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STADIUM CHRYSLER JEEP L.L.C. v. DAIMLERCHRYSLER MOTORS COMPANY

July 14, 2004.

STADIUM CHRYSLER JEEP, L.L.C., a domestic limited liability company of New Jersey; TETERBORO CHRYSLER PLYMOUTH, INC. d/b/a/ TETERBORO CPJ; KOBBE & FLANNERY, INC., d/b/a/ TENAFLY JEEP EAGLE CHRYSLER PLYMOUTH; WYCKOFF CHRYSLER PLYMOUTH, INC.; and FLEETWAY CHRYSLER PLYMOUTH, INC. Plaintiffs,
v.
DAIMLERCHRYSLER MOTORS COMPANY, LLC, a Delaware limited liability company, Defendant.



The opinion of the court was delivered by: JOEL PISANO, District Judge

OPINION

Before the Court are cross-motions for summary judgment filed by the Plaintiffs, Stadium Chrysler Jeep, L.L.C. ("Stadium"); Teterboro Chrysler Plymouth, Inc. d/b/a/ Teterboro CPJ ("Teterboro"); Kobbe & Flannery, Inc., d/b/a/ Tenafly Jeep Eagle Chrysler Plymouth ("Tenafly"); Wyckoff Chrysler Plymouth, Inc. ("Wyckoff"); and Fleetway Chrysler Plymouth, Inc. ("Fleetway") (collectively the "Plaintiffs") and Defendant DaimlerChrysler Motors Company, LLC ("DaimlerChrysler" or the "Defendant") pursuant to Federal Rule of Civil Procedure 56.

  The Plaintiffs' complaint (the "Complaint") alleges violations of the New Jersey Franchise Practices Act, N.J.S.A. §§ 56:10-13 (Count I), and 10-7 and 13.4 (Count II); violation of the Automobile Dealer's Day in Court Act, 15 U.S.C. § 1221-25 (Count III); and common law breach of contract (Count IV), breach of the implied covenant of good faith and fair dealing (Count V), and unjust enrichment (Count VI). The Defendant timely filed its answer.

  The Court has jurisdiction to consider this matter under 28 U.S.C. § 1331 with respect to Count III, and 28 U.S.C. § 1332 with respect to the remaining state law claims. The Court heard oral argument on March 29, 2004, and for the reasons set forth below, the Court grants summary judgment for the Plaintiffs in part, and for the Defendant in part.

  I. BACKGROUND

  This case involves the termination of the Plymouth brand of automobiles, which were marketed, manufactured, and distributed by Defendant DaimlerChrysler until September 30, 2001. Before the termination, each of the Plaintiffs had entered into Plymouth Sales and Service Agreements (each referred to as an "SSA"), and each were authorized dealers of Plymouth vehicles. Defendant's Local Civil Rule 56.1 Statement of Undisputed Facts, referred to herein as "Def.'s 56.1 Stmt." at ¶¶ 12, 19, 35, 42, 53; Plaintiffs's Local Civil Rule 56.1 Statement, referred to herein as "Pls.'s 56.1 Stmt." at ¶¶ 15, 17, 19, 21, 23. The SSA's expressly incorporate standard Additional Terms and Provisions ("Additional Terms"). Certification of George Mykulak ("Mykulak Cert.") Appendix ("App.") F, Engelsdorfer Ex. 12; Certification of Jason M. Schoenberg ("Schoenberg Cert." Ex. J at ¶ 5; Def.'s 56.1 Stmt. at ¶ 5; Compl. at ¶ 17. The Additional Terms provide that "[i]n the event of a dispute hereunder, the terms of this Agreement shall be construed in accordance with the laws of the State of Michigan." Mykulak Cert. App. F at ¶ 42.

  Paragraph 27 of the Additional Terms provides in pertinent part: "[DaimlerChrysler] at any time may discontinue any or all models, lines or body styles and may revise, change or modify their construction or classification. . . . [DaimlerChrysler] at any time may declare obsolete or discontinue any or all parts, accessories and other merchandise." Mykulak Cert. App. F at ¶ 27. Paragraph 28 governs termination of the franchise relationship, and expressly provides that the SSA "will terminate automatically without notice from either party on . . . the discontinuance by [DaimlerChrysler] of the production or distribution of all [DaimlerChrysler] vehicles listed on the Motor Vehicle Addendum," id. at ¶ 28(c)(v), which, according to DaimlerChrysler, "identifies the line-make sold under the particular [SSA]," Def.'s 56.1 Stmt. at ¶ 7. The Additional Terms also contain DaimlerChrysler's repurchase obligations, which pertain to repurchase of new, unused, and unsold specified vehicles, parts, accessories, special tools, and signs in the event of a termination. Mykulak Cert. App. F at ¶ 29.

  Beginning in the fall of 1999, DaimlerChrysler publicly announced "its decision to discontinue the Plymouth brand on a nationwide basis in late 2001, with the end of 2001 model year production." Def.'s 56.1 Stmt. at ¶ 55; see also Pls.'s 56.1 Stmt. at ¶ 25. At that point in time, the Plymouth product-line consisted of five automobiles: the Neon subcompact economy car, the Breeze mid-size sedan, the Voyager and Grand Voyager minivans, and the Prowler Roadster. Def.'s 56.1 Stmt. at ¶ 56. "DaimlerChrysler tied its decision to discontinue the remaining Plymouth models to a concurrent expansion of the Chrysler brand" Id. at ¶ 59. To this end, in 2000, DaimlerChrysler began "transitioning all existing Plymouth models but one into the Chrysler brand . . ." Id. at 70. Under this transition plan, Neon would be the only remaining Plymouth as of the effective date of the discontinuation, and then it would become an exclusive Dodge model. Id.

  In connection with the termination of Plymouth, "DaimlerChrysler developed a compensation plan to offer to terminated Plymouth dealers that would provide them the option of accepting lump sum compensation payments in lieu of returning vehicles, parts and tools." Def.'s 56.1 Stmt. at ¶ 81. DaimlerChrysler informed Plymouth dealers of the compensation plan in two separate August 2001 mailings. Id. at ¶ 83. On or about August 13, 2001, DaimlerChrysler issued letter which acknowledged to Plymouth dealers that individual sales and service agreements imposed repurchase obligations upon it in connection with the discontinuance, and that state law may modify those obligations. Id. at ¶ 83(A); Pls.'s 56.1 Stmt. at ¶¶ 26-27; Schoenberg Cert. Ex. Z (Aug. 13, 2001 letter). With the August 13 mailing, DaimlerChrysler included a sample copy of the Plymouth Discontinuance Repurchase/Compensation Agreement (the "Discontinuance Agreement"). Def.'s 56.1 Stmt. at ¶ 83(A); Pls.'s 56.1 Stmt. at ¶ 26.

  On or about August 30, 2001, DaimlerChrysler issued a letter which detailed the various options of Plymouth dealers ("Repurchase Instruction Letter"). Def.'s 56.1 Stmt. at ¶ 83(B); Pls.'s 56.1 Stmt. at ¶¶ 28-29; Schoenberg Cert. Ex. AA (Aug. 30, 2001 letter). The Repurchase Instruction Letter stated that
[e]ssentially, the Plymouth Discontinuance Repurchase/Compensation Agreement provides that [DaimlerChrysler] will offer [Plymouth dealers] the option to either receive a one-time compensation payment of three thousand and 00/100 ($3,000) dollars for each eligible new, unused, unsold and undamaged Plymouth vehicle in your inventory (other than Plymouth Prowlers), or you may request [DaimlerChrysler] to repurchase all eligible 2001 model Plymouth vehicles, unless otherwise required under state law.
Schoenberg Cert. Ex. AA at 1. Plymouth dealers were also offered a lump-sum compensation payment of five thousand dollars ($5,000) in lieu of "repurchase of eligible unique Plymouth parts and accessories under the terminated Plymouth Agreement," and three thousand dollars ($3,000) in lieu of the repurchase of any Plymouth special tools. Id. The Repurchase Instruction Letter also indicated that acceptance of lump sum compensation required release of all other claims against DaimlerChrysler for compensation relating to the discontinuance of Plymouth. Def.'s 56.1 Stmt. at ¶ 85; Pls.'s 56.1 Stmt. at ¶¶ 29-30; Schoenberg Cert. Ex. Z at 3. "Specifically excluded from this release are (1) amounts owing by [DaimlerChrysler] to DEALER as the result of this agreement, and (2) amounts that may be owing by [DaimlerChrysler] to DEALER in the ordinary course of business. . . ." Schoenberg Cert. Ex. Z. At 3.

  On or about September 30, 2001, the effective date of the termination, Plymouth was officially discontinued. Def.'s 56.1 Stmt. at ¶ 93; Pls.'s 56.1 Stmt. at ¶ 31. By this time, DaimlerChrysler had expanded their Chrysler and Dodge lines to include discontinued Plymouth models. Def.'s 56.1 Stmt. at ¶ 93.

  The liability and damages phases of this litigation have been bifurcated, and at this stage, the only issues before the Court relate to liability. Any arguments of counsel that involve damages will not be addressed by the Court.

  II. LEGAL DISCUSSION

  A. Summary Judgment Standard

  Summary judgment is appropriate under Rule 56(c) of the Federal Rules of Civil Procedure when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). On a motion for summary judgment, the moving party must first show that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). An issue is genuine "if the evidence is such that a reasonable jury could return a verdict" for the non-moving party. Healy v. N.Y. Life Ins. Co., 860 F.2d 1209, 1219 n. 3 (3d Cir. 1988). "The substantive law governing the dispute will determine which facts are material and only disputes over those facts `that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.'" Simmerman v. Corino, 804 F. Supp. 644, 649 (D.N.J. 1992) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)).

  If the moving party can show that no genuine issue of material fact exists, the burden then shifts to the non-moving party to present evidence that a genuine issue of fact exists. Celotex Corp., 477 U.S. at 324. In determining whether a genuine issue of material fact exists, the Court must view the facts in the light most favorable to the non-moving party and extend all reasonable inferences to that party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Stephens v. Kerrigan, 122 F.3d 171, 176-177 (3d Cir. 1997). In making this determination, the Court shall not "weigh the evidence and determine the truth of the matter," but only needs to determine whether a genuine issue necessitates a trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In order to satisfy this standard, however, the non-moving party "must do more than simply show that there is some metaphysical doubt as to the material facts. . . ." Matsushita, 475 U.S. at 586-87 (citations omitted). Instead, the non-moving party must prove beyond a "mere scintilla" of evidence that a genuine issue of material fact exists. Big Apple BMW v. BMW of N. Am., 974 F.2d 1358, 1363 (3d Cir. 1992). In addition, "a party cannot rely upon self-serving conclusions, unsupported by specific facts in the record." Laresca v. Am. Tel. & Tel., 161 F. Supp.2d 323, 327 (D.N.J. 2001) (citing Celotex Corp., 477 U.S. at 322-23).

  B. New Jersey Franchise Practices Act — Counts I and II

  Originally enacted in 1971, the New Jersey Franchise Practices Act (the "NJFPA"or the "Act") imposes obligations upon a motor vehicle franchisor and franchisee in the event of termination or modification of the franchise relationship. N.J.S.A. 56:10-1 through 10-15. Under the NJFPA, a "franchise" is defined as "a written arrangement . . . in which a person grants to another person a license to use a trade name, trade mark, service mark, or other related characteristics, and in which there is a community of interest in the marketing of goods or services. . . ." N.J.S.A. 56:10-3(a). A "franchisor" is "a person who grants a franchise to another person;" a "franchisee" is "a person to whom a franchise is offered or granted." N.J.S.A. 56:10-3(c), (d). Section 10-13 further defines a "motor vehicle franchise" as "a franchise for the marketing of new motor vehicles." N.J.S.A. 56:10-13. A "motor vehicle franchisor" is defined as "a "franchisor engaged in the business of manufacturing or assembling new motor vehicles, who will, under normal business conditions during the year, manufacture or assemble at least 10 motor vehicles, and his motor vehicle distributors." Id. Similarly, a "motor vehicle franchisee means every franchisee actively engaged in the business of buying, selling or exchanging new motor vehicles who has an established business." Id.

  Under the NJFPA, it is a violation for a franchisor to terminate a franchise "without good cause." N.J.S.A. 56:10-5. However, 1991 amendments to the Act, which were effective January 18, 1992, more specifically defined the obligations of motor vehicle franchisors, and replaced the good cause inquiry in the event of a termination of the franchise. These amendments included passage of sections 13.2 through 13.4, the principal statutory provisions being disputed before this Court. NJFPA section 13.4 provides in pertinent part that
the termination, cancellation or discontinuation of a series, line, brand or class of new motor vehicle marketed by a motor vehicle franchisor as a distinct series, line, brand, or class shall be deemed to be the termination, cancellation or nonrenewal of the motor vehicle franchise of a motor vehicle franchise of a motor vehicle franchisee holding a franchise which includes that series, line, brand or class, even if that series, line, brand, or class of new motor vehicle is part of a motor vehicle franchise which includes other series, lines, brands, or classes of new motor vehicles.
N.J.S.A. 56:10-13.4 (emphasis added). The section further states that
 
[n]otwithstanding the provisions of this section, a franchisor may change, add or delete models, specifications, model names, numbers or identifying marks or similar characteristics of the new motor vehicles it markets, if those changes, additions or deletions do not result, directly or indirectly, in the termination, cancellation or discontinuation of a distinct series, line, brand or class of new motor vehicle.
Id. (emphasis added).

  Where termination occurs "as a result of a termination or cessation of a part of the franchisor's business operations throughout the United States, which is not any part of any change in the ownership, operation or control of all or any part of the franchisor's business," the NJFPA imposes repurchase obligations on the franchisor, which includes the repurchase of unused, undamaged an unsold inventory, and special tools and signs required by the franchisor. N.J.S.A. 56:10-13.2. Other terminations of motor vehicle franchises trigger the payment obligations of section ...


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