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Fresno Motors, LLC v. Mercedes-Benz USA

March 19, 2010

FRESNO MOTORS, LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, PETITIONER,
v.
MERCEDES-BENZ USA, LLC, A DELAWARE LIMITED LIABILITY COMPANY, RESPONDENT.



The opinion of the court was delivered by: Dennis L. Beck United States Magistrate Judge

FINDINGS AND RECOMMENDATIONS REGARDING PETITION TO COMPEL ARBITRATION (Documents 1 & 5)

On December 31, 2009, Petitioner Fresno Motors, LLC ("Fresno Motors") filed the instant Petition to Compel Arbitration. On January 11, 2010, Fresno Motors filed a Notice of Hearing on Petition to Compel Arbitration. On February 1, 2010, Respondent Mercedes-Benz USA, LLC ("MBUSA") filed its opposition to the petition. On February 5, 2010, Fresno Motors filed a reply.

On February 17, 2010, the Court determined the matter was suitable for decision without oral argument pursuant to Local Rule 230(g). The hearing scheduled for February 19, 2010, was vacated and the matter was deemed submitted for written findings. On March 3, 2010, the matter was reassigned to the undersigned Magistrate Judge for decision.*fn1

FACTUAL BACKGROUND

On March 27, 2009, Asbury Fresno Imports, LLC ("Asbury") entered into an Asset Purchase Agreement ("APA") with Selma Motors to sell its assets in Mercedes-Benz of Fresno, a local Mercedes-Benz dealership. Selma Motors then assigned its rights under the APA to Fresno Motors. The APA was contingent upon MBUSA's approval of Fresno Motors as its new dealer.

Pursuant to a Passenger Car Dealer Agreement ("PCDA") between Asbury and MBUSA, MBUSA has a contractual right of first refusal or option to purchase assets, which supersedes the dealer's right to transfer interest or ownership of the dealership. Exhibit A to Opposition, pp.21-23. If MBUSA exercises its right of first refusal, it "then replaces the original buyer as the contract party with the selling dealer." Exhibit A to Opposition, p. 22; Opposition, p. 4.

On or about June 15, 2009, MBUSA exercised its right of first refusal under its PCDA with Asbury. Exhibit B to Opposition; Declaration of Mark H. Kelly ("Kelly Dec.") ¶¶ 3-4. On June 19, 2009, MBUSA and Asbury entered into an Acknowledgment of an Agreement with Respect to Exercise of Right of First Refusal ("Acknowledgment"). Exhibit 2 to Petition. Pursuant to the Acknowledgment, MBUSA agreed to be bound by the APA as if it were the original buyer of Asbury's dealership assets. MBUSA also made certain representations in the event it assigned its rights.

Thereafter, Fresno Motors objected to MBUSA's exercise of its right of first refusal as untimely and unlawful. To resolve the dispute, MBUSA voluntarily participated in mediation with Fresno Motors on July 30, 2009. As a result of mediation, MBUSA agreed to assign its rights under the APA to Fresno Motors provided that Fresno Motors met several conditions. Exhibit C to Opposition; Declaration of Gwen Young ("Young Dec.") ¶ 3. As one condition, Fresno Motors agreed to enter into a written assignment and assumption agreement "by which MBUSA will convey its interest under exercise of its [right of first refusal] to Fresno Motors as assignee; Fresno Motors will then close with Asbury as the buyer." Exhibit C to Opposition. Counsel for the parties prepared a draft assignment and assumption agreement, but Fresno Motors reportedly refused to sign the agreement. Exhibit D to Opposition; Kelly Dec. ¶ 5.

At some point, negotiations on an acceptable asset purchase agreement between Fresno Motors and Asbury broke down. Fresno Motors asserts that MBUSA "refused to follow through on its prior promises and agreements" and this, in turn, prompted Asbury to demand "significant concessions from Fresno Motors that materially differed from the terms of the APA." Petition ¶ 14. When Fresno Motors refused to accept the concessions, Asbury terminated the APA and all related agreements and negotiations. Petition ¶ 14.

On December 9, 2009, Fresno Motors initiated arbitration proceedings against Asbury and MBUSA. Asbury submitted to arbitration. MBUSA has refused or declined to participate in arbitration.

On December 31, 2009, Fresno Motors filed the instant petition pursuant to the Federal Arbitration Act to compel MBUSA to submit to arbitration.

DISCUSSION

A. Federal Arbitration Act

Fresno Motors and MBUSA agree that the Federal Arbitration Act ("FAA"), 9 U.S.C. ยง 1 et seq., governs this dispute. In ...


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