Unpublished Disposition, 852 F.2d 1289 (9th Cir. 1986)

Annotate this Case
U.S. Court of Appeals for the Ninth Circuit - 852 F.2d 1289 (9th Cir. 1986)

BJORKLUND VOLKSWAGEN, INC., Plaintiff-Appellant,v.RIVIERA MOTORS, INC., Defendant-Appellee.

No. 87-3836.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted May 5, 1988.Decided July 19, 1988.As Amended on Denial of Rehearing Sept. 8, 1988.

Before EUGENE A. WRIGHT and CANBY, Circuit Judges, and WILLIAM H. ORRICK, Jr.,**  Senior District Judge.


We consider whether an automobile distributor had sufficient grounds for terminating a dealer's franchise agreement, and whether it violated the Automobile Dealers' Day in Court Act. 15 U.S.C. § 1221-25. Affirmed.

Bjorklund Volkswagen had a five-year dealership agreement with Riviera Motors, Volkswagen's distributor for the Northwest. Faced with financial difficulties after one year under the franchise, Bjorklund arranged for several investors to back the dealership.

About the same time, Bjorklund communicated with Chrysler about adding a Chrysler dealership. After those preliminary negotiations, Bjorklund told Riviera about the pending acquisition. Riviera replied by letter. Bjorklund signed the Chrysler agreement, and began to erect Chrysler signs and to show its cars in its showroom.

Several months later, Riviera notified Bjorklund that the Volkswagen dealership would be terminated in 90 days. Bjorklund's complaint in federal district court alleged that Riviera had improperly terminated the dealership agreement. It asserted also that Riviera violated the federal Automobile Dealers' Day in Court Act (15 U.S.C. § 1221-25) and violated Washington's unfair trade statutes. Finding that Bjorklund breached the agreement, the court ruled that it could not recover on any of its claims. Bjorklund appealed. We reversed and remanded.

After remand, and less than two weeks before the discovery deadline, Bjorklund noted some depositions supporting its claim that Riviera violated the Automobile Dealers' Day in Court Act. It was unable to complete all the depositions before the deadline and it moved twice for extensions. The motions were denied.

Two months later, Judge Coughenour heard oral argument on Riviera's motion for summary judgment, and ruled in its favor.


Bjorklund argues that summary judgment was not proper because genuine and material issues of fact existed and because the court failed to consider all of the evidence.

We review de novo a grant of summary judgment. David v. United States, 820 F.2d 1038, 1040 (9th Cir. 1987). We affirm if, when viewing the evidence in the light most favorable to the non-moving party, we find that "no genuine issue of material fact exists" and that the moving party "was entitled to judgment as a matter of law." Id. at 1039-40.

The district court ruled that Bjorklund breached the dealership agreement by changing the financial structure of the dealership without Riviera's written consent, by failing to comply with minimum financial requirements, and by violating sign and vehicle display provisions. The unauthorized change in financial structure provides a sufficient basis for affirming summary judgment on the contract claim.

The relationship between Bjorklund and Riviera was governed by two documents: the Operating Standards for VW Dealers (Operating Standards) and the VW Dealer Agreement. The dealer agreement provides:

Dealer Agrees that there will be no change in Dealer's Owners or Executives without Distributor's prior written consent.

Volkswagen Dealer Agreement, Sec. 2 (emphasis added). Violation of this provision would entitle Riviera to terminate the Agreement for cause, with immediate effect. Standard Provisions, art. 11(1) (a).

The sale of shares of stock redistributed ownership to include five other investors. Although Bjorklund claims to have informed Riviera of the impending sale, it failed to obtain written permission before altering the company's ownership. That fact is undisputed, and is sufficient grounds for termination.

Bjorklund relies on the last paragraph of Article 11 to argue that Riviera was not entitled to terminate:

Upon learning that any event or situation which would give Distributor grounds to terminate this Agreement pursuant to Article 11(1) or 11(2) has occurred, Distributor will endeavor to discuss such event or situation with Dealer. Thereafter, Distributor may give Dealer written notice of termination in accordance with Article 11(1) or 11(2), as the case may be.

It characterizes this provision as a condition precedent, and contends that Riviera failed to comply. We Disagree.

Conditions precedent are disfavored, and this court has refused to construe "stipulations as conditions unless required to do so by unambiguous language." See Lockwood v. Wolf Corp., 629 F.2d 603, 610 (9th Cir. 1980); see also Jones Associates v. Eastside Properties, 704 P.2d 681, 684, 41 Wash. App. 462 (1985). Typically, the condition qualifies a duty to perform, whereas here, Bjorklund alleges that the right to terminate is conditional. We will apply the principles governing construction of conditions precedent, nonetheless.

Sections (1) and (2) of Article 11 grant the distributor the right to terminate upon the occurrence of certain enumerated events. That right is conditioned only on proper notification. Under section (1), the termination may be immediate; under section (2), 90 days notice is required.

The provision indicating that the "distributor will endeavor to discuss" appears in the last paragraph of Article 11. It is isolated from sections (1) and (2). It does not refer to the right to terminate. It does not compel a discussion between the parties, nor does it obligate the distributor to offer alternatives to termination. The obligation on the distributor, if any, is vague.

The agreement could have been drafted easily to provide expressly for additional conditions on the right to terminate. In light of the ambiguity, we construe the language as prescribing a procedure for termination that was aimed apparently at encouraging the parties to resolve their differences. It does not condition Riviera's right to terminate.

Bjorklund argues that Riviera knew of the change in ownership and acquiesced in the arrangement. The notice of termination lists "unauthorized changes in your financial structure" as a basis for the termination. The dealer agreement states that, except for situations not applicable here, failure to terminate will not constitute a waiver. Id. arts. 11(3), 14(7).

Nothing in the record indicates a factual dispute over this issue. After having been sent numerous requests for final documentation, Bjorklund furnished those documents on July 8, 1983. Riviera sent the termination notice 15 days later. Failure to protest formally or terminate the dealership sooner was not acquiescence. Summary judgment was proper.

Bjorklund's second cause of action alleged a violation of the Automobile Dealers' Day in Court Act (ADDICA). 15 U.S.C. § 1221-25. It asserted that Riviera terminated the dealership because Bjorklund planned to add the Chrysler dealership and it had undercut the pricing of other dealers.

The ADDICA was enacted in an attempt to equalize the bargaining power that auto manufacturers have over dealers, and to correct the abuses of arbitrary termination and nonrenewal of dealers' franchises. Autohaus Brugger, Inc. v. Saab Motors, Inc., 567 F.2d 901, 910 (9th Cir.), cert. denied, 436 U.S. 946 (1978). The ADDICA makes it unlawful for a manufacturer to fail to act in good faith in performing or complying with the terms of the franchise or in terminating or failing to renew the franchise. 15 U.S.C. § 1222.

The definition of "good faith" under the Act is explicit:

The term "good faith" shall mean the duty of each party to any franchise ... to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party....

15 U.S.C.A. Sec. 1221(e) (emphasis added).

The statute distinguishes persuasion from coercive or intimidating demands. " [R]ecommendation, endorsement, exposition, persuasion, urging or argument shall not be deemed to constitute a lack of good faith." Id.

This court requires proof of three elements to establish "lack of good faith." The dispositive element here focuses on coercion or intimidation; Bjorklund must establish a wrongful demand by Riviera which will result in sanctions if it does not comply. Autohaus Brugger, 567 F.2d at 911. A wrongful demand may be implied from facts or circumstances. No formal demand is necessary. Marquis v. Chrysler Corp., 577 F.2d 624, 634 (9th Cir. 1978).

Bjorklund alleged that the dealership was terminated because it added a Chrysler franchise. To establish the wrongful demand, it offered a letter from Riviera.1  The controversial section read:

Please don't make any sudden moves jeopardizing your Volkswagen franchise, unless you have decided your future lies with Chrysler Plymouth. Don't forget the building you are in was built for Volkswagen and I would strongly resent your handing it over to Chrysler Plymouth, to whom you owe nothing.

ER 240.

The district court ruled that this letter was not sufficient to raise an issue of material fact. It viewed it as a permissible demand that related to use of the showroom. It was not wrongful because it involved enforcement of a contract clause. See Marquis, 577 F.2d at 632.

Drawing all reasonable inferences in favor of Bjorklund, we conclude that it has failed to established improper demand as a disputed issue of fact. Read in context, the letter is no more than forceful urging to move slowly when making decisions that could result in termination. It does not elaborate on the impending "moves" that could result in termination, but there is no coercive demand that Bjorklund would be terminated merely for signing the Chrysler agreement. Nor can the references to Chrysler be read reasonably as a demand not to have a dual dealership.

Bjorklund alleged also that Riviera terminated the contract because of its price-cutting. We need not decide whether evidence of pressure to follow a manufacturer's price suggestions demonstrates bad faith. Bjorklund did not supply evidence of an explicit demand, or a basis for inferring a demand, that it alter its pricing strategy.

Without some evidence of a wrongful demand, Bjorklund cannot succeed on its ADDICA claim. Summary judgment was proper.

Bjorklund alleges that the court erred in granting summary judgment without considering testimony included in a later motion.

We do not decide if the court was required to consider the testimony. Even if it was, its decision would not have been affected. Evidence of a wrongful demand is essential to establishing Riviera's bad faith. Although the deposition excerpts about price-cutting may bring Riviera's motives into question, they do not supply evidence of a demand.

Bjorklund states that its counsel discovered important dealer testimony 12 days before the discovery deadline. It served notice immediately of 11 depositions and completed six before the deadline. Bjorklund's motion to extend the discovery deadline was denied. Later it moved to complete pending discovery. That also was denied.

A decision to limit discovery is within the court's discretion. See Ellis v. Brotherhood of Ry., Airline & S.S. Clerks, 685 F.2d 1065, 1071 (9th Cir. 1982). Bjorklund has not established prejudice resulting from the denial of its motions. From all indications, further testimony would have been cumulative and would have failed to provide any significant new information. The parties had several years to prepare their cases. Bjorklund was able to complete six depositions. The district court did not abuse its discretion.

Bjorklund's original complaint made four primary claims: violation of the federal ADDICA, breach of the dealership contract, and violation of Washington's Motor Vehicle Unlawful Practice Act (RCW Sec. 46.170.180) and Unfair Competition and Practices Act (RCW Sec. 19.86.020). Judge McGovern's judgment for Riviera found that Bjorklund had breached a contract provision. The court ruled that recovery on the other claims was barred by Bjorklund's breach. On appeal, Bjorklund sought review of the federal claims and breach of contract claim. This court reversed and remanded:

Because the district court rested its decision solely on the grounds that Bjorklund violated the 'change of premises' provisions of the contract, the court did not address other breaches that Riviera alleged were committed by Bjorklund that may have provided a basis for Riviera's termination of Bjorklund's franchise. Consequently, we remand this case to the district court so that these contentions might be adjudicated and so that Bjorklund's claims under the Automobile Dealers Franchise Act and under Washington law might be reexamined.

Bjorklund Volkswagen, Inc. v. Riviera Motors, Inc., No. 84-4118, slip op. at 6 (9th Cir. Apr. 30, 1986) (unpublished memorandum) (Bjorklund I) .

On remand, the district court held that Bjorklund waived the state statutory claims because it did not raise them on appeal. Bjorklund asserts that our 1986 mandate instructed the district court to review all of the original claims, including those not appealed.

We analyze only the issues presented for consideration. The state statutory claims were not raised on the first appeal and are deemed waived. Fed. R. App. P. 28(a) (2); Kates v. Crocker Nat'l Bank, 776 F.2d 1396, 1397 n. 1 (9th Cir. 1985). Although Bjorklund I noted the state statutory claims, slip op. at 4 n. 2, there is no express indication that the state statutory claims are exempt from the waiver rule. The reference to "claims ... under Washington law" is ambiguous somewhat, but it can be read fairly as referring only to the Washington breach of contract claim.

We do not address the question of right to a jury after remand because summary judgment is affirmed.


Summary judgment on the contract claim was proper in light of Bjorklund's violations of the financial terms of the dealership agreement. The court ruled correctly on the ADDICA claim because Bjorklund had not established the predicates for relief.

The judgment is AFFIRMED.


This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by Ninth Circuit Rule 36-3


Of the Northern District of California


Nothing in Donald Bjorklund's affidavit or the deposition testimony suggests an improper demand. See discussion infra at section A(3)