Opinions of the United
2005 Decisions States Court of Appeals
for the Third Circuit
12-21-2005
Cutrone v. DaimlerChrysler Mtr
Precedential or Non-Precedential: Non-Precedential
Docket No. 04-4259
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NOT PRECEDENTIAL
UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
No. 04-4259
WILLIAM J. CUTRONE, owner;
CHRYSLER PLYMOUTH WEST, INC.
t/d/b/a Chrysler Jeep West,
Appellants
v.
DAIMLER-CHRYSLER MOTORS COMPANY, LLC,
a Limited Liability Corporation
Appeal from the United States District Court
for the Western District of Pennsylvania
(D.C. Civil No. 03-cv-00861)
District Judge: Honorable Gary L. Lancaster
Argued December 15, 2005
Before: RENDELL, SMITH and VAN ANTWERPEN, Circuit Judges.
(Filed: December 21, 2005)
Michael J. Seymour [ARGUED]
Albert G. Feczko, Jr.
Feczko & Seymour
310 Grant Street
520 Grant Building
Pittsburgh, PA 15219
Counsel for Appellants
Christine L. Donohue
Klett, Rooney, Lieber & Schorling
One Oxford Centre
40th Floor
Pittsburgh, PA 15219
Robert D. Cultice [ARGUED]
Wilmer Cutler Pickering Hale & Dorr
60 State Street
Boston, MA 02109
Counsel for Appellee
OPINION OF THE COURT
RENDELL, Circuit Judge.
Chrysler Jeep West, a car dealership located in Coraopolis, Allegheny County,
Pennsylvania, and its owner, William Cutrone (together, “Chrysler Jeep West”), appeal
the District Court’s order dismissing their claims against DaimlerChrysler Motors Co.
(“DaimlerChrysler”). For the following reasons, we will affirm.
I.
Because we write only for the parties, we will state only the necessary facts.
Chrysler Jeep West and DaimlerChrysler’s predecessor corporation entered into a
franchise agreement in 1990 that entitled Chrysler Jeep West to purchase and resell
Chrysler and Plymouth vehicles. Sometime in the late 1990s, Chrysler Jeep West
purchased a nearby Jeep franchise for approximately $2,000,000.1 According to Chrysler
1
Chrysler Jeep West’s Second Amended Complaint does not specify when it purchased
the Jeep franchise. In its First Amended Complaint, Chrysler Jeep West stated that it
purchased the franchise in 1999. 1st Am. Compl. at ¶12.
2
Jeep West, DaimlerChrysler “pressured” it to purchase the franchise by announcing that
the Plymouth line of vehicles would be discontinued at the end of the 2001 model year.
DaimlerChrysler assured Chrysler Jeep West that purchasing the Jeep franchise would
replace its Plymouth business and “eliminate competition” from its market area. See 2d
Am. Compl. at ¶¶ 25-30, 54.
Throughout the 1990s, DaimlerChrysler maintained separate dealerships for its
Dodge and Chrysler vehicles. Under this policy, only Chrysler dealers could sell Jeep
vehicles, and no single dealer was permitted to sell Chrysler, Dodge and Jeep vehicles.
Chrysler Jeep West relied on this policy in purchasing the Jeep franchise. Sometime in
1999, however, DaimlerChrysler changed its policy to favor “fewer but larger, more
profitable dealerships.” It created new “Alpha Dealerships” that sold Dodge, Chrysler
and Jeep vehicles under the same roof. One such dealership, Mick’s Dodge-Chrysler-
Jeep, was located in Robinson Township, within ten miles of Chrysler Jeep West. Id. at
¶¶ 18-24.
Chrysler Jeep West complains that the creation of an Alpha Dealership within its
market area was “unfair and inequitable.” Id. at ¶ 24. It further contends that
DaimlerChrysler acted in bad faith when it pressured Chrysler Jeep West into purchasing
the Jeep franchise because it knew all along that it intended to establish a competing
Alpha Dealership nearby. See id. at ¶¶ 29, 52-55. Based on these facts, Chrysler Jeep
West advanced claims for relief under three separate legal theories, each expressed in a
3
separate count of its complaint: breach of contract, violation of the Automobile Dealer’s
Day in Court Act (“ADDCA”), 15 U.S.C. § 1221 et seq., and fraud. The District Court
gave Chrysler Jeep West two opportunities to amend its complaint, but ultimately
adopted the recommendation and report of a Magistrate Judge and granted
DaimlerChrysler’s motion to dismiss all three claims under Fed. R. Civ. P. 12(b)(6).
II.
We have jurisdiction to review the District Court’s final order of dismissal
pursuant to 28 U.S.C. § 1291. Our review of a dismissal under Federal Rule of Civil
Procedure 12(b)(6) is plenary. We accept all factual allegations in the complaint as true,
and must draw all reasonable inferences in favor of Chrysler Jeep West, the non-moving
party. “We may affirm a 12(b)(6) motion only if it is certain that no relief could be
granted to the non-movant on any set of facts which could be proven.” Gen. Motors
Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 325 (3d Cir. 2001).
III.
Chrysler Jeep West argues on appeal that the District Court dismissed each of its
three claims improperly. We have little difficulty affirming the dismissal of the second
claim, under the ADDCA, and the third, for fraud.
In order to sustain a claim under the ADDCA, a plaintiff must allege and prove a
breach of the manufacturer’s duty to act in “good faith,” 15 U.S.C. § 1222, which is
defined in terms of “coercion, intimidation, or threats of coercion or intimidation.” 15
4
U.S.C. § 1221(e). The statute explicitly provides that “recommendation, endorsement,
exposition, persuasion, urging or argument shall not be deemed to constitute a lack of
good faith.” Id. We have explained that “[t]he type of coercion or intimidation rendered
actionable under the ADDCA occurs only when the automobile manufacturer makes a
‘wrongful demand which will result in sanctions if not complied with.’” New A.C.
Chevrolet, 263 F.3d at 326 (quoting Buono Sales, Inc. v. Chrysler Motors Corp., 449
F.2d 715, 724 (3d Cir. 1971)). Chrysler Jeep West complains of DaimlerChrysler’s lack
of “good faith” and “pressure,” but fails to aver any coercion or intimidation or any
activity on the part of DaimlerChrysler that could rise to the level of such coercion or
intimidation under the statute and the relevant case law. Rather, the essence of Chrysler
Jeep West’s claim is unfairness, a far cry from the basis for a claim under the ADDCA.
Accordingly, we will not disturb the District Court’s dismissal of the second count.
Chrysler Jeep West’s fraud claim is similarly doomed, as the integration clause in
the parties’ 2000 franchise agreement prevents its assertion. The Magistrate Judge found
that the representations that form the basis for the fraud claim occurred sometime before
the parties entered into a new franchise agreement in 2000. Magistrate Judge’s Report
and Recommendation at 18 n.10. That agreement contains an integration clause that
specifically provides that the agreement and related documents “constitute the entire
agreement between the parties” and that “[n]o representations or statements, other than
those expressly set forth herein . . . are made or relied upon by any party hereto in
5
entering into this Agreement.” 2000 Franchise Agreement ¶ 6. Thus, as Chrysler Jeep
West acknowledged in its briefs and at oral argument, the only way that it could state a
claim for fraud would be to allege that the 2000 agreement or the integration clause
therein was procured through fraud. See HCB Contractors v. Liberty Place Hotel
Assocs., 652 A.2d 1278, 1279 (Pa. 1995); see also UAW-GM Human Res. Ctr. v. KSL
Recreation Corp., 579 N.W.2d 411, 419 (Mich. Ct. App. 1998).2 Because we conclude
that none of the allegations in Chrysler Jeep West’s Second Amended Complaint could
plausibly be construed to allege fraud relating to the integration clause or the 2000
franchise agreement, we will affirm the District Court’s dismissal of Chrysler Jeep West’s
fraud claim.
The breach of contract claim presents a somewhat closer question, made more
difficult by Chrysler Jeep West’s pleading and the relevant case law.
Chrysler Jeep West listed six ways in which DaimlerChrysler breached the
franchise agreement in its complaint.3 However, none is tied to a specific right under the
2
The Magistrate Judge cited cases from both Michigan and Pennsylvania law in
discussing Chrysler Jeep West’s fraud claim. Because there does not appear to be any
conflict between the states’ laws on this issue, and because the parties have not contested
the Magistrate Judge’s application of cases from both states, we need not decide which
state’s law applies and adopt the Magistrate Judge’s practice of citing both here.
3
Those six ways are: (1) establishing an Alpha Dealership to compete with Chrysler
Jeep West in its relevant market area and designated sales locality; (2) “circumventing”
the approval process for “new” competing dealers required under Pennsylvania law; (3)
increasing incentive allowances for vehicles sold by Chrysler Jeep West; (4) mailing
advertisements for Mick’s Dodge-Chrysler-Jeep to existing Chrysler Jeep West
customers; (5) unilaterally changing the “operating rules, policies, course of dealing and
6
agreement. The essence of Chrysler Jeep West’s argument is lack of good faith, but a
duty of good faith arises only in connection with specific contractual obligations. See
Ulrich v. Fed. Land Bank of St. Paul, 480 N.W.2d 910, 911 (Mich. Ct. App. 1992).
Chrysler Jeep West’s briefing and oral argument focused on the “Sales Locality” section
of the franchise agreement, in which Chrysler Jeep West is afforded a “non-exclusive
right” to sell Chrysler products in its designated area, called its “Sales Locality.” The
definition of “Sales Locality” explicitly provides that the area “may be shared with other .
. . dealers . . . as [DaimlerChrysler] determines to be appropriate.” 2000 Franchise
Agreement ¶ 4. Although it never referred to this language or provision in its complaint,
Chrysler Jeep West now asserts that the “Sales Locality” provision implicates the duty of
good faith that forms the basis for its breach of contract claim.
Unfortunately, Michigan law, which clearly governs,4 is not a model of clarity.
And while we have had occasion to construe Michigan’s law of the implied duty of good
faith, see New A.C. Chevrolet, 263 F.3d at 333-36, we have done so in a very different
trade usages” on which the franchise agreements were based; and (6) pressuring Chrysler
Jeep West to purchase a Jeep franchise when it knew that a competing dealership was
likely to be established nearby. 2d Am. Compl. at ¶ 36.
4
The 2000 franchise agreement contains a choice of law provision that states that the
agreement “shall be construed in accordance with the laws of the State of Michigan.”
2000 Franchise Agreement at ¶ 42. See Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S.
487, 496 (1941) (holding that federal courts sitting in diversity should apply the conflict
of law rules of the forum state); Churchill Corp. v. Third Century, Inc., 578 A.2d 532,
537 (Pa. Super. Ct. 1990) (“Pennsylvania courts will uphold choice-of-law provisions in
contracts to the extent that the transaction bears a reasonable relation to the chosen
forum.”).
7
context.
In Burkhardt v. City National Bank of Detroit, 226 N.W.2d 678 (Mich. Ct. App.
1975), the plaintiffs complained that the accounting method that a mortgage company was
using to calculate the amounts that they were required to pay into escrow for insurance
and taxes on their property was not contemplated by the parties’ agreement. Id. at 679.
The Michigan Court of Appeals noted that “[t]he mortgage agreement reposes in
defendant bank a considerable amount of discretion” in calculating the escrow amounts,
and held that the bank was required to exercise such discretion in good faith. The court
there stated that “[w]here a party to a contract makes the manner of its performance a
matter of its own discretion, the law does not hesitate to imply the proviso that such
discretion be exercised honestly and in good faith.” Id. at 680. And in General Motors
Corp. v. New A.C. Chevrolet, we held that a car manufacturer was required to exercise
good faith in establishing additional dealers within a dealer’s “Area of Primary
Responsibility” based on a provision of the dealer agreement that spelled out the
manufacturer’s obligations in that regard.5 263 F.3d at 334-36.
5
This provision, which was captioned “Establishment of Additional Dealers,” read as
follows:
[GM] reserves the right to appoint additional dealers but [GM] will not
exercise this right without first analyzing dealer network planning
considerations.
Prior to establishing an additional dealer within Dealer’s Area of Primary
Responsibility, [GM] will advise Dealer in writing and give Dealer thirty days
to present relevant information before [GM] makes a final decision. [GM] will
advise dealer of the final decision, which will be made solely by [GM]
8
In each such situation, the clauses relied upon pertained to the performance of a
contract obligation. Here, by contrast, we have a straightforward understanding that
Chrysler Jeep West’s right vis a vis the “Sales Locality” is “non-exclusive” and that
sharing would potentially occur. We do not read the inclusion of the concept that
DaimlerChrysler would allow sharing as “appropriate” to introduce a duty of good faith,
for “‘Michigan law does not imply the good faith covenant where parties have
unmistakably expressed their respective rights.’” Hubbard Chevrolet Co. v. Gen. Motors
Corp., 873 F.2d 873, 877 (5th Cir. 1989), quoted in New A.C. Chevrolet, 263 F.3d at 333-
34. To impose a duty of good faith on DaimlerChrysler in this case would be to
contradict the non-exclusive character of the right afforded Chrysler Jeep West in the
agreement.
Although we acknowledge that the franchise agreement does not detail many
rights available or reserved to Chrysler Jeep West, we will not rewrite it or interpret it in a
way that is contrary to the bargain struck by the parties. We therefore agree with the
District Court that Chrysler Jeep West has failed to state a breach of contract claim upon
which relief can be granted.
pursuant to its business judgment . . . .
Neither the appointment of a dealer at or within three miles of a former
dealership location as a replacement for the former dealer nor the relocation
of an existing dealer will be considered the establishment of an additional
Dealer for purposes of this [section]. Such events are within the sole
discretion of [GM], pursuant to its business judgment.
New. A.C. Chevrolet, 263 F.3d at 334.
9
IV.
We will affirm the order of the District Court.
10