University Motors v. GMC

Filed: February 17, 1999

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

Nos. 97-2612(L)
(CA-97-64-1)

University Motors Limited, etc.,

Plaintiff - Appellee,

versus

General Motors Corporation, etc.,
Defendant - Appellant.

O R D E R

The court amends its opinion filed January 13, 1999, as

follows:
On page 2, first paragraph of opinion, line 3 -- the sentence

is corrected to begin "University brought an action . . . ."

For the Court - By Direction

/s/ Patricia S. Connor
Clerk
UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNIVERSITY MOTORS LIMITED, a West
Virginia Corporation,
Plaintiff-Appellee,

v. No. 97-2612

GENERAL MOTORS CORPORATION, a
Delaware Corporation,
Defendant-Appellant.

UNIVERSITY MOTORS LIMITED, a West
Virginia Corporation,
Plaintiff-Appellee,

v. No. 98-1811

GENERAL MOTORS CORPORATION, a
Delaware Corporation,
Defendant-Appellant.

Appeals from the United States District Court
for the Northern District of West Virginia, at Clarksburg.
Irene M. Keeley, District Judge.
(CA-97-64-1)

Argued: December 3, 1998

Decided: January 13, 1999

Before WILKINSON, Chief Judge, MOTZ, Circuit Judge,
and WILLIAMS, United States District Judge for the
District of Maryland, sitting by designation.

_________________________________________________________________
Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: William Nathan Berkowitz, BINGHAM DANA, L.L.P.,
Boston, Massachusetts, for Appellant. Andrew G. Fusco, FUSCO &
NEWBRAUGH, L.C., Morgantown, West Virginia, for Appellee. ON
BRIEF: Daniel L. Goldberg, David Yamin, BINGHAM DANA,
L.L.P., Boston, Massachusetts; Lawrence S. Buonomo, GENERAL
MOTORS CORPORATION, Detroit, Michigan, for Appellant. Jef-
frey A. Ray, FUSCO & NEWBRAUGH, L.C., Morgantown, West
Virginia; Daniel E. Myers, MYERS, FOREHAND & FULLER, Tal-
lahassee, Florida, for Appellee.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

This diversity case arises out of an attempted termination by Gen-
eral Motors Corporation ("GM") of its franchise agreement with Uni-
versity Motors ("University"). University brought an action to enjoin
the termination under West Virginia's motor vehicle dealer franchise
statute, W.V. Code § 17A-6A-1, et seq. (1996). The district court con-
cluded that GM, as a matter of law, had failed to provide sufficient
notice and lacked good cause for its attempted termination. Accord-
ingly, the district court rendered final judgment in favor of University.
The court also awarded University attorney's fees and costs. GM
appeals from the district court's ruling on the merits and its award of
attorney's fees and costs. Finding no error, we affirm.

I.

University sells new and used automobiles in Morgantown, West
Virginia. In 1990, University obtained a GM franchise by entering

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into a five-year Dealer Agreement with GM. At that time, University
carried other vehicle lines including Toyota and Mercedes-Benz. GM
renewed the Dealer Agreement for another five-year term in 1995.

In January 1996, University was granted a Nissan franchise. Article
4.4.2 of the Dealer Sales and Service Agreement (the"Dealer Agree-
ment") between University and GM requires that University obtain
GM's approval prior to acquiring a new vehicle line. In a February
5, 1996 letter, GM refused to approve University's acquisition of the
Nissan Franchise. Despite GM's refusal, in August 1996, University
began selling Nissan vehicles.

On February 19, 1997, GM hand-delivered University a letter
informing University of its intent to terminate University's franchise
(the "Termination Letter"). In the Termination Letter, GM stated that
the reason for termination was the violation of Article 4.4.2 of the
Dealer Agreement. It further stated that "there were deficiencies
which were identified in your Net Working Capital, and both Sales
and Service performances." The letter explained that the termination
would be effective 90 days from the receipt thereof. On August 4,
1997, after discovery had begun in this matter, GM sent University
another letter, by certified mail, "intended to clarify the reasons for
termination."

On March 10, 1997, University filed suit in state court in West Vir-
ginia seeking preliminary and permanent injunctive relief to prevent
GM from terminating the Dealer Agreement. GM removed the action
to federal court and moved to consolidate the preliminary injunction
hearing with a trial on the merits. The court granted the motion to
consolidate and ordered GM not to terminate University's franchise
pending the outcome of the trial on the merits. Ultimately, the district
court found that GM had violated the provisions of West Virginia
Code § 17A-6A-1, et seq., and entered judgment in University's
favor.

II.

The district court ruled that GM's Termination Letter did not pro-
vide sufficient notice to terminate University's franchise. Specifically,
the court found that GM had hand-delivered its Termination Letter in

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violation of § 17A-6A-7, which requires a manufacturer or distributor
to send notice of termination by certified mail. Finding that the statute
lacked any provision authorizing supplemental notice, the court also
rejected GM's contention that its August 4 letter was sufficient to
cure this deficiency.

The district court also held that GM lacked good cause for its ter-
mination of University's franchise. Section 17A-6A-4(3) defines good
cause for a manufacturer or distributor's termination of a dealer when
that termination is based on poor performance related to sales or ser-
vice. It provides:

If the failure by the new motor vehicle dealer to comply
with a provision of the dealer agreement relates to the per-
formance of the new motor vehicle dealer in sales or ser-
vice, good cause shall exist for the purposes of a
termination, cancellation, nonrenewal or discontinuance
under subsection (1) of this section when the new motor
vehicle dealer failed to effectively carry out the performance
provisions of the dealer agreement if all of the following
have occurred:

(a) The new motor vehicle dealer was given writ-
ten notice by the manufacturer or distributor of the
failure;

(b) The notification stated that the notice of failure
of performance was provided pursuant to this arti-
cle;

(c) The new motor vehicle dealer was afforded a
reasonable opportunity to exert good faith efforts
to carry out the dealer agreement; and

(d) The failure continued for more than one hun-
dred eighty days after the date notification was
given pursuant to subdivision (a) of this subsec-
tion.

§ 17A-6A-4(3).

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The court found that these expanded notice requirements are impli-
cated when the manufacturer or distributor terminates a dealer's fran-
chise and a cause of the termination -- even if it is not the sole cause
-- relates to poor sales or service performance. The court noted that
the statute does not mention the words "sole" or "solely." Moreover,
it found that "use of the word `relates' in W.Va. Code §17A-6A-4(3)
suggests unambiguously that, if any part of the termination involves
sales or service, the manufacturer must comply with the more strin-
gent notice requirements of W.Va. Code §17A-6A-4(3) in order to
establish good cause."

In this case, the court found that GM had sought to terminate Uni-
versity's franchise, in part, because of University's poor sales and ser-
vice performance. Since GM's Termination Letter did not cite § 17A-
6A-4(3), as required by § 17A-6A-4(3)(b), and GM failed to afford
University a reasonable opportunity to cure the alleged defects or
allow 180 days to pass after its Termination Letter, as required by
§ 17A-6A-4(3)(c) and (d), the district court held that GM lacked good
cause.

The court also indicated its intention to award attorney's fees and
court costs to University as permitted by § 17A-6A-16(4).* The case
was submitted to the magistrate judge to determine the amount of
costs and attorney's fees; he recommended an award of costs in the
amount if $482.50 and attorney's fees in the amount of $53,955.22.
The district court adopted that recommendation on May 18, 1998.
_________________________________________________________________

* Section 17A-6A-16(4) provides that "a manufacturer or distributor
who violates this article shall be liable for all court costs and reasonable
attorneys' fees incurred by the dealer." GM argues that it has not "vio-
lated" the statute because § 17A-6A-4 prohibits a manufacturer or dis-
tributor from wrongfully terminating a dealer's franchise. GM contends
that since it had not actually succeeded in terminating University's fran-
chise, that it had not violated the statute and, therefore, the award of costs
and attorney's fees was inappropriate. We agree with the district court
that the most natural reading of the statute -- and the reading that effec-
tuates the legislative intent behind the statute -- permits the award of
costs and attorney's fees to the dealer when a manufacturer or distributor
fails to comply with statute's notice or good cause requirement.

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III.

Before us, GM reiterates contentions made to and rejected by the
district court. After carefully considering these contentions, as well as
the briefs, oral argument of counsel, record, and applicable law, we
conclude that the district court was correct. Accordingly, we affirm,
in all respects, on the basis of the district court's well-reasoned opin-
ions. See University Motors, Ltd. v. General Motors Corp., C.A. No.
1:97-CV-64 (October 21, 1997), University Motors, Ltd. v. General
Motors Corp., C.A. No. 1:97-CV-64 (May 18, 1998).

AFFIRMED

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