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Fresno Motors, LLC, A California Limited v. Mercedes-Benz Usa

March 27, 2012

FRESNO MOTORS, LLC, A CALIFORNIA LIMITED COMPANY; AND SELMA MOTORS, INC., A CALIFORNIA CORPORATION; PLAINTIFFS,
v.
MERCEDES-BENZ USA, LLC, A DELAWARE LIMITED LIABILITY COMPANY; DEFENDANT.



The opinion of the court was delivered by: _ Cormac J. Carney United States District Judge

ORDER GRANTING DEFENDANT'S CONVERTED MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

Plaintiffs Fresno Motors, LLC and Selma Motors, Inc. (collectively, "Plaintiffs") brought this action against Mercedes-Benz USA, LLC ("MBUSA"), alleging that MBUSA tortiously interfered with Plaintiffs' contractual right to purchase the assets of Mercedes-Benz of Fresno, a local Mercedes-Benz dealership ("Fresno Dealership"), from Asbury Fresno Imports, LLC ("Asbury"). (Dkt. No. 1.) In the operative First Amended Complaint ("FAC"), Plaintiffs allege that it executed an Asset Purchase Agreement ("APA") with Asbury to acquire certain assets in Asbury's Fresno Dealership, including Asbury's leasehold interest in the dealership premises. (FAC ¶ 12.) Plaintiffs allege that they were unable to close on the APA because MBUSA belatedly and unlawfully exercised its right of first refusal to purchase the dealership assets. (Id. ¶¶ 28--39.) Plaintiffs further allege that MBUSA thereafter conspired with Asbury and executed a secret agreement with Asbury acknowledging that MBUSA timely exercised its right of first refusal and additionally promising that, in the event MBUSA assigned its rights under the APA, MBUSA would purportedly guarantee the assignee's sublease under the APA. (Id. ¶¶ 40--45.) Plaintiffs, MBUSA, and Asbury thereafter engaged in negotiations to assign MBUSA's rights and obligations under the APA to Fresno Motors. (Id. ¶¶ 51-- 53.) During these negotiations, Plaintiffs allege that MBUSA concealed its promise to guarantee a sublease, forcing Plaintiffs to negotiate a new lease arrangement with Asbury's landlord. (Id. ¶¶ 54--55.) Negotiations between Plaintiffs, MBUSA, and Asbury eventually broke down, and Asbury terminated the APA. (Id. ¶¶ 59--64.)

Based on these allegations, Plaintiffs assert five causes of action against MBUSA under California law: (1) intentional interference with existing contractual advantage; (2) intentional interference with prospective economic advantage; (3) unfair and deceptive business acts and practices under California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code §§ 17200, et seq.; (4) violation of California Vehicle Code section 11713.3(t); and (5) fraudulent concealment. (Dkt. No. 23.) Plaintiffs request, inter alia, compensatory, statutory, and punitive damages as well as restitution. (FAC, Prayer.)

On November 18, 2011, MBUSA filed its renewed motion to dismiss the FAC pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (Dkt. No. 29.) The Court converted the motion to a summary judgment motion under Rules 12(d) and 56 because the Court determined that the material facts of the case were undisputed, the success of Plaintiffs' claims hinged on determination of legal issues, and additional evidence, where needed, could be submitted without further discovery. (Ct. Order, Dkt. No. 52, Jan. 12, 2012.) Presently before the Court is MBUSA's converted summary judgment motion, filed on February 3, 2012. (Dkt. No. 56.) After considering the undisputed evidence presented by the parties and the arguments of their counsel, the Court concludes that summary judgment is warranted in favor of MBUSA on all of Plaintiffs' claims.

II. BACKGROUND

This suit arises out of Plaintiffs' unsuccessful attempt to purchase the Fresno Dealership from Asbury pursuant to the APA. Mercedes-Benz, a Delaware corporation licensed by the California Department of Motor Vehicles, is a subsidiary of Daimler AG and distributes Mercedes-Benz vehicles manufactured by Daimler AG. (FAC ¶ 3 & Exh. A [APA], Appx.)*fn1 Asbury, a local Mercedes-Benz dealer, owned and operated the Fresno Dealership pursuant to a Passenger Car Dealer Agreement ("PCDA") and Light Truck Dealer Agreement ("LTDA") (collectively, "Dealer Agreements") with MBUSA. (Day Decl., Exh. 1 [PCDA]; Exh. 2 [LTDA].)*fn2 Asbury also operated the Fresno Dealership on premises that it leased from CAR AAG CA, L.L.C. (the "Landlord") under a Lease Agreement ("Lease"), dated April 1, 2003, for a lease term of fifteen years with two ten-year renewal options. (Young Decl., Exh. 13 [Lease], at 2--3, secs. 1.8, 1.13.)*fn3

Selma Motors and Fresno Motors were prospective buyers of the Fresno Dealership. Dwight G. Nelson is the owner and president of Selma Motors and the managing member and president of Fresno Motors. (FAC ¶¶ 1--2 & Exh. C [2nd Am. to APA].) On March 27, 2009, Selma Motors entered into the APA with Asbury to purchase certain assets in the Fresno Dealership, including a leasehold interest in the dealership premises. (APA; Nelson Decl. ¶ 3 & Exh. A; Undisputed Fact ["UF"] No. 1.)*fn4 Selma Motors subsequently assigned its rights under the APA to Fresno Motors. In order to purchase the Fresno Dealership from Asbury, Plaintiffs needed approval from both MBUSA regarding Asbury's sale to Plaintiffs and the Landlord regarding the transfer of Asbury's leasehold interest. (APA, at 7.) Plaintiffs, however, were unable to close on the APA when MBUSA exercised its right of first refusal. Plaintiffs, MBUSA, and Asbury thereafter attempted to renegotiate a deal under the APA, but negotiations broke down, and Asbury terminated the APA in the fall of 2009.

A. Dealer Agreements

Prior to the events underlying this action, Asbury entered into the Dealer Agreements with MBUSA on January 1, 2007. (PCDA; LTDA.) The agreements were valid from the date of execution to December 31, 2011. (PCDA, at vi; LTDA, at vi.) As an appointed Mercedes-Benz dealer, Asbury had a nonexclusive right to buy and resell Mercedes-Benz vehicles. (PCDA, at ii; LTDA, at ii.) The scope of Asbury's other functions, as an authorized dealer, also included the servicing, rental, and leasing of Mercedes-Benz vehicles; use and display of Mercedes-Benz marks and products; and financing or insurance services. (PCDA, at 37; LTDA, at 37.) The agreements further incorporated standard provisions that furnished detailed guidance regarding the parties' rights and obligations as to the acquisition, delivery, and inventory of Mercedes-Benz vehicle products; the dealer's marketing and sales of Mercedes-Benz vehicles; the dealer's service obligations, along with MBUSA's obligations to provide service manuals and materials and field personal assistance; the dealer's service and parts organization requirements; the dealer's customer satisfaction obligations; the dealer's location and facilities requirements; MBUSA's warranty obligations; the dealer's financing, capital, and accounting requirements; and the dealer's sales reporting requirements. (PCDA, at 1--20; LTDA, at 1--20.) Moreover, the agreements permitted MBUSA to monitor the dealer's performance by periodically evaluating the dealer's service and parts performance, the dealer's customer satisfaction performance, and the dealer's facilities as well as by inspecting the dealer's accounts and records on a reasonable basis. (PCDA, at 12--15, 19--20; LTDA, at 12--15, 19--20.)

The agreements additionally specified the terms and conditions for assignment. The dealer could not transfer ownership of the dealership without MBUSA's written consent. (PCDA, at ii, 35; LTCA, at ii, 36.) In the event of Asbury's assignment or transfer or its assets, the agreements also provided:

MBUSA has a right of first refusal or option to purchase such assets or ownership interest, including any leasehold interest or realty. MBUSA's exercise of its right or option under this Section IX.B supersedes Dealer's right to transfer its interest in, or ownership of, the dealership. . . . If Dealer has entered into a bona fide written buy/sell agreement for its dealership business or assets, MBUSA's right under this Section IX.B is a right of first refusal, enabling MBUSA to assume the buyer's rights and obligations under such buy/sell agreement, and to cancel this Agreement and all rights granted Dealer.

(PCDA, at 21, 22; LTDA, at 21, 22.) Concomitant with its right of first refusal, MBUSA was permitted to assign its right or option: "MBUSA's right or option may be assigned by it to any third party and MBUSA hereby guarantees the full payment to Dealer of the purchase price by such assignee." (PCDA, at 21; LTDA, at 21.)

B. Lease Agreement

Asbury operated the Fresno Dealership on premises that it leased from the Landlord under the Lease Agreement for a term of fifteen years, beginning on April 1, 2003. (Young Decl., Exh. 13 [Lease].) Asbury also had two ten-year renewal options under the Lease. (Id. at 2, sec. 1.13.) The Lease listed Asbury as the "Tenant" and the "Guarantor." (Id. at 1, sec. 1.4.) The Lease further provided that Asbury could not assign or sublease the Fresno Dealership premises without the Landlord's prior written consent except under certain conditions. (Id. at 10, sec. 7.1.) The Landlord's consent to any assignment or sublease, however, could not be construed as:

(i) waiving or releasing Tenant from any of its liabilities or obligations under this Lease as a principal, (ii) waiving or releasing Guarantor from its obligations under the Guaranty, or (iii) as relieving Tenant or any assignee or subtenant from the obligation of obtaining Landlord's prior written consent to any subsequent Assignment or Sublease.

(Id. at 11, sec. 7.2.)

C. Asset Purchase Agreement

Asbury and Selma Motors executed the APA on March 27, 2009, for the sale of certain assets in the Fresno Dealership, including Asbury's leasehold interest under the Lease Agreement. (APA.) The APA provided that Asbury would either (a) assign the lease to Selma Motors or (b) execute a sublease. (APA, at 3, sec. 2.05.) Specifically, section 2.05 of the APA states that at the closing, Asbury (the Seller) shall deliver, and Selma Motors (the Buyer) shall accept, a leasehold interest in the leased real property of the Fresno Dealership premises as follows:

by either (the manner to be chosen in the sole discretion of the Seller):

(a) an assignment to the Buyer of all right, title and interest in the Lease (with terms and conditions reasonably satisfactory to the Seller to the extent such terms and conditions apply to, or otherwise affect, such Seller, but including the full release of the Seller and/or its Affiliates) (the "Lease Assignment"), or (b) execution and delivery of a sublease for such leased real property in favor of the Buyer (with terms and conditions reasonably satisfactory to the Seller, but including a personal guarantee of the Buyer's principal and such principal's spouse securing the obligations of the Buyer under such sublease (the "Sublease"). The Lease Assignment or the Sublease, as the case may be, will be on a pass through basis such that the Buyer will be subject to the same terms and conditions in the Lease as in effect as of the date of this Agreement, without modification (except for the change contemplated in Section 7.04).

(Id.) Selma Motors' obligation to purchase the dealership assets was subject to several conditions, including approval from MBUSA and consent from the Landlord:

Section 7.03 Manufacturer Approval. The Manufacturer shall have approved the Buyer as an authorized dealer of its products.

Section 7.04 Landlord Consent. The landlord under the Lease shall have consented in writing to the Lease Assignment or the Sublease, as selected by the Seller as contemplated in Section 2.05 . . . .

(Id. at 7.) Similarly, Asbury's obligation to sell the dealership assets was subject to several conditions, including consent and release from MBUSA, assignment and assumption of liabilities by Selma Motors, and consent from the Landlord:

Section 8.03 Manufacturer Consent and Release. The Seller shall have obtained the Manufacturer's consent to terminate the Seller's existing dealership agreement with the Manufacturer, the Manufacturer's consent to releasing the Seller from all obligations under the Seller's existing dealership agreement with the Manufacturer, and the Seller terminating the Seller's existing dealership agreement with the Manufacturer.

Section 8.04 Assignment and Assumption. The Buyer executing and delivering to the Seller, on or before the Closing Date, an assignment and assumption agreement for the Assumed Liabilities, in a form reasonably acceptable to the parties.

Section 8.06 Landlord Consent. The landlord under the Lease shall have consented in writing to the Lease Assignment or the Sublease, as selected by the Seller as contemplated in Section 2.05.

(Id.) The termination date of the APA was initially set for April 17, 2009. (Id. at 11--12, secs. 11.01(b), (c), (g).) This date was extended to June 15, 2009 by a first, second, and third amendment to the APA. (FAC, Exhs. B--D; Nelson Decl. ¶¶ 5, 9, 10 & Exhs. B--D; UF Nos. 3, 7, 8.)

Subsequent to executing the APA, Selma Motors assigned its rights and obligations under the APA to Fresno Motors. (FAC ¶ 19 & Exh. C [2nd Am. to APA]; Nelson Decl. ¶ 9 & Exh. C [same]; UF No. 7.) In the assignment, the parties (which included Asbury, Selma Motors, and Fresno Motors) agreed to the following:

Assignment to New Buyer. The parties agree that Selma Motors['] rights under the Agreement are hereby assigned to the New Buyer, and the New Buyer shall be subject to the same obligations as Selma Motors as the Buyer under the Agreement. All references to the Buyer in the Agreement shall mean the New Buyer. Notwithstanding the foregoing, the assignment and assumption of the Buyer's rights and obligations under the Agreement by the New Buyer shall not operate as a release of Selma Motors of its obligations as the Buyer under the Agreement.

(2nd Am. to APA.)

D. Right of First Refusal and Acknowledgement Agreement

Pursuant to the Dealer Agreements, MBUSA had a contractual right of first refusal or option to purchase the Fresno Dealership assets that superseded Asbury's right to transfer interest or ownership of the dealership. (PCDA, at 21, 22; LTDA, at 21, 22; see also supra Part II(A).) MBUSA also had a statutory right of first refusal under section 11713.3(t) of the California Vehicle Code.

On or about June 15, 2009, MBUSA notified Asbury and Selma Motors of its exercise of first refusal by sending a letter to Asbury and Selma Motors via facsimile and overnight delivery. (FAC, Exh. E [Letter]; Nelson Decl. ¶¶ 13, 15 & Exhs. F--G; UF Nos. 11, 13.) MBUSA stated that pursuant to its Dealer Agreements with Asbury and Vehicle Code sections 11713.3, et seq., it was exercising its right of first refusal with respect to the APA and would "purchase the assets of the Fresno Dealership as more fully set forth in the terms and condition of the Sale Agreement on the same terms and for the same consideration as set forth in the Sale Agreement." (Letter.)

On June 19, 2009, MBUSA and Asbury entered into an "Acknowledgment of and Agreement with Respect to Exercise of Right of First Refusal." ("Acknowledgement Agreement" or "Ack. Agrmt."). (FAC, Exh. F [Ack. Agrmt.]; Nelson Decl., Exh. T [same]; Burkhalter Decl., Exh. E [same].)*fn5 The Acknowledgment Agreement states that, on June 15, 2009, MBUSA provided timely written notice to Asbury of its exercise of its right of first refusal with respect to the APA. (Ack. Agrmt.) The agreement also expressly reiterated Asbury's and MBUSA's respective rights and obligations as to such exercise of first refusal, including the following provision:

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 the 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 the 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.

(Id.; see also UF No. 51.) The agreement further provided that Asbury would terminate the APA with respect to Fresno Motors, but that such termination "will 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," and that "MB will continue to be bound by the terms and conditions under the Fresno Motors APA as if it were an original party to same as a buyer . . . ." (Ack. Agrmt.) Asbury sent a copy of the Acknowledgement Agreement to Plaintiffs on August 31, 2009, in the midst of Fresno Motors' renegotiations with MBUSA and Asbury to purchase the Fresno Dealership as MBUSA's assignee. (FAC ¶ 59; Nelson Decl. ¶ 33; Burkhalter Decl. ¶ 8; UF No. 31.)

E. Mediation and Termination

Asbury terminated the APA with Plaintiffs on June 19, 2009. (FAC ¶ 46; Nelson Decl. ¶ 16, Exh. H [Term. Letter]; UF No. 14.) Fresno Motors subsequently objected to MBUSA's exercise of its right of first refusal as untimely and unlawful. (FAC ¶ 49; Nelson Decl. ¶ 17.) In an effort to resolve the dispute, MBUSA voluntarily participated in mediation with Fresno Motors on July 30, 2009. (Woerner Decl. ¶ 2; Nelson Decl. ¶ 19; Burkhalter Decl. ¶¶ 3--4; UF No. 17.)*fn6 During the mediation, MBUSA agreed to assign its rights under the APA to Fresno Motors under certain conditions. (Id.) These conditions were memorialized in an email exchange, dated July 30 and July 31, 2009, between MBUSA and Fresno Motors. (FAC, Exh. G [July 30--31, 2009 Email]; Nelson Decl. ¶¶ 25--26 & Exhs. O--P [same]; Burkhalter Decl. ¶ 7 & Exh. D [same]; UF Nos. 23-- 24.) The conditions included, but were not limited to, the following:

Mr. Nelson should provide to Asbury whatever additional documentation, if any, it requires to secure approval of the sublease[.] . . .

Fresno Motors will need to agree on and sign an assignment and assumption agreement, by which MBUSA will convey its interest under its exercise of its ROFR to Fresno Motors as assignee; ...


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