Volkswagen Grp. of Am. v. GPB Capital Holdings, LLC
| Decision Date | 08 February 2021 |
| Docket Number | 20 Civ. 1043 (AT) |
| Parties | VOLKSWAGEN GROUP OF AMERICA, INC., Plaintiff, v. GPB CAPITAL HOLDINGS, LLC, Defendant. |
| Court | U.S. District Court — Southern District of New York |
Plaintiff, Volkswagen of America ("VWoA"), brings this action against Defendant, GPB Capital Holdings, LLC ("GPB"), asserting claims for declaratory relief and specific performance of a contract between the parties. Defendant moves to dismiss the complaint for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6), and failure to join necessary parties, pursuant to Federal Rule of Civil Procedure 12(b)(7). For the reasons stated below, the motion is DENIED.
VWoA, a motor vehicle distributor, authorizes dealerships throughout the country to sell its motor vehicles pursuant to franchise agreements between it and the dealership. Def. Mem. at 2, ECF No. 35; Bus. Relationship and Settlement Agreement ¶ A, ECF No. 14-1. These agreements call for VWoA's prior approval of certain events, such as changes in ownership. See, e.g., Arbitration Demand at Ex. A at 2, Ex. B at 2, Ex. C at 2, ECF 14-6 at 24, 38, 53. The franchise agreements, along with other aspects of the franchise relationship, are governed by various state laws, which create procedural and substantive rights. See Arbitration Demand atEx. A at 3, Ex. B at 3, Ex. C at 3, ECF 14-6 at 25, 39, 54; Mass. Gen. Laws Ann. ch. 93B, §§ 1 et seq.; Me. Rev. Stat. tit. 10, §§ 1171 et seq.; N.Y. Veh. & Traf. Law § 460.
In 2011, GPB, an "alternative asset management firm" based in New York, decided to invest in motor vehicle dealerships. Apparently, these transactions were to be consummated by GPB-related entities ("GPB-Related Entities"). Compl. ¶ 7. In 2014, a GPB-Related Entity acquired an ownership interest in a Volkswagen franchised dealership, without the prior notice to VWoA required by the dealership's franchise agreement. Id. ¶ 8. VWoA then issued a notice of termination to the franchise, resulting in litigation in New York state court and a settlement agreement mandating certain ownership conditions for that franchise (the "Settlement Agreement"). Id. ¶¶ 9, 13.
In 2017, multiple GPB-Related Entities entered into purchase agreements for additional Volkswagen dealerships, including one in Watertown, New York ("Caprara") and another in Saco, Maine ("Prime"). Id. ¶¶ 11, 14, 16. When VWoA learned of the proposed Prime transaction, VWoA "discovered that the terms of the [Settlement Agreement] had not been met." Id. ¶ 13. In consideration of VWoA's promise to not enforce the Settlement Agreement, and in order to permit the purchase of Caprara and Prime, on October 19, 2017, VWoA and GPB entered into a Business Relationship and Settlement Agreement (together with its 2018 amendment, ECF No. 14-2, the "BRA"). Id. ¶¶ 14-15; BRA at 1-2.
The BRA provides in pertinent part that certain individuals shall remain as managers and operators of the dealerships and that "neither GPB Group nor any of its owners"2 shall exercise operational control over the dealerships. BRA ¶ 7(D). The BRA also states that VWoA shallhave the right to review and approve any "sale, acquisition or change of ownership or voting rights of GPB Group." BRA ¶ 12(A). In addition, if after review of a change of ownership, VWoA determines that the new ownership would be "incompatible with VWoA's . . . interests," VWoA may "require that, within ninety (90) days of notice from VWoA invoking this provision, GPB Group shall (a) transfer all interest in all [d]ealerships to [b]ona [f]ide [t]ransferees. . . ; or (b) voluntarily terminate the [dealership's franchise agreements] associated with each of the [d]ealers." BRA ¶ 12(B).
The BRA was amended in October 2018 in connection with VWoA's consideration of GPB's proposed acquisition of another Volkswagen franchise. ECF No. 14-2. After the BRA was executed, Automile Holdings, LLC, a GPB-Related Entity, purchased a dealership in Norwood, Massachusetts ("Norwood" or, together with Prime and Caprara, the "Contested Dealerships"). Compl. ¶¶ 16, 22; Arbitration Demand at Ex. C, at 3-4, ECF No. 14-6 at 54-55. Each of the Contested Dealerships has a franchise agreement with VWoA (the "Dealership Agreements"). Arbitration Demand at Ex. A, Ex. B, Ex. C, ECF No. 14-6 at 24-25, 38-39, 53-54.
In September 2019, without prior notice to VWoA, GPB replaced the Contested Dealerships' previously approved manager, and removed three individuals from the board of directors of Automile Holdings, LLC. Compl. ¶¶ 19, 23. By letter dated October 31, 2019, VWoA provided GPB with a notice, pursuant to Paragraph 12 of the BRA, requiring GPB to transfer its ownership interests in the Contested Dealerships to a third party. Compl. Ex. 4, ECF No. 14-4. GPB did not do so. Compl. ¶¶ 28-29. Instead, in January 2020, GPB caused the Contested Dealerships to file an arbitration demand against VWoA with the AmericanArbitration Association, arguing that the BRA violates state franchise laws. Compl. ¶ 30; see Arbitration Demand.
VWoA then filed this action for a declaratory judgment, specific performance, and attorneys' fees, seeking enforcement of VWoA's rights under the BRA, termination of the Dealership Agreements, and the dismissal of the arbitration proceeding. Compl. at 16-17.
GPB characterizes VWoA's requested relief as "terminat[ing] the [Dealership Agreements] indirectly through GPB," Def. Mem. at 1 (emphasis added), and moves to dismiss the complaint for failure to state a claim, arguing that VWoA cannot terminate the Contested Dealerships without following the procedures set forth in state motor vehicle franchise laws. This motion is DENIED.
To withstand a Rule 12(b)(6) motion to dismiss, "a complaint must contain sufficient factual matter . . . to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A plaintiff is not required to provide "detailed factual allegations" in the complaint, but must assert "more than labels and conclusions." Twombly, 550 U.S. at 555. Ultimately, the "[f]actual allegations must be enough to raise a right to relief above the speculative level." Id. The court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the non-movant. ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007).
In determining whether state franchise laws apply, the threshold question is whether the Contested Dealerships are parties to the BRA. The BRA provides that it "shall be construed according to the laws of the District of Columbia." BRA ¶ 27. The District of Columbia employs the "objective law of contracts," such that "the written language embodying the terms of an agreement will govern the rights and liabilities of the parties [regardless] of the intent of the parties at the time they entered into the contract, unless the written language is not susceptible of a clear and definite undertaking." Lannan Found. v. Gingold, 300 F. Supp. 3d 1, 23 (D.D.C. 2017) (quoting Abdelrhman v. Ackerman, 76 A.3d 883, 887 (D.C. 2013). If the Court finds the contract language is unambiguous, the interpretation is a matter of law. Am. Civil Constr., LLC v. Fort Myer Constr. Corp., 246 F. Supp. 3d 309, 321 (D.D.C. 2017). If the Court determines the contract language is ambiguous, however, it may consider extrinsic evidence to determine the parties' subjective intent. Lannan Found., 300 F. Supp. 3d at 24.3
The Court finds the language of the BRA to be ambiguous. The opening sentence of the BRA states:
Volkswagen of America, Inc., an operating unit of Volkswagen Group of America, Inc. ("VWoA") and GPB Capital Holdings, LLC ("GPB") and its automotive subsidiaries and affiliates (GPB and its affiliates and subsidiaries may be collectively referred to herein as "GPB Group"), (VWoA and GPB may be collectively referred to herein as the "Parties") enter into this Business Relationship Agreement . . . on this 19 day of October, 2017.
BRA at 1. On the one hand, in this sentence the term "Parties" is defined as "VWoA and GPB";the term "GPB" is defined as "GPB Capital Holdings, LLC"; and the term "GPB Group" is defined as "GPB and its affiliates and subsidiaries". Id. Had the parties wished to include the GPB-Related Entities in the definition of the word "Parties," they could have done so. They did not. See id. ¶ 21 (). One the other hand, the same sentence also provides that "VWoA . . . and . . . GPB . . . and its automotive subsidiaries and affiliates . . . enter into this [BRA]," implying that GPB-Related Entities are also parties to the BRA. Id. at 1.
The BRA names only two specific entities: VWoA and GPB. Id. ¶¶ A-B. It indicates that notice to "GPB Group" shall be sent to GPB's address. Id. ¶ 29. In addition, the BRA states that it is governed by the law of the District of Columbia and that state franchise laws do not apply—both provisions that, if the Contested Dealerships were parties to the contract, would be impermissible under state franchise laws. Id. ¶¶ 18, 27; Mass. Gen. Laws Ann. ch. 93B § 15; Me. Rev. Stat. T. 10 § 1174(O); N.Y. Veh. & Traf. Law § 463(t). Moreover, the BRA twice states that "GPB Group shall cause all Dealerships" to act, implying that the Contested Dealerships are separate even from "GPB Group". BRA ¶ 10. However, most of the BRA's provisions impose obligations on and grant rights to "GPB Group," which, as defined, includes the Contested Dealerships as "affiliates and subsidiaries"—i.e., automotive entities owned indirectly by GPB. See, e.g., id. ¶¶ 2, 7; Arbitration Demand ¶¶ 9-12, ECF No. 14-6 at 6-7. On the signature page, GPB executed the BRA "on behalf of itself and its...
To continue reading
Request your trial