Antitrust Law Daily Wrap Up, FRANCHISING & DISTRIBUTION—W.D. Mich.: Denial of auto dealership’s relocation request did not breach dealer agreement, (Jul 10, 2015)

By Michael Menzhuber, J.D., LL.M.

An auto manufacturer’s denial of a dealership’s request to move to a new location was not a breach of the dealership agreement, the federal district court in Grand Rapids, Michigan has ruled. Thus, the manufacturer’s motion to dismiss the dealer’s contract action was granted (Albion Motors, Inc. v. Chrysler Group, LLC, July 7, 2015, Neff, J.).

Background. Albion Motors (Albion) entered into three separate agreements with Chrysler Corporation, pursuant to which Albion became as an authorized Chrysler, Jeep and Dodge Ram dealer. The dealership agreements included a Location Addendum which required Albion to conduct its dealership from its current location. The dealership agreements also expressly incorporated certain Additional Terms and Provisions which governed any potential change of Albion’s dealership location and which required the Albion receive Chrysler’s written consent to make such a change.

Albion asked for permission to relocate its dealership to a proposed location citing economic reasons for the request. After Chrysler denied giving its permission, Albion filed a complaint in which it: (1) alleged a breach of contract; (2) requested a mandatory injunction to force Chrysler to approve its proposed locations; and (3) alleged a breach of good faith requirement under Michigan’s Dealer Act (Dealer Act). Chrysler moved for dismissal of the complaint.

Breach of Contract. Chrysler contended that the language used in the Additional Terms provision unambiguously reserved to Chrysler the right of relocation refusal. The court agreed. It noted that asserting a breach of contract required a preponderance of the evidence that there was a contract, which the other party breached, and that breach resulted in damages to the party claiming breach. The court further noted that the parties did not disagree that the Additional Terms provision governed any potential change of Albion’s dealership location and conditioned any potential change on Chrysler’s written approval.

Albion asserted that the language in the Additional Terms provision left open the manner of performance which triggered an implied covenant of good faith and fair dealing. The court, however, disagreed. It concluded that: (1) the parties set the limits of what the contract required of them; (2) the plain language of the Additional Terms provision unambiguously precluded relocation absent Chrysler’s approval; and (3) the Additional Terms provision did not contain an implied covenant of good faith and fair dealing.

Albion also asserted that the Additional Terms provision did not include language expressly granting Chrysler the “sole discretion” or “exclusive judgment” to deny Albion’s relocation request. The court, however, determined that the contract presumed no discretion and, thereby, removed any basis upon which to imply a covenant of good faith and fair dealing.

The case is No. 1:14-cv-857

Attorneys: Robert Charles Davis (Davis Burket Savage Listman Brennan) for Albion Motors, Inc. Andrew Malen Spangler, Jr. (Barack Ferrazzano Kirschbaum & Nagelberg LLP) for Chrysler Group, LLC.

Companies: Albion Motors, Inc.; Chrysler Group, LLC.

Cases: FranchisingDistribution MichiganNews