Southtowns Nissan, Inc. v Nissan Div. of Nissan Motor Corp. in USA
Annotate this CaseDecided on November 1, 2005
Supreme Court, Erie County
Southtowns Nissan, Inc., Plaintiff
against
Nissan Division of Nissan Motor Corporation in USA and NISSAN NORTH AMERICA, INC., Defendants
2002/272
THOMAS C. D'AGOSTINO, ESQ.
MATTAR, D'AGOSTINO & GOTTLIEB, LLP
Attorneys for Plaintiff
CHRISTOPHER J. BELTER, ESQ.
GOLDBERG SEGALLA, LLP
WILLIAM N. BERKOWITZ, ESQ.
WILLIAM F. BENSON, ESQ.
BINGHAM McCUTCHEN, LLP
Attorneys for Defendants
Eugene M. Fahey, J.
Plaintiff, Southtowns Nissan, Inc., a former automobile dealer for the
Defendants, Nissan Division of Nissan Motor Corporation In USA and Nissan North America,
Inc., brings this action against the Defendants alleging (1) breach of contract, (2) breach of the
covenant and duty of good faith and fair dealing, (3) tortious interference with business and (4)
prima facie tort.
Now, Defendants Nissan move for summary judgment dismissing the Complaint in its entirety.
Defendants Nissan's motion is granted.
The Court incorporates the paper submitted by the parties in support and in opposition to Plaintiff Southtowns' prayer for reargument/renewal in regard to the original motion for summary [*2]judgment.
The Court also accepts that this dispute arises out of the Nissan Dealer Sales and Service Agreement executed between Plaintiff Southtowns and Defendants Nissan on September 25, 1989 and that Section 17F of the Agreement specifies that it:
"be deemed to have been entered into in the State of California and all questions concerning...its terms...or...rights or obligations of the parties hereof, shall be governed by...the internal laws of the State of California...(Affidavit of Mark Grimm, Exhibit "2")."
Under the Dealer Agreement, Nissan imposed, and Southtowns accepted, responsibilities to provide facilities, sales performance, and net working capital in accordance with guidelines established by Nissan, and Nissan was provided with the contractual authority to terminate Southtowns for non-performance, after notice of failure and a reasonable opportunity to correct.
By letter dated August 21, 1995, Plaintiff Southtowns' President, William T. Gacioch stated to Nissan that he was displeased by the performance of the dealership and was investigating remedies to improve the situation, and was also interested in a sale of the entire dealership (Affidavit of Mark Grimm, Exhibit "5").
Beginning in January, 1997, Defendants Nissan delivered a series of letters by certified mail to Southtowns relating to inadequate wholesale capitalization and sales performance before declaring Southtowns in breach of the Agreement in June, 1997, and requesting a plan for improvement (Affidavit of Mark Grimm, Exhibits "6", "7", "8", "9", "10" and "11"). In March, 1998, Nissan informed Southtowns that it was rated 56th out of 61 dealers for retail sales penetration in New York and that it had not received any response to its request for a capitalization/sales plan (Affidavit of Mark Grimm, Exhibit "11").
In August, 2000, Plaintiff Southtowns received a notice of default of the Agreement from Nissan relating to Daewoo automobile sales and service operations at the dealership facility in violation of Section 2C of the Agreement, inadequate square footage, unsatisfactory sales, and capitalization. Nissan gave it ninety days to rectify the situation prior to the issuance of a notice of termination (Affidavit of Mark Grimm, Exhibit "14").
In December, 2000, Plaintiff Southtowns received another letter from Nissan agreeing to withhold issuance of a notice of termination based on verbal assurances that the Daewoo operations were being removed (Affidavit of Mark Grimm, Exhibit "15"). A second December letter from Nissan extended that time to comply to February 25, 2001 (Affidavit of Mark Grimm, Exhibit "16").
By letter dated January 31, 2001, Plaintiff Southtowns informed Daewoo that it was immediately terminating its sales agreement with it and copying Defendants Nissan (Affidavit of Mark Grimm, Exhibit "18"). By letter dated June 15, 2001, Nissan noted that Southtowns still had Daewoo vehicles for sale on the lot, was still in violation, and again extended the notice of default to July 16, 2001 (Affidavit of Mark Grimm, Exhibit "21").
By letter dated June 19, 2001, William T. Gacioch stated to Defendants Nissan that he was in receipt of the letter of extension and that this was the first letter he had received of any default, that they were never brought to his attention by his executive manager, that he had never been advised that Daewoo sales were prohibited (Affidavit of Mark Grimm, Exhibit "22"). A second letter from William Gacioch, dated July 31, 2001, requested Nissan provide him with any incentives it would make if he sold the dealership to West-Herr/Scott Bieler (Affidavit of Mark Grimm, Exhibit [*3]"23").
The next letter from Nissan, of August 8, 2001, indicated that Nissan had no policy of offering financial incentives, that Southtowns remained in default, and that Nissan had no alternative but to seek termination of the Agreement (Affidavit of Mark Grimm, Exhibit "24").
The letter in reply from William Gacioch on August 9, 2001 dealt with his non-receipt of the default letters, failure of Nissan to assist him in improving the dealership, his plans to sell or reorganize, and disputing the various grounds for default (Affidavit of Mark Grimm, Exhibit "25"). A letter from Nissan immediately followed, which expressed surprise that Gacioch had not received the various letters received by Southtowns, that the parties had discussed various potential buyers, and that Nissan's insistence on exclusivity should not bar any sale (Affidavit of Mark Grimm, Exhibit "26").
Nissan's October 9, 2001 Notice of Termination letter, effective in ninety days, then followed (Affidavit of Mark Grimm, Exhibit "27").
On December 27, 2001, Plaintiff Southtowns forwarded a Buy/Sell Agreement between it and West-Herr automotive group, with a request that Nissan approve the purchase by January 7, 2002 (Affidavit of Mark Grimm, Exhibit "31"). It appears that William Gacioch had been negotiating with the West-Herr group starting as early as July, 2000.
By letter dated January 30, 2002, William Gacioch advised Nissan that he agreed upon Nissan's "execution of a Nissan Dealer Sales and Service Agreement with West-Herr Oldsmobile, Inc....upon closing of the sale to West-Herr...to terminate in accordance with the terms thereof any and all agreements...entered into with Nissan relating to the purchase and sale of Nissan motor vehicles (Affidavit of Mark Grimm, Exhibit "33").
After that time, Nissan approved the purchase and Southtowns sold the dealership to West-Herr for $2.1 million.
This action by Plaintiff Southtowns followed.
Conclusions of Law
In order to successfully oppose a motion for summary judgment, a party must assemble and lay bare sufficient affirmative proof to demonstrate existence of a genuine triable issue of fact. Visa v. Town of Greece, 104 AD2d 778 (4th Dept. 1984). Further analysis will rely upon California or Federal law.
Here, Defendants Nissan have laid down a compelling argument that Plaintiff Southtowns was not performing satisfactorily pursuant to the performance standards imposed upon it by the Agreement as early as 1995. The letter by William Gacioch to Nissan that August, stating his displeasure with the performance of his own dealership, is a substantial concession to that reality.
The various letters from Nissan to Southtowns from 1997 through 2001, termed harassment by Plaintiff Southtowns, are required under the notice provisions of Section 12B (Termination by Seller for Non-Performance by Dealer) prior to termination.
In this regard, the Court notes the disquieting impact of the letters of June, 2001 by William [*4]Gacioch, that he was not in receipt of the numerous certified letters of notice of default, that they had not been brought to his attention by his executive manager, and that he was not aware that Daewoo sales were prohibited under the Agreement, that he was looking at financial incentives from Nissan and a sale to West-Herr. There is nothing in the two letters that would enable Nissan to conclude that Southtowns was an efficiently run operation committed to curing its deficiencies, and deserving of a second, third, or fourth chance. Instead, the letters might well have triggered a decision by Nissan that is was past time for termination. If so, Nissan's argument that it proceeded to termination pursuant to the protocols of Section 12C, based on its own objective criteria for performance, where the Agreement specifically provided such a termination, satisfies its required showing of an entitlement to summary judgment. There can be no breach of contract or good faith and fair dealing where a party has the right to act in that manner (VTR, Inc. v. Goodyear Tire, 303 F. Supp 777, D.C.NY 1969).
In response, Plaintiff Southtowns argues that other Western New York dealers also underperformed (in terms of sales versus expected sales) during the 1997-2001 period. Unhappily, this point is undercut by Southtowns consistently being the worst performer, by a significant margin, ranging between 38 percent and 29 percent of expected sales, while Autoplace and Mike Barney ranged between 57 percent and 74 percent in that period (Plaintiff Southtown's Exhibit Book, Exhibit "N").
The Court takes judicial notice that Lockport Nissan, whose performance tailed off in 2001 after being more comparable to Autoplace and Mike Barney, went out of business, and was replaced by Basil Nissan in Lockport.
The data does not support Southtowns' claim that it was unfairly targeted by a false ground for termination.
In the absence of any such proof, the Court can only conclude there is no material issue of fact presented so that, even viewing the facts in a light most favorable to the Plaintiff, that the contract gave Nissan the authority to exercise its discretion to terminate so long as it conformed to the Agreement's notice provisions, and that this is what it did.
Turning to the tortious interference and prima facie tort claims, what the Amended Complaint terms the wrongful conduct, the threatening acts, harassment, and intentional and unjustified interference, the forcing to sell, the malicious intent - all go to Nissan's contractual authority to terminate Southtowns for non-performance, so long as it abided by the termination process outlined in Section 12B of the Agreement. The Complaint itself thus demonstrates that the acts, standing alone, were privileged and that no cause of action in tort is stated (see Freed v. Manchester Service, Inc., 165 Cal.App2d 186 [2d Dist. 1958]).
The Court need not reach the question of waiver raised by Defendant Nissan. The defense of waiver would apply if the Court were prepared to conclude that Plaintiff Southtowns had shown a genuine issue of fact as to breach. Southtowns voluntarily exercised its right to terminate the Agreement, and declined to engage in the administrative appeal procedures within the contract provisions. Its voluntary act effectively constituted "a waiver, the intentional relinquishment of a known right...by such conduct or failure to act as to evince an intent not to claim the purported advantage (Outboard Marine Corp. v. Supreme Court of Sacramento County, 5L Cal. App3d 30, 1975)." However, this Court finds that there are no material issues of fact, thus it is unnecessary to reach the issue of waiver. [*5]
Defendants Nissan's motion for summary judgment dismissing the Complaint is granted.
Submit order upon notice to opposing counsel.
EUGENE M. FAHEY, J.S.C.
Dated: November 1, 2005
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