Sims Buick-GMC Truck, Inc. v. Gen. Motors LLC

• Decision Date: 20 November 2017
• Docket Number: No. 16-3871,16-3871
• Citation: 876 F.3d 182
• Parties: SIMS BUICK–GMC TRUCK, INC., Plaintiff–Appellant, v. GENERAL MOTORS LLC, Defendant–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

876 F.3d 182

SIMS BUICK–GMC TRUCK, INC., Plaintiff–Appellant,

v.GENERAL MOTORS LLC, Defendant–Appellee.

No. 16-3871

United States Court of Appeals, Sixth Circuit.

Argued: October 4, 2017

Decided and Filed: November 20, 2017

Rehearing Denied November 30, 2017^*

ARGUED: Christopher M. DeVito, MORGANSTERN, MACADAMS & DEVITO CO., L.P.A., Cleveland, Ohio, for Appellant. J. Todd Kennard, JONES DAY, Columbus, Ohio, for Appellee. ON BRIEF: Christopher M. DeVito, MORGANSTERN, MACADAMS & DEVITO CO., L.P.A., Cleveland, Ohio, for Appellant. J. Todd Kennard, JONES DAY, Columbus, Ohio, for Appellee. John C. Camillus, STOCKAMP & BROWN, LLC, Dublin, Ohio, for Amicus Curiae.

Before: CLAY, ROGERS, and SUTTON, Circuit Judges.

SUTTON, J., delivered the opinion of the court in which CLAY, J., joined. ROGERS, J. (pp. 190–91), delivered a separate dissenting opinion.

SUTTON, Circuit Judge

General Motors provides sales incentives to dealers who sell cars to GM employees, retirees, and their family members at a discounted rate. As part of the process, the dealer must collect a signed agreement from the purchaser that establishes his eligibility for the program. In 2014, General Motors audited one of its dealers, Sims Buick–GMC Truck, and discovered a number of transactions in which Sims had failed to collect the agreement from purchasers within the timeline set by General Motors. GM debited Sims' account $47,493.28 for improper incentive payments, and Sims filed this lawsuit alleging breach of contract and violations of the Ohio Dealer Act. The district court granted summary judgment for General Motors. Because the parties' dealership arrangement permitted the debit and because a timely filed Consumer Dealer Agreement constitutes "material documentation" under § 4517.59(A)(20)(a) of the Ohio Dealer Act, we affirm.

I.

Sims Buick–GMC Truck sells GM cars and trucks in Warren, Ohio. It participates in GM's Vehicle Purchase Program, which allows GM employees, retirees, and their family members, among other affiliates, to buy vehicles at a reduced price. Each sale under the Purchase Program entitles the dealer to a financial incentive payment. After the dealer sells a vehicle to an eligible purchaser, the dealer submits an incentive claim to GM, and GM issues a credit to the dealer. Sims is located near a large GM plant in Lordstown, Ohio, and the Purchase Program accounts for 80% to 90% of its sales.

Under the Purchase Program, the dealer must collect and submit a number of forms, including a Consumer Dealer Agreement. The Consumer Agreement includes the purchaser's name, qualification for participation in the Purchase Program, and an authorization number generated by General Motors and provided to the purchaser.

General Motors initially did not impose any timing requirement on when dealers collected the Consumer Agreement. But in 2012, it issued a bulletin that required dealers to obtain a Consumer Agreement when they delivered the vehicle to the purchaser. General Motors relaxed this requirement in 2014 by allowing a 30–day grace period after delivery.

In March 2014, General Motors audited Sims' new car sales between March 26, 2013 and January 9, 2014. The audit revealed a number of transactions under the Purchase Program in which Sims had not obtained a completed Consumer Agreement on time and yet still collected incentive payments from General Motors. The car company debited Sims' account $66,674.91 for improper payments. It later reduced the amount to $47,493.28.

Sims sued General Motors in the Ohio Court of Common Pleas alleging breach of contract and violations of the Ohio Dealer Act. Invoking the diversity jurisdiction of the federal courts, General Motors removed the case to the United States District Court for the Northern District of Ohio, where the parties cross-moved for summary judgment. The court granted General Motors' motion for summary judgment.

II.

At summary judgment, the question is whether a genuine issue of material fact requires a trial or whether one party should win as a matter of law. Civil Rule 56(a). We review that question with fresh eyes and draw all reasonable factual inferences in favor of Sims. Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 587–88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

Breach of Contract . Sims maintains that General Motors' charge back breached the parties' primary contract, known as the GM Dealer Sales and Services Agreement, because it does not require Sims to collect Consumer Agreements within a set timeframe. We disagree.

Michigan law, as an initial matter, governs this inquiry. In a diversity case, we apply the choice-of-law principles of the forum State, here Ohio. State Farm Mut. Auto. Ins. Co. v. Norcold, Inc. , 849 F.3d 328, 331 (6th Cir 2017). Ohio law enforces a contract's choice-of-law provision unless (1) the chosen State has no substantial relationship to the parties or the transaction and there is no other reasonable basis for the parties' choice or (2) its application would contradict a fundamental policy of another State with a materially greater interest in the issue. See Sekeres v. Arbaugh , 31 Ohio St.3d 24, 508 N.E.2d 941, 942 (Ohio 1987). The parties chose Michigan law to govern their disputes under the contract, and neither exception applies. General Motors maintains its headquarters in Michigan, which suffices to meet Ohio's substantial relationship test. See Century Bus. Servs., Inc. v. Barton , 197 Ohio App.3d 352, 967 N.E.2d 782, 793–95 (2011). Although Sims does business in Ohio, Ohio's interest in the dispute is no greater than Michigan's. See id.

The contract authorizes the type of deadline that General Motors imposed in this case. Section 11.2 states that the dealer "agrees to timely submit true and accurate applications or claims." R. 1-1 at 41. Section 6.3.1 adds that, "[if] General Motors offers any incentives to customers or dealers, and payment is conditioned upon the purchase or lease of a new Motor Vehicle, Dealer agrees to comply with the then current applicable policies and procedures in the General Motors Incentive Manual, as amended from time to time." Id. at 35. The December 2012 Incentive Manual in turn requires that, under the Purchase Program, the Consumer Agreement must be "signed by the customer and dealer at time of delivery and must be retained in the deal jacket at the selling dealership." R. 28-1 at 10.

The Incentive Manual also states that "Dealers should refer to the individual incentive program administrative message/bulletins for their official rules and responsibilities under the programs."Id. On October 2, 2012, General Motors issued Incentive Bulletin 13-06, which like the Incentive Manual provided that the Consumer Agreement "must be signed by the customer and dealer at time of delivery and must be retained in the deal jacket at the selling dealership." Id. at 21–23. On February 1, 2014, GM issued Incentive Bulletin 14-06-004, which relaxed the delivery date deadline and allowed the Consumer Agreement to "be completed and signed no later than 30 calendar days from the date of delivery." Id. at 25–27.

Just as Sims had the right to expect General Motors to make the incentive payments in connection with the Purchase Program, General Motors had the right to expect Sims to comply with the requirements for obtaining the incentive payments. The terms of the relevant contracts leave no room for Sims' position. It was required to obtain and keep the relevant Consumer Agreements according to these timelines.

It makes no difference that the underlying GM–Sims contract does not establish this deadline. General Motors offers many allowance and incentive programs, each designed to meet dynamic market conditions and business needs. To preserve flexibility, the contract incorporates the Incentive Manual by reference and says that it will be "amended from time to time." R. 1-1 at 35. Sims contractually bound itself to this arrangement and cannot undo the bargain now.

Resisting this conclusion, Sims argues that General Motors breached an implied covenant of good faith and that a jury, not a court, must assess the allegation. But Michigan contract law does not recognize such an independent cause of action. Belle Isle Grill Corp. v. City of Detroit , 256 Mich.App. 463, 666 N.W.2d 271, 279–80 (2003). It uses the principle of good faith to evaluate a party's established contractual obligations or statutory duties, not to create a freestanding right of action. Gorman v. Am. Honda Motor Co. , Inc. , 302 Mich.App. 113, 839 N.W.2d 223, 233–35 (2013).

As just shown, General Motors' actions matched its rights and responsibilities under the contract and were performed in good faith. The car maker acted honestly and in a commercially reasonable manner. It imposed the Consumer Agreement deadline to ensure the integrity of the incentive program and provided Sims with notice of the change. Confirming the point, Sims knew about the changes. Mr. Sims, owner and president of the Sims dealership, admitted that he requires his salespeople to consult the incentive bulletins regularly for appropriate policies and procedures. And he testified that, for the period at issue, they were able to determine the requirements of the incentive program. Even though the audit period ended on January 9, 2014, and the 30–day grace period was not issued until February 1, 2014, GM debited Sims only for those transactions that would have violated the more lenient standard. That was not the action of a manufacturer bent on unfairly squeezing each dollar out of a dealer.

Sims' invocation of Littlejohn v. Parrish , 163 Ohio App.3d 456, 839 N.E.2d 49 (2005), adds little. The state court overturned a grant of summary judgment on a breach of contract claim in which one party argued that the other had not acted in good faith. But Littlejohn does not establish that all breach of good faith allegations must be decided by a jury. It merely found a genuine issue of material fact as to...