Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—Mo. App.: Declaratory judgment on auto dealer’s breach of good faith claim found premature, (Aug 12, 2015)

By Linda O’Brien, J.D., LL.M.

An automobile dealer’s petition—requesting a declaration that an automobile manufacturer violated the duty of good faith by working to establish a new dealership in the market area and refusing to fulfill new vehicle orders—did not present a controversy ripe for judicial determination. In reversing the trial court’s declaratory judgment, the Missouri Court of Appeals found that the declaration had no conclusive effect since the auto maker had not entered into a franchise agreement with a competing dealer (Century Motor Corporation v. FCA US LLC, August 11, 2015, Cohen, P.).

Century Motor Corp. is a franchise automobile dealer that sells vehicles manufactured by FCA US LLC, formerly known as Chrysler Group, including Jeep, Chrysler, Dodge, and Ram brands. In February 2011, Century and Chrysler executed a sales and service agreement (SSA). Under the agreement, Chrysler agreed to use its best efforts to fill Century’s accepted orders for specified Chrysler vehicles. However, Century acknowledged that Chrysler had the right to allocate supply in any reasonable manner in the event that demand exceeded supply of vehicles.

In April 2012, Century filed a petition for damages against Chrysler, alleging violations of the Missouri Motor Vehicle Franchise Practices Act (MVFPA). Century claimed that Chrysler breached the implied covenant of good faith and fair dealing by working to establish a new dealer in Century’s market area while failing or refusing to fulfill Century’s new vehicle orders. After the trial court entered a declaratory judgment in favor of Century, Chrysler appealed.

A declaratory judgment will be affirmed unless there is no substantial evidence to support it, it is against the weight of the evidence, or it erroneously declares or applies the law, the court explained. Chrysler contended that the trial court erred in entering the declaratory judgment because Century failed to demonstrate that its claim was ripe for judicial resolution.

Century’s petition requested a declaration that Chrysler violated its duty of good faith under the SSA by working to establish a new dealer in Century’s market area while at the same time failing and refusing to fill Century’s new vehicle orders. Century argued that it presented a justiciable controversy, since Chrysler was actively seeking to add a new dealer in Century’s market.

According to the appellate court, Century sought an advisory opinion on a speculative or hypothetical situation. Since Chrysler had not entered into a franchise agreement with a competing dealer in Century’s market area, the situation was not ripe for specific relief through a declaratory judgment. In the court’s view, the declaration did not resolve the parties’ dispute. At trial, Century acknowledged that it could use the declaratory judgment later on and may be entitled to injunctive relief in the event Chrysler entered into an agreement to open a dealership in Century’s area. Whether Chrysler would enter into an agreement with a competing dealer, the dealer would successfully open a dealership, and Century’s inventory issues would persist were pure speculation. Since the trial court’s declaration had no conclusive effect, there was no justiciable controversy, the appellate court concluded. Thus, the trial court’s declaratory judgment was reversed.

The case is No. ED101749.

Attorneys: Victor S. Williams (Hazelwood & Weber LLC) for FCA US LLC. Allen P. Press (Green Jacobson, PC) for Century Motor Corporation.

Companies: Century Motor Corporation; FCA US LLC

Cases: FranchisingDistribution MissouriNews