Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Mich. App.: Foreign distributor’s claims against Chrysler stall on appeal, (Mar 29, 2016)

Dismissal of claims of fraud and breach of the duty of good faith and fair dealing against Chrysler Group International LLC, FIAT S.P.A., and FIAT Group Automobiles S.P.A., for not expanding and improving a vehicle line for a Greek distributor, was affirmed by the Michigan Court of Appeals (Lancia Jeep Hellas S.A. v. Chrysler Group International LLC, March 24, 2016, Per Curiam).

After Lancia Jeep Hellas S.A. (LJH) responded to its termination as an importer and distributor for Chrysler and Dodge by filing a breach of contract action against the defendants, the parties executed a settlement agreement. The settlement agreement contained: (1) a release clause wherein LJH agreed to release its claims against the defendant, with certain exceptions that included claims relating to the negotiation or breach of the settlement agreement; and (2) a merger/integration clause, which provided that the settlement agreement superseded and replaced all prior agreements, arrangements, negotiations, representations, and understandings of the parties.

The settlement agreement also incorporated a “Lancia Distribution Agreement,” setting forth terms under which LJH would distribute certain Lancia “contract vehicles” in Greece. The “Lancia Distribution Agreement” contained a clause wherein the defendants retained the right to alter, modify, stop production of, or withdraw from the market any of the contract vehicles or derivative of the contract vehicles.

The defendants did not expand and improve the Lancia line of vehicles and LJH filed several causes of action against them, including fraud and breach of contract based on breach of the duty of good faith and fair dealing. According to LJH, it relied on the defendants’ representations that the Lancia line would be expanded and improved and, absent those representations, it would not have entered into the settlement agreement and have agreed to distribute Lancia products.

The trial court found that: (1) the integration clause nullified any alleged representation that they would develop an expanded line of Lancia models; and (2) the settlement agreement gave them complete control regarding the products that LJH was entitled to sell and allowed them to withdraw any vehicle from the market. On appeal, the court considered LJH’s claims of fraud and breach of the duty of good faith and fair dealing.

Fraudulent inducement. LJH argued that it was fraudulently induced to enter into the settlement agreement by the defendants’ pre-settlement representations that it would produce an expanded line of Lancia vehicles. The court, however, found that: (1) fraud that relates solely to an oral agreement that was nullified by a valid integration clause would have no effect on the validity of the settlement agreement; and (2) LJH did not demonstrate fraud that would invalidate the integration clause or otherwise invalidate the contract. The court also noted that the settlement agreement, by incorporation, included a clause that provided the defendants with complete discretion to withdraw all contract vehicles from the market. Consequently, even if the release clause had preserved LJH’s claim, it would have failed as a matter of law.

Breach of contract. LJH argued that, because the defendants had discretion regarding the development of the Lancia line, there was an implied duty of good faith and fair dealing that attached to that discretion. After noting that there was no implied duty of good faith where the parties have unmistakably expressed their respective rights, the court determined that the integration clause provided that the agreement contained all the terms and conditions of the contract and the express terms of the contract provided the defendants the option to withdraw contract vehicles from the Greek market.

The case is No. 329481.

Attorneys: Michael F. Smith (The Smith Appellate Law Firm) for Lancia Jeep Hellas SA. Thomas J. Tallerico (Bodman Plc) for Chrysler Group International LLC.

Companies: Lancia Jeep Hellas SA; Chrysler Group International LLC; Fiat S.p.A.; Fiat Group Automobiles S.p.A

Cases: FranchisingDistribution MichiganNews