Crivelli v. General Motors Corp

Opinions of the United
2000 Decisions States Court of Appeals
for the Third Circuit

6-14-2000

Crivelli v. General Motors Corp
Precedential or Non-Precedential:

Docket 99-3133

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Filed June 14, 2000

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 99-3133

NICHOLAS CRIVELLI;
NICHOLAS CRIVELLI CHEVROLET, INC.;
NICHOLAS CRIVELLI AND ORLAND CRIVELLI,
t/d/b/a Crivelli Enterprises

v.

GENERAL MOTORS CORPORATION,
Appellant

On Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. No. 94-cv-01453)
District Judge: Honorable Donald E. Ziegler

Argued December 6, 1999

BEFORE: SLOVITER, ROTH and COWEN, Circuit Judges

(Filed June 14, 2000)

Evan M. Tager
Eileen Penner (Argued)
Thomas B. Colby
Mayer, Brown & Platt
Washington, DC 20006

James A. Mollica, Jr.
Mollica & Murray
Pittsburgh, PA 15211

Carol Lesnek-Cooper
Detroit, MI 48232

Attorneys for Appellant
 Diane W. Perer (Argued)
Swensen Perer & Kontos
Pittsburgh, PA 15222

J. Alan Johnson
Pittsburgh, PA 15219

Samuel J. Orr, III
Beaver, PA 15009

Attorneys for Appellees

OPINION OF THE COURT

SLOVITER, Circuit Judge.

I.

INTRODUCTION

The issue presented in this case is whether the exercise
by General Motors Corp. ("GM") of its contractual right of
first refusal violated S 818.9(b)(3) of the Pennsylvania Board
of Vehicles Act ("the Act"), which prohibits an automobile
manufacturer from unreasonably withholding its consent to
the sale of a new vehicle dealer's franchise to a qualified
buyer. Nicholas Crivelli and Nicholas Crivelli Chevrolet, Inc.
(collectively Crivelli), the prospective buyer of the
Oldsmobile-Cadillac dealership at issue, brought this action
contending that GM violated the Act and intentionally
interfered with Crivelli's contract to purchase the dealership
when GM exercised its right of first refusal for the
dealership, allegedly without any reasonable justification.
The issue is a question of first impression for this court.

II.

BACKGROUND

Paul Scheidmantel was the owner and operator of an
Oldsmobile-Cadillac automobile dealership in Beaver Falls,

2
Pennsylvania since 1987 pursuant to an agreement with
GM. That agreement required Scheidmantel to provide GM
with prior written notice of any proposed change or transfer
of the dealership, required GM's approval for such change,
and required GM to promptly consider the proposal, which
it could not "arbitrarily refuse to approve." See Dealer Sales
& Service Agreement, Art. 12.2. In addition to the provision
requiring GM's consent to any transfer of the dealership,
the agreement provided GM with a right of first refusal. The
only limitation was that GM could not exercise this right if
the proposed transfer was to a member of the dealer's
family or to a qualified member of the dealer's management.
See Dealer Sales & Service Agreement, Art. 12.3.5.

Scheidmantel ran into serious financial trouble and
decided in 1991 to sell the dealership. On October 2, 1991,
he entered into an agreement under which Floyd McElwain
would purchase Scheidmantel's GM dealership along with
the assets, subject to GM's approval. The McElwain family
owned and operated McElwain Chevrolet-Oldsmobile, Inc.,
in nearby Ellwood City, and the agreement with
Scheidmantel contemplated that the Scheidmantel
dealership would stay in Beaver Falls. Scheidmantel
informed the local GM zone office, in this case the
Oldsmobile Zone Office, of the proposed sale. The local GM
zone office has the responsibility of making the initial
recommendation with respect to any proposed change in
dealership. The local zone office forwards its
recommendation to GM's Retail Organization and
Development Department in Lansing, Michigan, where the
proposal and recommendation are considered and afinal
recommendation made to corporate headquarters. In this
case, Charles Fisher, the manager of the local zone office,
recommended to GM headquarters that it approve the
McElwain-Scheidmantel proposal.

Prior to receiving word from GM headquarters, McElwain
became concerned over whether Scheidmantel could satisfy
his creditors, and he rescinded the agreement but offered to
reinstate it if sufficient guarantees were created.
Scheidmantel, however, turned to Crivelli, who had
previously expressed interest in buying the dealership.
Crivelli and Scheidmantel entered into a buy-sell agreement

3
on November 20, 1991. The agreement was conditioned on
obtaining the approval of GM and relocation of the
dealership from Beaver Falls to the more modern facilities
in nearby Vanport, Pennsylvania that housed Nick Crivelli
Chevrolet, Inc.

After reviewing the Scheidmantel-Crivelli buy-sell
agreement, the local zone office manager was concerned
about the new proposed sale because of Crivelli's plan to
move the dealership from Beaver Falls, and advised
Scheidmantel on December 7, 1991 that he would oppose
the transfer for that reason. The local zone office, interested
in maintaining the dealership in Beaver Falls, encouraged
McElwain to reconsider purchasing it and promised that
GM would exercise its right of first refusal if McElwain
agreed to buy and run the Beaver Falls dealership.
Meanwhile, Crivelli, who had been advised of GM's desire
that the dealership stay in Beaver Falls, agreed not to move
it out of Beaver Falls. Crivelli mailed notification of its
concession to GM and to the local zone office on January
30, 1992 and January 31, 1992 respectively. By then, the
local zone office had already recommended GM exercise its
right of first refusal and GM formally advised Scheidmantel
and Crivelli of its intention to do so on February 6, 1992.

In an internal memorandum dated February 4, 1992,
David Hartner, the manager of GM's Retail Organization
and Development Department, explained to his supervisors
his reasons for exercising the right of first refusal as
follows:

It should be noted that the decision to exercise our
Right of First Refusal was based on the fact that the
proposed buyer, Nick Crivelli Chevrolet had planned to
relocate the Oldsmobile and Cadillac Dealership
Operation to a different community. That proposal was
totally unacceptable to Oldsmobile and Cadillac. They
have since modified their agreement wherein the buyer
would now plan to stay in Beaver Falls. However, we
feel that Floyd McElwain is a superior candidate for us
at this location and we plan to proceed with the Right
of First Refusal.

JA at 1789.

4
Before any sale was consummated, Scheidmantel's
creditors filed an involuntary bankruptcy petition on March
20, 1992, and the disposition of the dealership transferred
to the jurisdiction of the Bankruptcy Court. The
Bankruptcy Court entertained a number of bids for the
dealership, including a bid from Crivelli and McElwain. The
Bankruptcy Court approved the sale of the dealership to
McElwain, due in part to GM's approval of that
arrangement. Crivelli never appealed the Bankruptcy
Court's order that approved the sale of the dealership to
McElwain. McElwain opened McElwain's Oldsmobile/
Cadillac dealership at the Scheidmantel location in Beaver
Falls in May, 1992.

Crivelli filed suit against GM in the United States District
Court for violation of the Pennsylvania Board of Vehicles
Act and for tortious interference with a contract, alleging
GM unreasonably withheld its consent to the sale of the
dealership when it exercised its right of first refusal. During
the pretrial proceedings, GM filed a motion for summary
judgment contending, inter alia, that the Act did not
preclude its exercise of its right of first refusal. The District
Court denied the motion. After a lengthy trial, a jury
determined that GM violated S 818.9 of the Act and
similarly concluded that GM intentionally and improperly
interfered with the buy-sell agreement between Crivelli and
Scheidmantel. The jury awarded compensatory damages of
$3.5 million in expected lost profits. The District Court
denied GM's post trial motion and entered judgment for
Crivelli on the verdict.

GM appeals on four grounds. Its principal claim is that a
manufacturer's exercise of its right of first refusal does not
constitute an unreasonable withholding of consent under
S 818.9 of the Act nor does it constitute tortious
interference with a contact. In the alternative, GM contends
that whether a manufacturer's conduct is "unreasonable"
under the Act should be measured by a good-faith business
judgment standard and that the District Court erred in
refusing to grant GM's jury instruction to that effect; that
the District Court exceeded its discretion by cutting off
testimony of GM's most important witness; and that GM is
entitled to a new trial on damages as the award of $3.5
million is manifestly excessive.

5
We have jurisdiction of the appeal under 28 U.S.C.
S 1291. To the extent that the appeal raises legal issues,
our review is plenary.

III.

DISCUSSION

A.

The Pennsylvania Board of Vehicles Act

Crivelli relies principally on S 818.9 of the Pennsylvania
Board of Vehicles Act enacted in 1983 and amended in
1991 and 1996. Pa. Stat. Ann. tit. 63, S 818.9(b)(3) (1991)
(amended 1996). The 1991 version is controlling here.
Section 818.9 provides that a manufacturer cannot
unreasonably withhold its consent to the sale, transfer, or
exchange of a new vehicle dealer franchise. Crivelli argues
that S 818.9 governed GM's exercise of its right of first
refusal and that by exercising that right, GM violated the
Act by unreasonably withholding its consent to
Scheidmantel's transfer of the dealership to Crivelli. In
reply, GM argues that the absence of any reference to the
right of first refusal in the Act as it existed at the relevant
time, as well as the long-established practice of including
such rights in dealership agreements, shows that the
Pennsylvania legislature did not intend S 818.9 to restrict
the manufacturer's ability to exercise its contractual right
of first refusal. There is no reported decision from a
Pennsylvania court on the application of S 818.9 to a right
of first refusal nor have we or the parties found any helpful
legislative history as to the Act either before or after its
amendment in 1996, which added S 818.16 (titled
"Manufacturer right of first refusal").

A right of first refusal grants the holder (in this case the
manufacturer) the option to purchase the grantor's (here
the dealer) property on the terms and conditions of sale
contained in a bona fide offer by a third party to purchase
such property. See Black's Law Dictionary 1325 (6th ed.

6
1990). It has been recognized and given effect by this court,
see Schultze v. Chevron Oil Co., 579 F.2d 776 (3d Cir.
1978), and others, see, e.g., Prudential Real Estate
Affiliates, Inc. v. PPR Realty, Inc., 204 F.3d 867 (9th Cir.
2000) (applying California law); Pincus v. Pabst Brewing
Co., 893 F.2d 1544 (7th Cir. 1990) (applying Wisconsin
law).

The right of first refusal must be distinguished from a
consent requirement, which requires the dealer (or
franchisee) to obtain the written approval of the
manufacturer (or franchisor) prior to the sale of the
dealership. Both a right of first refusal and a consent
requirement provide a mechanism by which the franchisor
can control the selection of its franchisees, but a right of
first refusal is a less restrictive form of control, as it
requires that the franchisor match the terms offered for the
franchise by the third party. See Schultze, 579 F.2d at 780
(right protects franchisor "without placing a burden" on
franchisee by "creating two prospective purchasers for every
offer received by the owner").

In this case, the agreement between GM and
Scheidmantel contained both a provision requiring GM's
consent to a change in ownership or transfer of the
dealership1 and a provision giving GM a right of first refusal.2
_________________________________________________________________

1. Section 12.2 of the Agreement provided as follows:

12.2 Other Changes in Ownership or Management

If Dealer [Scheidmantel] proposes a change in Dealer Operator, a
change in ownership, or a transfer of the dealership business or
its
principal assets to any person conditioned upon Division's [GM]
entering into a dealer agreement with that person, Division will
consider Dealer's proposal and not arbitrarily refuse to approve
it,
subject to the following:

12.2.1 Dealer agrees to give Division prior wr itten notice of any
proposed change or transfer described above. Dealer understands
that if any such change is made prior to Division's approval of the
proposal, termination of this Agreement will be warranted and
Division will have no further obligation to consider Dealer's
proposal.

2. Section 12.3.1 of the Agreement provides as follows:

7
While GM agreed not to arbitrarily withhold its consent to
a proposed sale, it expressly retained the right offirst
refusal at its sole discretion, so long as it matched the
purchase price and met the other terms of a bonafide buy-
sell agreement between the dealer and a third party. It has
been Crivelli's argument that notwithstanding this provision
in the contract, GM's exercise of its right of first refusal was
subject to the "reasonableness" standard ofS 818.9(b)(3) of
the Act.

The language of the 1991 version of S 818.9, largely
unchanged from the original 1983 version, provides in part
that it shall be a violation of the Act for any manufacturer
to "[u]nreasonably withhold consent to the sale, transfer or
exchange of the franchise to a qualified buyer capable of
being licensed as a new vehicle dealer in this
Commonwealth." Pa. Stat. Ann. tit. 63, S 818.9(b)(3) (1991)
(amended in 1996). The statute was amended in 1996 and
this provision, in essentially the same language, was
renumbered as S 818.12(b)(3). In order to minimize
confusion, we will continue to refer to the section as
S 818.9.

The Pennsylvania statute is one of many enacted in
various states regulating some aspects of the relationship
between motor vehicle manufacturers and their franchised
dealers. The provisions of the statutes vary, as do the
judicial decisions interpreting them. Their underlying goal,
similar to that which motivated the state statutes
regulating the franchise relationship generally, is to protect
the franchisee who has invested substantial capital in the
franchise and who is therefore vulnerable to a
manufacturer who may take advantage of this firm-specific
_________________________________________________________________

If Dealer submits a proposal for a change of ownership . . .,
Division
will have a right of first refusal to purchase the dealership
assets
regardless of whether the proposed buyer is qualified to be a
dealer.
If Division chooses to exercise this right, it will do so in its
written
response to Dealer's proposal. Division will have a reasonable
opportunity to inspect the assets, including real estate, before
making its decision.

Dealer Sales & Service Agreement, Art. 12.3.1.

8
investment. As the New Jersey Supreme Court explained in
Dunkin' Donuts of America, Inc. v. Middletown Donut Corp.,
495 A.2d 66, 71 (N.J. 1985), originally a franchise
relationship was treated as a common law contractual
relationship, and franchise agreements favored the interests
of franchisors, particularly with respect to termination.
"The effects of termination were starkly simple -the
franchisee would be ousted from the franchise, essentially
forfeiting his investment. . ." Id. This court has similarly
remarked, noting "[t]he franchisee's often substantial
specific investment thus creates an opportunity for post-
contract opportunistic behavior by the franchisor." New
Jersey Am., Inc. v. Allied Corp., 875 F.2d 58, 62 (3d Cir.
1989); see also Morley-Murphy Co. v. Zenith Elecs. Corp.,
142 F.3d 373, 374 (7th Cir. 1998) ("Dealers invest in a
great deal of firm-specific, or brand-specific, capital, in the
goods that they carry, and many states have concluded that
this leaves the dealers vulnerable to opportunistic
manufacturer behavior . . . .").

Over time, state legislators, recognizing the
dissatisfaction with the common-law scheme, "became
increasingly sensitive to the plight of franchisees who had
devoted considerable time and money towards building a
business only to be terminated at the whim of the
franchisor." Dunkin Donuts, 495 A.2d at 71. As a result,
many states passed statutes that limited cancellation and
nonrenewal of a franchise for other than good cause. Id. In
light of the extensive investment required for an automobile
dealership, it is not surprising that the Pennsylvania
legislature followed the national trend and in 1983 enacted
the Pennsylvania Board of Vehicles Act. Unlike many other
states, Pennsylvania does not have a statute generally
applicable to the franchise relationship. Thus, while
opinions of other state courts interpreting their statutes
may be informative, we must at all times seek to interpret
the Pennsylvania Board of Vehicles Act in accordance with
that state's intent, insofar as we can ascertain it.

The Act (using section numbers in effect in 1991)
establishes the requirements that govern both the
continuing relationship between the motor vehicle
manufacturer and the dealer, see, e.g., Pa. Stat. Ann. tit.

9
63, S 818.9, and the ability of the manufacturer to
unilaterally terminate the franchise or to object to the sale
of the franchise, see Pa. Stat. Ann. tit. 63S 818.9(c). Among
the provisions that protect the dealer from opportunistic
behavior by the manufacturer is S 818.18, which restricts a
manufacturer's ability to approve a dealer entering into an
existing dealer's market area, and S 818.9(c), which
precludes a manufacturer from terminating a franchise
except for "just provocation." Moreover, the manufacturer
cannot lock a dealer into an unprofitable arrangement by
unreasonably withholding its consent to the dealer's sale,
transfer or exchange of the franchise to a qualified buyer
who can be licensed as a new vehicle dealer. Pa. Stat. Ann.
tit. 63 S 818.9(b)(3) (1991).

For purposes of considering the interaction between
S 818.9(b)(3) and the manufacturer's contractual right of
first refusal, it is significant that until its amendment in
1996, the Board of Vehicles Act contained no reference at
all to the right of first refusal. In light of Pennsylvania's
prior recognition of a right of first refusal, see, e.g., Steuart
v. McChesney, 444 A.2d 659 (Pa. 1982); Warden v. Taylor,
333 A.2d 922 (Pa. 1975); L.E. Wallach, Inc. v. Toll, 113 A.2d
258 (Pa. 1955), there is little reason to believe that the
Pennsylvania legislature intended the Act to effect a marked
change in prior law.

It would not have been unreasonable for the legislature to
have decided to maintain the status quo in that connection.
In the first place, there are legitimate reasons why a
manufacturer would exercise its right of first refusal. That
right may protect the manufacturer from being forced into
a business relationship with a franchisee who it believes
may not represent it in the manner it desires, may not
expend sufficient effort to promote its products, and may
not have the loyalty to it and its business that it believes
necessary to be an integral part of its operation.

In the second place, a right of first refusal does not entail
the risks of post-contractual opportunistic behavior by the
manufacturer that the statutes regulating franchise
terminations were designated to prevent. See generally
Timothy J. Muris, Opportunistic Behavior and the Law of
Contracts, 65 Minn. L. Rev. 521 (1981). A dealer interested

10
in selling its operation is not significantly threatened by the
manufacturer's exercise of a right of first refusal, so long as
the dealer receives at least the same compensation as it
would have received from the prospective buyer. Unlike
termination or the manufacturer's refusal to consent to the
sale of the dealership, a right of first refusal does not
destroy the dealer's ability to recover its investment should
its relationship with the manufacturer turn sour, should it
encounter financial difficulties, or should it decide for
personal reasons to go elsewhere. In most instances, the
dealer would be largely indifferent to the identity of the new
owner.3

There have not been many decisions that consider the
effect of a right of first refusal in a somewhat comparable
situation. Of the reported opinions on the issue, wefind
ourselves most persuaded by the reasoning in Hand v.
Chrysler Corp., 30 F. Supp. 2d 667 (D. Vt. 1998). In that
case, Chrysler had a Sales and Service Agreement giving it
a right of first refusal in the event the dealer decided to sell.
It exercised its right of first refusal shortly after it was
notified the dealer had entered into an arrangement to sell
its assets to the Hands. Chrysler assigned that right to
Dorset Motor Co., the dealer consented to the assignment,
and the dealer thereafter sold its assets to Dorset. The
Hands filed suit against Chrysler alleging, inter alia, that
Chrysler's exercise of its right of first refusal was an
unreasonable withholding of consent that violated the
Vermont Dealers' Act.

The district court granted summary judgment for
Chrysler. The court held in the first instance that the
_________________________________________________________________

3. This may explain why cases that challenge the exercise of the right of
first refusal are generally brought by the disappointed prospective
purchaser, rather than the dealer. See, e.g., Blair v. General Motors
Corp., 838 F. Supp. 1196 (W.D. Ky. 1993). Although some courts have
dismissed such cases on lack of standing, see, e.g., Roberts v. General
Motors Corp., 643 A.2d 956 (N.H. 1994); Tynan v. General Motors Corp.,
591 A.2d 1024 (N.J. Super. Ct. App. Div.), cert. denied, 606 A.2d 362
(N.J. 1991), and rev'd in part not pertinent here, 604 A.2d 99 (N.J.
1992),
in interpreting the Pennsylvania Act, we held that prospective
purchasers have standing. See Big Apple BMW, Inc. v. BMW of N. Am.,
Inc., 974 F.2d 1358, 1383 (3d Cir. 1992).

11
Hands had not established their standing, but that even if
they had standing, Chrysler would still have been entitled
to judgment because its exercise of the right offirst refusal
did not violate the provisions of the Act. The court stated
that "Chrysler did not prevent [the dealer] from receiving
fair and reasonable compensation for the value of the
dealership. [The dealer] received the same price from Dorset
Motor Company that it would have received from [the
Hands]." Id. at 673. The similarity of the circumstances in
the Hand case and the present case is evident.

In language equally applicable here, the Hand court
stated:

Chrysler also properly exercised its right of first refusal
and had no obligation to honor the terms of the Asset
Purchase Agreement. The validity of that Agreement
was contingent on the approval of Chrysler. The Hands
assumed the risk and for whatever reason, the Hands
were not approved by Chrysler to obtain a sales and
service agreement. Consequently, any claims asserted
by the Hands that rely on the terms of the Agreement
are groundless.

Id.

We agree. Crivelli offers no explanation why the
Pennsylvania legislature would turn away from the common
law principle of freedom of contract and impose a
reasonableness standard on aspects of a private contract
between the manufacturer and dealer that, like the exercise
of a right of first refusal, presents little, if any, likelihood of
harm to the dealer.

Our conclusion that the Act did not limit a motor vehicle
manufacturer's exercise of its contractual right offirst
refusal is confirmed by the 1996 amendments to the Act. At
that time, the Pennsylvania legislature added S 818.16, a
new section titled "Manufacturer right of first refusal,"
which, for the first time, takes cognizance of a right of first
refusal. That section provides:

A manufacturer or distributor shall be permitted to
enact a right of first refusal to acquire the new vehicle
dealer's assets or ownership in the event of a proposed

12
 change of all or substantially all ownership or transfer
of all or substantially all dealership assets if all of the
following requirements are met . . . ."

Pa. Stat. Ann. tit. 63, S 818.16 (1996) (emphasis added).
There are four statutory prerequisites to the manufacturer's
exercise of the right of first refusal.

(1) . . . the manufacturer . . . must notify the d ealer in
writing within [60 or 75 days].

(2) . . . the dealer . . . [will] receiv[e] the same or greater
consideration as . . . contracted to receive in
connection with the proposed change of . . . ownership
. . . .

(3) The proposed change . . . does not involve . . . a
designated family member or members . . . of the
dealer . . . or . . . a qualified manager . . .[who are
protected should the dealer seek to transfer to them].4

(4) The manufacturer or distributor agrees to pay the
reasonable expenses, including reasonable attorney
fees . . . incurred by the proposed new owner and
transferee prior to the manufacturer's or distributor's
exercise of its right of first refusal in negotiating and
implementing the contract for the proposed change
. . . .

Title 63, S 818.16.

Crivelli argues that S 818.16 did not effect a repeal of
S 818.9 and should not be used in interpreting the meaning
of the prior provision. We share Crivelli's objection to
placing undue emphasis on the 1996 amendments when
interpreting the intent of the 1983 Pennsylvania legislature
that enacted S 818.9, see United States v. United Mine
Workers of Am., 330 U.S. 258, 282 (1947), and therefore
agree that the subsequent addition of S 818.16 cannot
provide controlling guidance in the interpretation of
S 818.9. However, having already concluded that nothing in
the Act as it stood at the time of the events required that
_________________________________________________________________

4. The right of first refusal in GM's agreement with Scheidmantel also
had incorporated terms similar to those in subsections (2) and (3) above,
later included in the amended statute.

13
the manufacturer provide a reasonable justification for its
decision to exercise its right of first refusal, we note that
the 1996 amendments reinforce that interpretation.

The 1996 amendments are instructive regarding the
scope of S 818.9(b)(3). Nothing in the language of S 818.16,
which defines the circumstances under which a
manufacturer may now exercise a right of first refusal,
suggests that any other provision of the Act may further
limit the ability of a manufacturer to exercise its right of
first refusal. To the contrary, a persuasive inference can be
drawn from the enactment of S 818.16(1) that the 1996
Pennsylvania legislature did not intend S 818.9(b)(3) to
govern rights of first refusal.

One of the subsections dealing with the manufacturer's
consent to a sale, S 818.9(b)(4), already required the
manufacturer to respond in writing to a request for its
consent to the sale of the franchise. However, S 818.16(1),
dealing with the right of first refusal, also requires the
manufacturer to notify the dealer in writing. That section
would have been duplicative if, as Crivelli contends, a right
of first refusal were considered a withholding of consent
under the Act. This evidences that the interpretation
Crivelli would have us adopt would conflict with the general
instruction in Pennsylvania's Statutory Construction Act of
1972 that "[e]very statute shall be construed, if possible, to
give effect to all its provisions." Pa. Stat. Ann. tit. 1,
S 1921(a). On the other hand, if, as GM contends, a right of
first refusal was not a withholding of consent, the
legislature could reasonably have believed that theS 818.16
amendment was necessary to establish the restrictions
governing a manufacturer's exercise of its right offirst
refusal.

Given the meaningful and clear dissimilarities between a
consent requirement and a right of first refusal, we
accordingly predict that the Pennsylvania Supreme Court
would hold that the exercise of a right of first refusal is not
a withholding of consent.5 Therefore GM was not required
_________________________________________________________________

5. The District Court referred to In re Headquarters Dodge, Inc., 13 F.3d
674 (3d Cir. 1994), a case that arose under the New Jersey Franchise

14
by S 818.9(b)(3) to justify its decision to the jury to enforce
its contractual right of first refusal. It follows that the
District Court erred as a matter of law in denying GM's
post-trial motion for judgment on the statutory count.

B.

Intentional Interference with a Contract

Because Crivelli's jury verdict and judgment were
premised on the Pennsylvania tort of intentional
interference with a contractual relation as well as the Board
of Vehicles Act, our decision that the statute cannot
support the judgment requires us to determine whether the
judgment can be sustained on the basis of the tort.

Under Pennsylvania law, the elements of a cause of
action for intentional interference with a contractual
relation, whether existing or prospective, are:

(1) the existence of a contractual, or prospective
contractual relation between the complainant and a
_________________________________________________________________

Practices Act (herein "FPA") not the Pennsylvania Act at issue here. The
FPA required a franchisor -- after receiving a proposal from a current
franchisee to transfer, assign, or sell a franchise to another person --
to
either approve the proposal or notify the franchisee of its decision to
disapprove, setting forth the "material reasons relating to the character,
financial ability or business experience of the proposed transferee." N.J.
Stat. Ann. S 56:10-6 (West 1989). GM exercised its contractual right of
first approval when a bankrupt GM dealer sought its consent to transfer
the dealership. The dealer and its proposed transferee filed suit against
GM, alleging it acted unreasonably or in bad faith because it changed its
reasons and the reasons given were not accurate. Relying on dictum in
Simmons v. General Motors Corp., 435 A.2d 1167, 1177 (N.J. Super. Ct.
App. Div. 1981), we held that the FPA "impose[s] a requirement of
reasonableness on a franchisor's decision to disapprove a transfer" and
accordingly reversed the grant of summary judgment as the plaintiffs
had presented a genuine issue of material fact as to the reasonableness
of GM's disapproval. Headquarters Dodge, 13 F.3d at 681. In light of the
different statutes at issue, however, that case does not support the
conclusion that the Pennsylvania Act imposes a requirement of
reasonableness on GM's decision to exercise its right of first refusal,
nor
has Crivelli so argued on appeal.

15
 third party; (2) purposeful action on the part of the
defendant, specifically intended to harm the existing
relation, or to prevent a prospective relation from
occurring; (3) the absence of privilege or justification on
the part of the defendant; and (4) the occasioning of
actual legal damage as a result of the defendant's
conduct.

Strickland v. University of Scranton, 700 A.2d 979, 985 (Pa.
Super. Ct. 1997) (citations omitted). Pennsylvania has
expressly adopted the Restatement (Second) of Torts, which
states that a necessary element of this tort is improper
conduct by the alleged tortfeasor, here GM. See Adler,
Barish, Daniels, Levin & Creskoff v. Epstein, 393 A.2d 1175,
1183 (Pa. 1978); Restatement (Second) of Torts SS 766-67.

The Restatement also sets forth the following factors to
consider when determining whether the interference is
improper:

(a) the nature of the actor's conduct, (b) the actor's
motive, (c) the interests of the other with which the
actor's conduct interferes, (d) the interests sought to be
advanced by the actor, (e) the social interests in
protecting the freedom of action of the actor and the
contractual interests of the other, (f) the proximity or
remoteness of the actor's conduct to the interference
and (g) the relations between the parties.

Restatement (Second) of Torts S 767.

The general issue is "whether, upon a consideration of
the relative significance of the factors involved, the conduct
should be permitted without liability, despite its effect of
harm to another." Adler, 393 A.2d at 1184 n.17 (quoting
Restatement (Second) of Torts S 767 cmt. b). According to
one of the Restatement's comments, the "nature of the
actor's conduct is a chief factor" in determining whether the
conduct is improper. Restatement (Second) of TortsS 767
cmt. c. It gives illustrative examples of improper conduct
actions, such as threats of physical violence, fraudulent
misrepresentations, threats of unmerited civil or criminal
litigation, economic pressure, and unlawful conduct. See id.
The conduct Crivelli attacks by its tort claim, GM's decision
to exercise its right of first refusal, is not comparable to any

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of those examples and, as we have just decided, violated no
statute, regulation, or governing judicial decision.

Although the Pennsylvania Supreme Court has not yet
addressed the circumstances presented in this case, other
courts have held that a company's exercise of a right of first
refusal cannot ordinarily give rise to a claim of intentional
interference with a contract. See Roberts, 643 A.2d at 960-
62; Tynan, 591 A.2d at 1034; cf. Noller v. GMC Truck &
Coach Div., General Motors Corp., 772 P.2d 271, 276-77
(Kan. 1989) (manufacturer who agreed with franchisee not
to withhold consent arbitrarily had no duty to prospective
purchaser who was merely an incidental beneficiary of the
agreement); Morse v. Ted Cadillac, Inc., 537 N.Y.S.2d 239,
240 (N.Y. App. Div. 1989) (manufacturer did not interfere
with prospective purchaser's contractual relations by
refusing to enter into franchise agreement).

Crivelli relies on our decision in Big Apple BMW, Inc. v.
BMW of North Am., Inc., 974 F.2d 1358, 1381-82 (3d Cir.
1992), that the withholding of consent pursuant to a
franchise agreement may constitute improper interference if
the action violated the Pennsylvania Board of Vehicles Act.
However, the franchisor in that case did not assert a
contractual right of first refusal whereas here GM asserted
a bona fide right of first refusal designed to protect its
interest in its franchise. Thus, GM's action falls within
Restatement S 773, which provides, "[o]ne who, by asserting
in good faith a legally protected interest of his own . . .
intentionally causes a third person not to perform an
existing contract or enter into a prospective contractual
relation with another does not interfere improperly with the
other's relation if the actor believes that his interest may
otherwise be impaired or destroyed by the performance of
the contract or transaction." Restatement (Second) of Torts
S 773.

While GM's exercise of its contractual right offirst refusal
necessarily interfered with the purchase agreement between
Crivelli and Scheidmantel, it does not subject GM to
liability for interfering with their contract. See Ruffing v. 84
Lumber Co., 600 A.2d 545, 548 (Pa. Super. Ct. 1991) ("[A]n
actor is privileged to interfere with another's performance of
a contract when: (1) the actor has a legally protected

17
interest; (2) he acts or threatens to act to protect the
interest; and (3) the threat is to protect it by proper
means.") (citing Gresh v. Potter McCune Co. , 344 A.2d 540,
542 (Pa. Super. Ct. 1975)).

Crivelli "concedes that any franchisor has an interest in
the identity of its franchisees . . . . [and] further concedes
that absent the statute, GM would be free to exercise its
right of first refusal . . . for any good faith reason it so
desired." Appellee's Br. at 47. The only basis on which
Crivelli defends its claim of intentional interference with a
contract is its argument that after the enactment of the
Board of Vehicles Act the "rules of the game" changed and
"GM no longer had a privilege to act in an unfettered
manner." Id. Because we have already decided that
S 818.9(b)(3) of the Act does not apply to GM's exercise of
its right of first refusal, we predict that the Pennsylvania
Supreme Court would conclude that, as a matter of law, the
exercise of a right of first refusal by GM did not constitute
an improper action within Pennsylvania's tort of intentional
interference with a contractual relationship. Accordingly,
Crivelli's tort claim should also have been dismissed.

IV.

CONCLUSION

Because of our holding that GM must prevail on Crivelli's
statutory claim and intentional interference with a contract
claim, we need not consider the various other issues GM
raised on appeal. For the reasons set forth, we will reverse
the District Court's denial of judgment to GM as a matter
of law and will direct it to enter judgment for the defendant
on both counts of the complaint. Each party to bear its own
costs.

A True Copy:
Teste:

Clerk of the United States Court of Appeals
for the Third Circuit

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