Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—2nd Cir.: Award of attorneys’ fees to franchisor Hyundai in termination case upheld, (Sep 15, 2014)

By Edward L. Puzzo, J.D.

The U.S. Court of Appeals in New York City has affirmed a district court’s award of attorneys’ fees to prevailing party Hyundai for work at the district court level, after a franchisee’s action challenging termination, and remanded the case to the district court for the determination of the amount of attorneys’ fees to be awarded to Hyundai for work at the appellate level (Giuffre Hyundai, Ltd. v. Hyundai Motor America, September 10, 2014, Per Curiam).

Background. Franchisor Hyundai Motor America (HMA) immediately terminated its franchise agreement with Giuffre Hyundai after a state court ruled that Giuffre had engaged in fraudulent and illegal business practices, deceptive acts, and false advertising.

Giuffre then brought an action in federal district court, seeking to enjoin the termination. The dealer alleged that the termination had been improper under the New York Franchised Motor Vehicle Dealer Act because it had not been given an opportunity to cure the breach. Section 463 of the New York Franchised Motor Vehicle Dealer Act required 90 day written notice of termination to the dealer and gave the dealer the right to challenge the termination in court. Under the Act, the franchisor must show good cause for the termination and provide the dealer with the opportunity to cure the breach.

However, the district court had reasoned that the Act did not displace the state common law principle that a party commits a material breach of its contract with another party when it violates a provision going to the root of their agreement, and the aggrieved party can terminate the agreement without providing the other party the opportunity to cure. The district court concluded that, considering Giuffre's "egregious breach," an opportunity to cure was not required because no cure was possible. The appellate court affirmed the district court’s ruling.

Fees at district court level. On September 16, 2013, during the pendency of the appeal referenced above, the district court awarded attorneys’ fees to Hyundai Motor America for work on the lower court case. Giuffre appealed the award of attorneys’ fees to the appellate court.

Giuffre first argued that the district court lacked jurisdiction to enter the judgment awarding fees because it had already filed a notice of appeal. The appellate court stated that this was clearly incorrect under precedent in the circuit.

Giuffre next argued that the district court was prohibited from awarding attorneys’ fees after it had declined to award costs or disbursements in its summary judgment decision, and that Giuffre had not been given the opportunity to present equitable factors that argued against a fee award, including the fact that the business was defunct and without revenue. The appellate court noted that Giuffre actually had the opportunity to object to the fee award in district court, and filed written objections presenting its equitable arguments. The district court considered Giuffre’s arguments and provided sufficient reasons for rejecting them, the appellate court stated.

Fees at appellate level. Hyundai also moved for attorneys’ fees related to the appeal. Giuffre again argued that reimbursement would be inequitable because it lacked revenue. However, the court noted, Giuffre did not submit any evidence to support its alleged lack of resources. Moreover, the appellate court stated, “given the resource intensive way that Giuffre has litigated on appeal, we agree with Hyundai that some reimbursement costs and fees incurred in litigation on appeal is appropriate.” As to the proper level of attorney’s fees for work at the appeal level, the court remanded the matter to the district court to determine reasonable attorneys’ fees and costs expended by Hyundai in litigating the appeal.

The case is Civil Action No. 13–3581.

Attorneys: Eric L. Chase (Bressler, Amery & Ross, PC) for Giuffre Hyundai, Ltd. John J. Sullivan (Hogan Lovells US LLP) for Hyundai Motor America.

Companies: Giuffre Hyundai, Ltd.; Hyundai Motor America.

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