Shamrock Motors, Inc. v. Ford Motor Co., 98-402
| Decision Date | 11 March 1999 |
| Docket Number | No. 98-402,98-402 |
| Citation | 1999 MT 21,293 Mont. 188,974 P.2d 1150 |
| Parties | SHAMROCK MOTORS, INC., Petitioner and Respondent, v. FORD MOTOR COMPANY, Respondent and Appellant. |
| Court | Montana Supreme Court |
Robert M. Carlson; Corette, Pohlman & Kebe, Butte, Montana, George E. Feldmiller; Berkowitz, Feldmiller, Stanton, Brandt, Williams & Stueve, Kansas City, Missouri, for Appellant.
James T. Harrison, Jr.; Harrison, Loendorf, Poston & Duncan, Helena, Montana, for Respondent.
¶1 This is an appeal from the District Court's reversal of a decision by the Motor Vehicle Division of the Montana Department of Justice (Motor Vehicle Division) ruling that Appellant Ford Motor Company (Ford) had good cause to terminate the automobile dealer franchise of Shamrock Motors, Inc. (Shamrock). Ford's notice of intent to terminate the dealership was based upon Shamrock's unauthorized sale of 80% of its stock without Ford's knowledge or consent, which was in violation of the Ford Sales and Service Agreement (FSSA). The Motor Vehicle Division issued a decision holding that "Ford Motor Company has carried its burden of proof under Montana law to establish that good cause exists to terminate its franchise with Shamrock Motors, Inc., under the standards established in Mont.Code Ann. § 61-4-205 to 61-4-207."
¶2 Shamrock appealed the Motor Vehicle Division's decision by filing a petition for judicial review with the Montana Second Judicial District Court, Silver Bow County. Based on diversity of citizenship, Ford removed the case to the United States District Court. The United States District Court reversed the Motor Vehicle Division's decision, and Ford appealed to the Ninth Circuit Court of Appeals.
¶3 While the matter was pending before the Ninth Circuit, Shamrock, in January of 1997, sold the dealership to Brooks Hanna Ford, Inc. (Brooks Hanna), and resigned as a Ford dealer. Ford executed a new FSSA with Brooks Hanna, the new Ford dealer. The Ninth Circuit then vacated the United States District Court's decision on the ground that the court lacked jurisdiction, and remanded the case back to state court. In February, 1998, Shamrock filed a second petition for judicial review. In response, Ford filed a motion to dismiss based on mootness and lack of standing, relying on Shamrock's sale of the dealership and the fact that Shamrock was no longer a Ford dealer.
¶4 The District Court found in favor of Shamrock and, without discussion, denied Ford's motion to dismiss. Relying on § 61-4-207(2)(a), MCA, the District Court concluded the franchise could not be terminated as the result of a sale of 80% of the franchisee's stock. It is from that decision that Ford appeals.
¶5 1. Whether the District Court erred by failing to grant Ford's motion to dismiss Shamrock's petition for judicial review on the grounds of mootness or lack of standing once Shamrock had sold its franchise.
¶6 2. Whether the District Court erred in holding that Shamrock's change in ownership, undertaken without knowledge or consent of Ford, could not, as a matter of law, be good cause for termination of the franchise.
¶7 In November, 1985, Ford and Shamrock entered into an FSSA which established Shamrock as an authorized Ford dealer in Butte, Montana. The FSSA stated that Shamrock was owned by Patrick Lyons (Lyons) and Charles Canty (Canty), and provided that Lyons would "have full managerial authority" on behalf the Shamrock dealership.
¶8 The FSSA provided that Shamrock had to obtain Ford's approval of any change in ownership or managerial authority. The FSSA required that Shamrock "give [Ford] prior notice of any proposed change in the said ownership or managerial authority." Further, it stated that Ford "has the right to approve or decline to approve any prospective purchaser as to his character, automotive experience, management, capital and other qualifications ... as an authorized dealer." The FSSA went on to provide that if Shamrock failed to obtain Ford's "prior written consent" to a "direct or indirect [change in] ownership or operating management," it would be "so contrary to the intent and purpose of this agreement as to warrant its termination or nonrenewal."
¶9 On May 11, 1993, Ford was informed for the first time that Lyons and Canty had sold 80% of Shamrock's stock to Merle Rhoades (Rhoades). This sale had been undertaken without prior notice to Ford and without Ford's prior written consent. Ford learned of the sale at a meeting to discuss Shamrock's participation in a Ford dealer development program. Upon learning of the sale, Ford's representative told Lyons that the sale was a breach of the FSSA. Rhoades, the new owner of Shamrock, took the position that Montana law made the provisions of the FSSA relating to a change in ownership unenforceable. On September 29, 1993, Ford sent a notice of its intention to terminate Shamrock's franchise to the Montana Department of Justice Title and Registration Bureau.
¶10 Shamrock exercised its right to both an internal and administrative review of Ford's decision to terminate the franchise. Shamrock's initial challenge of the termination decision was reviewed and dismissed by Ford's internal Dealer Policy Board in February, 1994. Shamrock's administrative appeal to the Motor Vehicle Division was concluded in June, 1994, when the Division issued an order upholding Ford's termination decision and finding that Ford had established good cause for termination.
¶11 Shamrock appealed the administrative decision by filing a petition for judicial review with the Montana Second Judicial District Court. After removal to federal court, the Ninth Circuit held that the Federal District Court lacked jurisdiction to reverse the administrative decision by the Motor Vehicle Division and the matter was remanded back to the Montana state court for appellate review. Shamrock Motors, Inc. v. Ford Motor Co. (9th Cir.1997), 120 F.3d 196, 200.
¶12 Because of the pendency of this litigation, Shamrock's franchise was never terminated by Ford. Rather, Shamrock continued to operate as an authorized Ford representative for nearly four years. In January, 1997, while the appeal was pending before the Ninth Circuit, Shamrock sold the dealership to Brooks Hanna. That sale was approved by both Lyons as President of Shamrock and Rhoades as a stockholder. Ford approved of the sale and executed an FSSA with Brooks Hanna. As part of the sales transaction, Shamrock resigned as a Ford dealer.
¶13 Following its voluntary resignation as a Ford dealer and its sale of the dealership to Brooks Hanna, Shamrock filed a second petition for judicial review with the Montana Second Judicial District Court. In its petition for review, Shamrock asked that the District Court enter an order that there is "no legitimate cause for termination of the franchise." Ford filed a reply and motion to dismiss contending that, since Shamrock had sold the Ford franchise, Shamrock no longer had a franchise or contract interest at issue and, thus, it lacked standing and its petition for review was moot.
¶14 The District Court denied Ford's motion to dismiss and held that Shamrock's sale of 80% of its stock without Ford's prior knowledge or approval was not good cause for termination under § 61-4-207(2)(a), MCA. Some three months later, Shamrock filed a separate suit against Ford seeking recovery for damages allegedly caused by Ford's termination of the franchise. Cause No. DV-98-161, Second Judicial District, Silver Bow County.
¶15 1. Whether the District Court erred by failing to grant Ford's motion to dismiss Shamrock's petition for judicial review on the grounds of mootness or lack of standing once Shamrock had sold its franchise.
¶16 Although Ford filed a motion to dismiss the petition for judicial review for mootness or lack of standing, the District Court did not directly rule on the motion. Rather, the court addressed the merits of Shamrock's petition for review and concluded:
The final decision of the Motor Vehicle Division of the Department of Justice is, accordingly, REVERSED. Because this finding is...
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