FRESNO MOTORS, LLC, a California limited liability company and SELMA MOTORS, INC., a California corporation, Plaintiffs-Appellants,
MERCEDES BENZ USA, LLC, a Delaware limited liability company, Defendant-Appellee
Argued and Submitted, January 17, 2014, San Francisco, California
[Copyrighted Material Omitted]
On Appeal from the United States District Court for the Eastern District of California. D.C. No. 1:11-CV-02000-CJC. Cormac J. Carney, District Judge, Presiding.
The panel affirmed in part, and reversed in part, the district court's summary judgment entered in favor of Mercedes-Benz USA, LLC in a diversity action brought by plaintiffs whose attempt to purchase a Fresno Mercedes-Benz dealership was unsuccessful due to Mercedes-Benz's exercise of a right of first refusal.
Applying California law, the panel affirmed the district court and held that the plaintiffs had no claims for intentional interference with contract or prospective economic advantage where Mercedes-Benz timely and lawfully exercised its right of first refusal (" ROFR" ). The panel also held that California Vehicle Code § 11713.3(t)(2) did not require a franchisor to send notice of the intent to exercise a ROFR to the prospective transferee. The panel further held that even if plaintiffs were entitled to notice from Mercedes-Benz of its exercise of the ROFR, the notice plaintiffs received was both timely and in proper form.
Mercedes-Benz and the existing franchisee entered into an acknowledgment agreement which set out the parties' rights and obligations with respect to Mercedes-Benz's exercise of its ROFR. The panel affirmed the district court, and held that plaintiffs' claim that Mercedes-Benz fraudulently concealed the existence of the acknowledgment agreement had no merit.
California Vehicle Code § 11713.3(t)(6) provides for a proposed transferee's right to recover its expenses from a franchisor that usurps its contract by exercising a ROFR. The panel concluded that the plaintiffs, as prospective transferees, had an implied right of action under section 11713.3(t)(6), and reversed the summary judgment to Mercedes-Benz on that count, and remanded for further proceedings.
Finally, the panel affirmed the district court's grant of summary judgment to Mercedes-Benz on plaintiffs' claim under the California Unfair Competition Statute.
Alexander F. Stuart (argued) and Ellyn E. Nesbit, Willoughby, Stuart & Bening, San Jose, California; Oliver W. Wagner, Wagner Jones Helsley, P.C., Fresno, California, for Plaintiffs-Appellants.
Gwen J. Young (argued) and Ryan P. Day, Wheeler, Trigg, O'Donnell LLP, Denver, Colorado, for Defendant-Appellee.
Before: J. Clifford Wallace, Jay S. Bybee, Circuit Judges, and Robert W. Gettleman, District Judge.[*]
GETTLEMAN, District Judge:
Plaintiffs Fresno Motors, LLC (" Fresno" ) and Selma Motors, Inc. (" Selma" ) (jointly, " plaintiffs" ) signed an Asset Purchase Agreement to purchase a Mercedes-Benz dealership from Asbury Fresno Imports, LLC (" Asbury" ). Mercedes-Benz USA, LLC (" MB" ), the manufacturer/importer of the vehicles sold by the dealership, exercised a right of first refusal (" ROFR" ) contained in its dealership
agreement with Asbury. After several unsuccessful attempts to resolve plaintiffs' objections to MB's exercise of its ROFR, plaintiffs brought this action contesting the timeliness and propriety of that exercise.
In a first amended complaint (" FAC" ) plaintiffs assert five claims against MB, all brought under California law: (1) intentional interference with existing contractual advantage; (2) intentional interference with prospective economic advantage; (3) violation of California Business and Professions Code § 17200; (4) violation of California Vehicle Code § 11713.3(t); and (5) fraudulent concealment. MB moved to dismiss the FAC under Fed.R.Civ.P. 12(b)(1) and 12(b)(6). Because all operative facts appeared to be agreed, the district court converted the motion to one for summary judgment under Fed.R.Civ.P. 12(d) and 56, and allowed the parties to file supplemental briefs and additional evidence if needed. In a March 27, 2012, comprehensive opinion, the court granted defendants summary judgment on all claims. Plaintiffs timely appealed.
Asbury owned and operated the Fresno Dealership pursuant to a Passenger Car Dealer Agreement (" PCDA" ) and Light Truck Dealer Agreement (" LTDA" ) (jointly, " Dealer Agreement" ) with MB. It operated the dealership on premises that it leased from CAR AAG CA L.L.C. (the " Landlord" ) under an April 1, 2003, Lease Agreement (" Lease" ) with a fifteen year term and two ten-year renewal options.
In fall 2008, Selma, owned by Dwight G. Nelson, began negotiating with Asbury for the purchase of the Fresno Dealership. Selma and Asbury executed an initial Asset Purchase Agreement on December 11, 2008. At that time Selma began working with MB to become approved as a Mercedes-Benz dealer, and submitted a completed Dealer Application Packet on December 28, 2008. Selma and Asbury mutually terminated the initial agreement on January 16, 2009.
On March 27, 2009, Selma and Asbury executed a second Asset Purchase Agreement (" APA" ). MB sent Selma a second dealer application, but on April 3, 2009, Selma informed MB that all of the requested information was in the original package. MB requested that Selma confirm that all information in the original package remained current, and on April 14 Selma responded by sending MB updated information including a Commitment Letter covering the floor plan financing for the proposed dealership, which Mercedes-Benz Financial confirmed as valid. On April 20, 2009, Selma sent MB a " Wholesale Financing Commitment Form" executed by Mercedes-Benz Financial.
On April 23, 2009, Nelson formed Fresno for the sole purpose of buying the Fresno Dealership from Asbury. The following day, Selma (through Nelson) informed MB that it intended to assign the APA to Fresno. On April 30, 2009, MB informed Nelson that because Fresno was the purchasing entity it was critical that MB receive a Wholesale Financing Commitment Form from Mercedes-Benz Financial reflecting Fresno as the buyer.
On May 1, 2009, Selma, Asbury and Fresno executed a second amendment to the APA, completing the assignment to Fresno. That amendment assigned to Fresno all of Selma's rights under the APA, but specifically indicated that it was not intended to operate as release of Selma's obligations. That same day, Fresno (through Nelson) sent to MB by facsimile and overnight mail the Wholesale Financing Commitment Form signed by Mercedes-Benz Financial evidencing its commitment to extend floor plan financing to Fresno.
Exactly forty-five days later, on June 15, 2009, at 8:18 p.m. EDT (5:18 Pacific Time), MB exercised its contractual ROFR. MB provided notice to Asbury by sending it a letter by email and facsimile. Although not contractually required to do so, MB also sent a copy of the letter to Nelson's personal email address and to the email address of Fresno's comptroller, Charles Fletcher. MB also sent the letter by facsimile to a fax machine at Nelson's business address at Selma Motors. The letter indicates that it was also sent via overnight delivery, but apparently was not placed with Federal Express until the following day, and then delivered on June 17, 2009.
On June 19, 2009, MB and Asbury entered into an agreement (the " Acknowledgment Agreement" ), which states that " [o]n June 15, 2009, MB provided timely written notice to Asbury of its exercise of its right of first refusal with respect to the . . . Fresno Motors APA . . . ." The Acknowledgment Agreement then expressly set out the parties' rights and obligations with respect to MB's exercise of its right of first refusal. In particular, the Agreement provides:
1. Terms of Exercise. MB acknowledges that by its exercise of its right of first refusal, MB will be subject to the same terms and conditions under the Fresno Motors APA as such terms and conditions apply to Fresno Motors. Further, any subsequent assignment by MB of its rights or obligations under any or all of the Fresno Motors APA and Purchase Documents, including, without limitation, the Sublease, shall not operate as a release of MB of its obligations under such Agreements. For avoidance of doubt, MB expressly agrees that it shall be primarily responsible for the performance under the Fresno Motors APA and Sublease. Asbury acknowledges that MB may assign its rights and obligations under the Fresno Motors APA and the Sublease to a third party provided that MB remain primarily responsible for the performance of any such assignee with respect to the Fresno Motors APA and the Sublease.
The Acknowledgment Agreement also provides that Asbury would terminate the Fresno APA with respect to Fresno Motors, but that the termination would " not be deemed a termination of the Fresno Motors APA as such terms and conditions now apply to MB as a result of its exercise of its right of first refusal as well as to any proposed assignee of MB." MB agreed to continue to be bound by the terms and conditions of the APA as if it were the original party.
Asbury did in fact terminate the APA with Fresno that same day, June 19, 2009. Fresno challenged MB's exercise of its ROFR as untimely. After MB's attempts to assign the APA to a third party failed, MB agreed to mediate its dispute with Fresno. That mediation took place on July 30, 2009, at which time MB agreed to assign its rights under the APA back to Fresno under certain conditions. Neither Asbury nor MB had yet informed Fresno of the Acknowledgment Agreement. Fresno did not receive that information until August 31, 2009.
MB's counsel memorialized the conditions of the assignment in an email to Fresno's counsel immediately after the mediation. MB and Fresno negotiated and finalized the terms of an " Assignment and Assumption Agreement" by August 28, 2009. Fresno did not sign, however, and negotiations reached an impasse when MB would not provide the Landlord with a guaranty of Fresno's obligations under the Sublease. Still unaware of the Acknowledgment Agreement, Fresno attempted to negotiate ...