Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—CalCtApp: GM Not Liable for Rejecting Dealership’s Asset Purchase , (Apr 10, 2013)

By Jody Coultas, J.D.

Car dealership First United, Inc. could not state claims against General Motors LLC for allegedly breaching the implied covenant of good faith and fair dealing or interfering with contract/economic advantage, according to a California appellate court (First United, Inc. v. General Motors LLC, April 9, 2013, O’Rourke, J.).

First United operated a Cadillac dealership and Grenier Poway, Inc. operated a Buick and GMC dealership under the terms of a GM dealer sales and service agreement. The dealerships entered into an asset purchase agreement under which First United agreed to purchase certain assets of Grenier's dealership. GM declined to approve the proposed relocation because it was inconsistent with the GM's dealer network planning. Grenier eventually terminated its dealer agreement with GM.

First United asserted breach of the implied covenant of good faith and fair dealing and interference with contract/economic advantage, alleging that GM's stated reason for rejecting the asset purchase and relocation was unreasonable, arbitrary, pretexual, and contrary to the terms and intent of the dealer agreements. A trial court granted GM's motion for summary judgment, finding no triable issues of material fact as to whether GM breached its contracts, made actionable misrepresentations or omissions, or tortiously interfered with contract rights or prospective economic advantage.

Because the court found that GM did not breach the contract, it held that GM did not breach the implied covenant of good faith and fair dealing. The court noted that the dealer agreement imposed a contractual obligation on GM to evaluate and make a final decision on the relocation proposal in light of dealer network planning considerations. There was no evidence that GM conducted itself in such an unreasonable manner to frustrate the First United from obtaining the benefits under the dealer agreement, namely, the right to an evaluation and final decision in light of dealer network planning considerations.

First United could not show that GM did not have a legitimate interest and affirmative rights in connection with the relocation agreement, according to the court. To prove intentional interference with prospective economic advantage, plaintiff must show: (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) an intentional act on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant. First United could not show how GM's communications with Grenier after GM already disapproved the transaction are unlawful, or somehow are proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.

The case is No. D061563.

Attorneys: Bradley Jacobs (Bradley L. Jacobs Atty. at Law, APC) for First United, Inc. Gregory Richard Oxford (Isaacs Clouse Crose & Oxford, LLP) for General Motors LLC.

Companies: First United, Inc.; General Motors LLC.; Grenier Poway, Inc.

Cases: FranchisingDistribution CaliforniaNews