Love Pontiac v. General Motors Corp ( 1999 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
LOVE PONTIAC, CADILLAC, BUICK,
GMC TRUCK, INCORPORATED,
Plaintiff-Appellant,
v.
No. 97-2490
GENERAL MOTORS CORPORATION;
GMC TRUCK DIVISION, a division of
General Motors Corporation,
Defendants-Appellees.
Appeal from the United States District Court
for the District of South Carolina, at Charleston.
Dennis W. Shedd, District Judge.
(CA-95-2161-9-19)
Argued: December 3, 1998
Decided: March 10, 1999
Before NIEMEYER and KING, Circuit Judges, and
MICHAEL, Senior United States District Judge for the
Western District of Virginia, sitting by designation.
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Affirmed by unpublished per curiam opinion.
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COUNSEL
ARGUED: Philip Benjamin Zuckerman, LEWIS, BABCOCK &
HAWKINS, L.L.P., Columbia, South Carolina, for Appellant. J. Rob-
ert Robertson, KIRKLAND & ELLIS, Chicago, Illinois, for Appel-
lees. ON BRIEF: Geoffrey M. Davis, KIRKLAND & ELLIS,
Chicago, Illinois, for Appellees.
_________________________________________________________________
Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).
_________________________________________________________________
OPINION
PER CURIAM:
Plaintiff Love Pontiac, Cadillac, Buick and GMC Truck, Inc.
("Love") brought suit against General Motors Corporation and the
GMC Truck Division of General Motors Corporation, alleging breach
of contract, fraud and violation of Title 56, Chapter 15 of South Caro-
lina law, "Regulation of Manufacturers, Distributors and Dealers."
The District Court adopted the recommendation of the Magistrate
Judge and granted summary judgment for defendants. The Magistrate
Judge reasoned that GM's actions were not in violation either of the
contract, which granted GM sole discretion to take such actions, or of
the South Carolina statute prohibiting arbitrary, bad faith, or uncon-
scionable actions. Love appeals the district court's disposition of the
breach of contract and statutory claims only.* For the reasons dis-
cussed below, we affirm.
I.
Plaintiff operated a General Motors dealership in Burton, Beaufort
County, South Carolina. In 1989, Love purchased the dealership and
entered into contracts with several GM Divisions, including a contract
as a provider of sales and service for GMC Trucks. The contract with
_________________________________________________________________
*Appellant's brief raised an additional issue on appeal: whether the
Magistrate Judge properly granted defendants' motion for a protective
order barring the deposition of John G. Smale, a chairman of General
Motors. Because the plaintiff failed to seek review of that order at the
district court level, we decline to reach the question on appeal.
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GMC Trucks was for a five-year period and included attached notices
that the Love dealership's "Area of Primary Responsibility" ("APR")
would be Beaufort and Jasper counties, including Hilton Head Island.
Several provisions of the contract with GMC Truck are particularly
relevant to our analysis of plaintiff's claims. The stated "Purpose of
the Agreement" is "to promote a relationship" between GMC Truck
Division and Love as an authorized dealer. The Agreement mentions
"mechanisms" by which dealers can provide input to GMC Truck
Division's decision-making process, but specifically preserves the
Division's "right to revise Dealer's Area of Primary Responsibility at
Division's sole discretion consistent with dealer network planning
objectives." Dealer Network Planning is described as distribution
through a network of dealers that is "appropriate in number" so that
each dealer is permitted "the opportunity to achieve a reasonable
return on investment if it fulfills its obligations." The Agreement pro-
vides further that GMC Truck "reserves the right to appoint additional
dealers" taking into consideration dealer network planning consider-
ations. The only assurance to dealers with regard to Division's deci-
sions to appoint new dealers is that Love would be advised in writing
and given thirty days to present information before a final decision.
However, the Agreement explicitly leaves that final decision solely to
GMC Truck "pursuant to its business judgment."
In March 1993, Love proposed establishing a satellite dealership on
Hilton Head Island. Also in March 1993, an agent of GMC Truck
advised Love that the division wanted to add a Hilton Head dealer.
However, GMC Truck turned down the proposed Love satellite on
Hilton Head in June 1993, citing two reasons: (1) corporate directives
as to the proper combination of GM products to be offered at a single
dealership, and (2) Love's ineffectiveness in selling GMC Trucks at
its Beaufort facility. Love received notice in June 1993 that its APR
for GMC Trucks would be altered to exclude Hilton Head. Around
that time, GMC Truck notified Love that it had decided to appoint a
dealer other than Love to sell GMC Trucks on Hilton Head, again in
keeping with corporate directives and anticipated sales. The dealer
selected for the Hilton Head GMC Truck franchise was Heritage
Motors ("Heritage"), an established dealership on Hilton Head which
sold several GM lines (Pontiac, Buick, and Oldsmobile) as well as
BMW products. Final approval of Heritage as the Hilton Head dealer
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for GMC Truck was granted in January 1994 with the conclusion of
a formal, written agreement.
II.
Plaintiff claims that defendants breached the terms of its contract
by appointing an additional dealer in Love's APR and reducing its
APR without adequate consideration of Love's interests. Interpreting
a contract in general is a matter of law for the court. See Cunningham
& Co. v. Consolidated Realty Mgt., 803 F.2d 840, 842 (5th Cir.
1986); see also Bourne v. Walt Disney Co., 68 F.3d 621, 629 (2nd
Cir. 1995) (contract is ambiguous and presents jury question only if
the "language used is susceptible to differing interpretations, each of
which may be as reasonable as another").
The court below correctly found that the contract was not ambigu-
ous and that plaintiff presented no question for a jury. The clear pur-
pose of the contract was to grant plaintiff the authority to act as
defendants' representative at the Burton/Beaufort location in selling
and servicing GMC trucks. Contractual provisions regarding dealer
input to GMC Truck and notice from GMC Truck to dealers are most
properly understood as measures designed to reassure the dealer.
Plaintiff's argument that such provisions diminish the discretion of
defendants in making such decisions founders on the language of the
contract which clearly preserves to defendants the"right to revise
Dealer's Area of Primary Responsibility at Division's sole discretion
consistent with dealer network planning objectives." Further, the con-
tract clearly leaves the final decisions in this matter to GMC Truck
"pursuant to its business judgment." These measures cannot, consis-
tent with language of the contract as a whole, be considered as condi-
tions precedent to actions left solely to the discretion of defendant
GMC Truck. As noted, the evidence clearly discloses the steps were
taken in the exercise of "its [defendant GMC Truck's] business judg-
ment."
The terms of the contract leave no ambiguities as to defendants'
discretion to establish additional dealerships and alter a dealer's APR.
While the contract provides that such decisions should be made only
after analyzing network planning considerations, those considerations
include many factors in addition to plaintiff's best interests. The con-
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tract provides that notice and opportunity be given plaintiff, but the
final decision is left solely in GMC Truck's discretion, "pursuant to
its business judgment." Defendants provided sound business judg-
ment reasons for both the decision to award the Hilton Head franchise
to Heritage rather than Love and the decision to diminish Love's
APR. While it may have been clear before the notice period had
expired that GMC Truck would probably not select Love as the Hil-
ton Head dealer, adequate notice was given before the final decision
to grant the dealership to another dealer was made.
Other courts have construed clauses very similar or even identical
to the ones at issue here in a manner favorable to defendants. See
Clair Int'l., Inc. v. Mercedes-Benz of N. America , 124 F.3d 314, 317
(1st Cir. 1997) (affirming dismissal of suit by dealer claiming new
dealership was improperly awarded to third party by construing con-
tract provision that final decision to establish additional dealers was
to be made solely by manufacturer pursuant to its own business judg-
ment without dealer's consent, notwithstanding other clauses in con-
tract); Hubbard Chevrolet Co. v. Gen'l Motors Corp., 873 F.2d 873,
874 (5th Cir. 1989) (affirming summary judgment for defendant
because exercise of sole discretion granted by contract cannot consti-
tute breach when GM cited reasons for its decision); Olympic Chevro-
let, Inc. v. Gen'l Motors Corp., 959 F.Supp. 918, 923 (N.D.Ill. 1997)
(although contract states that its purpose is to permit dealers fully to
realize opportunities for business success, that language does not ren-
der ambiguous, or contradict, other provisions in the contract leaving
decisions solely to GM).
III.
Plaintiff also claims defendants violated Title 56 of the Code of
Laws of South Carolina which governs motor vehicles. Chapter 15 of
that Title, captioned "Regulation of Manufacturers, Distributors and
Dealers," declares that unfair methods of competition and unfair or
deceptive acts or practices are unlawful. See S.C. Code Ann. § 56-15-
30 (1997). Specifically, it is a violation of § 56-15-30 for any manu-
facturer "to engage in any action which is arbitrary, in bad faith, or
unconscionable and which causes damage to any of the parties,"
including dealers. S.C. Code Ann. § 56-15-40(1).
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The statute does not define the terms "arbitrary," "bad faith," or
"unconscionable," but South Carolina courts have given them their
usual legal meanings. Arbitrary conduct consists of"acts which are
unreasonable, capricious or nonrational; not done according to reason
or judgment, depending on will alone." Taylor v. Nix, 416 S.E.2d 619,
621 (S.C. 1992). Bad faith is defined as the opposite of good faith,
which is "honesty in fact and the observation of reasonable commer-
cial standards of fair dealing in trade." Schott Motorcycle Supply v.
American Honda Motor Co., 976 F.2d 58 (1st Cir. 1992) (defining
terms using ordinary meaning because they were not specifically
defined in statute). Good faith exists and bad faith is absent when an
entity exercises reasonable business judgment. See Richland Whole-
sale Liquors v. Glenmore Distilleries Co., 818 F.2d 312, 316 (4th Cir.
1987) (construing South Carolina statute outlawing unfair trade prac-
tices). Unconscionable is defined as "shockingly unfair or unjust."
Schott, 976 F.2d at 63.
Defendants' actions were not in bad faith because they were based
on a reasonable exercise of business judgment. GM had conducted
market studies and other analyses before determining finally that a
dealership should be added at Hilton Head. The determination that
Heritage rather than Love should be awarded that dealership was
based on corporate policy and the poor performance of Love's exist-
ing dealership in representing GMC Truck. The court below correctly
accepted the proffered business judgment rationale for the decision.
For the same reasons, defendants' actions cannot reasonably be
deemed arbitrary or unconscionable. By definition, an action which
is based on a legitimate business rationale is not an arbitrary action.
And awarding a new franchise to one existing GM dealer rather than
another existing GM dealer cannot be called shockingly unjust or
unfair because inevitably one of the two had to be chosen over the
other.
IV.
Based on the foregoing reasons and analysis, the district court's
order granting summary judgment to defendants is
AFFIRMED.
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