Jaguar Land Rover North America, LLC v. Manhattan Imported Cars, Inc., No. 8:2008cv01599 - Document 71 (D. Md. 2010)
Court Description: MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 9/14/10. (Chasanow, Deborah)
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Jaguar Land Rover North America, LLC v. Manhattan Imported Cars, Inc. Doc. 71 IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND : JAGUAR LAND ROVER NORTH AMERICA, LLC : v. : Civil Action No. DKC 08-1599 : MANHATTAN IMPORTED CARS, INC. : MEMORANDUM OPINION Presently pending and ready for resolution in this breach of contract case are (1) a motion for summary judgment filed by Plaintiff Jaguar Land Rover North America, LLC (Paper 61) and (2) a motion to seal Imported Cars, Inc. exhibits filed (Paper 65). by Defendant Manhattan The issues are fully briefed and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow, Plaintiff’s motion will be granted in part and denied in part. Defendant’s motion will be granted. I. Background The facts Defendant, the viewed in non-moving the light party, are most as favorable follows. to the Plaintiff Jaguar Land Rover North America, LLC (“JLRNA”) is a limited liability company organized and existing under the laws of the State of Delaware with its principal place of business in New Jersey. (Paper 1 ¶ 1). Plaintiff is the exclusive distributor Dockets.Justia.com of Jaguar and Land Rover (Id. at ¶¶ 10, 12). products in the United States. Defendant Manhattan Imported Cars, Inc. (“Manhattan”) is incorporated in the State of Maryland with its principal place Manhattan’s of business president and in sole Rockville. shareholder (Id. is at John ¶ 2) Jaffe. Manhattan operates as a Land Rover and Jaguar dealer pursuant to agreements between (Paper 66 at 2.)1 dealer. decision Manhattan The 2008 under and JLRNA or its predecessors. Manhattan also operates as a Lincoln-Mercury (Id.). in Manhattan to its parties’ suspend dispute certain “Business Builder arises incentive Program” from JLRNA’s payments and to JLRNA’s failure to reimburse a number of Manhattan’s warranty claims The Business Builder Program is an incentive program under which a dealer can earn bonus payments of up to six percent of the Manufacturer’s Suggested Retail Price (“MSRP”) from JLRNA for each Jaguar or Land Rover it sells if the dealer meets 1 Prior to 2008, Land Rover vehicles were distributed in the United States by Land Rover North America, Inc. (“LRNA”), a subsidiary of Ford Motor Company. Jaguar vehicles were distributed by the Jaguar division of Ford. A single Ford business unit called “Aston Martin Jaguar Land Rover” was responsible for distribution of both brands. In 2008, Ford sold the Jaguar and Land Rover brands to Tata Motors Ltd, an Indian company. 2 certain criteria, including facility-related requirements. facility-related incentive percent of MSRP. (Paper 62, Exhibit 19, at 2 and Exhibit 20, at 2). payments can total up to The three To qualify for the facility-related incentive payments, dealers must have either an approved facility or an approved facility plan that details the process by which the dealer will obtain or construct an approved facility. Exhibit 19, at 3 and Exhibit 20, at 3). typically include project (Paper 62, Approved facility plans milestones, culminating opening of an approved facility at milestone five. with the If a dealer misses any project milestone by more than ninety days, it can be classified as “at risk” and JLRNA has the option to suspend that dealer’s incentive payments. (Paper 62, Exhibit 19, at 4 and Exhibit 20, at 4). The key events relevant to the present motions began in 2006. Mercury Prior to 2006, Defendant operated Jaguar and Lincoln franchises Maryland. in one “dualled” location (Paper 62, at 5, Paper 66, at 3). in Rockville, In May of 2006, Defendant acquired a Land Rover franchise from third party Land Rover Rockville and executed a Land Rover Dealer Agreement with JLRNA’s predecessor Land Rover (Paper 62, at 5-6, Paper 66, at 3-4). 3 North America (“LRNA”). Because LRNA was a not a party to Defendant’s Rockville, execute it the contained was buy-sell also “Land terms agreement necessary Rover for LRNA of Intent” Letter governing with the and Land Rover Defendant (“LOI”) parties’ which rights responsibilities after Defendant acquired the franchise. to and At the same time, Defendant and Jaguar Cars signed an “Amendment to the Jaguar Performance Agreement” (“PA”) to reflect the addition of the Land Rover franchise to Defendant’s facility. at 5-6, Paper 66, at 3-4). Defendant on May 2, 2006. (Paper 62, The LOI and PA were signed by (Id.). On May 16, 2006, Defendant closed on its buy-sell agreement with Land Rover Rockville and proceeded to execute the Land Rover Dealer Agreement with LRNA pursuant to which Defendant was operations as a Land Rover dealer. The Land renovations of Rover LOI Defendant’s and authorized to commence (Paper 62, at 9). Jaguar dealership PA both outlined facilities that the were necessary in order for Defendant to qualify for facility-related Business Builder incentive payments. The parties’ original plan called for Defendant to operate at its existing location on Old Georgetown Road in Rockville with certain initial renovations to the design and décor to accommodate Jaguar and Land Rover’s requirements followed by construction of a larger facility to 4 house only Land Rover Exhibits 15 and 17). and Jaguar vehicles. (Paper 62, The LOI and PA included a set of common milestones that culminated with a January 1, 2008, deadline for Defendant to have completed all site work and renovations and be open for business as a Jaguar/Land Rover Centre. agreement Lincoln also contained Mercury” wherein a paragraph Defendant entitled agreed to (Id.). Each “Relocation “relocate of [its] Lincoln Mercury operations out of the 11617 Old Georgetown Road facility” by either January 1, 2008, or, at the latest, July 1, 2008. (Paper 62, Exhibit 17 ¶ 3 and Exhibit 15 ¶ 4). relocation paragraph included the following language: You understand that [Land Rover and Jaguar] would not have entered into this Agreement, but for your commitment to relocate your Lincoln Mercury operations out of the 11617 Old Georgetown Road facility. If you fail to relocate your Lincoln Mercury operations out of the Old Georgetown Road facility under the terms of this agreement, you further understand that any such failure may result in your immediate ineligibility to receive payments under the Business Builder incentive program (or such other similar incentive program as may be subsequently adopted) to the extent that such an incentive program requires an approved facility or has other facility prerequisites. (Id.). 5 The Although Defendant successfully completed the first project milestone, by early 2007 it had fallen behind and sought to reach an milestone agreement with deadlines. Plaintiff Plaintiff to extend proposed new the remaining deadlines in a February 16, 2007, email and followed up with a revised LOI and PA for Defendant’s consideration on April 5, 2007. Exhibits 23 and 24). (Paper 62, In the proposed amendments, Plaintiff extended the deadline for completion of the renovations from January 2008 until September 2008. (Id.). Defendant did not sign the new agreement and instead requested a meeting with Plaintiff, which took place in August 2007. At that time, Defendant apprised Plaintiff of an opportunity it was pursuing to relocate the Jaguar Land Rover dealership to the ground floor of a mixed-use, high-rise project being developed near the White Flint metro Project”). station To in Montgomery facilitate County Defendant’s (the “White pursuit of Flint this opportunity, Plaintiff again revised the project milestones and sent proposed amendments (Paper 62, Exhibit 25). to Defendant in late October 2007. These proposed amendments gave the parties until September 2008 to evaluate the White Flint Project opportunity, but gave Plaintiff sole discretion in deciding whether to pursue the opportunity and retained the requirement 6 that Defendant remove the Lincoln Mercury franchise by September 2008. (Id.). These amendments were also rejected by Defendant in November 2007. (Paper 62, Exhibit 26). The parties met again in February 2008 to attempt to negotiate new deadlines, and following that meeting Plaintiff sent the third revised LOI and PA to Defendant. (Paper 62, Exhibits 27 and 28). This third revision extended the deadline for removal of the Lincoln Mercury franchise until December 2008. (Paper 62, Exhibit 27). In an email dated April 15, 2008, Defendant informed Plaintiff that it would not sign the proposed amendments and stated its belief that the agreements made two years ago were “obsolete.” (Paper 62, Exhibit 29). By letter dated April 30, 2008, Plaintiff gave Defendant notice of its facility-related intention incentive Jaguar vehicles sold. to suspend, payments for as of any July Land (Paper 62, Exhibit 30). 1, Rover 2008, and In response, Defendant’s lawyers sent a letter dated May 30, 2008, claiming that Plaintiff’s suspension of the payments violated Maryland law and threatened legal action. (Paper 62, Exhibit 31). Also at issue here is Plaintiff’s warranty reimbursement policy. Count VII of Defendant’s counterclaims alleges in part that Plaintiff failed to reimburse Defendant’s warranty claims 7 in accordance with the parties’ agreements. 76). (Paper 11 at ¶¶ 74- Plaintiff’s warranty reimbursement policies and procedures include specific details and a timeline for dealer’s submission of claims and returned parts. Typically, a dealer will not be reimbursed for warranty claims if the displaced parts are not returned to Plaintiff in a timely manner. Defendant alleges, however, that Plaintiff granted a one-time waiver of the return deadline for Defendant’s warranty claims from August 2006 to March 2008. (Paper 66, at 45). On June 19, 2008, Plaintiff filed its complaint seeking a declaratory judgment that its incentive payments was lawful. suspension (Paper 1). of Defendant’s Defendant answered on July 23, 2008, and asserted eight counterclaims.2 (Paper 11). Defendant’s remaining counterclaims seek (1) reformation of the parties’ agreements to require Plaintiff to make the facilityrelated payments irrespective of whether Defendant has an approved facility or facility plan (count II); (2) damages for breach of contract (count III); and (3) damages for violation of sections 15-207(b) and (d); section 15-206.1, and section 15212.1 of the Maryland Transportation Code (counts IV-VII). 2 Defendant voluntarily dismissed counts I and counterclaims on May 1, 2009. (Papers 49 and 50). 8 VIII of On its October 30, 2009, Plaintiff filed a motion for summary judgment on its request for counterclaims. (Paper 65). a (Paper declaratory 61). judgment Defendant and opposes Defendant’s this motion. In addition, Defendant filed a consent motion to seal certain exhibits filed in support of its opposition to Plaintiff’s motion for summary judgment. II. (Paper 65). Motion for Summary Judgment A. Standard of Review Plaintiff has moved for summary Federal Rule of Civil Procedure 56. judgment pursuant to It is well established that a motion for summary judgment will be granted only if there exists no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See Fed.R.Civ.P. 56(f); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). other words, if there clearly exists factual issues In “that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party,” summary judgment is inappropriate. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986); JKC Holding Co. LLC v. Washington Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001). 9 When ruling on a motion for summary judgment, the court must construe the facts alleged in the light most favorable to the party opposing the motion. See Scott v. Harris, 550 U.S. 372, 378 (2007); Emmett, 532 F.3d at 297. A party who bears the burden of proof on a particular claim must factually support each element of his or her claim. 323. Celotex Corp., 477 U.S. at “[A] complete failure of proof concerning an essential element . . . necessarily renders all other facts immaterial.” Id. Thus, on those issues on which the nonmoving party will have the burden of proof, it is his or her responsibility to confront the motion for summary judgment with an affidavit or other similar evidence in order to show the existence of a genuine issue for trial. See Anderson, 477 U.S. at 254; Celotex Corp., 477 U.S. at 324. “A mere scintilla of proof, however, will not Jenney, suffice 327 F.3d to 307, prevent 314 summary (4th Cir. judgment.” 2003). Peters There must v. be “sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party.” Anderson, 477 U.S. at 249. “If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted.” (citations omitted). 10 Id. at 249-50. B. Analysis 1. Declaratory Judgment Plaintiff seeks a declaratory judgment that Defendant is not entitled to facility-related incentive payments under the terms of the parties’ agreements and, therefore, Plaintiff was entitled to suspend its payment of these incentives in July 2008. Defendant counters that the relevant portion of the parties’ written agreement is no longer in effect. Pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, the court must consider three factors in determining whether to grant declaratory relief: (1) the complaint must allege an actual controversy between the parties of sufficient immediacy and reality to warrant issuance of a declaratory judgment; (2) the court must possess an independent basis for jurisdiction over the parties; and (3) the court must decide whether to exercise its discretion to determine or dismiss the action. Proa v. NRT Mid Atlantic, Inc., 477 (D.Md. 2007)(internal citations omitted). F.Supp.2d 677, 680 Here, the first two requirements are not disputed by the parties and are clearly met. Plaintiff has established an actual controversy, see Volvo Constr. Equip. North America, Inc. v. CLM Equip. Co., 386 F.3d 581, 593 (4th Cir. 2004)(finding an actual controversy where a 11 Volvo dealer sought declaratory relief in order to avoid the accrual of potential damages for past actions related to its dealer agreement), over the parties. and this court has diversity jurisdiction The remaining question is whether Plaintiff has made its case on the merits. The (Paper parties 62, agree Exhibit that 18), the the Land Land Rover Rover Dealer Letter Agreement of Intent (Paper 62, Exhibit 17), the Jaguar Dealer Agreement (Paper 62, Exhibit 13), the Amendment to the Jaguar Performance Agreement (Paper 62, Exhibit 15), and the Business Builder Program rules (Paper 62, Exhibits 19 and 20) constitute agreements between the parties. Their disagreement relates to whether all of these agreements remain in effect and whether they accurately reflect the content of the parties’ contract. Plaintiff contends that all of the agreements remain in effect and that they must be viewed in concert to understand fully the parties’ rights and obligations. (Paper 70, at 3-5). Defendant counters that the Land Rover LOI was superseded by the later dated Land Rover Dealer Agreement, which had an integration clause nullifying any prior agreements between the parties. Defendant also asserts that the 12 (Paper 66, at 9-10). written agreements do not accurately reflect the terms of the parties’ contract and should be reformed. (Id. at 29). Whether an agreement is integrated and the effect of an integration clause are preliminary questions of interpretation determined by the court. See Shoreham Developers Inc. v. Randolph Hills Inc., 248 Md. 267, 271-272 (1967)(interpreting meaning of integration clause in one of two written instruments between the parties); see also Restatement (Second) of Contracts §§ 209(2), 210(3) (1981).3 The presence of an express integration clause does not resolve definitively the question of whether the parties’ agreement is a complete integration. As noted in Shoreham, “even the sentence ‘This contract contains the final and entire Agreement between the parties,’ may embody a recital of facts which may be untrue.” 248 Md. at 272. The circumstances of the instruments’ drafting and the content of the written instruments provide guidance to interpret the scope of the parties’ agreement. 3 The parties assume without any discussion that Maryland contract law applies. Maryland generally applies the principle of lex loci contractus, whereby the law of the jurisdiction where the contract was made controls its validity and construction. Kramer v. Bally's Park Place, Inc., 311 Md. 387, 390 (1988). The contract at issue was formed when the documents were signed by Defendant in Rockville, Maryland, thus Maryland contract law governs questions of validity and interpretation. 13 Where several instruments are made a part of a single transaction they will all be read and construed together as evidencing the intention of the parties in regard to the single transaction. This is true even though the instruments were executed at different times and do not in terms refer to each other. Rocks v. Brosius, 241 Md. 612, 637 (1966); see also Bachmann v. Glazer & Glazer, Inc., 316 Md. 405, 415 (1989). Here, although several of the documents contain integration clauses, the totality of circumstances indicates that agreements were meant to be read and construed together. the Three of the agreements, the Land Rover LOI, the Jaguar PA, and the Land Rover Dealer Agreement signature at the same time. 2006 email from Plaintiff were submitted to Defendant for (Paper 70, Exhibit 44 (April 21, to Defendant enclosing “agreement package” containing the standard Land Rover Dealer Agreement, Land Rover Standard Terms and Conditions, Land Rover LOI, and Jaguar PA)). The Land Rover Dealer Agreement was executed a few days later than the Land Rover LOI only because it could not take effect until Defendant had finalized its buy sell agreement with a third party. Defendant argues that the language in the May 16, 2006, Land Rover Dealer Agreement, 14 stating that it “cancels, supersedes and annuls any prior contract, agreement, or understanding” between Land Rover and Defendant means that the Land Rover LOI, dated May 2, 2006 was cancelled by the execution of the Land recognized Rover that Dealer such Agreement. clauses will But only be Maryland has read annul to long or cancel a prior agreement where the later agreement was executed by the same matter. parties and related to the exact same subject See G.M. Pusey & Assocs., Inc. v. Britt/Paulk Ins. Agency, Inc., 2008 WL 2003747, *5 (D.Md. 2008)(citing Hercules Powder Co. v. Harry T. Campbell Sons Co., 156 Md. 346 (1929)). Here each agreement does not cover the same subject matter and the Land Rover Dealer Agreement on its own is insufficient to explain the full extent of the parties’ obligations. The Land Rover specific LOI and the Jaguar PA discuss facility requirements, whereas the Land Rover Dealer agreement governs the terms of the franchise-dealer relationship. Further together is evidence found Agreement itself. in that the the agreements terms of the are Land to be viewed Rover Dealer In Article 4, the Dealer Agreement states that the facility requirements are governed by “the attached Dealer’s Facility and Location Exhibits.” at Art 4.3-4.4). (Paper 62, Exhibit 18 Yet, no Dealer Facility or Location Exhibits 15 were attached to the Dealer Agreement. Indeed the only agreements discussing facility requirements are the Land Rover LOI and Jaguar PA. (See Paper 62, Exhibits 15 and 17). For all of these reasons, the parties’ written agreement, viewed as a collective whole, constitute the parties fully integrated agreement. When considering the written agreements as whole, the express language of the parties’ contract authorized Plaintiff to suspend the incentive payments. The Land Rover LOI, the Jaguar PA and the Business Builder Program rules all make clear that failure to satisfy the facility requirements will result in a suspension of the facility-related incentive payments. (See Paper 62, Exhibit 15, at 3; Exhibit 17, at 3; Exhibit 19, at 4, and Exhibit 20, at 4). In accordance with this language, Plaintiff was entitled to suspend incentive payments in 2008 after Defendant failed to meet many facility-related project milestones. 2. Breach of Contract Plaintiff also seeks summary judgment on Defendant’s breach of contract counterclaim (count III). This counterclaim is the reverse of Plaintiff’s declaratory judgment claim. The crux of Defendant’s argument is that it was entitled to facility-related 16 incentive payments according to the parties’ agreement and Plaintiff’s suspension of those payments constituted a breach of contract. To prevail in an action for breach of contract, a plaintiff must prove that the defendant owed the plaintiff a contractual obligation and that the defendant breached that obligation. Taylor v. NationsBank, N.A., 365 Md. 166, 175 (2001). Under the objective theory of contracts, which applies in Maryland, [A] court is to determine from the language of the agreement, what a reasonable person in the position of the parties would have understood the contract to mean at the time the contract was entered into; when the language of the contract is plain and unambiguous, there is no room for construction as the courts will presume that the parties meant what they expressed. Mathis v. Hargrove, 166 Md.App. 286, 319 (2005). As explained above, under the express language of the LOI and PA, approved Defendant had to have facility plan in order incentive payments. an to approved receive suspend the or an facility-related Defendant’s facility did not adhere to the requirements laid out in the LOI and PA. to facility incentive payments Plaintiff was entitled under the parties’ contract, and was not in breach of them. 17 terms of the 3. Reformation In count II of its counterclaims, Defendant seeks reformation of the parties’ agreement so that (1) Plaintiff is contractually obligated to continue to make full payments to Defendant under the Business Builder incentive program and (2) Defendant will not be obligated to remove the Lincoln Mercury franchise or make any of the other facility outlined in the Land Rover LOI and Jaguar PA. modifications Plaintiff now seeks summary judgment on this count arguing that Defendant has not set forth a factual or legal basis to justify reformation. Reformation is an equitable remedy that is only warranted when one of two circumstances exists: “either there must be mutual mistake, or there must be fraud, duress, or inequitable conduct.” Maryland Port Admin. v. John W. Brawner Contracting Co., 303 Md. 44, 59 (1985); see also Julian v. Buonassissi, 414 Md. 641, n.15 (2010)(“when a competent person signs a contract or disposes of his or her property in the absence of fraud, misrepresentation, mistake, undue influence, relations, the contract will be enforced.”) or fiduciary “The burden on a party seeking reformation is substantial and must overcome the rebuttable presumption that deliberately prepared and executed 18 written instruments reflect the parties’ true 28 Williston on Contracts § 70:209 (4th ed.) intentions.” Here accurately there is no evidence of mutual mistake; seeks to enforce the agreements as written. therefore, identify inequitable conduct material fact. some evidence sufficient to of create Defendant must fraud, a Plaintiff duress, genuine issue or of To that end, Defendant asserts that Plaintiff made a number of inaccurate or false statements throughout the parties’ negotiations that sign the agreements. ultimately persuaded Defendant to Defendant relies primarily on affidavits of its employees as evidence of Plaintiff’s statements and oral promises. has not Assuming these statements are true, Defendant still set forth evidence sufficient to establish fraud, duress, or inequitable conduct in the formation of the contract, and thus reformation is not warranted. Defendant argues that Plaintiff made misrepresentations about the future profitability of the Land Rover dealership that induced Defendant to purchase the franchise from a third party and sign the Land Rover Dealer Agreement and Land Rover LOI. Estimates or projections of future profits are statements of opinion, however, and not fact. Snyder v. Herbert Greenbaum & Assocs., 38 Md.App. 144, 148-49 (1977); Polson v. Martin, 228 19 Md. 343, unpublished 346 (1962). opinion Although not this court from binding authority, considering a alleged violations of the Maryland Franchise Registration and Disclosure Law in instructive on this point. See Flynn v. Everything Yogurt, Civ. A. No. HAR92-3421, 1993 WL 454355, (D.Md. September 14, 1993). In Flynn, the court considered alleged violations of the Maryland Franchise Registration and Disclosure Law, Md. Code Ann. § 14-227-229, which regulates fraud, deceit, and untrue statements or omissions of material fact in connection with an offer to sell or the sale of a franchise. The plaintiffs in Flynn asserted that the franchisor, Everything Yogurt, had made misrepresentations when convincing the plaintiffs to purchase a franchise, including inaccurate projections of future profits. Id. at *2. claim though The court granted defendant’s motion to dismiss this holding that the projections of future inaccurate, did not constitute fraud earnings, or even inequitable conduct in violation of the statute. Id. at *8; see also Layton v. F.Supp. Aamco Transmissions, Inc., 717 368, 371 (D.Md. 1989)(holding that projections cannot constitute fraud because they are not susceptible to exact knowledge at the time they are made). 20 Plaintiff’s Rover’s future allegedly inaccurate profitability and projections inaccurate of planning Land volumes could only be considered fraudulent if there was evidence that the plaintiff knew they were inaccurate at the time they were made. Here, Defendant has adduced no evidence that Plaintiff knowingly offered inaccurate projections. Moreover, John Jaffe, the president and sole stakeholder of Manhattan, testified that he considered indicating that the planning even volumes Defendant opinions and not fact. knew to these be “guestimates” numbers (See Paper 70, Exhibit 46). were just Without any evidence of intent to deceive, these statements of opinion do not justify reformation. Defendant’s remaining bases for reformation actions taken after the agreements were signed. Defendant asserts that the agreements should relate to Specifically, be reformed to reflect revised post 2006 Jaguar and Land Rover planning volumes for automobile sales and to reflect Plaintiff’s alleged waiver of the milestone requirement that deadlines the Lincoln in the Mercury facility plan franchise be and the relocated. (Paper 66 at 29). Defendant’s arguments reflect purpose and limits of reformation. 21 a misunderstanding of the Reformation is a two step process. The party seeking reformation must establish that (1) the contract as written should not be enforced, either because of a mutual mistake, or duress or inequitable conduct, and (2) “there is clear, convincing and satisfying proof of a mutual understanding expressed.” Md. 518, and bargain that has not been accurately City of Baltimore v. De Luca-Davis Constr. Co., 210 524, (1956). Reformation is a not a vehicle for rewriting contracts to reflect changed circumstances since the time of contract formation. See Janusz v. Gilliam, 404 Md. 524, 534 (2008)(“no party has a right to rescind or modify a contract merely because conditions, that he he or or she she finds, has in made the a light bad of changed deal.”)(internal quotations citations omitted). Here, Defendant has produced no evidence that the parties agreed to terms different from those contained in the written agreements. Plaintiff proposed amendments on several occasions, but Defendant refused to sign any of the proposals. Defendant seeks to insert new terms, to which Plaintiff has not assented, into the parties’ original agreement to reflect events occurring after the contract’s formation. Reformation cannot be applied to alter contractual terms in this fashion. 22 4. Maryland Transportation Code Violations Plaintiff also seeks summary judgment on each of Defendant’s counterclaims asserting violations of the Maryland Transportation Sections Code. 15.207(b), Defendant 15-207(d), has alleged 15-206.1, and violations 15-212.1 of of the Transportation Code. a. Sections 15.207(b) and 15.207(d) Subsections 15.207(b) and 15.207(d) of the Transportation Code prohibit agreements existing and from franchises operations hardship franchisors in on a from coercing or to manner the or dealers requiring alter that dealer. coercing dealers dealership imposes into b remove facilities substantial Subsection to making states or financial that “a manufacturer, distributor, or factory branch, whether directly or through an agent, employee, affiliate, or representative, may not coerce manufacturer, any dealer distributor, to or make any factory employee, affiliate, or representative.” § 15-207(b) (2010). agreement branch or with their the agent, Md. Code Ann., Transp. Subsection d elaborates on the types of agreements that cannot be forced upon dealers through coercion and states that: 23 A manufacturer, distributor, or factory branch, whether directly or through an agent, employee, affiliate, or representative, may not require or coerce a dealer, by franchise agreement or otherwise, or as a condition to the renewal or continuation of a franchise agreement, to: (1) Exclude from the use of the dealer’s facilities a dealership for which the dealer has a franchise agreement to utilize the facilities; or (2) Materially change the dealer’s facilities or method of conducting business if the change would impose substantial financial hardship on the business of the dealer. Md. Code Ann., Transp. § 15-207(d) (2010). Coercion in the statute is defined as “(i) a means to compel or attempt to compel by threat of harm, breach of contract, or other adverse consequences.” (amended 2009). Md. Code Ann., Transp. § 15-207(a)(2)(i) (2006) Coercion does not include “to argue, urge, recommend, or persuade.” § 15-207(a)(2)(ii).4 The meaning of subsection 15-507(d)(2) was interpreted by the Maryland Court of Special Appeals in Antwerpen Dodge Ltd. v. Herb Gordon Auto World, Inc., 117. Md.App. 290, 310 (1997). 4 Subsection 15-107(a) was amended effective June 1, 2009 and the definition of coercion was modified. Because the events at issue took place prior to June 1, 2009, the prior version of the statute, quoted here, is applicable. 24 In order for coercion to exist within the meaning of this definition, the manufacturer must specifically undertake to change the dealer’s conduct. This concept of coercion is similar to that utilized in the Automobile Dealers’ Day in Court Act, 15 U.S.C. § 1221, et seq. (Federal Dealers’ Act). Specifically, the concept of coercion requires, at the very least, a demand by a manufacturer that is accompanied by a threat of sanctions for noncompliance. The similarities between the Maryland Transportation Code and the Automobile Dealers’ Day in Court Act (“ADDCA”) were confirmed in Colonial Dodge Inc. v. Chupler Corp., 11 F.Supp.2d 737, 744 (D.Md. 1996), aff’d, 121 F.3d 697 (4th Cir. 1997)(“While there are slight differences between the state and federal statutes, “coercion” under both the State Act and the ADDCA embodies the same concept, and accordingly the same analysis applies.”) In Colonial Dodge, Chrysler and Dodge dealers in Maryland asserted that they had been coerced into building a new showroom and coerced into abandoning their opposition to the placement of new dealerships in the area. Id. at 744. The court determined that there was insufficient evidence that the dealer was “confronted with a wrongful demand accompanied by a threat of sanctions for noncompliance” and found no violation of the statutes. Id. at 746. 25 It is generally accepted that a distributor’s enforcement of the terms of its bargained-for agreement with a dealer is not “coercion.” See, e.g., Wagner & Wagner Auto Sales, Inc. v. Land Rover North America, Inc. 539 F.Supp.2d 461, 473-74 (D. Mass), aff’d on other grounds, 547 F.3d 38 (1st Cir. 2008)(holding that franchisor’s demands that the dealer comply with the facility obligations from its LOI did not constitute coercive conduct under ADDCA); Empire Volkswagen, Inc. v. World-Wide Volkswagen Corp., 814 F.2d 90, 96-97 (2d Cir. 1987)(collecting cases holding that threats to take action authorized by parties’ contract do not constitute coercion). Court of Appeals for In Empire Volkswagen for example, the the Second Circuit, held that the franchisor (World-Wide Volkswagen) could enforce the terms of its agreement with the dealer (Empire Volkswagen) to construct a separate facility for Volkswagen-Porsche-Audi cars without violating ADDCA so long as the contract terms were valid and reasonable. Here, Id. Defendant argues that Plaintiff’s insistence that Defendant remove the Lincoln Mercury franchise from its facility violates the Maryland law because Defendant is being coerced to remove a pre-existing franchise (§ 15-507(d)(1)) and to make material facility changes that will have an adverse financial 26 impact on Defendant (§ 15-507(d)(2)). Specifically Defendant argues that the provisions in the Jaguar PA and Land Rover LOI relating to the removal of the Lincoln Mercury franchise constitute wrongful demands, as did Plaintiff’s later assertions that it intended to enforce these facility requirements. (Paper 66 at 22). Defendant further argues that Plaintiff’s notification it that would withhold the facility-related incentive payments if Defendant did not comply was a threat of sanctions. (Id.). not Defendant, coerce Plaintiff responds by arguing that it did but parties’ valid contract. rather it sought to enforce the Plaintiff also argues that it has not insisted that Defendant de-dual its facility, instead it has insisted that Defendant agree to and perform in accordance with an “approved facility plan”, of which de-dualing is only one component. (Paper 70, at 6). Plaintiff’s conduct Transportation Code. stated that does not violate § 15-207 of the As discussed above, the parties’ agreement Defendant had to meet specified facility requirements in order to qualify for certain incentive payments for sales of Land Rover or Jaguar models. This requirement is a reasonable Defendant contract term to which assented. Accordingly, Plaintiff’s attempts to enforce this term, whether 27 by requesting that Defendant comply or by suspending the incentive payments, do not constitute coercion. b. Section 15.206.1 Section requires a 15.206.1 of manufacturer the or Maryland distributor Transportation (or their Code agents or employees) to act in good faith “(1) in acting or purporting to act under the terms, provisions, or conditions of any franchise agreement; or (2) in any transaction or conduct governed by this subtitle.” faith is Md. Code Ann., Transp. § 15-206(b) (2010). defined as “honesty in fact and the Good observance of reasonable commercial standards of fair dealing in the trade.” § 15-206.1(a). The legislative history indicates that “the intent of the bill is to take the definition of ‘good faith’ under the Uniform Commercial Code (§ 2-103 of the Commercial Law Article) and apply it specifically to manufacturers in their dealings with franchised dealers.” good faith obligation does not (Paper 62, Exhibit 12). impose new or The additional obligations on the franchising party, but rather “requires only that one party to a contract not frustrate the other party’s performance.” Lanham Ford v. Ford Motor Co., 273 F.Supp.2d 691, 694 (D.Md. 2003), aff’d, 101 Fed.Appx 381 (4th Cir. 2004), cert. denied, 543 U.S. 957. 28 Although there is little case law applying the good faith requirement of the Maryland Transportation Code, Defendant notes that several imposing other an states obligation have on passed analogous automobile statutes manufacturers and distributors to act in good faith (or not act in bad faith). (See Paper 66 at n.15)(citing statutes from Alabama, Georgia, Illinois, Maine, Missouri, New Hampshire, and South Carolina.) These state’s interpretations of the good faith obligation, while not binding, provide a useful benchmark for analysis. Georgia and Maine, for example, franchisor’s actions were not motivated by legitimate American Honda Motor in business Co., 982 the bad courts faith interest. F.Supp. 881, held In that where they See Hickman 885-886 a were v. (N.D.Ga. 1997)( interpreting Ga. Code Ann. § 10-1-631 and holding that “Honda’s rejection of the proposed franchise transfer of Town & Country was made with a legitimate business interest in mind and did not violate the statute), aff’d, 138 F.3d 958 (11th Cir. 1998); Schott Motorcycle Supply, Inc. v. American Honda Motor Co., 976 F.2d 58, 63 (1st Cir. 1992)(interpreting Me. Rev. Stat. 10 § 1174.1 and finding no bad faith where dealer had made predictions about future profitability that proved inaccurate where dealer presented no evidence 29 that franchisor was not acting in accordance with legitimate business interests); see also Diversified Foods, Inc. v. First National Bank of Boston, 605 A.2d 609, 614 (Me. 1992)(finding summary judgment appropriate on bad faith claim under § 1-203 of U.C.C. where there were no facts “which indicate that [a defendant] motives, or for anything directly, acted other or through dishonestly, than inference with business ulterior reasons in exercising their rights under [an] agreement.”). Defendant argues that Plaintiff violated its good faith duties by not engaging in fair dealing and by failing to act with honesty in fact in requiring the removal of the Lincoln Mercury franchise (Paper 66, at 17). and suspending the incentive payments. In support Defendant highlights a case from the United States Court of the Appeals for the Seventh Circuit, Shor-Line Rambler, Inc. v. American Motor Sales, 543 F.2d 601 (7th Cir. 1976). In Shor-Line Rambler, the Seventh Circuit upheld a jury verdict finding that a manufacturer had acted in bad faith when it put unreasonable demands on a dealer to build new facilities, increase credit, and make extensive personnel changes and then terminated the franchise agreement when the dealer failed to satisfy these demands. situation in Shor-Line Rambler 30 is Id. at 603-604. distinguishable, The however, because in that case there was not a pre-existing contractual agreement whereby changes. Here, the dealer Defendant was had obligated consented to to make facility certain facility requirements in the Land Rover LOI and Jaguar PA. Defendant immediately facility also suspend argues that payments milestone, when Plaintiff because Plaintiff Defendant thereby missed waived did its the not first facility requirements and could not enforce them at a later time without acting in bad faith. (Paper 66, at 17). supported by the evidence. This position is not The plain language of the Business Builder Incentive program manual states, “any waivers granted will be temporary and will have to be renewed each calendar quarter.” provided (Paper 62, Exhibit 20, at 10). any evidence that requirement indefinitely.5 Plaintiff Defendant has not intended to waive this To the contrary, on April 30, 2008 Plaintiff sent a letter providing written notice that it would begin enforcing the milestone provisions at the beginning of the following quarter. 5 (Paper 62, Exhibit 30, Paper 66, at 18). In a footnote, Defendant argues that Plaintiff’s failure to establish a new timeline for its facility plan milestones also constituted a breach of the agreement. (Paper 66, at n.17). Yet, Defendant has elsewhere conceded that Plaintiff attempted to negotiate new milestones but Defendant rejected Plaintiff’s proposals. (Paper 66 and n. 18, Paper 62, Exhibit 30). 31 Plaintiff’s prior lenience with respect to the facility requirements did not make its subsequent decision to enforce them an act of bad faith. In sum, Defendant has produced no evidence that Plaintiff failed to act in good faith. c. Section 15-212.1 Section 15-212.1 requires a manufacturor or distributor to pay a dealer’s claims “for any incentive or reimbursement program sponsored by the manufacturer, . . ., or distributor, under the terms compensation.” Defendant has of which the dealer is eligible for Md. Code Ann., Transp. § 15-212.1(a) (2010). asserted two violations of Section 15-212.1: Plaintiff’s failure to pay facility-related incentive payments and Plaintiff’s failure to reimburse all of Defendant’s warranty claims. With positions respect are to the explained in incentive detail payments, in the the analysis declaratory judgment and breach of contract claims. parties’ of the For the same reasons that Defendant’s breach of contract claim fails, Defendant’s claim that Plaintiff’s failure to make facility- related incentive payments violated section 15-212.1 also fails. The warranty reimbursement claim bears further analysis. Defendant has identified $129,734.76 worth of unpaid warranty 32 reimbursement claims that it contends Plaintiff is obligated to pay under § 15-212.1. (Paper 66, at n. 40).6 summary judgment ruling payment for its any that unpaid Defendant warranty is Plaintiff seeks a not entitled reimbursement to claims. Plaintiff contends that no payments are due because Defendant has not complied with the policies and procedures of Plaintiff’s warranty program which require submission of warranty claims and return of warranty parts in accordance with a specified timetable. For a portion of the unpaid claims, Plaintiff has met its burden of establishing that Defendant is not entitled to relief. Specifically, Defendant has admitted that for $73,802.05 of it unpaid claims, it does not have parts to return. Exhibit 48, Deposition of David Bohn). (Paper 70, Defendant is not entitled to reimbursement for the return of parts it does not have. (See, e.g., Paper 62, Policies and Procures Section G: and Exhibit Section G: 6 35 (Land Rover Exhibit 33 (Jaguar Warranty Displaced Parts Procedures) Warranty Policies and Procedures Displaced Parts Procedures)). Defendant initially asserted $132,860.20 in outstanding warranty claims, but has conceded that two previously paid claims were included in this total due to an accounting error. (Paper 66, at n.40). 33 The status of the remaining $55,932.71 in warranty claims is unclear. Although the parties have provided a list of the outstanding warranty claims, (Paper 62, Exhibits 37 and 38), Defendant has not indicated for which of the claims it has no parts to return and for which of the claims it has a part but Plaintiff has refused to accept it. In addition, Defendant identified some evidence that Plaintiff granted a waiver of its submission deadlines so that Defendant could submit late claims. (See Paper 66, Exhibit TT). which of Exhibit the supplied (Jaffe Deposition), Exhibit KK, The scope and details of this waiver, including unpaid claims explained on the record. has JJ Plaintiff it would cover, are not fully It is also unclear whether Defendant with the return facilitate submission of the warranty parts. labels needed to (Paper 66, at 46 and Exhibit JJ (Jaffe Deposition)). Although demonstrated Defendant that it is has not entitled clearly to warranty and succinctly reimbursements, there is sufficient evidence that a reasonable jury could reach a verdict in favor of Defendant. Therefore, summary judgment in favor of Plaintiff will not be granted on this count. 34 III. Motion to Seal Defendant has filed a motion to seal several documents (Paper 65) in connection with its response to the motion for summary judgment. The motion must comply with Local Rule 105.11, which provides: Any motion seeking the sealing of pleadings, motions, exhibits or other papers to be filed in the Court record shall include (a) proposed reasons supported by specific factual representations to justify the sealing and (b) an explanation why alternatives to sealing would not provide sufficient protections. The Court will not rule upon the motion until at least 14 days after it is entered on the public docket to permit the filing of objections by interested parties. Materials that are the subject of the motion shall remain temporarily sealed pending a ruling by the Court. If the motion is denied, the party making the filing will be given an opportunity to withdraw the materials. Local Rule 105.11. There is also a well established common law right to inspect and copy judicial records and documents. v. Warner competing Commc’ns, interests Inc., 435 outweigh U.S. the 589, public=s 597 right Nixon (1978). of If access, however, the court may, in its discretion, seal those documents from the public=s view. In re Knight Publ’g Co., 743 F.2d 231, 235 (4th Cir. 1984). 35 Furthermore, prior to sealing any documents, the court must provide notice of counsel=s request to seal and an opportunity to object to the request before making its decision. Id. Either notifying the persons present in the courtroom or docketing the motion Areasonably in advance of deciding the issue@ will satisfy the notice requirement. consider less drastic Id. at 234. alternatives, versions of the documents. appropriate, the court Finally, the court should such as filing redacted If the court decides that sealing is should provide reasons, supported by specific factual findings, for its decision to seal and for rejecting alternatives. Id. at 235. Defendant seeks to seal four exhibits. All are documents that Plaintiff produced with “confidential” or “attorney’s eyes only” designations during discovery and they contain Plaintiff’s sensitive and confidential financial data. four exhibits are: (1) 2006 Release (Paper 65 ¶ 2). Land Rover The Planning Volumes, (2) 2008 Release Land Rover Planning Volumes, (3) 2008 Release Jaguar Planning Volumes, and (4) 2008 Jaguar Forecast. (Id. at ¶ 6). Plaintiff has consented to the motion. (Id. at ¶ 5). Defendant argues that these documents should be sealed to protect their sensitive and confidential financial information 36 and further notes that Plaintiff only agreed to produce these documents if their contents would be protected. (Id. at ¶ 7). Defendant argues that alternatives to sealing are not suitable because the information in the documents must be reviewed as a whole to provide proper context. (Id.). Defendant has provided an adequate justification for its request to seal the four exhibits. Therefore, the motion to seal will be granted. IV. Conclusion For the foregoing reasons, Plaintiff’s motion for summary judgment will be granted in part and Defendant’s motion to seal will be granted. denied in A separate Order will follow. /s/ DEBORAH K. CHASANOW United States District Judge 37 part.
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