Smith Cairns Subaru, Inc. v Subaru Distrib. Corp.

[*1] Smith Cairns Subaru, Inc. v Subaru Distrib. Corp. 2013 NY Slip Op 51807(U) Decided on October 8, 2013 Supreme Court, Westchester County Connolly, J. Published by New York State Law Reporting Bureau pursuant to Judiciary Law § 431. This opinion is uncorrected and will not be published in the printed Official Reports.

Decided on October 8, 2013
Supreme Court, Westchester County

Smith Cairns Subaru, Inc. now known as SMITH CAIRNS FORD, INC., d/b/a SMITH CAIRNS FORD LINCOLN MAZDA SUBARU, Plaintiff,

against

Subaru Distributor Corp., Defendant.



59159/2013



Stevan H. LaBonte, Esq.

LaBonte Law Group, LLC

Attorneys for the plaintiff

100 Ring Road West, Suite 108

Garden City, NY 11530

BY NYSCEF

Dale A. Schreiber, Esq.

Charles S. Sims. Esq.

Proskauer Rose, LLP

Attorneys for the defendant

11 Times Square

New York, NY 10036

By NYSCEF

Francesca E. Connolly, J.

The following documents were read in connection with the plaintiff's order to show cause for a preliminary injunction and the defendant's cross motion to dismiss pursuant to CPLR 3211 (a) (1), (3), and (7) or, in the alternative, for summary judgment dismissing the fourth and seventh causes of action:

Plaintiff's Order to Show Cause, Affidavits, Memo of Law,

Affirmation, Exhibits1-10

Defendant's Memo of Law in Opposition11

Defendant's Notice of Cross-Motion, Memo of Law,

Affidavits, Exhibits12-52

Plaintiff's Memo of Law in Reply to Defendant's Opposition

and Opposition to Defendant's Cross-Motion, Affidavit,

Exhibits53-64

Defendant's Reply Memo of Law, Affidavit, Exhibits65-69

The plaintiff, an automobile dealer, moves for a preliminary injunction staying the defendant from terminating an automobile Dealer Agreement pending final judgment in this action. The defendant, an automobile distributor, cross-moves to dismiss the complaint pursuant to CPLR 3211(a) (1), (3), and (7) or, in the alternative, for summary judgment dismissing the fourth and seventh causes of action.

FACTUAL/PROCEDURAL BACKGROUND

The plaintiff brings the action under the name "Smith Cairns Subaru, Inc. now known as Smith Cairns Ford, Inc., d/b/a Smith Cairns Ford Lincoln Mazda Subaru." Although the plaintiff represents itself as a single entity, some of the entities that it now contends are one, had (or potentially continue to have) separate corporate identities. To provide clarity in this Order, the Court has used the following naming conventions: When referring to the single entity that commenced this lawsuit, the Court will use the term "the plaintiff." When referring to "Smith Cairns Subaru, Inc.," which the complaint and caption allege is now known as something else, the Court will use the name "SC Subaru." "Smith Cairns Ford, Inc.," will be referred to as "SC Ford," and "Smith Cairns Ford Lincoln Mazda Subaru," an alleged d/b/a but nevertheless separately identifiable, will be referred to as "SC FLMS." The Court will refer to the sole defendant Subaru Distributor Corp., simply as "the defendant."

The complaint

The complaint alleges that SC Subaru entered into a Dealer Agreement with the defendant in or about 1997. The Dealer Agreement (Exhibit A to the complaint) acknowledges that Dwight McGuirk (hereinafter McGuirk) is the president and principal owner of SC Subaru. In or about 1998, the defendant approved a relocation of SC Subaru to 900 Central Park Avenue, Yonkers, where McGuirk also operated two separate dealerships under the entity names SC Ford and Smith [*2]Cairns Mazda. Thereafter, SC Subaru began operating under the assumed name SC FLMS. In May 2008, McGuirk decided that "for accounting purposes . . . his businesses would be better suited if they operated under one . . . corporate entity." Accordingly, on May 14, 2008, McGuirk filed a certificate of dissolution of SC Subaru with the New York State Department of State (Exhibit D to the complaint). Subsequently, McGuirk began operating all three dealerships under SC Ford d/b/a SC FLMS.

The complaint alleges that McGuirk did not deem it necessary to inform the defendant of the dissolution and formation of the new entity since the defendant had already approved the combined operation of the dealerships. McGuirk continued to operate as a Subaru dealership at the 900 Central Park Avenue location under SC FLMS for nearly six years. McGuirk submitted monthly and annual financial statements to the defendant that accurately divulged all financial matters relating to the dealership. In or about 2011, the defendant approached McGuirk demanding that, unless he committed to certain facility upgrades, the Dealer Agreement would be terminated. Despite protest, McGuirk acquiesced to the defendant's demands and entered into a facility addendum (Exhibit E to the complaint). The unsigned facility addendum annexed to the complaint states that it is a contract between SC Subaru and the defendant.

The plaintiff alleges that, in or about February 2013, the defendant, in bad faith, commenced efforts to terminate McGuirk's Subaru franchise. The defendant, by letter, advised McGuirk of its intention to enforce certain deadlines pursuant to the facility addendum agreement, which required McGuirk to obtain all permits and approvals by March 31, 2013, and to complete the facility upgrades by June 30, 2013.

Thereafter, on April 1, 2013, the defendant served its first termination notice upon McGuirk and SC Subaru seeking termination, effective July 5, 2013, based upon its failure to meet the deadline to obtain all permits as required by the facility addendum. The termination notice (Exhibit G to the complaint) is addressed to McGuirk and SC Subaru.

Additionally, by letter dated April 22, 2013 (Exhibit H to the complaint), the defendant advised McGuirk and SC Subaru that it had now become aware that SC Subaru had been dissolved and had been merged with SC Ford, forming a new entity. The letter opined, among other things, that McGuirk had no authority to contract with the defendant under the name SC Subaru, and that, pursuant to the original Dealer Agreement "[y]ou have no authority to operate your Subaru business under any other entity." The letter asserted that the dissolution and operation of the dealership under a new name, which required the defendant's consent, were grounds for immediate termination of the agreement. The letter further requested that corporate and financial documents for both SC Subaru and the new entity be provided to the defendant by April 26, 2013 in an effort to resolve the issue by consenting to, in essence, a retroactive reorganization of the dealership.

On or about May 10, 2013, the defendant served McGuirk with a second notice of termination that sought to terminate SC Subaru effective May 27, 2013, thus accelerating the prior July 5, 2013 termination deadline, on the grounds that SC Subaru failed to cure pursuant to the first [*3]termination notice, and failed to cure the unauthorized assignment. The termination was allegedly extended by mutual agreement until June 14, 2013.

On June 12, 2012, the plaintiff commenced this action by summons and verified complaint seeking to recover $5 million in monetary damages and a permanent injunction enjoining the defendant from terminating the Dealership Agreement. The plaintiff asserts eleven causes of action sounding in common law tort and breach of contract, violations of the New York Franchised Motor Vehicle Dealer Act (hereinafter the NY Dealer Act), and a violation of the Federal Automobile Dealers Day in Court Act.

The plaintiff's order to show cause for a preliminary injunction

Simultaneously with the commencement of this action, the plaintiff moves for a preliminary injunction pursuant to the Vehicle & Traffic Law §§ 463(2) (e) (1) and 469, staying the notice of termination pending final judgment in this action.

In an affidavit, McGuirk avers that since the inception of the Subaru dealership, SC Subaru routinely filed its Subaru manufacturer financial statements showing the joint business, including his status as a dealer for Ford, Lincoln, Mercury and Mazda. Thus, he argues that since 1998 the defendant understood and acknowledged that all of the automobile dealerships located in Yonkers were operating under one corporation. He states that when he decided to formally continue all business operations under the new entity, the ownership, management, capitalization and "Dealer Principal" (himself) remained the same. McGuirk submits that the defendant's attempt to seize upon what was essentially a name change as grounds for termination serves as proof of its malicious conduct and intent to destroy his business. With regard to the first termination letter concerning the parties' facility addendum, McGuirk submits that he was pressured into executing the agreement, and was provided unreasonable and unattainable deadlines for the completion of very difficult tasks. He contends that it was unreasonable for the defendant to give him only six months to obtain all of the government permits necessary to renovate the dealership. He also claims: "I am unable to find a buyer willing to pay fair market value for the franchise as Subaru as informed other Subaru dealers and Smith Cairns employees that Subaru is terminating the franchise" (McGuirk affidavit ¶ 28).

The defendant's answer and third-party complaint

The defendant answered and asserted various counterclaims involving SC Subaru's obligations under the Dealer Agreement, and for attorneys' fees and costs. In a third-party complaint, the defendant also asserts the same claims against McGuirk, seeking to hold him personally liable for debts and obligations arising out of the Dealer Agreement.

The defendant's opposition and cross motion [*4]

The defendant opposes the plaintiff's motion for a preliminary injunction and cross-moves to dismiss the complaint in its entirety pursuant to CPLR 3211 (a) (1), (3), and (7) or, in the alternative, for summary judgment dismissing the fourth and seventh causes of action.

In opposition to the plaintiff's motion, the defendant argues that SC Subaru's dissolution and purported assignment of the Dealer Agreement without its consent prevents the plaintiff from establishing a likelihood of success on the merits entitling it to a preliminary injunction. The defendant argues that, pursuant to BCL 1005 (a) (1), SC Subaru's voluntary dissolution precludes it from seeking the injunctive relief, since, as a dissolved corporation, it may only take action relating to its winding up or liquidating. The defendant also argues that the plaintiff lacks standing since SC Subaru is not a "franchised motor vehicle dealer" within the meaning of the NY Dealer Act. With regard to the assignment of the parties' Dealer Agreement, the defendant argues that neither SC Subaru nor McGuirk ever requested the defendant's consent. The defendant argues that the first, second, third, fifth, eighth, ninth, tenth, and eleventh causes of action fail to state a cause of action, and should be dismissed as redundant or duplicative. The defendant also moves, in the alternative, for summary judgment dismissing the fourth and seventh causes of action pursuant to CPLR 3212. The defendant argues, among other things, that SC Subaru's failure to comply with the facility addendum and/or the anti-assignment provision of the Dealer Agreement establishes that it had a good faith basis to terminate the Dealer Agreement, entitling it to summary judgment dismissing those causes of action.

In support, the defendant submits affidavits from Barron A. Butler, the defendant's Director of Market Representation, and C. David Sammons, the defendant's President and Chief Executive Officer. Sammons avers that, contrary to McGuirk's assertions, there were no documents that would reflect knowledge of the assignment or any request to transfer the franchise to another entity. Butler explains the circumstances surrounding the defendant's efforts to work with McGuirk to secure compliance with its facility upgrade commitments, which the plaintiff never completed.

The plaintiff's reply/opposition

In a reply/opposition affidavit, McGuirk avers that SC Subaru was forced to enter into the facility addendum agreement and made good faith attempts to obtain the necessary permits to proceed with the renovations. McGuirk avers that Butler's opinion that the renovations in the facility addendum agreement were not timely completed is inaccurate. McGuirk states that it is undisputed that SC Subaru was dissolved, however, he argues that the dissolution has not resulted in any risk or exposure to the defendant that would allow it to seek termination. McGuirk contends that all material aspects of the Subaru business and dealership relationship have remained completely the same, and thus, the defendant would not be permitted to withhold consent to the change in corporate name. Accordingly, had the defendant given him a reasonable time period within which to submit information, the defendant would have been compelled to consent to the change in corporate names.

McGuirk also argues that the defendant had actual knowledge of the corporate name change for the past six years, and that there are issues of fact as whether the defendant provided him with [*5]sufficient statutory notice of the breach and opportunity to cure with respect to the change of corporate name. McGuirk avers that he had multiple conversations with Mr. Cedolin, an officer of the defendant, concerning the change in corporate identity, and that Mr. Cedolin reassured him that as long as the "Dealer Principal," capitalization, and management remained the same, there would be no need for formal approval of the change in corporate name. McGuirk further avers that his company sent a fax to Mr. Cedolin in 1998 in which he submitted proof that SC Subura had obtained a certificate to do business under the name of Smith Cairns Ford Mazda Subaru name (see Exhibit J to McGuirk reply affidavit) (note the absence of "Lincoln," reflecting that this was a different d/b/a than the one in the caption of this action). McGuirk states: "While formal dissolution of [SC Subaru] did not occur until 2008, operation of the actual Subaru business had been transacted under the Plaintiff corporation for many years prior to dissolution" (McGuirk reply affidavit at ¶ 51). He argues that by virtue of the foregoing, the defendant was aware of the change in corporate name.

The defendant's reply

In a reply affidavit, Pierino Cedolin, the previous Vice President of Market Representation, avers that he was employed by the defendant from 1987 until 2012 when he retired, and is, thus, familiar with the plaintiff dealership. He avers that McGuirk's assertions are false insofar as McGuirk never proposed to the defendant any restructuring of the dealer operations, nor did Cedolin ever give McGuirk any authority and/or approval to make changes to the corporate name. Mr. Cedolin further avers that he never received the attachments to a fax allegedly sent to him. He states that the only fax received from McGuirk requested authority to use the "dba Smith Cairns Ford Mazda Subaru" for invoicing purposes, which the defendant implemented and began invoicing the plaintiff in this fashion.

In a separate reply affidavit, C. David Sammons (the defendant's President and Chief Executive Officer) states that McGuirk's claims that the defendant knew that McGuirk was operating his Subaru business through SC Ford, rather than SC Subaru, are false, unsupported, and meritless. He contends that McGuirk's assertion that the defendant impliedly consented to an assignment of the Dealer Agreement is factually incorrect. He argues that, upon investigation, the plaintiff has paid account bills by checks issued by SC Ford, however, that fact is not relevant to whether the plaintiff had authority to assign its Dealer Agreement to the new entity without the defendant's prior written consent. Put simply, Sammons states that once the defendant learned that SC Subaru had been dissolved, the defendant still provided the plaintiff and McGuirk with ample opportunity to request an assignment, but the plaintiff failed to provide the new entity's organizational documents and financial statements. Thus, McGuirk's refusal to cooperate with the defendant permitted the defendant to terminate the Dealer Agreement.

LEGAL ANALYSIS/DISCUSSION

Since the question of whether the plaintiff is entitled to a preliminary injunction depends upon whether the action will survive the defendant's cross motion, the analysis begins with the defendant's cross motion. [*6]

A. The Defendant's Cross Motion is Denied

1. The plaintiff has capacity to bring this action

The Court finds that, at this preliminary stage of the action, the plaintiff has capacity to proceed with its case (see CPLR 3211 [a] [3]).

The defendant contends that, since SC Subaru has been dissolved, it may not seek forward-looking relief that is unrelated to winding up its affairs. Indeed, "[u]pon dissolution, a corporation's legal existence terminates" (Lorisa Capital Corp. v Gallo, 119 AD2d 99, 110 [2d Dept 1986]). The Business Corporation Law (hereinafter BCL) provides: "The corporation shall carry on no business except for the purpose of winding up its affairs" (BCL 1005 [a] [1]). Further, "[t]he corporation shall proceed to wind up its affairs, with power to fulfill or discharge its contracts, collect its assets, sell its assets for cash at public or private sale, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business" (BCL 1005 [a] [2]). Although these provisions permit the dissolved corporation to sue and be sued, they nevertheless have been held to limit the dissolved corporation's capacity to pursue forward-looking relief that is not related to winding up its affairs (see Brooklyn Elec. Supply Co., Inc. v Jasne & Florio, LLP, 84 AD3d 997 [2d Dept 2011] ["the plaintiff, a dissolved corporation, lacked the capacity to sue because the plaintiff had been dissolved before the defendant was retained, and this legal malpractice action does not relate to the plaintiff's winding up of its corporate affairs"]; see also Lorisa Capital Corp. v Gallo, 119 AD2d at 110 [a corporation dissolved by proclamation of the Secretary of State for failure to pay franchise taxes "retains a limited de jure existence solely for the purpose of winding up its affairs, and retains capacity to bring suit for that purpose"]).

However, despite the undisputed fact that "SC Subaru" is dissolved, the named plaintiff in this case is "Smith Cairns Subaru, Inc. now known as Smith Cairns Ford, Inc., d/b/a Smith Cairns Ford Lincoln Mazda Subaru." Disregarding the "d/b/a" portion of the plaintiff's name as surplusage, a question remains as to whether SC Subaru or SC Ford is the real party in interest bringing this suit.

The allegations in the complaint, as amplified by McGuirk's affidavits in support, are that SC Subaru's rights under the Dealer Agreement were in some way assigned or transferred to SC Ford (see Cron v Hargro Fabrics, 91 NY2d 362, 366 [1998] [in opposition to a motion to dismiss, "a plaintiff may submit affidavits to remedy defects in the complaint and preserve inartfully pleaded, but potentially meritorious claims" (internal quotation marks omitted)]). In his reply affidavit, McGuirk states: "While formal dissolution of [SC Subaru] did not occur until 2008, operation of the actual Subaru business had been transacted under the Plaintiff corporation for many years prior to dissolution" (McGuirk reply affidavit at ¶ 51). Notably, the complaint alleges that SC Subaru is "now known as" SC Ford. While the record does not contain evidence of a formal merger or documented assignment of SC Subaru's rights to SC Ford, the complaint sufficiently alleges that SC Ford is a valid (undissolved) corporation with capacity to enforce whatever rights have been transferred or assigned to it under the Dealer Agreement. The defendant has submitted no [*7]documentary evidence to rebut SC Ford's alleged right to seek forward-looking relief.[FN1]

Additionally, the Court must, at this preliminary stage of the litigation, reject the defendant's contention that the plaintiff's causes of actions asserted under the NY Dealer Act (i.e., the second, third, fourth, fifth, seventh, tenth, and eleventh causes of action) should be dismissed for lack of capacity to sue because SC Subaru, as a result of its dissolution, is not a "franchised motor vehicle dealer" (see Vehicle and Traffic Law § 462 [7] [definition of "franchised motor vehicle dealer"]; see also Vehicle and Traffic Law § 462 [6] [definition of "franchise"]). Insofar as SC Ford is the alleged beneficiary of an assignment of rights under the Dealer Agreement from SC Subaru, the Court finds that SC Ford has made sufficient allegations to establish its capacity to go forward with its NY Dealer Act claims (see Simkin v Blank, 19 NY3d 46, 52 [2012] ["On a motion to dismiss under CPLR 3211, the pleading is to be given a liberal construction, the allegations contained within it are assumed to be true and the plaintiff is to be afforded every favorable inference"]).

Although the defendant contends that the purported assignment of rights or merger of SC Subaru and SC Ford was in violation of an anti-assignment clause in the Dealer Agreement, one of the plaintiff's central contentions in this case is that the defendant was aware of the corporate restructuring and continued to do business with the plaintiff after obtaining knowledge of the assignment and, therefore, the defendant has waived, or is estopped from asserting, its rights under the anti-assignment clause (see e.g. Alsens American Portland Cement Works v Degnon Contracting Co., 222 NY 34, 37 [1917] ["Whether or not there was a waiver on the part of the plaintiff was a question of fact determinable by the jury."]). Although McGuirk admits that he never formally informed the defendant of the name change, he also avers that SC Ford issued checks to the defendant for six years (a fact acknowledged by C. David Sammons, the defendant's President and Chief Executive Officer, in his reply affidavit). McGuirk further avers that the plaintiff's floor plan to purchase Subaru vehicle inventory from the defendant has been in the name of SC Ford, and that the defendant conducted several audits, which permitted the defendant to review the plaintiff's books and records, and, thus, the defendant was aware of the change.

Since the issues of whether the plaintiff has capacity or standing to sue are intertwined with the merits of the plaintiff's allegations, and since the plaintiff has alleged a theory under which the anti-assignment clause of the contract may be unenforceable, (1) the branch of the defendant's motion which is to dismiss the complaint in its entirety because the plaintiff lacks capacity to sue as a dissolved corporation must be denied, and (2) the branches of the defendant's motion which are to dismiss the second, third, fourth, fifth, seventh, tenth, and eleventh causes of action because the plaintiff lacks standing as a "franchised motor vehicle dealer" must also be denied (see Siegel, NY Prac § 261 [5th ed.] ["If the plaintiff's capacity to sue depends on status, and the status is disputed, an action brought to clarify the status can't be defeated with the capacity objection"]). [*8]

2. The NY Dealer Act causes of action (the second, third, fourth, fifth, seventh, and eleventh causes of action)

The complaint asserts several causes of action under the NY Dealer Act, specifically, the second, third, fourth, fifth, seventh, and eleventh causes of action. The defendant's motion to dismiss these causes of action is denied.

"When a party moves to dismiss a complaint pursuant to CPLR 3211 (a) (7), the standard is whether the pleading states a cause of action, not whether the proponent of the pleading has a cause of action" (Vermont Mut. Ins. Co. v McCabe & Mack, LLP, 105 AD3d 837, 839 [2d Dept 2013]). "In considering such a motion, the court must accept the facts as alleged in the complaint as true, accord plaintiffs the benefit of every possible favorable inference, and determine only whether the facts as alleged fit within any cognizable legal theory" (id.). "Whether a plaintiff can ultimately establish its allegations is not part of the calculus in determining a motion to dismiss" (EBC I, Inc. v Goldman Sachs & Co., 5 NY3d 11, 19 [2005]).

By way of background, the NY Dealer Act, codified in article 17-A of the Vehicle & Traffic Law, was passed "to regulate motor vehicle manufacturers, distributors and factory or distributor representatives and to regulate dealers of motor vehicles doing business in this state in order to prevent frauds, impositions and other abuses upon its citizens and to protect and preserve the investments and properties of the citizens of this state" (Vehicle & Traffic Law § 460 [legislative findings]). The NY Dealer Act has been called the New York State counterpart to the federal Automobile Dealer's Day in Court Act (see Action Nissan, Inc. v Nissan N. Am., 454 F Supp 2d 108, 118 [SDNY 2006]; see also 15 USC 1221 et seq.). As relevant to the case at bar, the NY Dealer Act protects dealers from certain unfair business practices by distributors or manufacturers (i.e., franchisors) "notwithstanding the terms of any franchise contract" (see Vehicle & Traffic Law § 463 [2] [emphasis added]; see also Vehicle & Traffic Law § 462 [8] [the term "franchisor" includes a manufacturer or distributor who "enters into or is presently a party to a franchise with a franchised motor vehicle dealer"). Further, the act prohibits certain unreasonable restrictions on the transfer or termination of a franchise (see Vehicle & Traffic Law § 466).

Turning to the specifics of the plaintiff's complaint, the second cause of action asserts a violation of Vehicle & Traffic Law § 466 (2) (i). Section 466 of the Act makes it "unlawful for a franchisor directly or indirectly to impose unreasonable restrictions on the franchised motor vehicle dealer relative to transfer, sale . . . or termination of a franchise" (Vehicle & Traffic Law § 466 [1]). Further, subsection (2) (i) states: It shall be deemed an unreasonable restriction upon the sale or transfer of a dealership for a franchisor . . . directly or indirectly to prevent or attempt to prevent a franchised motor vehicle dealer from obtaining the fair value of the franchise or the fair value of the dealership business as a going concern.

(Vehicle & Traffic Law § 466 [2][i]). Here, the plaintiff has alleged that the defendant forced it [*9]into renovating its dealership with unreasonable deadlines, has prevented it from changing the capital structure of its business, and has "informed other Subaru dealers and Smith Cairns employees that Subaru is terminating the franchise" (McGuirk affidavit ¶ 28), which actions have prevented the plaintiff from obtaining the fair value of the franchise, either in a sale or in the transfer of the dealership to SC Ford (see Cron v Hargro Fabrics, 91 NY2d 362, 366 [1998] [in opposition to a motion to dismiss, "a plaintiff may submit affidavits to remedy defects in the complaint and preserve inartfully pleaded, but potentially meritorious claims" (internal quotation marks omitted)]). Given the preliminary stage of this action, the Court finds that the plaintiff has stated a cause of action pursuant to Vehicle & Traffic Law § 466 (2) (i).

The third cause of action alleges a violation of Vehicle & Traffic Law § 463 (2) (d) (1), which provides that it shall be unlawful for a franchisor "[t]o terminate, cancel or refuse to renew the franchise of any franchised motor vehicle dealer except for due cause, regardless of the terms of the franchise." Here, the plaintiff alleges that the defendant's attempts to terminate it based on its failure to upgrade its facility were in bad faith. It further alleges that the second termination notice (based on SC Subaru's dissolution), was a pretext to accomplish the termination on an alternate ground. The plaintiff has sufficiently pleaded that the defendant's attempts to terminate the Dealer Agreement were not "for good cause," and accordingly, the branch of the defendant's motion which is to dismiss the third cause of action is denied.

The fourth cause of action alleges a violation of Vehicle & Traffic Law § 463 (2) (e), which states, in relevant part: "Any franchised motor vehicle dealer who receives a written notice of termination or a written notice of a franchisor's demand that the dealer substantially renovate an existing place of business . . . may have a review of the demand to change the place of business or the threatened termination by instituting an action" (Vehicle & Traffic Law § 463 [2] [e] [1]). Further, "[t]he issues to be determined in an action commenced pursuant to subparagraph one of this paragraph are whether the franchisor's notice of termination was issued with due cause and in good faith" (Vehicle & Traffic Law § 463 [2] [e] [2]). The plaintiff has alleged that it received a termination notice based upon its failure to comply with a demand to substantially renovate its place of business, and that such demand was not with due cause, or in good faith. Under these circumstances, the plaintiff has stated a cause of action.

The fifth cause of action alleges a violation of Vehicle & Traffic Law § 463 (2) (b), which makes it unlawful for a franchisor "[t]o directly or indirectly coerce or attempt to coerce any franchised motor vehicle dealer to enter into any agreement with such franchisor or officer, agent or other representative thereof, or to do any other act prejudicial to the monetary interests or property rights of said dealer by threatening to cancel any unexpired contractual agreement existing between such franchisor and said dealer." However, the statute provides "that good faith notice to any franchised motor vehicle dealer of said dealer's violation of any terms or provisions of such franchise shall not constitute a violation of this article" (Vehicle & Traffic Law § 463 [2] [b]). Again, since the plaintiff has alleged that the defendant, in bad faith, coerced it to enter into a facility addendum agreement necessitating rehabilitation of its facility, the plaintiff has stated a cause of action. [*10]

The seventh cause of action seeks an injunction pursuant to Vehicle & Traffic Law §§ 463 (2) (e) (1) and 469. As discussed above with respect to the fourth cause of action, Vehicle & Traffic Law § 463 (e) (1) states that a dealer may commence an action to challenge a written notice of termination. That section further provides: "If such action is commenced within four months of receipt of notice, such action shall serve to stay, without bond, the proposed termination or renovation or demand to change the place of business until the final judgment has been rendered in an adjudicatory proceeding or action, as provided in section four hundred sixty-nine of this article" (Vehicle & Traffic Law § 463 [2] [e] [1]). Section 469 provides that a dealer aggrieved by a violation of the NY Dealer Act may have "injunctive relief and damages in any court of the state having jurisdiction over the parties." Insofar as this Court has already found that the complaint states a cause of action pursuant to Vehicle & Traffic Law §§ 463 (2) (e), the complaint also states a cause of action for injunctive relief. To the extent that the defendant contends that the seventh cause of action is redundant to the fourth cause of action, the Court notes that the fourth cause of action seeks monetary damages and the seventh cause of action seeks an injunction. Pursuant to Vehicle & Traffic Law § 469, a prevailing dealer would be entitled to either damages, an injunction, or both. Accordingly, the seventh cause of action is not redundant to the fourth cause of action.

The eleventh cause of action alleges a violation Vehicle & Traffic Law § 463 (j) and seeks a declaratory judgment. This section makes it unlawful for a franchisor "[t]o prevent or attempt to prevent, by contract or otherwise, any franchised motor vehicle dealer from changing the capital structure of its dealership, or the means by or through which it finances the operation of its dealership, or finances the acquisition or retention of inventory, provided the dealer at all times meets any capital standards agreed to between the dealer and the franchisor and as applied by the franchisor to all other comparable franchised motor vehicle dealers of the franchisor located within the state (emphasis added)." The plaintiff has sufficiently alleged that the defendant attempted to prevent SC Subaru and SC Ford from changing the capital structure of their businesses, and that the defendant's actions were unlawful because SC Ford met the capital standards agreed to in the original Dealer Agreement. Specifically, the plaintiff alleges that SC Subaru's rights under the Dealer Agreement were assigned or transferred to SC Ford with the defendant's knowledge that McGuirk continued to operate the Subaru dealership through SC Ford, and the plaintiff's companies continued to meet the capital standards contemplated in the original agreement. The plaintiff seeks a declaratory judgment that SC Ford is the successor in interest to SC Subaru. At this preliminary stage of the action, the plaintiff has alleged sufficient facts to state a cause of action pursuant to Vehicle & Traffic Law § 463 (j) and seek a declaration as to the validity of the new structure of the business under the pre-existing Dealer Agreement. Accordingly, the branch of the defendant's motion which is to dismiss the eleventh cause of action is denied.

To the extent that the defendant also moves to dismiss the second, third, fourth, fifth, seventh, and eleventh causes of action based upon documentary evidence, the motion is denied since these causes of action implicate the defendant's good faith in seeking to terminate the Dealer Agreement, and the documentary evidence submitted in support of the motion does not "utterly refute" the plaintiff's allegations as a matter of law (see Nunez v Mohamed, 104 AD3d 921, 922 [2d Dept 2013] ["A motion to dismiss a complaint based upon documentary evidence may be [*11]appropriately granted only where the documentary evidence utterly refutes the plaintiff's factual allegations, conclusively establishing a defense as a matter of law"]).

Further, the branches of the defendant's motion which are for summary judgment dismissing the fourth and seventh causes of action pursuant to CPLR 3212, are denied. Contrary to the defendant's claims, Vehicle & Traffic Law §§ 463 (2) (e) and 469 give a dealer served with a termination notice the right to seek judicial review of the issue of "whether the franchisor's notice of termination was issued with due cause and in good faith." The defendant's argument that the fourth and seventh causes of action should be dismissed because they are pled "in total disregard to the structure" of the NY Dealer Act is without merit, as the complaint is sufficient to provide the defendant with notice of the plaintiff's claims (see Leon v Martinez, 84 NY2d 83, 87-88 [1994] [on a motion to dismiss, the court is to "determine only whether the facts as alleged fit within any cognizable legal theory"]).

Finally, despite the evidence submitted by the defendant that its decision to terminate the Dealer Agreement was in fact made in good faith, it is premature at this stage of the action to consider an award of summary judgment (see CPLR 3212 [f]). Accordingly, the branches of the defendant's motion which are for summary judgment are denied with leave to renew upon the completion of discovery (see Jones v American Commerce Ins. Co., 92 AD3d 844, 845 [2d Dept 2012]). In any event, the plaintiff's submissions that the defendant knew about the transfer or assignment of SC Subaru's rights to SC Ford raise questions of fact as to the defendant's good faith or good cause for issuing the termination notice (see Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).

3. The Automobile Dealer's Day in Court Act cause of action (the sixth cause of action)

The defendant also argues that the plaintiff's sixth cause of action, which alleges a violation of the Federal Automobile Dealer's Day in Court Act (hereinafter ADDCA) (see 15 USCA § 1221, et seq), should be dismissed. ADDCA provides that an automobile dealer may sue and recover damages incurred "by reason of the failure of said automobile manufacturer . . . to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise with said dealer" (15 USCA § 1222). Further, "in any such suit the manufacturer shall not be barred from asserting in defense of any such action the failure of the dealer to act in good faith" (id.). As previously discussed with respect to the plaintiff's claims under the NY Dealer Act, the plaintiff has sufficiently alleged that the defendant issued the termination notices in bad faith. Accordingly, the complaint states a cause of action under ADDCA. Contrary to the defendant's contention, the complaint sufficiently alleges that it is an "automobile manufacturer" within the meaning of 15 USCA § 1221(a) ("The term automobile manufacturer' shall mean any person, partnership, corporation, association, or other form of business . . . which acts for and is under the control of such manufacturer or assembler in connection with the distribution of said automotive vehicles" [emphasis added]).

4. The remaining causes of action for tortious interference, breach of contract and breach [*12]of fair dealing (the first, eight, ninth, and tenth causes of action)

The complaint states a cause of action for tortious interference with contract or with prospective contractual relations. "The elements of a cause of action alleging tortious interference with contract are: (1) the existence of a valid contract between the plaintiff and a third party, (2) the defendant's knowledge of that contract, (3) the defendant's intentional procurement of the third party's breach of that contract, and (4) damages" (see Chung v Wang, 79 AD3d 693, 694 [2d Dept 2010]). "To state a cause of action for tortious interference with prospective contractual relations, a plaintiff must plead that the defendant directly interfered with a third party and that the defendant either employed wrongful means or acted for the sole purpose of inflicting intentional harm on plaintiff[]'" (Posner v Lewis, 18 NY3d 566, 570 n 2 [2004] [internal quotation marks omitted]). The plaintiff alleges that the defendant's attempt to terminate the Dealership Agreement interfered with its present and future business relationships with "customers, employees, other third parties and the consumer public" (see complaint at ¶ 29). Further, in his affidavit, McGuirk claims that: "Subaru has informed other Subaru dealers and Smith Cairns employees that Subaru is terminating the franchise" (McGuirk affidavit ¶ 28), which has prevented him from selling the business. Accordingly, the plaintiff has alleged the direct interference with third-parties necessary to sustain a cause of action for tortious interference with contract or with prospective contractual relations (cf. Action Nissan, Inc. v Nissan N. Am., 454 F Supp 2d 108, 132 [SDNY 2006] ["Although plaintiff alleges in its Complaint that defendant tortiously interfered with plaintiff's relations with customers, suppliers and others,' even construing all inferences against defendant, there is no indication that [the defendant] directed any action toward anyone other than [the plaintiff]"]).

Further, the allegations that the defendant attempted to wrongfully terminate the Dealer Agreement is sufficient to plead a cause of action for breach of contract (see Kausal v Educational Prods. Info. Exch. Inst., 105 AD3d 909, 910 [2013] ["The elements of a cause of action to recover damages for breach of contract are the existence of a contract, the plaintiff's performance under the contract, the defendant's breach of the contract, and resulting damages"]). Notably, "[t]he [NY Dealer Act] does not modify or displace the state common law principle that a party commits a material breach of its contract with another party when it violates a provision going to the root of their agreement" (Giuffre Hyundai, Ltd. v Hyundai Motor Am., 2013 U.S. Dist. LEXIS 67795, *7-8 [SDNY 2013]).

The allegations that the defendant acted in bad faith in attempting to terminate the Dealer Agreement are also sufficient to state a cause of action for breach of the implied covenant of fair dealing (see Aventine Inv. Mgmt., Inc. v Canadian Imperial Bank of Commerce, 265 AD2d 513, 514 [2d Dept 1999] ["For a complaint to state a cause of action alleging breach of an implied covenant of good faith and fair dealing, the plaintiff must allege facts which tend to show that the defendant sought to prevent performance of the contract or to withhold its benefits from the plaintiff"]).

The complaint states a cause of action to recover attorney's fees insofar as such fees are recoverable pursuant to Vehicle & Traffic Law § 469 (1). [*13]

B. The Preliminary Injunction is Granted

The plaintiff's motion for a preliminary injunction is granted. As discussed above, the plaintiff has stated a cause of action pursuant to Vehicle & Traffic Law § 463 (2) (e) (1). Where a dealer seeks review of a threatened termination under that section "within four months of receipt of notice, such action shall serve to stay, without bond, the proposed termination . . . until the final judgment has been rendered in an adjudicatory proceeding or action." Accordingly, the plaintiff is entitled to a preliminary injunction staying the termination until a final judgment has been rendered (cf. J.P.T. Automotive, Inc. v Toyota Motor Sales, U.S.A., Inc., 659 F Supp 2d 350, 361 [EDNY 2009] [discussing the "automatic stay" provision of the NY Dealer Act]).

Based upon the foregoing, it is hereby

ORDERED that the plaintiff's motion for a preliminary injunction pursuant to Vehicle & Traffic Law § 463 (2) (e) (1) is granted, and the proposed termination is stayed, without bond, pending final judgment in this action; and it is further

ORDERED that the cross motion is to dismiss the complaint pursuant to CPLR 3211 (a) (1), (3), and (7), or in the alternative for summary judgment dismissing the fourth and seventh causes of action, is denied; and it is further

ORDERED that the parties are directed to appear in the Preliminary Conference Part on Monday, October 28, 2013, at 9:30 a.m., in Room 811 of the Westchester County Supreme Court, 111 Dr. Martin Luther King, Jr., Boulevard, White Plains, New York; and it is further

ORDERED that all other relief requested and not decided herein is denied.

This constitutes the decision and order of the Court.

Dated: White Plains, New York

October 8, 2013

HON. Francesca E. Connolly, J.S.C. Stevan H. LaBonte, Esq.

LaBonte Law Group, LLC

Attorneys for the plaintiff

100 Ring Road West, Suite 108

Garden City, NY 11530

BY NYSCEF [*14]

Dale A. Schreiber, Esq.

Charles S. Sims. Esq.

Proskauer Rose, LLP

Attorneys for the defendant

11 Times Square

New York, NY 10036

By NYSCEF

Footnotes

Footnote 1: This Court will overlook the discrepancy between captioned plaintiff, "Smith Cairns Ford, Inc.," which contains no hyphen and which is allegedly not the true name of an incorporated entity, and "Smith-Cairns Ford, Inc." (with a hyphen), an entity which the defendant contends is actually incorporated in New York.