Opinion
Civil Action No. 00-1620, SECTION: "R"(4).
September 21, 2000.
ORDER AND REASONS
Defendant Mazda Motor of America, Inc. a/b/a Mazda North America Operations moves to dismiss the complaint of Crescent City Mazda pursuant to Federal Rule of Civil Procedure 12(b) (6). For the following reasons, the motion is granted.
I. Background
Crescent City Mazda sues for violations of the Louisiana Motor Vehicles Act (LMVA), La. R.S. 32:1251 through 1257, the Automobile Dealer's Day in Court Act (ADDCA), 15 U.S.C. § 1221-1225, and for breach of contract and the implied covenant of good faith. Crescent City purchased a Mazda franchise from Tom Benson in 1997, subject to Mazda's approval of Crescent City as a Mazda dealer. Crescent City agreed to pay Benson certain financial penalties if Mazda failed to approve of Crescent City as a Mazda dealer. In seeking Mazda's approval, Crescent City informed Mazda of its desire to operate the franchise as a dual dealership, which Benson had done when it owned the franchise. On April 28, 1997, Mazda issued a Letter of Intent authorizing plaintiff to operate a Mazda franchise on the condition that plaintiff operate the franchise as an exclusive Mazda dealership. Plaintiff signed this letter and a subsequent Dealer Agreement, thereby agreeing to the exclusive dealership provision. plaintiff claims it was coerced into signing the exclusive agreement because of the financial penalties it would owe Benson if it failed to get Mazda's approval as a dealer.
Plaintiff claims that it suffered losses as a result of operating an exclusive dealership. In 1998, plaintiff again requested permission to operate a dual dealership with a nearby Dodge franchise. Mazda discussed this option with plaintiff but refused to give its permission to operate a dual dealership. Plaintiff claims it was intimidated into renewing the dealership as an exclusive Mazda outlet. In July 1999, plaintiff claims it was forced to terminate its Mazda franchise and to sell the dealership to minimize losses. Mazda then permitted the new franchisee to operate a dual dealership.
II. Discussion
A. Rule 12(b)(6)
In a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), the Court must accept all well-pleaded facts as true and view the facts in the light most favorable to the plaintiff. See Baker v. Putnal, 75 F.3d 190, 196 (5th Cir. 1996); American Waste Pollution Control Co. v. Browning-Ferris, Inc., 949 F.2d 1384, 1386 (5th Cir. 1991). Dismissal is warranted if "it appears certain that the plaintiff cannot prove any set of facts in support of his claim that would entitle him to relief." Piotrowski v. City of Houston, 51 F.3d 512, 514 (5th Cir. 1995) (quoting Leffall v. Dallas Indep. Sch. Dist., 28 F.3d 521, 524 (5th Cir. 1994)). When considering a motion to dismiss for failure to state a claim, the district court must take the factual allegations of the complaint as true and resolve any ambiguities or doubts regarding the sufficiency of the claim in favor of the plaintiff. See Fernandez-Montes v. Allied Pilots Ass'n, 987 F.2d 278, 284 (5th Cir. 1993). However, conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to defeat a motion to dismiss. See id.
B. LMVA Claims
Defendant moves to dismiss plaintiff's claims under the LMVA for lack of standing. Defendant contends that the LMVA does not confer a private right of action to dealers or other private persons or entities. Defendant claims that the Louisiana Legislature granted enforcement authority in the LMVA only to the Louisiana Motor Vehicle Commission (LMVC).
In 1985, the Louisiana Legislature enacted the LMVA in order to provide automobile dealers with certain safeguards in their transactions with automobile manufacturers. The Act prohibits a manufacturer of motor vehicles from coercing dealers into any agreement, engaging in unfair practices with respect to dealers, and terminating dealerships "unfairly and without just cause." See La. R.S. 32:1254(N)(6)(b)-(c). The Act does not include a private right of action. The question for the Court is whether there is an implied private right under the statute. The Court finds that there is not.
The LMVA empowers only the LMVC to enforce the provisions of the Act. The Commission has the power to grant, deny, and revoke licenses for motor vehicle dealerships, to hold hearings, subpoena witnesses, impose civil penalties for violations of the Act, and order renewal or reinstatement of a dealer's franchise that a manufacturer has canceled without just cause. See La. R.S. 32:1254 1256. The Act also empowers the Commission to institute an injunctive action to enforce its provisions, and to enter cease and desist orders prohibiting conduct in violation of the Act. La. R.S. 32:1256(F)(I). Thus, the LMVA constitutes a comprehensive regulatory scheme that confers upon the Commission the power and authority to implement its purpose. The language of the Act does not contemplate private actions to enforce its provisions.
This legislative scheme is analogous to other Louisiana legislation under which courts have denied a private right of action. For example, in Billeaud v. Assoc. of Retarded Citizens of Evangeline, 569 So.2d 1020, 1024 (La.App. 3d Cir. 1990), the court dismissed plaintiff's claims under the Mental Retardation and Development Disability Law, La. R.S. 28:382, finding that the Department of Health and Human Resources is the only entity with the authority to enforce compliance with the Act. The Act empowered only the Department of Human Services to grant, deny, and revoke licenses to operate homes for the mentally disabled. Accordingly, the Court held that a private party did not have standing to challenge a defendant's facility as failing to comply with the Act.
Similarly, in Clausen v. Fidelity and Deposit Company of Maryland, 660 So.2d 83 (La.App. .1st Cir. 1995), the court found that the statutes empowering the Commissioner of Insurance to investigate allegations of unfair acts in the insurance business do not provide private causes of action. In Clausen, a bank customer sued a bank's insurer claiming that defendant's conduct violated Section 22:1214 (14) of the Louisiana Insurance Code. In denying a private right of action, the court reasoned that the insurance statutes contained a detailed enforcement mechanism which empowered the Insurance Commissioner to investigate allegations of unfair methods of competition or unfair or deceptive acts in the insurance business, to hold hearings, to issue cease and desist orders, to assess monetary penalties for violations, and to suspend or revoke the licenses of violators. See Clausen, 660 So.2d at 86 ( citing La. R.S. 22:1212, 1216, 1217 and 1217.1); see also Jones v. Physicians Mutual Insurance Co., 2000 WL 1154615, *2 (E.D. La. Aug. 14, 2000). These powers parallel the LMVC's powers under the LMVA and, like the Court in Clausen, this Court finds that the grant of such broad regulatory and enforcement powers to a state agency forecloses a private right of action, absent language expressly granting one.
Further, the Louisiana legislature knows how to create a private right of action when it intends to do so. For example, in the Louisiana Unfair Trade Practices and Consumer Protection Law (LUTPCPL), the legislature explicitly provided a right of action for private individuals and entities, as well as for an administrative body. See La. R.S. 51:1407 (empowering Division of Consumer Protection and the attorney general to obtain court orders restraining or enjoining unfair trade practices); La. R.S. 51:1409 (granting private right to bring damage action for unfair or deceptive trade practices). The legislature could have included a similar provision in the LMVA, and it is instructive that it did not.
Plaintiff contends that several courts have allowed private actions under the LMVA to continue, so that the LMVA must envision a private right of action. In none of these cases, however, did the court confront the precise question of whether the Act authorizes private suits to enforce its provisions. Plaintiff cites Benton-Volvo-Metairie, Inc. v. Volvo Southwest, Inc., 479 F.2d 135 (5th Cir. 1973), in which the Fifth Circuit reversed a summary judgment in favor of an automobile manufacturer in a case that apparently involved the LMVA and a breach of contract claim. The Fifth Circuit vacated the judgment and remanded the case because the district court gave no reasons for granting summary judgment. The appellate court did not address the issue of whether plaintiff had standing to sue under the LMVA; nor did the district court on remand. Therefore, this case is of no precedential value on the standing issue. The same logic applies to the other cases that plaintiff cites as allowing a private right of action. See Ray Brandt Nissan, Inc. v. Gurvich, 726 So.2d 474 (La.App. 5th Cir. 1999); Aetna Casualty Surety Co. v. Lively-Culpepper Chevrolet Oldsmobile, Inc., 609 So.2d 1055 (La.App. 2d Cir. 1992). Further, in Westside-Marrero Jeep Eagle v. Chrysler Corp., No. 97-3012 (E.D. La. 1999), another section of this court directly addressed the issue and held that there is no private right of action under the LMVA. Given the lack of precedent or statutory language creating a private right of action and the enforcement scheme established in the statute, the Court concludes that plaintiff has no standing to sue under the LMVA.
C. ADDCA
1. Standing under the ADDCA
Defendant argues that plaintiff also lacks standing to sue under the ADDCA because plaintiff was not an "automobile dealer" at the time of the alleged coercion. Defendant argues that the only alleged coercive activities that plaintiff complains of occurred before the signing of the franchise agreement, thus the ADDCA does not apply.The ADDCA provides in pertinent part:
An automobile dealer may bring suit against any automobile manufacturer . . . and shall recover the damages by him sustained . . . by reason of the failure of said automobile manufacturer . . . to act in good faith in performing or complying with any of the terms or provisions of the franchise . . . . Provided, that in any such suit the manufacturer shall not be barred from asserting in defense of any such action the failure of the dealer to act in good faith.15 U.S.C. § 1222. Under the Act, an "automobile dealer" has a claim against an "automobile manufacturer" for the manufacturer's failure to act in good faith in performing or complying with the terms of the franchise. Section 1221(c) defines "automobile dealer" as:
. . . any person, partnership, corporation, association, or other form of business enterprise resident in the United States or in any Territory thereof or in the District of Columbia operating under the terms of a franchise and engaged in the sale or distribution of passenger cars, trucks, or station wagons.
Thus, an "automobile dealer" is one "operating under the terms of a franchise." Section 1221(b) defines "franchise" as: ". . . the written agreement or contract between any automobile manufacturer engaged in commerce and any automobile dealer which purports to fix the legal rights and liabilities of the parties to such agreement or contract."
The Court rejects defendant's contention that plaintiff challenges only preagreement conduct. Rather, plaintiff challenges Mazda's conduct after it entered the franchise agreement, claiming it was forced to renew the franchise and then to terminate the agreement. Accordingly, plaintiff has standing to assert these claims. As to plaintiff's complaints about Mazda's pre-franchise conduct, it is true that some courts have found that without a written franchise, there can be no claim or cause of action under the Act. See Stansifer v. Chrysler Motors Corp., 487 F.2d 59, 63 (9th Cir. 1973); see also Reliable Volkswagen Sales Service Co. v. World-Wide Automobile Corp., 216 F. Supp. 141, 144 (D.N.J. 1963) (finding a sine qua non to recovery is proof of a written contract which "purports to fix the legal rights and liabilities of the parties. . . ."); Lawrence Chrysler Plymouth, Inc. v. Chrysler Corp., 461 F.2d 608, 613 (7th Cir. 1972) (finding only a signatory to a written franchise agreement can be held accountable for performing or complying with it). It is also true that oral representations with respect to a franchise cannot supply the basis for a claim under the Act. See York Chrysler-Plymouth, Inc. v. Chrysler Credit Corp., 447 F.2d 786, 791 (5th Cir. 1971); Southern Rambler Sales, Inc. v. American Motors Corp., 375 F.2d 932, 934-5 (5th Cir. 1967).
However, some courts have found that if the parties enter into a valid franchise agreement after the alleged bad faith, the bad faith can be incorporated into the agreement. See e.g., Colonial Ford, Inc. v. Ford Motor Co., 592 F.2d 1126 (10th Cir. 1979). In Colonial, the court held that certain preconditions the manufacturer insisted upon before granting the franchise became part of the franchise for purposes of the Act. See Colonial, 592 F.2d at 1128. The Court finds this holding persuasive. Further, the cases defendant relies upon are distinguishable because they all involved instances when no written franchise agreement came to being. Accordingly, plaintiff has standing to sue under the ADDCA.
2. ADDCA Claims
Plaintiff claims that defendant violated the ADDCA by failing to act in good faith in its dealings with plaintiff. "Good faith" is defined under the Act as:
the duty of each party to any franchise, and all officers, employees, or agents thereof to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party: Provided, that recommendation, endorsement, exposition, persuasion, urging or argument shall not be deemed to constitute a lack of good faith.15 U.S.C. § 1221 (e). There is no question that the failure to exercise good faith within the meaning of the Act has a limited and restricted meaning; it is not to be construed liberally. See Milos v. Ford Motor Co., 317 F.2d 712 (3d Cir. 1963). The Act does not mean "good faith" in a hazy or general way; nor does it mean unfairness. The existence or nonexistence of "good faith" must be determined in the context of actual or threatened coercion or intimidation. Lawrence Chrysler-Plymouth, Inc. v. Chrysler Corp., 461 F.2d 608 (7th Cir. 1972); Salco Corp. v. General Motors Corp., 517 F.2d 567 (10th Cir. 1975); Overseas Motors, Inc. v. Import Motors Limited, 519 F.2d 119 (6th Cir. 1975); Rea v. Ford Motor Co., 497 F.2d 577 (3d Cir. 1974); McGeorge v. Leyland Motor Sales, Inc., 504 F.2d 52 (4th Cir. 1974); Autowest, Inc. v. Peugeot, Inc., 434 F.2d 556 (2d Cir. 1970).
In order to lack good faith, the manufacturer's actions must be unfair and inequitable in addition to being for the purpose of coercion and intimidation. Randy's Studebaker Sales, Inc. v. Nissan Motor Corp., 533 F.2d 510 (10th Cir. 1976). Coercion or intimidation must include a wrongful demand that will result in sanctions if not complied with, see Fray Chevrolet Sales, Inc. v. General Motors Corp., 536 F.2d 683 (6th Cir. 1976), and it is necessary to consider not only whether the manufacturer brought pressure to bear on the dealer, but also his reason for doing so. Rea v. Ford Motor Co., 497 F.2d at 585; Overseas Motors, Inc. v. Import Motors Limited, 519 F.2d at 124.
When a termination or nonrenewal of a franchise is involved, there must be a "causal connection" between the dealer's resistance to the coercive conduct and the termination or nonrenewal for there to be a lack of good faith under the Act. See Autowest, Inc. v. Peugeot, Inc., 434 F.2d at 561. The existence of coercion or intimidation depends upon the circumstances. However, unless the transactions between the parties involve coercion or intimidation, or threats of coercion or intimidation, the duty of good faith imposed by the Act does not prohibit a manufacturer's "recommendation, endorsement, exposition, persuasion, urging or argument normal in competitive commercial relationships." See House Report 2850, (1956 U.S. Code Cong. Admin. News at 4596). The Act also does not prohibit the manufacturer from terminating or refusing to renew the franchise of a dealer who is not providing the manufacturer with adequate representation. See id. Nor does the Act curtail the manufacturer's right to cancel or not to renew an inefficient or undesirable dealer's franchise. Id. at 4603.
Courts have found that a manufacturer's actions lacked good faith and violated the Act when, for example, the manufacturer tried to compel the dealer to accept an undesirable line of cars by withholding delivery of a highly successful line of cars. See McGeorge v. Leyland Motor Sales, Inc., 504 F.2d 52 (4th Cir. 1974). Similarly, courts have found a lack of good faith when the manufacturer threatened to cease shipping Ford cars, unless a separate corporation, in which the dealer was a principal stockholder, resigned its franchise as an Oldsmobile dealer in a neighboring town. See Rea v. Ford Motor Co., 497 F.2d 577 (3d Cir. 1974); see also Autowest, Inc. v. Peugeot, Inc., 434 F.2d 556 (2d Cir. 1970) (manufacturer terminated dealer because dealer resisted manufacturer's coercion to follow the suggested resale price); Randy's Studebaker Sales, Inc., v. Nissan Motor Corp., 533 F.2d 510 (manufacturer used nonrenewal weapon, as well as curtailment of car deliveries, to coerce dealer into retail price fixing); Shor-Line Rambler, Inc. v. American Motor Sales, 543 F.2d 601 (7th Cir. 1976) (manufacturer put unreasonable and unrealistic demands on dealer to build new facilities, increase credit, and make extensive personnel changes, then terminated dealership when it could not comply).
The Fifth Circuit has recognized that actual coercion, intimidation, or threats are essential elements of a cause of action under the ADDCA. See Maxfield v. American Motor Company, 637 F.2d 1033, 1038 (5th Cir. 1981); Southern Rambler Sales, Inc. v. American Motor Corp., 375 F.2d at 935. The Fifth Circuit has also found that arbitrary actions by the manufacturer, standing alone, do not rise to the level of coercion and intimidation set out in the narrow definition of good faith. See Hubbard Chevrolet Co. v. General Motors Corp., 873 F.2d 873, 875 (5th Cir. 1989); accord Gage v. General Motors Corp., 796 F.2d 345, 350 (10th Cir. 1986); Empire Volkswagen Inc. v. World-Wide Volkswagen Corp., 814 F.2d 90 (2d Cir. 1987) (dealer must demonstrate that manufacturer exercised coercion or intimidation or made threats against the dealer). Further, the Fifth Circuit requires more than coercion and subsequent termination for failure to submit, because a lesser standard would prevent the manufacturer from insisting upon reasonable contract conditions. Woodward v. General Motors Corp., 298 F.2d 121, 128 (5th Cir. 1962). A wrongful demand plus threats or coercion are required.
In order to succeed under the ADDCA, plaintiff must therefore allege more than just persuasion, obstinance, or even threats. Plaintiff must assert that defendant withheld something of value to get something defendant wrongfully demanded. This type of coercion requires more than merely requiring plaintiff to abide by the contract. Plaintiff had every right and several opportunities to convince defendant to alter the contract or waive its provisions to permit a dual dealership. But defendant had every right to deny these requests and to enforce the contract as written. This refusal does not amount to coercion or bad faith under the ADDCA definition. Although plaintiff uses the word "coercion" conclusorily, it has alleged no acts that amount to coercion. Therefore, the Court dismisses plaintiff's claims under the ADDCA for failure to state a claim upon which relief can be granted.
D. Louisiana Contract Law Claim
Plaintiff also claims that defendant breached the franchise agreement by acting in bad faith when defendant refused to allow plaintiff to operate as a dual dealership. The franchise authorized only an exclusive Mazda dealership. Plaintiff does not allege that there was any impediment to the formation of the contract. Therefore, the parties' obligations are governed by the terms of the written agreement.
Under Louisiana law, courts must enforce a contract to ratify the intent of the parties. See Domed Stadium Hotel, Inc. v. Holiday Inns, Inc., 732 F.2d 480, 484 (5th Cir. 1984) ( citing Acree v. Shell Oil Co., 548 F. Supp. 1150, 1153 (M.D. La. 1982). Courts must also ascertain the intent of a contract by referring to the words of the contract, as long as the words are explicit and clear. See id. (citing Maloney v. Oak Builders, Inc., 235 So.2d 386 (1970)). In addition, Louisiana recognizes an implied covenant of good faith and fair dealing in every contract. See Clark v. America's Favorite Chicken Co., 110 F.3d 295 (5th Cir. 1997); Brill v. Catfish Shaks of America, 727 F. Supp. 1035, 1039 (E.D. La. 1989); Bonanza Int'l, Inc. v. Restaurant Management Consultants, Inc., 625 F. Supp. 1431, 1445 (E.D. La. 1986). The Fifth Circuit has held that "[t]he implied obligation to execute a contract in good faith usually modifies the express terms of the contract and should not be used to override or contradict them." Clark, 110 F.3d at 297 (quoting Domed Stadium Hotel, 732 F.2d at 485).
The Clark court began its inquiry into an alleged breach of the implied covenant of good faith by examining the express terms of the contract. See Clark, 110 F.3d at 298. The court recognized that the contract expressly reserved certain rights to the defendant and that the plaintiff knew of this reservation of rights. The court then held that there could be no breach of good faith when defendant's challenged conduct fell within the express reservation of rights. See id.
Plaintiff's argument contradicts Clark's reasoning. Plaintiff argues that defendant breached the implied covenant of good faith when it refused to allow a dual dealership. However, plaintiff knew when it negotiated with Benson that it could not operate a Mazda franchise without Mazda's approval and that Mazda would have to agree to a dual distributorship before it could operate as such. Plaintiff decided at least twice to sign contracts with Mazda providing for an exclusive dealership. To find that plaintiff has stated a claim, the Court would have to override the express terms of its contracts with Mazda. Under Clark, one cannot be liable for exercising its legal rights under a contract. Furthermore, plaintiff fails to allege a lack of good faith because its complaint merely contains vague references to acts of "coercion." Therefore, the Court dismisses plaintiff's contract claims for failure to state a claim upon which relief can be granted.
III. Conclusion
For the foregoing reasons, the Court grants defendant's motion to dismiss the complaint under Rule 12(b)(6) of the Federal Rules of Civil Procedure.