[PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT FILED
________________________ U.S. COURT OF APPEALS
ELEVENTH CIRCUIT
No. 06-14306 JANUARY 6, 2009
________________________ THOMAS K. KAHN
CLERK
D.C. Docket No. 05-01510-CV-5-CLS
EDWIN L. EDWARDS, individually,
ELL 12, LLC, d/b/a Huntsville Kia,
Plaintiffs-Appellants,
versus
KIA MOTORS OF AMERICA, INC.,
Defendant-Appellee.
________________________
Appeal from the United States District Court
for the Northern District of Alabama
_________________________
(January 6, 2009)
Before HULL and MARCUS, Circuit Judges, and BARZILAY,* Judge.
BARZILAY, Judge:
The issue in this case concerns the application of the Alabama Motor
*
Honorable Judith M. Barzilay, Judge, United States Court of International Trade, sitting
by designation.
Vehicle Franchise Act (“Franchise Act” or “the Act”) to a retrospective mutual
release agreement (the “Release”)1 between Appellants Edwin Edwards and ELL
12,2 and Appellee Kia Motors America, Inc. (“KMA”). See Ala. Code § 8-20-11.
Unable to determine whether the relevant provisions of the Franchise Act did in
fact operate to prohibit enforcement of the Release, the court certified a question
to the Alabama Supreme Court to clarify the state law at issue. Edwards v. Kia
Motors of America, Inc., 486 F.3d 1229 (11th Cir. 2007) (“Edwards II”). In light
of the Alabama Supreme Court’s clarified view of the Franchise Act, the court
affirms the holdings of the district court in full for the following reasons.
I. Background
Notwithstanding the terms of the Release between the parties,3 Appellants
1
For purposes of this opinion, a “retrospective release” is a legal instrument that
relinquishes all then existing viable claims that a franchisee automobile dealer may bring against
the franchisor manufacturer and is executed for a specific known purpose.
2
ELL 12 is a limited liability company.
3
In relevant part, the Release provides:
DEALER, DEALER OWNER(S) and KMA do, . . . release, acquit and forever
discharge one another of and from all claims which have arisen or may ever arise,
demands and causes of action arising from, related to, or in any manner connected
with the sale and service of Kia Products, including, without limitation, the Dealer
Agreement, and from any and all claims for damages, related to or in any manner
connected with the Dealer Agreement or the parties’ business relationship.
....
[I]t is understood and agreed that this agreement includes all claims of every
nature in kind whatsoever, known or unknown, suspected or unsuspected, arising
out of, in connection with, in consequence of, in any way involving, or related to,
2
commenced this action against KMA in the United States District Court for the
Northern District of Alabama. See Edwards v. Kia Motors America, Inc., No.
CV-05-S-1510-NE, 2006 WL 4738660 (N.D. Ala. May 18, 2006) (“Edwards I”).
Appellants sought money damages and equitable relief for (1) violations of the
Franchise Act4 and (2) common law claims of fraud, fraudulent suppression of
material facts, breach of covenant of good faith and fair dealing, negligence and
wantonness, and negligent and wanton supervision. In the alternative, Appellants
argued that the Release was voidable because it was executed under economic
duress. KMA moved for partial summary judgment, averring that Appellants’
claims were barred by the Release. The district court entered summary judgment
in favor of KMA, and Appellants appealed.
In Edwards II, the court’s inquiry focused on “whether the Franchise Act
permits an automobile dealer to bring a claim under the Act, despite the fact that
both parties [had] already executed a mutual release agreement in which the dealer
the Dealer Agreement or the business relationship between or among DEALER,
DEALER OWNER(S) and KMA from the beginning of the world through and
including the date of the Closing.
Edwards II, 486 F.3d at 1232 n.5 (citing Evidentiary Submission Filed In Support of Def. KIA
Motors Am., Inc.’s Mot. For Partial Summary J. Ex. 7 at 1-2).
4
Appellants claim violations of Ala. Code §§ 8-20-4(1)(d), (3)(a) & (u) and 8-20-7(a),
(b), (d).
3
relinquished all existing legal claims against the manufacturer in exchange for
valid consideration.” 486 F.3d at 1233. After a thorough review of the record and
oral argument, the court was unable to determine whether § 8-20-11 of the
Franchise Act prohibited the enforcement of the Release. See id. at 1233-35.
Accordingly, the court affirmed the district court in part and certified a question to
the Alabama Supreme Court.5 See id. at 1238. Specifically, the court (1) certified
to the Alabama Supreme Court the issue of whether a retrospective release is
effective under the Franchise Act, (2) affirmed the district court’s finding that
Appellants failed to satisfy the first and third prongs of its claim of economic
duress, and (3) affirmed the district court’s determination – subject to the Alabama
Supreme Court’s interpretation of the Franchise Act – that Appellants’ common
law claims do not fit within the limited exceptions contained in the release at
issue. See id. at 1235, 1237-38.
II. Jurisdiction & Standard of Review
This Court has jurisdiction over appeals from the United States District
Court for the Northern District of Alabama pursuant to 28 U.S.C. § 1291. In this
5
“[S]ubstantial doubt about a question of state law upon which a particular case turns
should be resolved by certifying the question to the state supreme court.” Jackson-Shaw Co. v.
Jacksonville Aviation Auth., 508 F.3d 653, 654 n.2 (11th Cir. 2007) (citations & quotations
omitted).
4
circuit, “a state supreme court’s answer to certified questions is conclusive on the
issue certified.” Nat’l R.R. Passenger Corp. (Amtrak) v. Rountree Transp. and
Rigging, Inc., 422 F.3d 1275, 1282 (11th Cir. 2005) (citations & quotations
omitted). Indeed, “upon receiving an answer to a certified question, [the Eleventh
Circuit] does not second-guess a State’s application of its own law.” Id. (citations
& quotations omitted). The presumption that the Eleventh Circuit should apply
the state law at issue is particularly strong where “private parties have entered
legal relationships with the expectation that their rights and obligations would be
governed by state-law standards.” See In re Prudential of Florida Leasing, Inc.,
478 F.3d 1291, 1298 (11th Cir. 2007) (citation & quotations omitted).
III. Discussion
A. The Alabama Supreme Court’s Interpretation of the Franchise Act
Pursuant to Rule 18 of the Alabama Rules of Appellate Procedure, the court
certified the following question to the Alabama Supreme Court:
[W]hether the Franchise Act permits an automobile dealer
to bring a claim under the Act, despite the fact that both
parties [had] already executed a mutual release agreement
in which the dealer relinquished all existing legal claims
against the manufacturer in exchange for valid
consideration.
5
Edwards v. Kia Motors of America, Inc., No. 1061167, 2008 WL 2068088, at *1
(Ala. May 16, 2008) (“Edwards III”); See Ala. R. App. P. 18.6 After reviewing the
certified question and the parties’ respective arguments, the Alabama Supreme
Court determined that the dispositive issue was “whether the legislature intended §
8-20-11 to apply so broadly as to preclude parties subject to the Franchise Act
from reaching any form of binding agreement by which then existing, ripe claims
could be mutually settled without resort to a judicial determination of the claim.”
Edwards III, 2008 WL 2068088, at *2 (footnote omitted). Section 8-20-11
provides as follows:
Notwithstanding the terms, provisions, or conditions of any dealer
agreement or franchise or the terms or provisions of any waiver, and
notwithstanding any other legal remedies available, any person who is
injured in his business or property by a violation of this chapter by the
commission of any unfair and deceptive trade practices, or because he
refuses to accede to a proposal for an agreement which, if consummated,
would be in violation of this chapter, may bring a civil action in a court
of competent jurisdiction in this state to enjoin further violations, to
recover the damages sustained by him together with the costs of the suit,
including a reasonable attorney’s fee.
§ 8-20-11 (emphasis added). The Alabama Supreme Court ultimately answered
the certified question in the negative, holding that while § 8-20-11 “protects both
6
The Alabama Supreme Court denied a request for oral argument on the certified
question on May 15, 2008, and also denied an application for rehearing on October 24, 2008.
See Ala. R. App. P. 34(a), 40(a). Accordingly, the Alabama Supreme Court’s judgment on the
question from this court was certified on October 24, 2008. See Ala. R. App. P. 41.
6
parties by prohibiting either from exempting its conduct from the requirements of
the Franchise Act,” it “does not . . . render unenforceable the settlement and
release of existing claims.” Edwards III, 2008 WL 2068088, at *5 (emphasis
added).
In so concluding, the Alabama Supreme Court looked to the plain language
of the statute. Noting that the relevant terms “waiver” and “release” are not
defined by the Franchise Act,7 the Alabama Supreme Court relied on the
legislative intent of the Act, which is to “protect the state’s citizens from abuses by
motor vehicle manufacturers and dealers, and, to that end, to regulate
manufactures and dealers and the dealings between manufacturers and their
dealers.” Id. at *3 (citation & quotations omitted). That court further
acknowledged that the “purpose of the Franchise Act is to give balance to the
inequality of bargaining power between individual dealers and their
manufacturers.” Id. (citation & quotations omitted). However, notwithstanding
the purpose of the Act, the Alabama Supreme Court stated that there is “no
indication of a legislative intent to prohibit the parties to an automobile-dealership
7
The Alabama Supreme Court noted that while the terms are not defined by the Franchise
Act, “it is a well-settled principle of Alabama law that a waiver is generally defined as the
intentional relinquishment of a known right.” Id. at *3 n.5 (citations & quotations omitted).
Further, that court recognized that under Alabama law “a release is a contract and must be
supported by a lawful and valuable consideration; and, if not supported by a lawful consideration,
is nudum pactum.” Id. at *3 n.6 (citations & quotations omitted).
7
franchise agreement from reaching a good-faith settlement of existing claims after
those claims arise and entering into a binding settlement agreement.” Id. That is,
a retrospective mutual release agreement is enforceable and not prohibited by the
Franchise Act so long as (1) it is made in good faith by the parties thereto, and (2)
concerns claims then existing at the time of the agreement’s inception. See id.
Moreover, reading the Franchise Act as a whole, the Alabama Supreme
Court stated that “there is no indication that § 8-20-11 does or was intended to
prohibit the settlement of known claims as an alternative to taking them to trial
and ultimately to judgment. If the legislature had wished to include the settlement
and release of known claims in the language of § 8-20-11, it knew how to do so.”
Id. The Alabama Supreme Court also noted that while the legislature listed
prospective releases and waivers in describing particular unfair trade practices
under the Franchise Act, it did not similarly state that a retrospective release is an
“unfair trade practice or include such a release in its list of ineffective provisions
in § 8-20-11.” Id. at *4. In other words, that the Franchise Act proscribes
prospective releases and waivers does not mean that retrospective releases and
waivers are similarly prohibited by that Act. Thus, the Alabama Supreme Court
concluded that “[h]ad the legislature meant to require the litigation of every
disagreement between a manufacturer and a dealer, it could have said so.” Id.
8
B. The Effect of the Alabama Supreme Court’s Interpretation of the
Franchise Act in Edwards III on the Court’s Holdings in Edwards II
In light of the Alabama Supreme Court’s interpretation and clarification of
the relevant provision of the Franchise Act, the issues here are (1) whether a
retrospective release lies beyond the purview of the Franchise Act, and (2)
whether Appellants’ common law claims continue not to fit within the limited
exceptions contained in the Release.8 The court answers both questions in the
affirmative and, therefore, upholds the rulings of the United States District Court
for the Northern District of Alabama.
1. Application of the Franchise Act to the Release
In Edwards II, the court held that no provision of the Franchise Act is
dispositive on the issue of “whether a good faith retrospective release is
enforceable or voidable.” 486 F.3d at 1235. The court noted that “§ 8-20-4(3)(m)
limits the application of the term ‘any waiver’ in § 8-20-11 to those situations
where a manufacturer has induced a potential franchisee dealer to waive or release
all future claims in the initial dealership agreement.”9 Id. at 1234 (emphasis
8
In Edwards II, the court affirmed the district court’s ruling to dismiss Appellants’ claim
of economic duress on grounds unrelated to the Release and, thus, that issue is not discussed
here. See 486 F.3d at 1235-37.
9
Section 8-20-4 states that:
9
added). However, the court recognized that, taken together, “§ 8-20-11, § 8-20-
4(3)(m), and the remedial purpose of the Franchise Act do not provide sufficient
guidance to determine whether the Release should bar Appellants’ claims against
KMA.”10 Id. at 1234-35. Moreover, the court found that “Alabama’s general
policy of enforcing release agreements pursuant to § 12-21-109 [of the Alabama
Code] does not supercede the terms of the Franchise Act’s specific legislative
Notwithstanding the terms, provisions, or conditions of any dealer agreement or
franchise or the terms or provisions of any waiver, prior to the termination,
cancellation, or nonrenewal of any dealer agreement or franchise, the following acts
or conduct shall constitute unfair and deceptive trade practices: . . . . (3) For any
manufacturer, factory branch, factory representative, distributor, or wholesaler,
distributor branch or distributor representative: . . . . (m) To prospectively assent to
a release, assignment, novation, waiver, or estoppel which would relieve any person
from any liability or obligation under this chapter or to require any controversy
between a new motor vehicle dealer and a manufacturer to be referred to any person
other than the duly constituted courts of this state or the United States, if the referral
would be binding on the new motor vehicle dealer.
§ 8-20-4 (emphasis added).
10
We stated in Edwards II that “the remedial purpose of the statute requires that its terms
be applied broadly.” 486 F.3d at 1234. Specifically, the court observed that the Alabama
legislature articulated the remedial nature of the statute as follows:
The legislature finds and declares that the distribution and sale of motor vehicles
within this state vitally affect the general economy of the state and the public interest
and the public welfare, and that in order to promote the public interest and the public
welfare, and in the exercise of its police power, it is necessary to regulate motor
vehicle manufacturers, distributors, dealers and their representatives and to regulate
the dealings between manufacturers and distributors or wholesalers and their dealers
in order to prevent fraud and other abuses upon the citizens of this state and to protect
and preserve the investments and properties of the citizens of this state.
Id. (quoting Ala. Code § 8-20-2).
10
mandate.” Id. at 1235. Accordingly, the court certified to the Alabama Supreme
Court the question of “whether the explicit prohibition of prospective releases
under § 8-20-4(3)(m) clearly implies that retrospective releases lie beyond the
purview of the Franchise Act.” Id.
As previously noted, the Alabama Supreme Court unequivocally found that
a retrospective release, such as the release agreement at issue here, is not
prohibited by the Franchise Act. Specifically, that court noted that the Franchise
Act “does not . . . render unenforceable the settlement and release of existing
claims.” Edwards III, 2008 WL 2068088, at *5. Any retrospective mutual release
agreement is enforceable under the Act as long as (1) it is made in good faith and
(2) concerns then existing legal claims between the parties. See id. at *3. Here,
the parties executed a mutual release agreement in which Appellants relinquished
all existing legal claims against KMA in exchange for valid consideration.
KMA’s consent to the sale of Appellants’ dealership in Huntsville, which was
required by the Kia Dealer Sales & Service Agreement,11 is the valid consideration
that makes the Release effective. See Edwards II, 486 F.3d at 1232. Therefore,
the court affirms the ruling of the district court because the Release is an
11
Appellants consented and entered into a Kia Dealer Sales & Service Agreement in
August 2002. See Edwards II, 486 F.3d at 1231.
11
enforceable agreement between the parties that is not proscribed by the Franchise
Act.
2. Dismissal of Common Law Claims
In Edwards II, the court held that Appellants’ common law claims of fraud,
breach of good faith and fair dealing, negligence and wantonness, and negligent
and wanton supervision do not fall within the limited exceptions to the Release.12
See id. at 1237-38. Specifically, the court found that “[t]he exceptions to the
Release are available only for what amounts to reimbursements for warranty
services rendered, parts, and incentive or rebate programs,” and do not provide for
claims involving tortious conduct such as Appellants’ common law claims here.
See id. at 1237. Moreover, the court noted that although the supporting evidence
for their common law claims involve the type of conduct excepted under the
Release, the legal grounds for relief remain in common law torts. See id.
12
In relevant part, the exceptions section of the Release provides that:
....
Notwithstanding anything herein to the contrary, DEALER, DEALER OWNER(S)
and KMA expressly agree that the mutual release shall not include or pertain to (a)
any credits due to DEALER for warranty claims submitted but not processed as of
the date hereof . . . and/or for warranty repairs performed by DEALER for which no
claim has yet been submitted by ELL 12 to KMA as of the date hereof . . . ; (b)
purchases made related to ELL 12's parts account with KMA up until the date of the
closing; (c) obligations between the parties arising out of incentive or rebate
programs.
....
Edwards II, 486 F.3d at 1237 n.9.
12
Therefore, the court affirmed the district court’s holding that Appellants’ claims
do not fit within the limited exceptions contained in the Release, subject to the
Alabama Supreme Court’s finding that the Release is a valid agreement under the
Franchise Act.
As we noted above, the Release is an enforceable agreement between the
parties and is not prohibited by the Act. Appellants and KMA agreed to a
retrospective mutual release agreement that was made in good faith and that
settled then existing legal claims between them. According to the Alabama
Supreme Court, such an agreement is enforceable and a binding settlement on the
parties thereto. Therefore, Appellants’ common law claims are dismissed and the
court affirms the district court’s holding on this issue.
IV. Conclusion
For the foregoing reasons, we AFFIRM the district court’s decision.
13
Edwards v. Kia Motors of America, Inc.
Court: Court of Appeals for the Eleventh Circuit
Date filed: 2009-01-06
Citations: 554 F.3d 943
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