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Agar Truck Sales, Inc. v. Daimler Trucks North America, LLC

United States District Court, S.D. New York

April 1, 2014

AGAR TRUCK SALES, INC., Plaintiff,
v.
DAIMLER TRUCKS NORTH AMERICA, LLC, and DETROIT DIESEL CORPORATION, Defendants.

MEMORANDUM OPINION AND ORDER

NELSON S. ROMN, District Judge.

Plaintiff Agar Truck Sales, Inc. ("Plaintiff") commenced the instant action against Daimler Trucks North America, LLC ("DTNA") and its wholly owned subsidiary, Detroit Diesel Corporation ("DDC") (collectively "Defendants"), seeking monetary damages, declarative and injunctive relief for alleged violations of the New York Franchised Motor Vehicle Dealer Act ("Dealer Act"), N.Y. Veh. & Traf. L. ("VTL") ยงยง 460-73, and seeking specific performance of a contract. In its Complaint, Plaintiff asserts Claim 1 against DTNA for attempting to terminate Plaintiff's Freightliner truck franchise without due cause or good faith; Claim 2 against DDC for attempting to terminate Plaintiff's Detroit Diesel truck engine franchise without due cause or good faith; and Claim 3 against DDC for a declaration that the franchise contract is in full force and effect and for specific performance thereof.

DDC now moves pursuant to Rule 12(b)(6) to dismiss the claims against it for failure to state a claim upon which relief may be granted. DDC asserts that (1) the Dealer Act does not apply to it because it is not a "franchisor" as defined therein, and (2) under the terms of the DDC franchise contract, its decision not to execute the contract renewal precludes Plaintiff's assertion that the renewal is in full force and effect. DTNA does not join this motion.

Plaintiff cross-moves for leave to file an amended complaint which supplements factual allegations and asserts Claim 2, unlawful termination of the Detroit Diesel franchise, against both DDC and DTNA. In reply, DDC asserts the proposed amended complaint would be futile - because Plaintiff concedes DDC is not a "franchisor" under the Dealer Act and because under Michigan law, which governs the contract, no contract exists when a party does not sign a written agreement after manifesting an intent not to be bound until execution. For the following reasons, DDC's motion to dismiss is granted. Plaintiff's cross-motion is granted in part and denied in part.

I. FACTUAL BACKGROUND[1]

Plaintiff is a tractor trailer dealer located in Yonkers, New York. DTNA exists under Delaware law and is authorized to do business in New York. DDC is a Delaware corporation authorized to do business in New York. Plaintiff has apparently been a franchisee of DTNA's Freightliner trucks ("Freightliner franchise") for many years. Plaintiff is also a franchisee of DDC's Detroit Diesel brand of engines ("Detroit Diesel franchise") manufactured for installation in Freightliner trucks. Plaintiff alleges that one quarter of the Freightliner trucks it sells have Detroit Diesel engines. Plaintiff's proposed amended complaint asserts that one particular Freightliner model comes exclusively with Detroit Diesel engines. The most recent renewal of Plaintiff's Freightliner franchise was executed by Plaintiff's agent on December 29, 2009, and by DTNA's agent on January 11, 2010, and expires on December 31, 2014. Plaintiff and DDC renewed the Detroit Diesel franchise at the same time ("the 2009 renewal"), which was to expire December 31, 2012. The same individual signed both franchise renewals on behalf of DTNA and DDC, respectively. Despite its expiration date, the 2009 renewal could be renewed further by a written agreement executed by both parties before December 31, 2012. However, it prohibits construing any other act by DDC as a renewal for another term or a waiver of termination.

On November 15, 2012, DDC sent Plaintiff another renewal contract for the Detroit Diesel franchise ("the 2012 renewal"), which would expire December 31, 2016.[2] On November 19, 2012, Plaintiff's agent executed the contract. DDC did not sign the 2012 renewal, although DDC continued to sell products to Plaintiff. The 2012 renewal agreement states it would come into force "only with [DDC]'s written acknowledgement of receipt of its copy of this Agreement." (MacWhirter Decl. Ex. E, Direct Dealer Agreement art. 5.) Both the 2009 and 2012 renewal agreements are governed by Michigan law.

In the Freightliner franchise agreement, Plaintiff's assigned market territory for truck sales includes Bronx, Kings, New York, Queens, and Westchester Counties in New York, and a portion of Fairfield County in Connecticut. Plaintiff alleges that another dealer in Richmond Hill, Queens, is closer to Queens and Kings Counties, and a third dealer in Milldale, Connecticut, is closer to the portions of Connecticut assigned to Plaintiff. Plaintiff's assigned Freightliner sales objectives varied, rising from 82 trucks in 2009 to 166 trucks in 2010, 269 trucks in 2011, and 473 trucks in 2012, then falling to 42 trucks in 2013. Plaintiff did not meet the sales objectives in any of these years, though Plaintiff asserts the requirements were unfair, unreasonable, and arbitrary.

On April 27, 2012, DTNA sent a letter notifying Plaintiff that it had breached the sales performance requirements of the Freightliner franchise and providing Plaintiff a six-month cure period beginning April 30, 2012. The letter allegedly required Plaintiff to develop a truck sales plan that included nine action items. Plaintiff alleges it satisfied each action item but one. On June 7, 2013, DTNA notified Plaintiff by letter that Plaintiff had failed to correct the sales performance deficiencies identified in April 2012. Specifically, DTNA asserted that Plaintiff failed to attain its market share and failed to promote and sell Freightliner trucks through systematic contacts. DTNA listed ten action items supposedly identified in the April 27, 2012, letter and briefly explained how each was not met. Accordingly, DTNA asserted it would terminate Plaintiff's Freightliner franchise 90 days after Plaintiff's receipt of the June 7 letter.

Also on June 7, 2013, DDC notified Plaintiff it would no longer conduct business with Plaintiff as of September 3, 2013. DDC asserted that the Detroit Diesel franchise agreement had expired December 31, 2012, and that DDC had continued to conduct business with Plaintiff on a day-to-day basis since that time. DDC's letter did not assert any contract breach or other failure to perform by Plaintiff. On August 6, 2013, Plaintiff filed the instant action.

II. LEGAL STANDARDS

A. Motion to Amend Pleadings

A party may amend a pleading once as a matter of course or at any time before trial with leave of the court. Fed.R.Civ.P. 15(a)(1)-(2). If a party seeks leave to amend a pleading, "[t]he court should freely give leave when justice so requires." Fed.R.Civ.P. 15(a)(2). "The rule in this Circuit has been to allow a party to amend its pleadings in the absence of a showing by the non[-]movant of prejudice or bad faith." AEP Energy Servs. Gas Holding Co. v. Bank of Am., N.A., 626 F.3d 699, 725 (2d Cir. 2010) (quoting Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993)). "Mere delay, ... absent a showing of bad faith or undue prejudice, does not provide a basis for the district court to deny the right to amend." Ruotolo v. City of New York, 514 F.3d 184, 191 (2d Cir. 2008) (quoting State Teachers Ret. Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981)); accord Block, 988 F.2d at 350. Thus, if the underlying facts and circumstances upon which the moving party relies support the claim or defense sought to be added, the party should generally be allowed to test that claim or defense on the merits. United States ex rel. Maritime Admin. v. Cont'l Ill. Nat'l Bank & Trust Co. of Chicago, 889 F.2d 1248, 1254 (2d Cir. 1989) (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)); accord EEOC v. Nichols Gas & Oil, Inc., 518 F.Supp.2d 505, 508 (W.D.N.Y. 2007). Nonetheless, leave to ...


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