Opinion
00-CV-1619
March 18, 2002
DECISION ORDER
Plaintiff Adirondack Cycle Marine, Inc. (Adirondack) brought this action pursuant to the Court's diversity jurisdiction against the Defendant American Honda Motor Co., Inc. (American Honda) alleging breach of the implied duty of good faith and fair dealing for the termination of their franchise agreement. American Honda now moves for summary judgment pursuant to FED. R. CIV. P. 56. The Court notes that the Plaintiff has not opposed this motion. By letter dated December 18, 2001, American Honda detailed to the Court the various extensions of time granted Plaintiff to answer this motion. To date, no response has been received by Adirondack, nor has Adirondack asked the Court for more time to file a response. A failure to respond to a summary judgment motion does not mean that the motion should be granted automatically. Champion v. Artuz, 76 F.3d 483, 486 (2d Cir. 1996). However, Local Rule 7.1(b)(3) states that "failure by the non-moving party to file or serve any papers as required by this Rule shall be deemed by the court as consent to the granting . . . of the motion." The Court notes that a review of the record indicates that the complaint is verified. "A verified complaint is to be treated as an affidavit for summary judgment purposes." Colon v. Coughlin, 58 F.3d 865, 872 (2d Cir. 1993); see also Fitzgerald v. Henderson, 251 F.3d 345, 355 (2d Cir. 2001). Thus, the complaint, to the extent it meets the other requirements for an affidavit, will be considered in opposition to this motion. Colon, 58 F.3d at 872 (discussing factors of an affidavit).
Local Rule 7.1 requires a party opposing summary judgment to respond to the statement of undisputed material facts submitted by the movant. To the extent such facts are not controverted, the properly supported facts will be taken as true. Lopez v. Reynolds, 998 F. Supp. 252, 256 (W.D.N.Y. 1997). Consequently, the facts below are taken from Defendant's 7.1 Statement.
I. Factual Background
American Honda is a wholesale distributor of Honda motorcycles, motor scooters, all terrain vehicles (ATV) and automobiles. American Honda sells its products though a network of independent, authorized dealers. It has no company-owned dealerships. Plaintiff became a Honda dealer in 1980 and became a Honda ATV and motorcycle dealer in 1985. The parties signed a Service and Sales Agreement ("Agreement" or "contract"). This Agreement included a provision requiring Adirondack to abide by any legal directives given to Honda, including any directives limiting the age of riders of ATVs. Failure to abide by the terms of the contract was grounds for termination of the agreement by American Honda.
In 1988, American Honda and other ATV manufacturers entered a Consent Decree in the District Court for the District of Columbia following an investigation and lawsuit alleging that ATVs were dangerous, particularly for young riders. That Consent Decree included, among other provisions, a requirement that the ATV manufacturers abide by the established Age Requirement Guidelines (Age Guidelines). These Age Guidelines specifically detailed that motors with greater than 70 cubic centimeter displacement (cc) be used only by those aged 12 and older and that those with 90 cc or greater motors be used only by those 16 and older. The Consent Decree required American Honda to use its "best efforts" to abide by the age requirements, including requiring their dealers to abide by the age requirements. In compliance, American Honda affixed a warning label to its ATVs and sent warning labels to its dealers to be affixed to existing ATVs. Additionally, it provided ATV dealers with "Point-of-Purchase" safety materials, hang tags, safety videos, and safety alerts for disbursement to customers.
In order to ensure compliance with the Consent Decree, American Honda conducted undercover "shopping" expeditions to its dealers. Similarly, the Consumer Products Safety Commission (CPSC) also sent "shoppers" undercover to ensure compliance with the Consent Decree. In 1990, American Honda entered into a Letter Agreement with the Department of Justice in which it agreed to monitor its dealers and, if a dealer was found to have violated the consent decree two or more times during the next two years, "absent compelling circumstances, initiate termination proceedings against the Dealership." A similar agreement was entered between American Honda and the Department of Justice for the 1993-1995 years. American Honda notified its dealers of each of these agreements. Despite this notification, Plaintiff was found on two occasions, once in 1992 and once in 1994, to have violated the Age Guidelines by recommending a large motor ATV to a person inquiring about an ATV for a 13 year old.
As a result of these investigations from 1990 through 1997, 42 dealers were found to have violated the Consent Decree two or more times. Seventeen signed "Termination Agreements" in which they agreed to have their dealerships terminated for a future violation. Nine dealers were terminated. Fourteen dealers were excused under the "compelling hardships" provision. Two dealers, including Plaintiff were considered to have termination agreements pending. Consequently, Adirondack was treated in the same manner as other ATV dealers.
Plaintiff subsequently brought an action in the Northern District of New York alleging that American Honda had wrongfully threatened to terminate the agreement. While settlement discussions in that case were underway, Adironack filed for bankruptcy. Consequently, American Honda gave notice under the contract that the contract was being terminated for Plaintiff's failure to remain in business. A second action based on the same underlying facts was commenced by Adirondack's owner in the Northern District of New York. This Court granted summary judgment in favor of American Honda in both cases.
Plaintiff brings this action claiming that American Honda terminated its dealership solely to prove to the Department of Justice that it was willing to comply to with the Consent Decree and that American Honda had no basis to terminate the agreement. American Honda contends that the agreement was terminated pursuant to the contract and that no bad faith breach occurred.
II. Discussion
A. Standard for Summary Judgment
It is well settled that on a motion for summary judgment, the Court must construe the evidence in the light most favorable to the non-moving party, see Tenenbaum v. Williams, 193 F.3d 581, 593 (2d Cir. 1999), cert. denied, 529 U.S. 1098 (2000), and may grant summary judgment only where "there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). An issue is genuine if the relevant evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986).
A party seeking summary judgment bears the burden of informing the court of the basis for the motion and of identifying those portions of the record that the moving party believes demonstrate the absence of a genuine issue of material fact as to a dispositive issue. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If the movant is able to establish a prima facie basis for summary judgment, the burden of production shifts to the party opposing summary judgment who must produce evidence establishing the existence of a factual dispute that a reasonable jury could resolve in his favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). A party opposing a properly supported motion for summary judgment may not rest upon "mere allegations or denials" asserted in his pleadings, Rexnord Holdings, Inc. v. Bidermann, 21 F.3d 522, 525-26 (2d Cir. 1994), or on conclusory allegations or unsubstantiated speculation. Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir. 1998). With this standard in mind, the Court will address the defendant's motion.
B. Plaintiff's Complaint
Plaintiff has submitted a complaint that makes only one allegation, that defendant American Honda breached the implied duty of good faith and fair dealing in terminating Plaintiff's contract. Compl. at First Cause of Action. Under California law, "[e]very contract imposes upon each party a duty of good faith and fair dealing." Traumann v. Southland Corp., 858 F. Supp. 979, 983 (N.D.CA. 1994). This covenant applies "where the express terms of the contract grant to parties certain discretionary powers." Id.
Plaintiff has a Second Cause of Action that is solely a claim for punitive damages.
The contract in question has a choice of law clause indicating that California law governs the contract. See Dealership agreement at Section 17.10.
Section 15.3(D) of the Dealership agreement provides that the agreement will terminate upon any filing of bankruptcy of the Dealer. This provision is unambiguous and clear. Moreover, it is undisputed that Adirondack filed for bankruptcy, thus, triggering the provision listed here. Where the action by a party is expressly authorized by the contract, no implied duty will be imposed. See Locke v. Warner Bros., Inc., 66 Cal.Rptr.2d 921, 926 (Cal.Dist.Ct.App. 1997) (citing Carma Developers v. Marathon Development, Inc., 6 Cal.Rptr.2d 467 (Cal. 1992)). Here, the contract expressly provided for the termination of the agreement upon bankruptcy and did not provide American Honda with any discretion in making this decision to terminate. Consequently, the implied covenant of good faith and fair dealing cannot be imposed in this contract.
Further, even if this Court were to look to the prior termination of the dealership for failure to comply with the ATV warnings, this Court could would not find that such an implied covenant has been breached here. Paragraph 2.2 of the agreement requires Dealers to refrain from "all conduct and activities which American Honda reasonably deems might be detrimental or reflect adversely upon the reputation of Honda Products. Dealer shall refrain from any conduct which is contrary to . . . or in violation of the letter or spirit of any laws." Moreover, Paragraph 2.3 obligates the Dealer to follow all reasonable directives of American Honda. Paragraph 15.3(A) allows American Honda to terminate the agreement for violations of Section 2 of the Agreement. Under California law, such a clause might well give rise to the obligation to deal in good faith. See, e.g., Traumann, 858 F. Supp. at 983 (imposing obligation into franchise agreement that allowed termination after determination of breach by franchisor); see also Locke, 66 Cal.Rptr.2d at 926-28(imposing duty where contract gave one party discretion to work with the other party). Even if that were the case here, however, Plaintiff has not put forward any evidence to support a breach of this duty by American Honda.
It is undisputed that the contract was initially terminated because Plaintiff failed to comply with the Age Guideline Requirements. It was clearly contrary to law for Plaintiff not to comply with the Age Guidelines at that time. Plaintiff has come forward with no evidence that suggests the dealership agreement was termination for any reason other than failure to comply with Age Guidelines. Moreover, American Honda has put forward evidence that it was told by the Department of Justice that it needed to comply with the Consent Decree, and thus, it sent the letter of termination to Plaintiff. Consequently, no reasonable jury could find that American Honda was unjustified in terminating the agreement, and no issue of fact exists here.
III. Conclusion
For the foregoing reasons, Defendant's motion for summary judgment is GRANTED. Plaintiff's claim is dismissed.
IT IS SO ORDERED