, including securing state licenses and bonds, and obtained its own financing, contracts with utility providers, and employee benefit and insurance plans. After the sale, most OPJ employees stayed on and continued working for Reed Auto. A few months after signing the Purchase Agreement, OPJ dissolved.
Reed Auto entered into the Purchase Agreement with the intention of relocating the dealership once the current lease expired and began looking for a new location right away. It found and purchased a property just off the I-35 corridor, within ten miles of Landers McLarty's Olathe dealership. FCA approved the new location and filed a notice of intent to relocate on behalf of Reed Auto. At the time it filed the notice, FCA did not expect Landers McLarty to file a protest. However, Landers McLarty did intend to protest and so informed FCA before doing so in April 2019. At the time it filed the protest, both Landers McLarty and FCA were aware of the Settlement Agreement, but neither mentioned it to Reed Auto. Reed Auto fought the protest at considerable expense until July 2019, when the former owner of OPJ brought the Settlement Agreement to Reed Auto's attention and assigned Reed Auto his rights under it (the "July 2019 Assignment"). Reed Auto informed Landers McLarty of the assignment, and Landers McLarty dismissed the protest. Reed Auto moved to the new location.
Reed Auto then sued Landers McLarty for, among other things breaching the Settlement Agreement by filing a protest. Because Reed Auto had not yet been assigned the Settlement Agreement at the time Landers McLarty filed its protest, it argued (1) it was a third-party beneficiary to the Settlement Agreement, and therefore Landers McLarty owed it a duty not to protest the relocation; and (2) it was a "successor" to OPJ, and therefore the Settlement Agreement applied to Reed Auto in the same way it applied to OPJ even before it was assigned. Landers McLarty argued Reed Auto was neither a successor nor a third-party beneficiary and there was never any valid enforceable contract between them. Applying Michigan law as called for in the Settlement Agreement, the district court granted summary judgment in favor of Landers McLarty on the third-party beneficiary theory. It then held a bench trial on the successor theory. At the conclusion of the trial, the district court found Reed Auto was not a successor to OPJ, and therefore Reed Auto did not have standing to enforce the Settlement...
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