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Carstens Chevrolet, Inc. v. General Motors, LLC

United States District Court, E.D. California

June 16, 2017

CARSTENS CHEVROLET, INC., a California corporation, dba CARSTENS MOTORS, INC.; and ROBERT H. CARSTENS, aka BOB CARSTENS, Plaintiffs,
GENERAL MOTORS, LLC, a Delaware Limited Liability Company, and DOES 1 through 25, inclusive, Defendants. GENERAL MOTORS, LLC, a Delaware Limited Liability Company, Third-Party Plaintiff,
BILLY LEON MARKER, JR., Third-Party Defendant.



         Through the present lawsuit, Plaintiffs Carstens Chevrolet, Inc. and Robert H. Carstens (“Plaintiffs”) allege eight claims against Defendants General Motors, LLC and twenty-five unnamed Doe Defendants (“Defendants”).[1] The claims stem from two alleged occurrences: first, that Defendants wrongfully refused to approve a Stock Purchase Agreement between Plaintiffs and a prospective purchaser, Third-Party Defendant Billy Marker (“Marker”), and second, that Defendants unreasonably withheld delivery of sufficient vehicles. Plaintiffs' first two claims charge Defendants with violations of California Vehicle Code § 11713.3(d) and (a). The third, fourth, and fifth claims charge Defendants with tortious interference. The sixth and seventh claims charge Defendants with contractual breaches, and the eighth claim charges Defendants with unfair business practices. Defendant General Motors (“GM”) now moves to dismiss all claims under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. For the reasons set forth below, that Motion is GRANTED.

         BACKGROUND [2]

         Plaintiffs own and operate an automobile dealership in Alturas, California. Pursuant to the franchise contract between GM and Plaintiffs, GM has to consider any proposal made by Plaintiffs to transfer the franchise and may not unreasonably withhold approval of such a transfer. The franchise contract also obligates GM to distribute adequate quantities of vehicles to Plaintiffs.

         On April 1, 2015, Plaintiffs and Marker entered into a Stock Purchase Agreement (“SPA”) that would effectively transfer ownership to Marker, conditioned on GM's approval of the transaction.

         GM sent a letter to Carstens on April 29, 2015, notifying Plaintiffs that GM would neither authorize the SPA, nor approve of Marker assuming ownership of the franchise. The letter explained that in 2002, Marker signed an Agreement of Settlement, Compromise and Release (“Settlement Agreement”) in which he agreed never to seek ownership of any GM dealership. Although GM as constituted in 2002 has since been reorganized through bankruptcy proceedings, GM's letter also informed Plaintiffs that the reorganized company had acquired all the contracts not specifically excluded from its 2009 bankruptcy sale agreement with General Motors Corporation (“old GM”).

         Plaintiffs claim that GM's refusal to consider Marker's qualifications was willful and unreasonable, amounting to violations of Vehicle Code § 11713.3(d), tortious interference with contractual relations and prospective advantage, breaches of contract and the implied covenant of good faith and fair dealing, and unfair business practices. Plaintiffs also allege that Defendants “continually ‘fail[ed] to deliver in reasonable quantities and within a reasonable time after receipt of an order from a dealer having a franchise for the retail sale of a new vehicle sold or distributed by the manufacturer or distributor, '” and that such conduct constituted a violation of Vehicle Code § 11713.3 (a), tortious interference with Plaintiffs' prospective advantage, breach of contract and the implied covenant of good faith and fair dealing, and unfair business practices. Pls.' Compl., ¶ 22, ECF No.1.

         Moving for dismissal, GM contends Plaintiffs failed to show causation between GM's refusal to approve the SPA and Plaintiffs' injury. GM further argues that Plaintiffs have pleaded insufficient facts to state any claims based on the allegation of insufficient vehicle delivery.

         Plaintiffs dispute the validity of the Settlement Agreement and allege that, regardless of its enforceability, the agreement was excluded from the assets transferred to GM through old GM's bankruptcy sale.


         On a motion to dismiss for failure to state a claim under Federal Rule of Civil Procedure 12(b)(6), all allegations of material fact must be accepted as true and construed in the light most favorable to the nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337-38 (9th Cir. 1996). Rule 8(a)(2) “requires only ‘a short and plain statement of the claim showing that the pleader is entitled to relief' in order to ‘give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint attacked by a Rule 12(b)(6) motion to dismiss does not require detailed factual allegations. However, “a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Id. (internal citations and quotations omitted). A court is not required to accept as true a “legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555). “Factual allegations must be enough to raise a right to relief above the speculative level.” Twombly, 550 U.S. at 555 (citing 5 Charles Alan Wright & Arthur R. Miller, Federal Practice and Procedure § 1216, at 235-36 (3d ed. 2004) (stating that the pleading must contain something more than “a statement of facts that merely creates a suspicion [of] a legally cognizable right of action”)).

         Furthermore, “Rule 8(a)(2) . . . requires a showing, rather than a blanket assertion, of entitlement to relief.” Twombly, 550 U.S. at 556 n.3 (internal citations and quotations omitted). Thus, “[w]ithout some factual allegation in the complaint, it is hard to see how a claimant could satisfy the requirements of providing not only ‘fair notice' of the nature of the claim, but also ‘grounds' on which the claim rests.” Id. (citing Wright & Miller, supra, § 1202, at 94-95). If the “plaintiffs . . . have not nudged their claims across the line from conceivable to plausible, their complaint must be dismissed.” Id. at 570. /// A court granting a motion to dismiss a complaint must then decide whether to grant leave to amend. Leave to amend should be “freely given” where there is no “undue delay, bad faith or dilatory motive on the part of the movant, . . . undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of the amendment . . . .” Foman v. Davis, 371 U.S. 178, 182 (1962); Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003) (listing the Foman factors as those to be considered when deciding whether to grant leave to amend). Not all of these factors merit equal weight. Rather, “the consideration of prejudice to the opposing party . . . carries the greatest weight.” Id. (citing DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 185 (9th Cir. 1987)). Dismissal without leave to amend is proper only if it is clear that “the complaint could not be saved by any amendment.” Intri-Plex Techs. v. Crest Group, Inc., 499 F.3d 1048, 1056 (9th Cir. 2007) (citing In re Daou Sys., Inc., 411 F.3d 1006, 1013 (9th Cir. 2005); Ascon Props., Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989) (“Leave need not be granted where the amendment of the complaint . . . constitutes an exercise in futility . . . .”)).


         A. Vehicle Code Violations

         Under California law, “[a]ny licensee suffering pecuniary loss because of any willful failure by any other licensee to comply with [§ 11713.3] . . . may recover damages and reasonable attorney fees.” Cal. Veh. Code § 11726 (West). Plaintiffs allege that GM violated Vehicle Code § 11713.3(d) and (a).

         1. Vehicle Code § 11713.3(d)

         It is a violation to prevent “a dealer, or an officer, partner, or stockholder of a dealership, the sale or transfer of a part of the interest of any of them to another person.” Cal. Veh. Code § 11713.3(d)(1) (West). However, a dealer does not “have the right to sell, transfer, or assign the franchise, or a right thereunder, without the consent of the manufacturer or distributor except that the consent shall not be unreasonably withheld.” Id. Vehicle Code § 11726 allows recovery only if Plaintiffs' loss is caused by GM's willful failure to comply with § 11713.3. GM correctly argues that Plaintiffs have failed to show that their pecuniary loss was ...

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