Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Mich.: Chrysler dodges breach of contract claims by former dealership manager, (Jul 27, 2015)

By Linda O’Brien, J.D., LL.M.

The manager of a Chrysler vehicle dealership was unable to show that a contract was formed, establishing him as the owner and operator of that dealership under Chrysler’s dealer financial assistance program, the federal district court in Detroit has ruled. Thus, the auto manufacturer’s motion for summary judgment on the manager’s breach of contract and promissory estoppel claims was granted (Davis v. Chrysler Group, LLC, July 24, 2015, Cohn, A.).

Auto manufacturer Chrysler offered a Market Investment (M.I.) program that provided financial assistance to individuals who otherwise would qualify but lacked sufficient capital to operate a dealership. Chrysler employed a rigorous application process for approval in the M.I. program, which included a background investigation, identification of personal assets and liabilities, and the completion of various documents and a comprehensive business plan.

Fred Davis was a M.I. manager who was assigned to a struggling dealership in Georgia. In March 2011, Davis began discussions with his supervisors regarding his interest in becoming an M.I. operator of the dealership. As an M.I. operator, Davis would be required to sign several agreements, resign his employment with Chrysler, and invest substantial funds in the dealership. In April 2011, Davis requested in an email that his supervisor confirm that the dealership would remain an M.I. dealership and he would be the M.I. operator. The supervisor responded that the dealership was Davis’ if he wanted it.

In June 2011, a Chrysler executive informed Davis that, due to the dealership’s poor sales and financial performance over the last six months, it was not viable for the dealership to continue under the M.I. program and Davis would be reassigned to a management position in Michigan. Shortly thereafter, Chrysler sold the dealership’s assets, and Davis was assigned to a new position with no change in pay or benefits. Davis filed suit against Chrysler for breach of contract and promissory estoppel, alleging the Chrysler breached its promise to provide him the opportunity to become a Chrysler dealership owner under the M.I. program. Chrysler moved for summary judgment.

Breach of contract. The court found there was no material question of fact as to whether a contract was formed establishing Davis as the M.I. operator of the dealership. Davis’ contention that the supervisor’s statement in the email response constituted an enforceable contract was rejected. The court noted that the statement was at most an unenforceable expression of intent to reach an agreement at a later date. Davis was familiar with the extensive M.I. program application process for potential operators, and none of those steps took place. Furthermore, there was no dispute that the application process required approval only by a Chrysler executive and the supervisor did not have the authority to approve Davis’ participation in the M. I. program.

Promissory estoppel. Additionally, there was no material question of fact as to Davis’ promissory estoppel claim. According to the court, Davis failed to demonstrate a clear and definite promise by Chrysler that he would become and continue as the M.I. operator of the Georgia dealership. The fact that Davis relocated his family to Georgia based on the alleged promise was customary and necessary incidents of changing jobs rather than consideration to support a promissory estoppel claim. The employment contract between Davis and Chrysler was terminable at will by either party at any time and did not create a claim for promissory estoppel, even if a clear and definite promise was made, the court concluded.

The case is No. 2:13-cv-14250-AC-MAR.

Attorneys: Jennifer Lossia McManus (Dib and Fagan, PC) for Fred Davis. Vicki J. Patterson (Ogletree, Deakins, Nash, Smoak & Stewart, PC) for Chrysler Group, LLC.

Companies: Chrysler Group, LLC

Cases: FranchisingDistribution MichiganNews