Van Wie Chevrolet, Inc. v. Gen. Motors, LLC

• Decision Date: 07 October 2016
• Citation: 38 N.Y.S.3d 662,145 A.D.3d 1,2016 N.Y. Slip Op. 06583
• Parties: VAN WIE CHEVROLET, INC., Doing Business as Evans Chevrolet, Plaintiff–Respondent–Appellant, v. GENERAL MOTORS, LLC, Defendant–Appellant–Respondent, et al., Defendant. (Appeal No. 3.).
• Court: New York Supreme Court — Appellate Division

145 A.D.3d 1

38 N.Y.S.3d 662

2016 N.Y. Slip Op. 06583

VAN WIE CHEVROLET, INC., Doing Business as Evans Chevrolet, Plaintiff–Respondent–Appellant,

v.GENERAL MOTORS, LLC, Defendant–Appellant–Respondent, et al., Defendant. (Appeal No. 3.).

Supreme Court, Appellate Division, Fourth Department, New York.

Oct. 7, 2016.

Lavin, O'Neil, Cedrone & Disipio, New York City (John J. O'Donnell, of the Pennsylvania Bar, Admitted Pro Hac Vice, of Counsel), for Defendant–Appellant–Respondent.

Bressler, Amery & Ross, New York City (Eric L. Chase of Counsel), and Rivette & Rivette, P.C., Syracuse, for Plaintiff–Respondent–Appellant.

PRESENT: CENTRA, J.P., PERADOTTO, LINDLEY, CURRAN, AND TROUTMAN, JJ.

Opinion by CENTRA

, J.P.

The primary issue raised on this appeal is whether defendant, General Motors, LLC (GM), violated Vehicle and Traffic Law § 463(2)(ff)(1)

when it approved the relocation request of a Chevrolet dealer in the Syracuse area, but failed to give notice thereof to plaintiff, Van Wie Chevrolet, Inc., doing business as Evans Chevrolet, another Chevrolet dealer in the same area. We conclude that no violation of the statute occurred.

Plaintiff and defendant Sharon Chevrolet, Inc. (Sharon) both operate Chevrolet dealerships, franchised by GM. Plaintiff and GM entered into a standard GM Dealer Sales and Service Agreement (Dealer Agreement). Pursuant to the Dealer Agreement, every GM dealer is assigned an “Area of Primary Responsibility” (APR). The APR is comprised of census tracts based upon the geography in which a particular dealer is deemed to have a competitive advantage in attracting customers. The APR is used by GM to assess the performance of dealers in its dealer network.

Sharon, whose dealership is located 5.28 miles away from plaintiff's dealership, requested approval from GM to relocate its dealership to a site that is 3.97 miles away from plaintiff's dealership. At first, GM denied Sharon's request, concluding that the relocation would not be in the interests of GM, Chevrolet, or the GM dealer network in Syracuse. However, after Sharon commenced a federal lawsuit against GM seeking monetary damages for GM's denial of its relocation request, GM approved the relocation and settled the lawsuit.

Plaintiff commenced this action against GM and Sharon seeking to enjoin GM from taking any action to relocate Sharon. Supreme Court (DeJoseph, J.) granted Sharon's motion to dismiss the complaint against it, and granted in part GM's motion to dismiss the complaint against it by dismissing five causes of action, leaving only a cause of action for the violation of Vehicle and Traffic Law § 463(2)(ff)(1)

and a cause of action for breach of fiduciary duty (appeal No. 1). Following discovery, plaintiff and GM moved for summary judgment on the remaining two causes of action. Supreme Court (Gilbert, J.) granted plaintiff's motion in part on its cause of action pursuant to section 463(2)(ff)(1) and granted GM's motion in part by dismissing the cause of action for breach of fiduciary duty (appeal No. 2). A judgment was thereafter entered on the orders in appeal Nos. 1 and 2 (appeal No. 3). GM appealed from the judgment in appeal No. 3, and plaintiff cross-appeals from the orders in appeal Nos. 1 and 2.

As a preliminary matter, although plaintiff did not cross-appeal from the judgment in appeal No. 3, we exercise our discretion to treat plaintiff's notice of cross appeal in appeal Nos. 1 and 2 as valid and deem its cross appeal as taken from the judgment in appeal No. 3 (see Ironwood, L.L.C. v. JGB Props., LLC [Appeal No. 2], 130 A.D.3d 1527, 1528, 14 N.Y.S.3d 248

, lv. denied 26 N.Y.3d 908, 2015 WL 6143429 ). As another preliminary matter, we reject plaintiff's contention that the appeal and cross appeal are moot. In September 2015, GM approved Sharon's request to relocate to a different site than it had previously requested. In the letter approving the request, GM explained that Sharon's prior relocation request was currently “closed” as a result of the judgment rendered in this case, but it further explained that the status of that prior relocation request might change if GM prevailed on the pending appeal. GM stated that, if it prevailed on the appeal, then Sharon would have to choose whether to pursue its current proposed relocation or its prior relocation request. We agree with GM that Sharon did not withdraw its prior relocation request, which is the subject of this appeal, and the appeal and cross appeal are therefore not moot.

Plaintiff's second cause of action alleges that GM violated the notification requirements of Vehicle and Traffic Law § 463(2)(ff)(1)

. Plaintiff sought a declaration that GM's approval of Sharon's relocation would result in a modification of plaintiff's APR and its franchise; that GM violated the notice requirements under the law; that the modification of plaintiff's franchise would adversely affect plaintiff's rights, obligations, investments, or return on investments; and that the modification was not undertaken in good faith or for good cause.

New York enacted the Franchised Motor Vehicle Dealer Act (Dealer Act), codified at Vehicle and Traffic Law § 460 et seq.

, to protect dealers from “[u]nfair business practices by franchisors” (§ 463 ). “By enacting the Dealer Act, the legislature sought to address a historical inequality in the vehicle franchise business that favored automobile manufacturers over motor vehicle dealers” (Beck Chevrolet Co., Inc. v. General Motors LLC, 27 N.Y.3d 379, 393, 33 N.Y.S.3d 829, 53 N.E.3d 706, rearg. denied 27 N.Y.3d 1187, 38 N.Y.S.3d 96, 59 N.E.3d 1208 ). “The imbalance placed dealers at the mercy of manufacturers who were able to draft and impose protectionist agreements favorable to manufacturers, placing at risk a dealer's financial investment” (id. ). The statute “ ‘provide[s] certain basic protection for the dealer in areas where such protection is deemed necessary, [and] ... the protection afforded the dealer through the [statute] ... counterbalance[s] the numerous protections afforded the manufacturer under the terms of its franchise agreement with the dealer’ ” (id., quoting the Memorandum in Support of Legislation). The Dealer Act thus “statutorily overrid[es] agreement provisions that [are] unfair to dealers” (id. at 394, 33 N.Y.S.3d 829, 53 N.E.3d 706 ).

The Dealer Act specifically addresses relocations of dealers and notice to other dealers of the relocation. Vehicle and Traffic Law § 463(2)(cc)(1)

provides that it is unlawful for any franchisor to, inter alia, “relocat[e] an existing new motor vehicle dealer into the relevant market area of an existing franchise motor vehicle dealer of the same line make unless the franchisor provides notice pursuant to the terms of this subdivision.” Written notice of the proposed relocation must be given to all dealers “that have a relevant market area that encompasses the proposed site,” and the franchisor has the “burden of proving that there exists good cause for any such ... relocation” (§ 463[2][cc][1] ). Section 463(2)(cc) does not apply, however, to the relocation of

“an existing new motor vehicle dealer within that dealer's own existing relevant market area, provided that the relocation not be to a site within the relevant market area of a licensed new motor vehicle dealer for the same line make of motor vehicle, unless such existing franchise was previously located within such new motor vehicle dealer's relevant market area” (§ 463[2][cc] [2] [i]

).

Inasmuch as it is undisputed that plaintiff's location and Sharon's current and proposed location were within the same relevant market area, we conclude that the exception under section 463(2)(cc)(2)(i)

applied, and plaintiff was not entitled to notice of the proposed relocation pursuant to section 463(2)(cc)(1). Plaintiff does not contest the dismissal of its first cause of action, which alleges a violation of that section.

As stated above, plaintiff's second cause of action alleges a violation of Vehicle and Traffic Law § 463(2)(ff)(1)

, which provides that it is unlawful for any franchisor “[t]o modify the franchise of any franchised motor vehicle dealer unless the franchisor notifies the franchised motor vehicle dealer, in writing, of its intention to modify the franchise of such dealer at least [90] days before the effective date thereof, stating the specific grounds for such modification.” Under that subdivision, a modification “means any change or replacement of any franchise if such change or replacement may substantially and adversely affect the new motor vehicle dealer's rights, obligations, investment or return on investment” (§ 463[2][ff][2] ). “A modification is deemed unfair if it is not undertaken in good faith; is not undertaken for good cause; or would adversely and substantially alter the rights, obligations, investment or return on investment of the franchised motor vehicle dealer under an existing franchise agreement” (§ 463[2][ff][3] ).

The decision by the Court of Appeals in Beck Chevrolet Co., Inc. , 27 N.Y.3d 379, 33 N.Y.S.3d 829, 53 N.E.3d 706

was issued after the judgment was rendered in this case. In that case, GM gave notice to its dealer that it was changing its area of geographic sales and service advantage (AGSSA) (id. at 387, 33 N.Y.S.3d 829, 53 N.E.3d 706 ), which was a subset of the dealer's APR (id. at 396, 33 N.Y.S.3d 829, 53 N.E.3d 706 ). The Court, answering a question certified by the Second Circuit Court of Appeals, held that “a change in the AGSSA is a change to the franchise” inasmuch as a “revised AGSSA has the potential to significantly impact the franchise agreement” (id. ). The Court further explained, however, that, “by its terms, section 463(2)(ff)(1) is concerned only with those modifications that result in negative consequences for the dealer, and which meet its requirements for determining whether a change is statutorily impermissible” (id. [emphasis added] ). Thus, a revision to the AGSSA did not “categorically violate[ ] section...