The opinion of the court was delivered by: Conner, Senior D.J.
Copies E-Mailed to Counsel of Record
Plaintiff Action Nissan, Inc. ("Action Nissan") brings this action
against Nissan North America, Inc. ("NNA") asserting violations of the
federal Automobile Dealer's Day in Court Act ("ADDCA"), 15 U.S.C. §§
1221 et seq., and the New York Franchised Motor Vehicle Dealer Act
("FMVDA"), N.Y. VEH. & TRAF. CODE §§ 460
et seq., as well as various common law claims following NNA's notice
of termination of Action Nissan's franchise dealership.*fn1
Plaintiff seeks damages in addition to a permanent injunction
preventing NNA from effectuating the termination.*fn2
Presently before the Court are the parties' cross-motions for summary judgment. Plaintiff requests summary judgment in its favor on each cause of action alleged, while defendant requests summary judgment in its favor on the federal statutory claim, several of the common law claims and damages. For the reasons stated herein, plaintiff's motion for summary judgment is granted in part and denied in part, and defendant's motion for summary judgment also is granted in part and denied in part. Also before the Court is plaintiff's motion to bar the testimony of defendant's experts Sharif Farhat and Charles Schillingberg. This motion is denied as to both experts.
Action Nissan operates a franchised motor vehicle dealership at 40 Route 59 in Nyack, New York that sells and services Nissan motor vehicles and parts pursuant to a Nissan Dealer Sales and Service Agreement ("SSA") with manufacturer franchisor NNA.*fn3 (Pl. Rule 56.1 Stmt. ¶ 1; Def. Rule 56.1 Stmt. ¶¶ 1, 2, 7, 8.) The SSA was signed on July 26, 1993 by Louis Stern as dealer principal of the Action Nissan dealership, and subsequently was amended twice to reflect changes in ownership structure giving Louis Stern's son, Jonathan, an 85 percent ownership interest, thereby propelling him to the position of principal owner and executive manager. (Pl. Rule 56.1 Stmt. ¶¶ 2-3; Def. Rule 56.1 Stmt. ¶¶ 3-5.)
According to the SSA, Action Nissan assumed responsibility for
"actively and effectively promoting the sale at retail . . . of Nissan
Vehicles within Dealer's Primary Market Area." (Trussell Decl., Ex. A,
art. 2(b).) Section 1.N. of the SSA's Standard Provisions defines
primary market area ("PMA") as the geographic area which is designated
from time to time as the area of Dealer's sales and service
responsibility for Nissan Products in a Notice of Primary Market Area
issued by Seller to Dealer. Seller reserves the right, in its
reasonable discretion, to issue new, superseding "Notices of Primary
Market Area" to Dealer from time to time. Such geographic area may at
any time be applicable to Dealer and to other Authorized Nissan
Dealers. (Id., Ex. A, § 1.N.) Action Nissan was assigned to a PMA
incorporating the area in and around Nyack, New York.*fn4
(Id., Ex. XX at PH-2.)
Apparently, the parties' relationship proceeded smoothly until 1998. At that time, an NNA-requested market study recommended that Action Nissan relocate to Route 304 in Nanuet, New York, a location in close proximity to other motor vehicle dealerships. (Pl. Rule 56.1 Stmt. ¶ 9; Def. Rule 56.1 Stmt. ¶ 35.) Action Nissan was informed of this recommendation by a hand delivered letter and again via certified mail.*fn5 (Grimm Decl., Exs. G, H.) Another market study was conducted in 2002 that resulted in a similar relocation recommendation. (Pl. Rule 56.1 Stmt. ¶ 10; Def. Rule 56.1 Stmt. ¶¶ 37-38.) Action Nissan was also informed of this study via certified mail. (Grimm Decl., Ex. E.)
There is no doubt that the Sterns viewed relocation favorably. (Pl. Rule 56.1 Stmt. ¶ 14.) The parties' relationship deteriorated, however, with each year that Action Nissan failed to relocate. The reasons for this failure are numerous and vigorously disputed. (Pl. Rule 56.1 Stmt. ¶¶ 16-66; Def. Rule 56.1 Resp. at 8-9, 13-19, 22, 26-28.) While the relocation effort continued, Action Nissan and NNA struggled over the condition of Action Nissan's facilities, which sustained damage in 1999 from Hurricane Floyd and from a subsequent fire. (J. Stern Dep. at 81-83, 287-89; Barrett Dep. at 68; Grimm Dep. at 73.) The damage was not fully repaired until late 2003. (Pl. Rule 56.1 Stmt. ¶ 68.)
On November 10, 2003, Action Nissan sent NNA a letter enclosing plans to substantially renovate its existing facilities while it continued to pursue relocation. (Grimm Decl., Ex. N.) According to NNA, a review of these plans indicated a previously unnoticed deficiency in meeting NNA facility guidelines regarding land and building square footage as well as the required number of service bays. (Grimm Decl. ¶ 42.) Shortly thereafter, on November 24, 2003, NNA issued a Notice of Default pursuant to § 12.B.1. of the SSA's Standard Provisions via certified mail.*fn6 (Pl. Rule 56.1 Stmt. ¶ 71; Def. Rule 56.1 Stmt. ¶ 48.) The notice stated that Action Nissan failed to substantially fulfill its obligations under the SSA due to: (1) unsatisfactory sales performance; (2) unsatisfactory customer satisfaction performance; (3) noncompliance with NNA facilities guidelines; and (4) noncompliance with NNA capitalization requirements. (Grimm Decl., Ex. O.) The notice provided Action Nissan with roughly three months, or until March 1, 2004, to cure these defects in order to avoid SSA termination. (Id.) March 1 passed without NNA terminating Action Nissan. Two months later, NNA issued an Extension and Amendment of Notice of Default to Action Nissan via certified mail. (Id., Ex. P.) This notice added Action Nissan's unsatisfactory score on the Nissan Service Index ("NSI") to the list of defaults and extended Action Nissan's cure period by 90 days. (Id.) That date too passed without event.
However, on October 15, 2004, NNA issued a Notice of Termination ("N.O.T.") to Action Nissan via certified mail stating that termination would be effective 90 days from Action Nissan's receipt of the notice. (Trussell Decl., Ex. B.) The stated reasons for termination included: (1) unsatisfactory sales penetration performance; (2) unsatisfactory customer satisfaction performance;
(3) failure to fulfill Nissan facility responsibilities; and (4) failure to maintain wholesale financing arrangements in accordance with NNA guidelines.*fn7 (Id.)
On November 17, 2004, Action Nissan filed a Notice of Appeal with the
NNA Policy Review Board ("PRB") pursuant to § 16 of the SSA's Standard
Provisions seeking review of NNA's termination decision.*fn8
(Stephens Decl., Ex. K.) The procedures governing this
internal review mechanism dictate who is permitted to attend an appeal
hearing and expressly state that "[t]he Chairman may, in his
discretion, exclude anyone from the meeting or any portion thereof."
(Trussell Decl., Ex. PPP, § 5.B.) The PRB Chairman excluded Action
Nissan's legal counsel from the hearing in order to discuss the matter
in an "informal" and "businesslike" forum. (Stephens Decl., Ex. M at
2; Def. Rule 56.1 Stmt. ¶¶ 75, 78.) Jonathan Stern represented Action
Nissan. (Def. Rule 56.1 Stmt. ¶ 82.) Mark Grimm, NNA's then-Regional
Vice President of the Northeast Region, represented NNA. (Id. ¶ 83.)
Neither party was represented by counsel. (Id. ¶ 84.) Betsy
Kohan, Senior Counsel for NNA, attended the hearing as, according to NNA,
secretary to the PRB. (Am. Answer ¶ 105; Kohan Dep. at 25-27, 80-82.)
In a decision dated March 16, 2005, the PRB ruled that NNA had
sufficient grounds to terminate Action Nissan.*fn9
(Stephens Decl., Ex. R.)
Action Nissan then filed a complaint before this Court on April 15, 2005, which it subsequently amended twice. On September 7, 2005, NNA amended the N.O.T. to include a fifth ground for termination (the "Amended N.O.T."). (Trussell Decl., Ex. C.) That count charged Action Nissan with false sales reporting, which NNA claimed was warranted following the discovery of recordkeeping discrepancies during a field audit of Action Nissan's records on NNA dealership incentive programs.*fn10 (Id.; see id., Ex. A, §§ 6.G., 12.A.10.; Grimm Decl., Ex. R.)
By letter dated September 21, 2005, Action Nissan requested a second PRB review in connection with this new charge. (Stephens Decl., Ex. S.) This request was denied by letter dated September 27, 2005.*fn11
Under FED. R. CIV. P. 56, summary judgment may be granted where there are no genuine issues of material fact and the movant is entitled to judgment as a matter of law. See FED. R. CIV. P. 56(c); Anderson v. Liberty Lobby, 477 U.S. 242, 247-50 (1986). A fact is material only if, based on that fact, a reasonable jury could find in favor of the non-moving party. Anderson, 477 U.S. at 248. The burden rests on the movant to demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). In deciding whether summary judgment is appropriate, the court resolves all ambiguities and draws all permissible factual inferences against the movant. See Anderson, 477 U.S. at 255. To defeat summary judgment, the non-movant must go beyond the pleadings and "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).
The court's role at this stage of the litigation is not to decide issues of material fact, but to discern whether any exist. See Gallo v. Prudential Residential Servs., L.P., 22 F.3d 1219, 1224 (2d Cir. 1994).
II. The Automobile Dealer's Day in Court Act ("ADDCA")
The ADDCA "provides a dealer a federal cause of action against an automobile manufacturer who has failed to act in good faith regarding a franchise."*fn12 Gen. Motors Corp. v. Villa Marin Chevrolet, Inc., No. 98-CV-5206, 2000 WL 271965, at *17 (E.D.N.Y. Mar. 7, 2000); see Gen. Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 325 (3d Cir. 2001) ("The ADDCA is a remedial statute enacted to redress the economic imbalance and unequal bargaining power between large automobile manufacturers and local dealerships, protecting dealers from unfair termination and other retaliatory and coercive practices." (quoting Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 92 (3d Cir. 2000)); see also15 U.S.C. § 1222. Pursuant to § 1222
[a]n automobile dealer may bring suit against any automobile manufacturer engaged in commerce, in any district court of the United States in the district in which said manufacturer resides, or is found, or has an agent, without respect to the amount in controversy, and shall recover the damages by him sustained and the cost of suit by reason of the failure of said automobile manufacturer from and after August 8, 1956, 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: Provided, That 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.
The statute defines "good faith" as the duty of each party to any franchise, and all officers, employees, or agents thereof to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party: Provided, That recommendation, endorsement, exposition, persuasion, urging or argument shall not be deemed to constitute a lack of good faith. 15 U.S.C. § 1221(e). Courts in the Second Circuit have noted that "good faith" under the ADDCA "'has a narrow, restricted meaning.'" Bronx Chrysler Plymouth, Inc. v. Chrysler Corp., 212 F. Supp. 2d 233, 245 (S.D.N.Y. 2002) (quoting Empire Volkswagen, Inc. v. World-Wide Volkswagen Corp., 814 F.2d 90, 95 (2d Cir. 1987). As the court in Lazar' s Auto Sales, Inc. v. Chrysler Fininancial Corp. explained: "First, the plaintiff must demonstrate that an 'automobile manufacturer' coerced, intimidated or threatened him. Second, the plaintiff must prove that any coercion or intimidation was designed to achieve some improper of wrongful objective." 83 F. Supp. 2d 384, 388 (S.D.N.Y. 2000); see Empire Volkswagen, 814 F.2d at 95. "'[M]ore is required than coercion and subsequent termination for failure to submit, for otherwise the manufacturer would be precluded from insisting upon reasonable and valid contractual provisions.'" Empire Volkswagen, 814 F.2d at 95 (quoting Autowest, Inc. v. Peugeot, Inc., 434 F.2d 556, 561 (2d Cir. 1970)). "A wrongful demand may be inferred 'from all the facts and circumstances' even in the absence of evidence that a formal, explicit demand was made." Bronx Chrysler Plymouth, 212 F. Supp. 2d at 245 (quoting Marquis v. Chrysler Corp., 577 F.2d 624, 634 (9th Cir. 1978)). Of course, "[l]ack of good faith does not mean simply unfairness or breach of a franchise agreement." Subaru Distrib. Corp. v. Subaru of Am., Inc., No. 98 Civ. 5566, 2002 WL 413808, at *12 (S.D.N.Y. Mar. 18, 2002). "If the manufacturer has an objectively valid reason for its actions, the plaintiff cannot prevail without evidence of an ulterior motive." Id. "This is not to say, however, that a manufacturer who chooses to terminate a dealer can immunize itself from ADDCA liability by simply pointing to a franchise agreement provision with which the dealer ostensibly failed to comply and assert that such provision was the basis for its severance of the franchise relationship." New A.C. Chevrolet, 263 F.3d at 326-27.
III. The New York Franchised Motor Vehicle Dealer Act ("FMVDA")
The FMVDA, N.Y. VEH. & TRAF. CODE§§ 460 et seq., is the New York State counterpart to the ADDCA.*fn13 Section 460 declares that the legislature found it necessary to regulate the motor vehicle frachisor/franchisee relationship "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." N.Y. VEH. & TRAF. CODE§ 460. Broadly speaking, the FMVDA prohibits automobile manufacturers from, inter alia: (1) terminating a franchise except for "due cause"*fn14 ; (2) coercing a dealer to enter into an agreement or act in a manner contrary to its economic interests by threatening to cancel an unexpired contractual agreement*fn15 ; (3) conditioning a franchise renewal on a dealer making substantial renovations or constructing a new facility, except in limited circumstances*fn16 ; or
(4) imposing unreasonable restrictions on the transfer or sale of a franchise.*fn17
Action Nissan alleges that NNA violated each of these provisions. New York courts have adopted the same standards under both ADDCA § 1222 and FMVDA § 463(2)(b) for proving coercion and lack of good faith-actual coercion or intimidation. See, e.g., Subaru Distribs. Corp., 2002 WL 413808, at *12. Therefore, these claims will be analyzed together.
Establishing "due cause" under FMVDA § 463(2)(d) appears to require a different analysis. The statute does not define due cause. However, the court in Bronx Auto Mall, Inc. v. American Honda Motor Co., 934 F. Supp. 596, 611 (S.D.N.Y. 1996), aff'd per curiam, 113 F.3d 329 (2d Cir. 1997), stated that due cause is "not satisfied unless the franchisor has both good cause and acts in good faith." The court relied upon the Uniform Commercial Code to "shed light on the meaning of 'good faith.'" Id. That court therefore settled on a definition of "honesty in fact in the conduct or transaction concerned." Id. (citing N.Y. U.C.C. § 1-201(19).)
IV. Application to the Notice of Termination
As noted above, NNA proffered five grounds in support of its termination decision: (1) unsatisfactory sales penetration performance; (2) unsatisfactory customer satisfaction performance; (3) failure to fulfill Nissan facility responsibilities; (4) failure to maintain wholesale financing arrangements in accordance with NNA guidelines; and (5) false sales reporting. Action Nissan not only requests that this Court determine that, as a matter of law, each of these reasons is false, but also contends that the principal-and unstated-reason for termination was Action Nissan's inability to relocate to a more central location within the PMA, specifically Route 304 in Nanuet, New York. (Pl. Mem. Supp. Mot. Summ. J. at 13.) Plaintiff alleges that NNA repeatedly threatened to terminate the SSA with Action Nissan unless it relocated, and then frustrated its attempts to do so through purposeful obfuscation and delay in approving both relocation sites and repairs to its existing facility. Defendant denies that its actions fall within the narrow definition of coercion used in analyzing ADDCA and FMVDA claims and moves for summary judgment in its favor on that basis.
In order to whether NNA's allegedly threatening or coercive behavior supports an inference of wrongful demand based on ulterior motives, the Court must separately analyze each purported justification for termination.*fn18 Given the lengthy list of genuine issues of material fact we identify below, it is clear that plaintiff's motion for summary judgment on all its causes of action-save its alleged failure to properly maintain floor plan financing-must be denied. So too must defendant's motion for summary judgment on the ADDCA claim, as the Court must resolve a number of issues of fact before ruling on whether NNA's behavior amounted to actual coercion.
A. Unsatisfactory Sales Penetration Performance
NNA's first ground allegedly warranting termination is poor sales performance. According to the N.O.T., Action Nissan repeatedly was "apprised of its poor sales performance by Nissan representatives, who . . . discussed with [Action Nissan] the nature and extent of these deficiencies, and possible reasons therefore [sic]." (Trussell Decl., Ex. B at 2.) "Despite Nissan's counseling and assistance," Action Nissan "failed to make substantial progress ...