Ray Hutson Chevrolet v. General Motors Corp ( 2000 )

  • In the
    United States Court of Appeals
    For the Seventh Circuit
    No. 00-2233
    Appeal from the United States District Court
    for the Western District of Wisconsin
    No. 99-C-518-S--John C. Shabaz, Chief Judge.
    Argued October 24, 2000--Decided December 18,
      Before FLAUM, Chief Judge, and MANION and
    EVANS, Circuit Judges.
      EVANS, Circuit Judge. This case, brought
    under our diversity jurisdiction,
    requires us to interpret a provision of
    the Wisconsin Automobile Dealership Law,
    sec. 218.01 Wis. Stat. The district judge
    granted the motion of the General Motors
    Corporation to dismiss the statutory
    claims on the basis of language in the
    1993 revisions to the law, which he read
    to grant GM broad immunity from suit.
    Ultimately he dismissed all the claims,
    including common law claims, on the basis
    of the immunity provision. On this
    unsettled question of Wisconsin law we
    must surmise how the Wisconsin Supreme
    Court would likely interpret the statute.
      Since 1953 Ray Hutson Chevrolet has been
    a licensed Chevrolet dealership in
    LaCrosse, Wisconsin. In 1966 Hutson built
    new dealership facilities in accordance
    with GM’s facility space guidelines.
    These facilities have proven to be larger
    than required to handle the dealership’s
    service business. In 1985 Hutson obtained
    GM approval to add Nissan service to the
    service facility. Though it serviced
    Nissans in the GM service facility,
    Hutson sold Nissans out of a separate
    building because GM does not allow sales
    of cars other than GM cars out of GM
    dealerships. Even after Nissan service
    was added, the service facility was too
    large for the business.
      In the spring of 1999 Hutson accepted an
    offer from the United States distributor
    for Kia vehicles, Kia Motors America,
    Inc., to open a Kia franchise at the
    Hutson dealership. The plan was to sell
    Kias out of the Nissan facility but to
    add Kia to the GM service and parts
    facility, which GM and Nissan were
    already sharing.
      Under the dealership agreement with GM,
    Hutson was required to notify GM of these
    plans. It did that and furnished all the
    information GM requested for its
    evaluation of the proposal. GM rejected
    the proposal on May 24, 2000, citing
    "performance standards." One was the GM
    facility standard, which refers to its
    policy of not selling competing brands
    from its GM sales facilities. But Hutson
    claims it was not going to sell Kias out
    of the GM sales facility and GM had
    recently approved a plan similar to
    Hutson’s for another dealership. GM also
    cited customer satisfaction standards,
    which it says were low and Hutson says
    were fine when compared to similar
    dealerships. With regard to working
    capital standards, which GM also cited,
    Hutson agreed to raise its working
      As a result of GM’s refusal to approve
    the Hutson proposal, Kia withdrew its
    franchise offer and Hutson says it lost
    an opportunity to increase net profits by
    several hundred thousand dollars. This
    case followed. The district judge granted
    a motion to dismiss and a motion for
    summary judgment for GM, both of which
    depend on the interpretation of a
    Wisconsin statute. Our review of those
    decisions is de novo. Lexington Ins. Co.
    v. Rugg & Knopp, Inc., 
    165 F.3d 1087
    Cir. 1999). Because the issue involves an
    unsettled issue of Wisconsin law, we must
    determine what the Wisconsin Supreme
    Court would have to say about it.
      In 1937 Wisconsin enacted the Wisconsin
    Automobile Dealership Law; its purpose
    was to protect dealers from
    manufacturers. Forest Home Dodge, Inc. v.
    29 Wis. 2d 78
     (1965). The law was
    revised in 1993. The 1993 revisions are
    at issue here.
      The 1993 revisions created sec.
    218.01(3x), which set out procedures for
    challenging a manufacturer’s refusal to
    allow a change in ownership, management,
    or location of a dealership and, as
    relevant here, to add another franchise
    to an existing facility. It provided that
    if the grantor does not approve the
    dealer’s request, it must provide a
    written statement, within 30 days, of its
    reasons for disapproval. Failure to file
    the statement results in approval. A
    dealership which is served with a written
    statement disapproving its proposal may
    file a complaint with the Wisconsin
    Department of Transportation and ask for
    a determination of whether there is good
    cause for permitting the proposed action.
    The Office of the Commissioner of
    Transportation must promptly schedule a
    hearing and decide the matter. Factors
    which the commissioner should consider
    are set out in the statute.
      Subsection (3x) also has a qualified
    immunity provision which provides:
    The reasons given for the disapproval or
    any explanation of those reasons by the
    manufacturer . . . shall not subject the
    manufacturer . . . to any civil liability
    unless the reasons given or explanations
    made are malicious and published with the
    sole intent to cause harm to the dealer .
    . . .
    Hutson says the qualified immunity
    provision shields the manufacturer only
    from defamation claims which might arise
    out of the requirement that the
    manufacturer give reasons for the denial
    of the request; GM says it provides
    qualified immunity as to any cause of
    action for damages arising out of its
    disapproval of a proposed dealership
    change. It was the latter interpretation
    which carried the day with the district
      The language of the immunity provision,
    like a lot of legislative enactments, is
    not as clear as crystal. Hutson’s reading
    of the statute requires that we imply
    that the legislature meant that the
    "publication of the reasons," rather than
    simply the reasons themselves, shall not
    subject the manufacturer to liability. On
    the other hand, if, as GM contends, the
    legislature had intended to provide a
    broad grant of immunity, it could easily
    have done so more clearly.
      Before we try our hand at making sense
    out of these provisions, we need to look
    at other relevant provisions of the law.
    Section 218.01(9), provides a civil cause
    of action for various violations of the
    law: "Without exhausting any
    administrative remedy available under an
    agreement or this section, except as
    provided in sub. (3)(f) and (fm), a
    licensee may recover damages in a court
    of competent jurisdiction for pecuniary
    loss" and costs and attorney fees if the
    loss is caused by certain violations,
    including two which are relevant to our
    analysis. One is "[b]eing a manufacturer
    . . . who fails to comply with the
    procedures in sub. (3x) regarding a
    dealer’s request for approval of . . .
    adding another franchise at the same
    location as its existing franchise . . .
    ." Section 218.01(3)(a)24. Another covers
    violations of subsection (3)(a)22, which
    in turn refers to section 219.01(2g),
    which requires that performance standards
    by which dealership performance is
    measured must be "fair, reasonable and
      Hutson brought its lawsuit based on
    violations of subsection (3)(a)22,
    requiring fair performance standards, and
    (3)(a)11, forbidding unconscionable
    practices, rather than subsection
    (3)(1)24, regarding failure to comply
    with the procedures for evaluation of a
    request to add a franchise.
      Even though there is considerable
    incongruity in saying that, without
    exhausting administrative remedies, a
    dealer can bring a suit for damages if a
    manufacturer fails to comply with
    administrative procedures, it appears
    that the parties agree that a suit based
    on subsection (3)(a)24 can only be
    brought based on a manufacturer’s failure
    to do just that. We surmise that the
    reason Hutson brought its suit for
    damages for violations of subsections
    (3)(a)22 and (3)(a)11, rather than for
    violations of subsection (3)(a)24, is
    that GM had not refused to comply with
    administrative procedures; in fact,
    Hutson had never instituted
    administrative procedures.
      But the parties disagree about whether,
    in a situation such as the one here,
    subsection (3)(a)24 is an exclusive
    remedy. That is, if the dispute involves
    a refusal to approve a proposal to add a
    franchise to the dealership, does
    subsection (3)(a)24, which specifically
    covers that situation, occupy the field?
    Or, in a situation such as exists between
    Hutson and GM in which the manufacturer
    cites the dealership’s failure to meet
    performance standards as the reason for
    the refusal to approve the proposal, can
    the dealership also rely on the
    subsections of the statute concerning the
    unfair application of the performance
      Looking at the entire scheme, it seems
    likely to us that the purpose of
    subsection (3x) was to establish an
    administrative procedure to deal with
    requests to add franchises (and to change
    ownership, management, or location of a
    dealership). The commissioner of the
    Department of Transportation is given
    authority to evaluate rejections of these
    requests and administrative review of the
    commissioner’s decision is provided. If
    the manufacturer does not comply with the
    administrative procedures, then the
    dealer can file a civil action based on
    that noncompliance. It is a comprehensive
    scheme for dealing with changes to the
    dealership; it does not apply directly to
    the existing franchise itself. To put
    responsibility for evaluating this kind
    of change to an existing franchise in the
    hands of the department has some logical
    appeal. After all, it seems clear that
    the dealership’s interest in its existing
    franchise is different in kind from its
    interest in obtaining a new franchise.
    The integrated nature of the scheme leads
    us to conclude that subsection (3x)
    provides an exclusive procedure for
    evaluating a manufacturer’s rejection of
    a proposal such as the one here. If the
    statute did not provide for an exclusive
    procedure, then it seems likely that very
    often, as here, the entire administrative
    scheme could be ignored and a dealer
    could head straight to court, seeking
    damages based on the rejection of its
    proposal, thus reading the administrative
    procedures out of the statute.
      It follows that the civil remedy
    provided in subsection (24) is exclusive
    even if the rejection of the proposal is
    based, as it is here, on performance
    standards. We see a difference between
    reliance on the imposition of performance
    standards on a dealership for purposes of
    enforcing or perhaps terminating the
    existing franchise agreement, and
    areference to performance standards as a
    reason for the rejection of the addition
    of another franchise to an existing
    dealership. The manufacturer could be
    saying, as in fact GM seemed to be saying
    here, that the dealership’s performance
    is acceptable but not good enough to
    allow the addition of another franchise.
    In fact, GM specifically said in its
    letter rejecting the proposal that it was
    "concerned that the addition of Kia would
    further dilute your focus on Chevrolet."
    We do not read the letter to say that the
    existing franchise is in immediate
      The immunity provision fits into this
    scheme. Subsection (3x) says, in part,
    that the reasons given for disapproving a
    proposal "shall not subject the
    manufacturer . . . to any civil
    liability" unless the reasons or
    explanations are malicious and published
    with the "sole intent to cause harm to
    the dealer . . . ." It is reasonable to
    read that provision as an attempt to
    ensure that (3x) remains the exclusive
    mechanism for resolving disputes like
    this one between Hutson and GM. If, as we
    conclude, the legislature meant for
    disputes regarding the addition of
    franchises or changes to existing
    franchises to be resolved through the
    Department of Transportation, it follows
    that the immunity provision is intended
    to prevent end-runs around the statutory
    scheme. In the absence of the immunity
    provision, it seems likely that, rather
    than using the administrative procedures
    set out in the statute, at least some
    dealers would file a miscellany of civil
    claims. In short, they would do what
    Hutson has done here. On the other hand,
    if the immunity provision provides
    manufacturers with a broad immunity from
    suit so long as they have not acted with
    malice, it is consistent with the other
    provisions of the statute. It completes
    the circle. Our conclusion is that, in
    fact, the statute provides manufacturers
    with such immunity and bars this civil
      Accordingly, the judgment of the
    district court is

Document Info

DocketNumber: 00-2233

Judges: Per Curiam

Filed Date: 12/18/2000

Precedential Status: Precedential

Modified Date: 9/24/2015