Stone Motor Co. v. General Motors Corp.

• Decision Date: 09 March 2005
• Docket Number: No. 04-1838.,No. 04-1921.,04-1838.,04-1921.
• Parties: STONE MOTOR COMPANY, Appellant/Cross-Appellee, v. GENERAL MOTORS CORPORATION, Appellee/Cross-Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

400 F.3d 603

STONE MOTOR COMPANY, Appellant/Cross-Appellee, v. GENERAL MOTORS CORPORATION, Appellee/Cross-Appellant.

No. 04-1838.

No. 04-1921.

United States Court of Appeals, Eighth Circuit.

Submitted: January 13, 2005.

Filed: March 9, 2005.

John D. Beger, argued, Rolla, MO, for appellant/cross-appellee.

Jeffrey J. Jones, argued, Columbus, OH (David M. Harris and Dawn M. Johnson, St. Louis, MO, and J. Todd Kennard, Columbus, OH, on the brief), for appellee/cross-appellant.

Before WOLLMAN, MURPHY, and BYE, Circuit Judges.

MURPHY, Circuit Judge.

This dispute between Stone Motor Company (Stone), a former dealer of Chevrolet and Geo cars and trucks, and General Motors Corporation (GM), is back before the court for a second time. In Stone Motor Co. v. General Motors Corp., 293 F.3d 456 (8th Cir.2002) (Stone I), we reversed in part a judgment of dismissal and remanded Stone's claims for breach of the duty of good faith and fair dealing and violations of the Missouri Motor Vehicle Franchise Practices Act. The remanded issues related to the effect of a release Stone had signed and to GM's allocation of vehicles. After the record was further developed on remand, the district court¹ dismissed Stone's remaining claims and denied GM's request for attorney fees. Stone appeals the dismissal of its good faith claim, and GM appeals the denial of fees. We affirm.

Stone purchased a Chevrolet-Geo dealership in Cuba, Missouri in 1995, and entered into a standard franchise agreement with GM. Business at the dealership did not go as well as hoped, and Stone contends that the reason for its poor return was that GM had not allocated it enough of the most desirable vehicles nor a sufficient number of vehicles. GM contends that it allocated more vehicles to Stone than it had to the previous franchisee, and that Stone received more vehicles than it was entitled under GM's standard allocation formula. After two years of poor performance, Stone decided to sell to Fairground Motors, a dealership in neighboring Rolla, Missouri. After its talks with Fairground, Stone presented the proposed sale to GM for its consideration and approval.

Under the terms of Stone's Dealer Service and Sales Agreement with GM, Stone was obligated to provide GM with written notice if it wished to transfer the dealership, and GM was required to consider and not arbitrarily refuse any proposed transfer. The franchise agreement specified factors that GM was to include in that consideration:

factors such as (a) the personal, business, and financial qualifications of the proposed dealer operator and owners, and (b) whether the proposed change is likely to result in a successful dealership operation with acceptable management capitalization, and ownership which will provide satisfactory sales, service, and facilities at an approved location, while promoting and preserving competition and customer satisfaction.

The contract further required GM to issue a written decision on any proposed sale within 60 days of the proposal and to include a statement of its reasons for disagreement if approval was denied. GM was also entitled under the agreement to indicate in its written response to a dealer's proposal that it would buy the dealership rather than approve its sale to a third party.

GM notified Fairground by letter on July 8, 1997 that its "application and proposal to become a Chevrolet dealer in Cuba, MO ha[d] been approved" and that GM was "prepared to appoint Fairground Motors .... as an authorized Chevrolet dealer, conditioned on [its] providing [GM] with [stated] information and documentation...." Included among the listed documents that would be required prior to any execution of a franchise agreement with Fairground was a release from Stone.

At the closing of Stone's sale of the dealership to Fairground Motors on July 14, 1997, the president of Stone signed a document which:

releas[ed] and forever discharg[ed]...General Motors Corporation, Chevrolet Motor Division of and from all, and all manner of action and actions, causes of action, suits, proceedings, debts, dues, contracts, judgments, damages, claims or demands whatsoever, in law or equity, which it or he or either of them ever had or now have against...General Motors Corporation, Chevrolet Motor Division upon or by any reason of any manner, cause or thing whatsoever occurring or existing at any time or times prior to or during the entire period of the operation or arising from the termination of [Stone Motor Company].

This release document also stated that the signing party acknowledged that it was agreeing to it "for and in consideration of the sum of One Dollar ($1.00) in hand paid by General Motors Corporation, Chevrolet Motor Division, a Delaware corporation, receipt of which is hereby acknowledged and other good and valuable consideration." Stone's president later testified that he knew that GM's approval of the proposed sale was contingent upon his signing the instrument.

Stone brought this action against GM nearly two years later, alleging in part that its unsatisfactory allocation of vehicles to the dealership breached its duty of good faith and fair dealing and violated the Missouri Motor Vehicles Franchise Practices Act, Mo.Rev.Stat. §§ 407.810-407.835 (2004) (MVFPA). The district court dismissed all claims, and Stone appealed. Our court ruled that if the release were valid, it would bar all of Stone's claims but that it was unclear whether consideration had been given for it. Stone I, 293 F.3d at 460-62. There also appeared to be a genuine question as to whether GM had acted in good faith in allocating vehicles among dealerships. Id. at 464-68. We therefore affirmed the dismissal of Stone's other claims but remanded the claims that GM had violated the MVFPA and breached its implied contractual duty of good faith and fair dealing.

After the case was returned on remand, the district court scheduled an evidentiary hearing to address the validity of the release. The parties filed a joint motion for continuance, however, because there was a pending motion by GM to compel production of documents and deposition testimony relating to the release. Stone then filed an amended complaint based on its two surviving claims, and GM responded with a counterclaim seeking damages from Stone, including costs and attorney fees, alleging that Stone had breached the release by filing this action.

GM moved for summary judgment, contending that Stone's claims were barred by the release, that Stone had abandoned its franchise and therefore lacked standing under the MVFPA, that GM had delivered Stone more vehicles than were owed under its standard allocation system and it had not acted in bad faith, and that Stone had not shown any cognizable damages. The district court granted the motion for summary judgment on the MVFPA claim since Stone was no longer engaged in the franchise business at the time it brought this action. The court concluded that it was therefore barred from suing under the statute, and Stone has not contested this ruling on appeal. See Mo.Rev.Stat. 407.830 ("It shall be a defense for a motor vehicle franchisor, to any action brought under sections 407.810 to 407.835 by a motor vehicle franchisee, if it be shown that ... the motor vehicle franchisee has ceased conducting its business or has abandoned the franchise."). The motion for summary judgment was denied as to Stone's claim that GM breached its duty of good faith and fair dealing, as was a subsequent motion by GM for a scheduling conference. In denying the latter motion, the court indicated that the question of whether consideration had been given for the release was a fact issue to be determined at the previously scheduled trial.

The parties prepared for trial and submitted a joint stipulation of uncontested facts, as well as trial briefs, witness and exhibit lists, and proposed jury instructions. They also filed a number of motions in limine. On the morning of trial, the district court met with counsel and indicated that a jury panel would be available later in the day. The court then asked counsel to set out their positions on two main issues respecting Stone's claim for breach of the duty of good faith: the validity of the release and damages. The parties also were given the opportunity to state the evidence on which they relied. Included in the evidence Stone said it planned to introduce were GM's July 8, 1997 letter to Fairground Motors and the Dealer Service and Sales Agreement between the parties. In its discussion GM indicated that it would rely in part on the deposition testimony of Stone's president, Virgil Stone, and thereafter the court permitted Stone to summarize any further evidence it would offer at trial.

After hearing the presentations and arguments of the parties at the conference, the district court concluded that GM was entitled to judgment on Stone's claim. The court concluded that Stone lacked submissible evidence on damages but that the case turned on the release, ruling that the release barred Stone's claim. GM's final approval of Stone's sale to Fairground provided consideration for the release, making it a valid contract, the court concluded. The court also indicated that it intended to award attorney fees and costs to GM as damages on its counterclaim, reasoning that Stone had violated the terms of the release by bringing the lawsuit; it requested memoranda on the amount GM should be awarded. Stone filed a notice of appeal, but it was dismissed because there was not a final judgment.

The district court later issued a written order for judgment, dismissing Stone's claim and GM's counterclaim. In departing from its announced intention to award damages to GM, the court indicated that an award of attorney fees and costs would be improper in the absence of a statutory or contractual provision authorizing them. See In re Estate of Cannamore, 44 S.W.3d 883, 885 (Mo.Ct.App.2001) (fees appropriate "only...