Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—E.D. Mich.: Syrian auto dealer’s claims against Ford dismissed, (Nov 8, 2013)

By Linda O’Brien, J.D., LL.M.

A U.S. automobile manufacturer properly terminated a dealership agreement with a Syrian auto dealer after the issuance of a presidential executive order prohibiting the exportation of goods to Syria, the federal district court in Detroit has ruled. The auto manufacturer’s motion for summary judgment on counterclaims for breach of contract, promissory estoppel, and unjust enrichment was granted (Ford Motor Co. v. Ghreiwati Auto, November 7, 2013, Edmunds, N.).

Ford Motor Company and Ghreiwati Auto (Auto) entered into a Global Importer Service Dealer Sales and Service Agreement (GIDSSA) to establish Auto as an authorized dealer for the sale and service of Ford vehicles in Syria. The GIDSSA provided that Ford could terminate the agreement at will with 120 days’ notice and contained a severability clause under which Ford could elect to terminate the agreement in its entirety or consider it divisible if any provision was invalid, unenforceable, or prohibited by law. The agreement also provided that Ford had the right to amend, modify or change the agreement in the case of legislation, government regulation or circumstances beyond its control that materially affected the relationship between Ford and Auto.

Subsequently, President Bush issued an executive order prohibiting the exportation of certain goods to Syria. This order provided an exception, a ten percent de minimis rule, where products in which the value of U.S. goods in the total item was less than ten percent of the total value could be shipped to Syria. Ford continued to do business with Auto under the ten percent de minimis rule from 2004 to 2011. During this time, Auto made large investments in the infrastructure, dealer network, and brand representation of Ford products. In 2011, President Obama issued an executive order further restricting certain transactions with Syria. Following the issuance of the executive order, Ford terminated its dealership agreement with Auto. Ford filed for arbitration, and Auto filed counterclaims against Ford alleging breach of contract, promissory estoppel, and unjust enrichment. Ford moved for summary judgment to dismiss Auto’s claims.

In granting Ford’s motion for summary judgment, the court held that a contract that violates an executive order or law is unlawful and discharges performance of the contract under federal and state (Michigan) law. The GIDSSA which provided for the payment, reimbursement, and shipment of goods directly to Syria was prohibited by the 2011 executive order. Since Ford’s performance of the GIDSSA would violate the executive order, Ford had the right to terminate the agreement, the court concluded. Additionally, the GIDSSA expressly allowed Ford to terminate the agreement if a law prohibited its performance.

The court, in rejecting Auto’s argument that Ford continued to do business with Auto after the 2004 executive order, found that Ford was not required by GIDSSA to seek an exception to continue doing business with Auto after the issuance of the 2011 executive order which was a more encompassing embargo against Syria.

Finally, the court found that Auto’s claims for promissory estoppel and unjust enrichment should be dismissed since its recovery under those theories would contravene the policy and purpose of the executive order to prohibit the flow of money to Syria.

The case is No. 12-14313.

Attorneys: Susan Asam (Dykema Gossett PLLC) for Ford Motor Co. Daniel E. Myers (Fuller & Myers) for Ghreiwati Auto.

Companies: Ford Motor Co.; Ghreiwati Auto

Cases: FranchisingDistribution MichiganNews