Risley v. Nissan Motor Corp.

• Decision Date: 27 June 2001
• Docket Number: No. 99-15321,99-15321
• Citation: 254 F.3d 1296
• Parties: (11th Cir. 2001) JOHN PHILLIP RISLEY, individually, J. STEPHEN RISLEY, JR., individually, et al., Plaintiffs-Appellants, v. NISSAN MOTOR CORP. USA, a California corporation, Defendant-Appellee
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1296

254 F.3d 1296 (11th Cir. 2001)

JOHN PHILLIP RISLEY, individually, J. STEPHEN RISLEY, JR., individually, et al., Plaintiffs-Appellants, v. NISSAN MOTOR CORP. USA, a California corporation, Defendant-Appellee.

No. 99-15321

IN THE UNITED STATES COURT OF APPEALS FOR THE ELEVENTH CIRCUIT

June 27, 2001

Appeal from the United States District Court for the Middle District of Florida D. C. Docket No. 98-CV-00863-CV-J-16B

Before BLACK and MARCUS, Circuit Judges, and HANCOCK^*, District Judge.

BLACK, Circuit Judge:

Appellee Nissan Motor Corporation distributes its automobiles through a nationwide network of independently-owned dealerships. Appellants are the former shareholders of two such dealerships located in Jacksonville, Florida. Appellants claim Appellee violated the Florida Automobile Dealer's Act, Fla. Stat. §§ 320.60-320.70 (1997).¹ For this violation, Appellants seek damages and attorney's fees pursuant to Fla. Stat. § 320.697. The district court granted summary judgment to Appellee. We affirm.²

I. BACKGROUND³

Beginning in 1996, AutoNation,⁴ a non-party, embarked on a strategy of purchasing automobile dealerships nationwide. In March 1997, AutoNation and Appellee met to discuss AutoNation's interest in acquiring Nissan dealerships. Appellee believed that the meeting produced an oral contract, under which AutoNation agreed to limit its ownership of Nissan dealerships to 5% of those available nationally without any time limitation. AutoNation, however, denied entering into any oral contract.

Thereafter, AutoNation and Appellee continued negotiations with the goal of entering into a Parent Company Agreement (PCA) to govern AutoNation's ownership of Nissan dealerships. The only issue that remained unresolved was the time frame for the proposed ownership limits. On November 21, 1997, Appellee wrote a letter to AutoNation indicating that unless an agreement could be reached regarding the PCA, Appellee would reject any dealership transfers to AutoNation.

While the negotiations between AutoNation and Appellee were ongoing, Appellants were exploring the possibility of AutoNation's acquiring their two dealerships in Jacksonville, Florida. On November 24, 1997, Appellants and AutoNation entered into a merger agreement, under which Appellants would sell their equity interests in the two dealerships in exchange for employment contracts, stock options, and $ 6.7 million worth of AutoNation stock. Upon receiving notice of the merger agreement, Appellee informed Appellants in a letter dated December 22, 1997, that it had "significant issues" with AutoNation.

In a letter dated January 12, 1998, Appellee advised AutoNation that unless a PCA was signed by January 16, 1998, Appellee would reject all further proposed transfers, including the transfer of the two Jacksonville dealerships. The same letter stated that recent developments had forced Appellee to question its trust of AutoNation. Among other things, Appellee accused AutoNation of not adhering to dealership policies, contrary to AutoNation's prior representations.

No PCA was signed by January 16, 1998. On January 20, 1998, Appellee notified Appellants that it was rejecting the proposed transfer of the two Jacksonville dealerships to AutoNation. On the same day, in order to block the transfer, Appellee initiated an administrative proceeding by filing a verified complaint with the Florida Department of Highway Safety and Motor Vehicles (DHSMV).

In the DHSMV proceeding, Appellee relied on two grounds under Florida law to justify its decision to reject the proposed transfer: (1) AutoNation's lack of good moral character, Fla. Stat. §§ 320.643(1), 320.643(2)(a), and (2) AutoNation's lack of business experience, Fla. Stat. §§ 320.643(1), 320.644. Appellants filed a motion to dismiss. Since the proposed transfer involved merely a sale of stock (and not a transfer of the franchise agreement or a change in executive management), the Florida administrative law judge (ALJ) ruled that Fla. Stat. § 320.643(2)(a) provided the sole basis for Appellee to object to the transfer. The ALJ held that, under § 320.643(2)(a), the only permissible ground for challenging a transfer is the transferee's lack of good moral character. Therefore, the ALJ dismissed Appellee's complaint insofar as it alleged AutoNation lacked business experience.

With respect to AutoNation's alleged bad moral character per § 320.643(2)(a), the ALJ held that Appellee's verified complaint stated a prima facie case. The allegations in the verified complaint were detailed and specific. Some of the allegations touched upon AutoNation's conduct with respect to the dealerships it had already acquired. For instance, AutoNation allegedly did not comply with Appellee's dealer-ownership policies, in contravention of oral and written representations made by AutoNation throughout 1997. Additionally, AutoNation allegedly refused to give local management full and complete control over dealership operations, in violation of AutoNation's contractual obligations. Notably, one of Appellee's executives swore under oath and signed a statement that the allegations in the verified complaint were true.

The ALJ rendered his ruling on March 24, 1998. On April 9, 1998, however, Appellee withdrew its verified complaint.⁵ The withdrawal of the verified complaint permitted Appellants and AutoNation to consummate their merger, which they did on April 22, 1998. Nevertheless, Appellants contend that they were damaged because the value of AutoNation's stock dropped during the delay in consummating the merger.

On September 2, 1998, Appellants filed the instant lawsuit seeking damages for losses related to Appellee's attempt to block the transfer of their dealerships to AutoNation. After discovery, the parties filed cross-motions for summary judgment. The district court denied Appellants' motion and granted Appellee's motion.

II. STANDARD OF REVIEW

We review a grant of summary judgment de novo, applying the same standard as the district court. See, e.g., Katz v. Comprehensive Plan of Group Ins., 197 F.3d 1084, 1088 (11th Cir. 1999). This case requires us to examine the Florida Dealer Protection Act (the Act), Fla. Stat. §§ 320.60-320.70 (1997). In rendering a decision based on state substantive law, "we are bound to decide the case the way it appears the state's highest court would." E.g., Royal Ins. Co. of Am. v. Whitaker Contracting Corp., 242 F.3d 1035, 1040 (11th Cir. 2001) (internal quotation marks and citation omitted).

III. DISCUSSION

Appellants' suit is based on Fla. Stat. § 320.697, which provides a cause of action to "[a]ny person who has suffered pecuniary loss or who has been otherwise adversely affected because of a violation by a licensee of [the Act]" (emphasis added). Appellants contend that Appellee, a licensee,⁶ violated the Act, specifically Fla. Stat. § 320.643, when it filed the verified complaint and objected to the transfer of the dealerships' equity interest.

Section 320.643 provides a mechanism to regulate the transfer of dealer franchise agreements and equity interests. A licensee, like Appellee, is entitled to written notice of any such transfer. To object to the transfer, a licensee must file a verified complaint with the DHSMV no later than 60 days after receiving notice. The available grounds for objection differ depending on the type of transfer. For a transfer of a franchise agreement, a licensee, under § 320.643(1), may not unreasonably withhold its approval, and all objections to the transfer -- other than objections to the transferee's moral character or business experience -- are presumed to be unreasonable. In contrast, for a transfer of the equity interest, a licensee, under § 320.643(2)(a), may object solely on the ground that the transferee lacks good moral character.⁷

The parties agree that Appellants were transferring merely their equity interest, not the franchise agreement, to AutoNation. In light of the Florida Supreme Court's decision in Hawkins v. Ford Motor Co., 748 So. 2d 993 (Fla. 1999), Appellee concedes that it could properly object to the transfer solely under § 320.643(2)(a) and on the basis of AutoNation's lack of good moral character. See id. at 1000-02. Likewise, Appellants concede the ALJ was correct insofar as he ruled that Appellee filed a legally sufficient verified complaint, under the Act, when it objected to AutoNation's lack of moral character.

Nonetheless, Appellants contend that the filing of the verified complaint was a "violation" of the Act, because Appellee would have lost on the merits had it not voluntarily dismissed the complaint.⁸ In other words, according to Appellants, any licensee who exercises its rights under § 320.643 by filing a legally sufficient verified complaint, but who ultimately would lose on the merits, is in violation of the Act and subject to damages and attorney's fees under § 320.697. On the other hand, Appellee contends that, since its verified complaint was legally sufficient, it did not commit a "violation" of the Act.

In arguing their positions, both parties rely on Mike Smith Pontiac, GMC, Inc. v. Mercedes-Benz of North America, Inc., 32 F.3d 528 (11th Cir. 1994), where we faced similar circumstances under the Act.⁹ In that case, the automobile dealership initially proposed transferring its equity interest to Mr. Cutler. See id. at 530. Later, the dealership notified the licensee that the equity interest would instead be transferred to Mr. Taylor. See id. The licensee objected to the Taylor transfer and filed a verified complaint under § 320.643. See id. The sole ground cited in the licensee's complaint was that the Taylor transfer might cause the licensee to incur multiple liability. See id. The ALJ dismissed the complaint, and on appeal, the Florida First District Court of Appeal affirmed. See id. (citing Mercedes-Benz of N. Am. v. Mike Smith Pontiac GMC, Inc. 561 So. 2d 620, 625 (Fla. 1st DCA 1990)). In affirming, the ...