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General Motors LLC v. Englewood Auto Group, LLC

United States District Court, D. New Jersey

September 9, 2014

GENERAL MOTORS LLC, Plaintiff/Counterclaim-Defendant,
v.
ENGLEWOOD AUTO GROUP, LLC, Defendant/Counterclaimant,
v.
ARGONAUT HOLDINGS, INC., Counterclaim-Defendant.

OPINION

WILLIAM J. MARTINI, District Judge.

Plaintiff General Motors LLC ("GM") brings this breach of contract action against Defendant Englewood Auto Group, LLC ("EAG"), seeking a declaration that it may lawfully terminate its franchise agreements with EAG. In response, EAG filed Counterclaims against GM and GM's affiliate, Argonaut Holdings, Inc. ("Argonaut" This matter comes before the Court on (1) GM's motion to dismiss Counts IV, V, VIII, and X of EAG's Counterclaims under Federal Rule of Civil Procedure 12(b)(6), (2) Argonaut's motion to dismiss all Counterclaims against it under Rule 12(b)(6), and (3) EAG's cross-motion for leave to file amended counterclaims. There was no oral argument. Fed.R.Civ.P. 78(b). For the reasons set forth below, the Court GRANTS the three pending motions.

I. BACKGROUND

GM manufactures and distributes motor vehicles and related products under various brand names through a network of authorized dealers. This case arises from GM's decision to end its contractual relationship with one of its authorized dealers, EAG. Since 1999, EAG has been an authorized dealer of Chevrolet automobiles and products under successive Dealer Sales and Service Agreements (the "Chevrolet Dealer Agreement"). Def.'s Countercls. ¶ 9. And since 2002, EAG has also been an authorized dealer of Buick and GMC automobiles and products under successive Dealer Sales and Services Agreements (the "Buick GMC Dealer Agreement" and, together with the Chevrolet Dealer Agreement, the "Dealer Agreements"). Def.'s Countercls. ¶ 11. EAG operates both its Chevrolet dealership and its Buick GMC dealership in Englewood, New Jersey. Def.'s Countercls. ¶¶ 9, 11. EAG sublets the Buick GMC dealership facility from Argonaut under a dealer sublease (as amended, the "Sublease"

Prior to its bankruptcy in 2009, GM was known as General Motors Corporation ("Old GM"). Def.'s Countercls. ¶ 10. In connection with its acquisition of the Buick GMC Dealership in 2002, EAG entered into an Agreement and Business Plan, dated January 2, 2002, with Old GM (the "Business Plan Agreement"). The Business Plan Agreement included provisions regarding EAG's assumption of the Sublease. The Business Plan Agreement also contemplates EAG eventually receiving the right to operate a Pontiac franchise at its Buick GMC Dealership facility. Under the Business Plan Agreement, Old GM agreed to provide a subsidy of twenty-eight percent (28%) of the basic rent for the Buick GMC Facility until it was able to appoint EAG as a Pontiac franchisee (the "Pontiac Rent Subsidy").[1] Decl. of Diane C. Hertz filed in Support of GM's Mot. to Dismiss ("Hertz GM Decl.") Ex. B ¶ 12, ECF No. 32.

In 2004, Old GM secured the rights to grant EAG a Pontiac franchise. In connection with EAG's acquisition of the Pontiac franchise, the parties amended both the Business Plan Agreement (the "Business Plan Amendment") and the Sublease. The Business Plan Amendment provides that the Pontiac Rent Subsidy would sunset on December 31, 2004.[2] Hertz GM Decl. Ex. C ¶ 4.

On June 1, 2009, Old GM filed for bankruptcy. In connection with that bankruptcy filing, Old GM discontinued the Pontiac brand. Def.'s Contercls. ¶ 94. Also in connection with the bankruptcy, GM and EAG entered into two Participation Agreements, one for the Chevrolet Dealer Agreement and the other for the Buick GMC Dealer Agreement (the "Participation Agreements"). Id. ¶¶ 11, 12. The Participation Agreements allowed EAG to continue acting as a Chevrolet and Buick GMC dealer following the bankruptcy. Id.

The Participation Agreements contain a sales performance requirement, called the Retail Sales Index ("RSI"). Def.'s Countercls. ¶ 14. GM claims that EAG failed to meet the required RSIs at both its Chevrolet and GMC Buick dealerships for several years. Def.'s Countercls. ¶¶ 16-19. Accordingly, on August 2, 2013, GM filed the Complaint, seeking a declaration that it may lawfully terminate its contractual relationship with EAG. In response, EAG filed the Counterclaims against GM and Argonaut, alleging violations of the New Jersey Franchise Practices Act, breach of contract, unjust enrichment, reformation based on mistake, and breach of the implied covenant of good faith and fair dealing. GM and Argonaut both move to dismiss several of EAG's Counterclaims. EAG cross-moves for leave to amend the Counterclaims.

II. GM'S AND ARGONAUT'S MOTIONS TO DISMISS

The instant motion involves the following Counterclaims

(1) Count IV: Breach of the Dealer Agreements for Allowing Brokered Sales against GM;
(2) Count V: Unjust Enrichment against GM and Argonaut;
(3) Count VI: Breach of the Sublease against Argonaut;
(4) Count VII: Reformation of the Sublease against Argonaut and GM;
(5) Count VIII: Breach of the Dealer Agreements for Denial of Saturn Warranty Work against GM;
(6) Count X[3]: Breach of the Implied Covenant of Good Faith and Fair Dealing against GM.

A. Legal Standard

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a complaint, in whole or in part, if the plaintiff fails to state a claim upon which relief can be granted. The moving party bears the burden of showing that no claim has been stated. Hedges v. United States , 404 F.3d 744, 750 (3d Cir. 2005). In deciding a motion to dismiss under Rule 12(b)(6), a court must take all allegations in the complaint as true and view them in the light most favorable to the plaintiff. See Warth v. Seldin , 422 U.S. 490, 501 (1975); Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Inc. , 140 F.3d 478, 483 (3d Cir. 1998

Although a complaint need not contain detailed factual allegations, "a plaintiff's obligation to provide the grounds' of his entitlement to relief' requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555 (2007). Thus, the factual allegations must be sufficient to raise a plaintiff's right to relief above a speculative level, such that it is "plausible on its face." See id. at 570; see also Umland v. PLANCO Fin. Serv., Inc. , 542 F.3d 59, 64 (3d Cir. 2008). A claim has "facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556). While "[t]he plausibility standard is not akin to a probability requirement'... it asks for more than a sheer possibility." Id. In deciding a motion to dismiss ...


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