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SPX Corporation v. Shop Equipment Specialists

United States District Court, W.D. Michigan, Southern Division
Mar 28, 2001
Case No. 4:00cv 49 (W.D. Mich. Mar. 28, 2001)

Opinion

Case No. 4:00cv 49.

March 28, 2001.


PARTIAL SUMMARY JUDGMENT


IT IS ORDERED that defendant's motion for leave to amend its counterclaim (docket # 28) be and hereby is GRANTED. Defendant's proposed counterclaim, dated February 1, 2001, is deemed filed instanter. Plaintiff is granted 20 days in which to move, answer or otherwise plead in response thereto.

IT IS FURTHER ORDERED that plaintiff's motion for partial summary judgment (docket # 18) be and hereby is GRANTED. A partial summary judgment is hereby entered in favor of plaintiff and against defendant dismissing with prejudice defendant's counterclaim and amended counterclaim under the Washington Franchise Investment Property Law and the Michigan Franchise Investment Property Law (Count I), and the Washington Consumer Protection Act (Count IV). All other aspects of the counterclaim remain pending.

DONE AND ORDERED this 28th day of March, 2001.

OPINION

This is a civil action falling within this court's diversity jurisdiction. 28 U.S.C. § 1332. The action began with the filing of a complaint by SPX Corporation, a Michigan manufacturer of automotive emission testing equipment, to collect $562,591.36 allegedly owed by defendant, Shop Equipment Specialists, Inc. (SES), for goods sold and delivered in the regular course of business. Attached to the complaint is a lengthy statement of account purporting to show balances due for goods sold to defendant from approximately June of 1999 through April of 2000. SES filed a counterclaim asserting that SES and SPX had entered into a Service Center Agreement under which SES was a franchisee of SPX within the meaning of the Washington Franchise Investment Protection Act, and alleging claims under that Act, the Washington Consumer Protection Act and the common law.

Presently pending before the court is a motion by plaintiff SPX for partial summary judgment (docket # 18). In its motion, SPX seeks dismissal of both statutory counterclaims. SPX argues that (1) the Washington Franchise Act does not apply, because the parties agreed that Michigan law would govern their contract; (2) even if the Washington Franchise Act applies, the Service Center Agreement is not a franchise under that Act; and (3) plaintiff has not established a triable claim under the Washington Consumer Protection Act. In response, defendant asserts that (1) Washington law applies, despite the existence of a contractual provision adopting Michigan law and (2) the record is sufficient to raise genuine issues of material fact, precluding summary judgment on defendant's counterclaims both under the Washington Franchise Act and the Consumer Protection Act. Alternatively, defendant has moved for leave to file an amended complaint asserting an alternative claim under the Michigan Franchise Act. Plaintiff counters that the motion to amend is both untimely and futile, in that the Service Center Agreement is not a franchise under Michigan law in any event.

The parties have consented in writing to the case dispositive jurisdiction of a magistrate judge, and the matter has been referred to me for all further proceedings, including the entry of judgment. 28 U.S.C. § 636(c). (See Consent and Order of Reference, docket # 9). I conducted a hearing on the pending motions on March 15, 2001. For the reasons set forth below, defendant's motion to amend will be granted, and a partial summary judgment will be entered on behalf of plaintiff and against defendant on the statutory causes of action in both the original and amended counterclaims.

Findings of Undisputed Fact

The record before the court consists of admissions made in the pleadings and in response to Rule 36 requests, affidavits submitted on behalf of both parties, depositions, and authenticated documents. The court finds the following facts to be beyond genuine issue:

1. Plaintiff, SPX Corporation, is a Delaware corporation with principal place of business in Kalamazoo County, Michigan. SPX is in the business of manufacturing automotive emission testing equipment and after-market automotive diagnostic equipment, which is sold on a nationwide basis.
2. Shop Equipment Specialists (SES) is a corporation organized under the laws of the State of Washington, with principal place of business in Spokane, Washington. SES maintains, sells and services equipment used by automotive repair centers. This includes service for equipment at retail establishments, such as Goodyear Service Centers, as well as captive auto repair centers, such as those operated by local governments with vehicle fleets. SES services equipment manufactured by numerous companies that supply tools and products to the automotive repair industry.
3. This case arises from a Service Center Agreement between SPX and SES dated February 9, 1998 (attached as Exhibit B to plaintiff's motion, docket # 18). Although the parties had previous contractual relationships, they both rely upon the 1998 Service Center Agreement in this action, and the matters at issue arose during the existence of the agreement.
4. The pertinent provisions of the Service Center Agreement are as follows:
(a) SPX appointed SES as an authorized service center to provide repair and maintenance of SPX products and to sell parts, tools, and accessories manufactured by SPX. (¶ 1).
(b) SPX agreed to sell genuine SPX repair parts and specialty repair tools to SES. (¶ 2).
(c) SES promised to perform warranty and repair work for SPX customers, for which SPX would compensate SES at agreed rates. (¶ 3).
(d) All parts and equipment purchased by SES from SPX would be sold at the then-current user price, less a discount. (¶ 8).
(e) SES agreed to maintain a representative inventory of parts to satisfy the demand for sale and service by SPX customers, but was allowed to return excess stock annually. (¶¶ 9, 12).
(f) The agreement would remain in effect indefinitely, but was subject to termination by either party for any reason upon thirty days' written notice. (¶ 4).
(g) The Service Center Agreement contained this choice-of-law provision: "This Agreement shall be construed in accordance with the laws of the State of Michigan." (¶ 20).
(h) SES consented to exclusive jurisdiction of the state or federal courts serving Muskegon County, Michigan, for the adjudication "of any or all disputes arising from or relating to this Agreement." (¶ 21).
(i) An attachment to the Agreement established rates to be paid by SPX to SES for warranty and other work. The attachment also contemplated that the territories covered by the Agreement would be described by zip code in a further attachment. It is undisputed that no other attachment was executed, so that the geographical scope of the Agreement was never reduced to writing. Nevertheless, it is also undisputed that at the time the Agreement was executed, the territorial scope was essentially the State of Washington and parts of Idaho.
(j) The Service Center Agreement expressly superseded all previous agreements between the parties, and integrated all other agreements, representations and promises. Furthermore, the parties prohibited oral modifications or amendments to the written contract: "[N]one of the provisions of this Agreement shall be waived, altered, or amended, except, in writing signed by an officer of SPX on the one hand and by the Center [SES] on the other." (¶ 19).
5. It is undisputed that, at the time the Agreement was entered into, SES was not required to and did not pay any capital contribution, commission, or other payment to SPX that would qualify as a franchise fee.
6. Over time, SPX and SES orally agreed to expand the territory serviced by SES. By the end of 1999, SES was providing warranty work on SPX automotive test equipment throughout most of the United States. The record is devoid of any evidence concerning the terms and conditions under which the territory of SES was expanded after the parties signed the Service Center Agreement. There is no evidence of a writing, signed by the parties, embodying any amendment of the Service Center Agreement to include new territories.
7. During the time that the parties performed the Agreement, there were numerous financial transactions between them. SES would bill SPX for time spent in performing warranty calls and providing parts and labor to SPX customers during warranty repair work. Conversely, SPX would bill SES for parts purchased from SPX. All sales to SES were at or below the published SPX wholesale price.
8. In the spring of 1999, SPX changed its accounting system. Thereafter, a dispute arose between the parties concerning monies owed.
9. In late 1999 and early 2000, SES and SPX began discussions regarding a new Service Center Agreement. In January of 2000, SPX tendered a new form of agreement, which was 14 pages in length, as opposed to the 1998 Agreement, which included only 4 pages. It contained many new provisions, such as a requirement that SES pay a five percent commission on gross revenue collected from non-warranty work. (See Proposed Contract, Exhibit B to Foucault Aff., docket # 27). SES refused to enter into the proposed agreement, and it was never executed.
10. On March 6. 2000, SPX wrote to SES concerning several matters then in dispute. The letter demanded payment of over $500,000 allegedly due to SPX on previous sales to SES. The letter stated that SPX would terminate the relationship if this amount was not paid by March 15, 2001. (docket # 18, Ex. D). SPX terminated the 1998 Service Center Agreement on March 15, 2000. SES acknowledged the termination on March 16, 2000. (Ex. E).
11. On April 6, 2000, SPX initiated the present civil action, alleging that SES owed $562,591.00, plus interest and other fees, on an account stated. SES filed an answer denying that monies were owed and a counterclaim asserting statutory claims under the Washington Franchise Act and Consumer Protection Act.

Discussion

I. Motion to Amend

SES has moved for leave pursuant to Fed.R.Civ.P. 15(a) to amend its counterclaim. SES seeks to assert claims under the Michigan Franchise Investment Law, MICH. COMP. LAWS §§ 445.1501-.1546, as well as the Washington statutes cited in its original counterclaim. Plaintiff opposes the motion, both because it comes three months after the time established for amendment of pleadings in paragraph 3 of the case management order (docket # 10) and because the amendment would be futile.

SPX is correct in asserting that a motion to amend pleadings brought after the expiration of the time established in the case management order must meet both the requirements for amendment of Fed.R.Civ.P. 15(a) and the more stringent "good cause" standard of Fed.R.Civ.P. 16(b). See Parker v. Columbia Pictures Indus., 204 F.3d 326, 339 (2d Cir. 2000); Lower v. Albert, Nos. 97,2122, 97-2123, 1999 WL 551414 at * 3 (6th Cir. July 20, 1999); Johnson v. Mammoth Recreations, Inc. 975 F.2d 604, 609-11 (9th Cir. 1992); Archer Daniels Midland Co. v. Aon Risk Servs., Inc., 187 F.R.D. 578, 582 (D.Minn. 1999). The motion of SES, which invokes only Rule 15(a), is therefore deficient. The good-cause standard is an exacting one, and contemplates "an affirmative showing on the part of the moving party, demonstrating that the moving party would have been unable to meet a scheduled deadline despite due diligence." Amcast Indus. Corp. v. Detrex Corp., 132 F.R.D. 213, 218 (N.D.Ind. 1990). This standard primarily considers the diligence of the party seeking the amendment. Parker, 204 F.3d at 339; Johnson, 975 F.2d at 609.

If defendant's proffered amendment attempted to inject a new cause of action into this case, this court would certainly hold that defendant had failed to show good cause under this standard for its unexcused delay in seeking leave to amend. Defendant's proffered amendment, however, is not substantive, but technical. The original counterclaim clearly sets forth a cause of action for violation of state franchise law. The plaintiff itself, in its motion for summary judgment, raised the issue of the appropriate state law to be applied. If successful, plaintiff's motion would not result in the outright dismissal of defendant's Franchise Act counterclaim. Rather, it would result only in the application of the franchise law of Michigan, rather than that of Washington. Consequently, the effect of defendant's motion to amend would be identical to that sought in plaintiff's dispositive motion: analysis of defendant's Franchise Act counterclaim under Michigan law.

In these circumstances. the court views defendant's motion as seeking a merely technical amendment to the counterclaim in response to an issue raised by plaintiff itself. The good-cause standard in this circumstance is far less onerous than it would be if defendant were attempting to inject a completely new cause of action at this late date in the litigation. The court discerns no prejudice from the technical amendment and affirmatively finds that granting the amendment will serve the interests of both parties, as it will allow the court to adjudicate all claims between them in a single action.

Plaintiff's alternative argument, that of futility, is not well taken. In the Sixth Circuit, leave to amend should be denied on grounds of futility only when the amended pleading would not withstand a motion to dismiss under Fed.R.Civ.P. 12(b)(6). See Rose v. Hartford Underwriters. Ins. Co., 203 F.3d 417, 420 (6th Cir. 2000). Plaintiff's argument in the present case, however, is not that the amended pleading would fail to state a claim under the Michigan Franchise Investment Law, but that it would fail to withstand a motion for summary judgment on the ground that no franchise fee was paid. This is not reason to disallow an amendment, as it relates not to the facial validity of the claim but to defendant's ability to support it with requisite proof. In these circumstances, the proper result is to allow the motion to amend but to subject the amended claim to scrutiny under Rule 56. Such a result does not prejudice defendant, because the requirement of the Michigan Act concerning the necessity of a franchise fee is identical to that of the Washington Act, an issue that has been fully briefed by the parties.

For the foregoing reasons, defendant's motion for leave to amend its counterclaim will be granted.

II. Motion For Partial Summary Judgment

A. Applicable Standard

As the Sixth Circuit has noted, the federal courts have entered a "new era" in summary judgment practice. Cox v. Kentucky Dep't of Transp., 53 F.3d 146, 150 (6th Cir. 1995); Street v. J. C. Bradford Co., 886 F.2d 1472, 1478-81 (6th Cir. 1989). While preserving the constitutional right of civil litigants to a trial on meritorious claims, the courts are now vigilant to weed out fanciful, malicious, and unsupported claims before trial. Summary judgment is appropriate when the record reveals that there are no issues as to any material fact in dispute and the moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(c); Hiney Printing Co. v. Brantner, Nos. 99-4535, 00-3012, ___ F.3d ___, 2001 WL 256366, at * 2 (6th Cir. Mar. 16, 2001); Redding v. St. Edward, 241 F.3d 530, 532 (6th Cir. 2001); Parker v. Metropolitan Life Ins. Co., 121 F.3d 1006, 1009 (6th Cir. 1997) (en banc). The standard for determining whether summary judgment is appropriate is "whether `the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.'" See Adcox v. Teledyne, Inc., 21 F.3d 1381, 1385 (6th Cir. 1994) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986)); see also, Burnett v. Tyco Corp., 203 F.3d 980, 982 (6th Cir. 2000); Crabbs v. Copperweld Tubing Products Co., 114 F.3d 85, 88 (6th Cir. 1997).

The court must consider all pleadings, depositions, affidavits, and admissions on file, and draw all justifiable inferences in favor of the party opposing the motion. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574. 587 (1986); Wathen v. General Elec. Co., 115 F.3d 400, 403 (6th Cir. 1997). The party moving for summary judgment bears the initial burden of pointing out to the district court that there is an absence of evidence to support the nonmoving party's case, but need not support its motion with affidavits or other materials "negating" the opponent's claim. Moore v. Philip Morris Companies, Inc., 8 F.3d 335, 339 (6th Cir. 1993). Once the movant shows that "there is an absence of evidence to support the nonmoving party's case," the non-moving party has the burden of coming forward with evidence raising a triable issue of fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

To sustain this burden, defendant may not rest on the mere allegations of its pleadings. FED. R. CIV. P. 56(e); Campbell v. Grand Trunk Western R.R., 238 F.3d 772, 775 (6th Cir. 2001); Copeland v. Machulis, 57 F.3d 476, 479 (6th Cir. 1995). A party opposing a motion for summary judgment has the burden to come forth with requisite proof to support his legal claim, particularly where he has had an opportunity to conduct discovery. See Cardamone v. Cohen, 241 F.3d 520, 524 (6th Cir. 2001); Noble v. Chrysler Motors Corp., 32 F.3d 997, 999 (6th Cir. 1994); Street v. J. C. Bradford Co., 886 F.2d at 1478-81. In so doing, plaintiff must set forth specific facts showing that there is a genuine issue for trial. FED. R. CIV. P. 56(e); see Mounts v. Grand Trunk Western R.R., 198 F.3d 578, 580 (6th Cir. 2000); Kensu v. Haigh, 87 F.3d 172, 175 (6th Cir. 1996); Brennan v. Township of Northville, 78 F.3d 1152, 1156 (6th Cir. 1996). Conclusory statements, unsupported by specific evidence to support a claim, do not meet this standard. Kensu, 87 F.3d at 175.

B. Franchise Act Claim

1. Choice of Law

Defendant's original counterclaim set forth claims under the Washington Franchise Investment Protection Act, WASH. REV. CODE § § 19.100.010-.100.940, for misrepresentation, failure to deal in good faith, wrongful termination, discrimination in terms of trade, and other theories. The court is met at the outset with a disagreement between the parties concerning the law to be applied to defendant's franchise claim. Relying upon paragraph 20 of the Service Center Agreement, plaintiff argues that the law of Michigan must be applied to the franchise claim, because that was the law chosen by the parties to govern their contractual relationship. Defendant, by contrast, argues that Washington law should apply despite the contractual provision.

Paragraph 20 of the Service Center Agreement provides as follows: "This Agreement shall be construed in accordance with the laws of the State of Michigan." Read literally, this choice-of-law provision does not indicate that the parties wish to have their contract regulated under Michigan law, but only that the contract should be interpreted under the law of that state. The Sixth Circuit, however, has rejected this argument in the past, holding that similar contract language evidenced the parties' intention to have their contractual relationship governed by the substantive law of the chosen state. See Kipin Indus., Inc. v. Van Deden Int'l, Inc., 182 F.3d 490, 494 (6th Cir. 1999); Boatland, Inc. v. Brunswick Corp., 558 F.2d 818, 821-22 (6th Cir. 1977) (focusing on the technical distinction between "interpret/construe" and "govern" would yield an unwarranted and strained construction of contract language). Consequently, following Sixth Circuit authority, this court holds that the language of paragraph 20 is sufficiently broad to invoke the substantive law of Michigan as well as its interpretive principles.

In order to determine whether the substantive law of Michigan or Washington applies to defendant's franchise claim, this court must undertake a conflict-of-laws analysis. A federal court exercising diversity jurisdiction must apply the choice of law or conflict rules of the forum state, in this case, the State of Michigan. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 490 (1941); Kipin, 182 F.3d at 493. In resolving choice-of-law issues, the courts of the State of Michigan follow sections 187 and 188 of the Restatement (Second) of Conflict of Laws. See Johnson v. Ventra Group, Inc., 191 F.3d 732, 738-39 (6th Cir. 1999); Chrysler Corp. v. Skyline Indus. Servs., Inc., 528 N.W.2d 698, 703 (Mich. 1995).

When the enforceability of a contractual choice-of-law provision is at issue, section 187 of the Restatement provides that "[t]he law of the state chosen by the parties to govern their contractual rights and duties will be applied" unless (1) there is no substantial relationship between the chosen state and the contract or other reasonable basis for the state's selection or (2) the application of the chosen state's law would violate a fundamental policy of a state which has a materially greater interest in the disputed issue and which would have supplied the governing law in the absence of the parties' selection. RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 187(2) (1988 revision).

Fortunately, this nation's leading court in analyzing conflicts-of-laws issues under the Restatement, as applied to franchise claims, is the United States Court of Appeals for the Sixth Circuit. The seminal case is Tele-Save Merchandising Co. v. Consumers Distrib. Co., 814 F.2d 1120 (6th Cir. 1987). Tele-Save was a diversity case in which the plaintiff sued under the Ohio franchise law, but the written agreement stipulated that the contract would be governed by New Jersey law. Because suit was brought in a federal district court in Ohio, the Sixth Circuit applied Ohio choice-of-law principles. Ohio, like Michigan, has adopted the guidelines of the Restatement (Second) of Conflict of Laws, including section 187. 814 F.2d at 1121. The Tele-Save court upheld the choice-of-law provision because (1) the parties had agreed in advance to the law to be applied in future disputes; (2) contacts between the parties were fairly evenly divided between the state selected and the plaintiff's home state; (3) the parties were not of unequal bargaining strength; and (4) the application of the chosen law was not repugnant to the public policy of the plaintiff's state. 814 F.2d at 1123. In addressing a claim that application of the chosen law of New Jersey would somehow be contrary to a fundamental policy of the State of Ohio, the Court of Appeals held as follows:

It is not sufficient for Tele-Save to argue nor would we hold that Ohio law should be applied merely because a different result would be reached under New Jersey law. In order for the chosen state's law to violate a fundamental policy of Ohio, it must be shown that there are significant differences in the application of the law of the two states.
Tele-Save, 814 F.2d at 1123 (citation omitted).

The Court of Appeals again applied this analysis in Banek, Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 357 (6th Cir. 1993). Banek was a suit brought in the Eastern District of Michigan by a franchisee located in Monroe. Michigan. The franchise agreement provided that the rights and obligations of the parties would be governed by Georgia law. The Sixth Circuit applied Michigan conflict-of-law rules, including section 187 of the Restatement. Applying the test of section 187(2)(a), the court found a substantial relationship with the State of Georgia, because the franchisor was located there. 6 F.3d at 361. The court then turned to the requirements of section 187(2)(b), which asks whether application of the chosen law would be contrary to a fundamental policy of the State of Michigan. The court warned that a district court should "`move cautiously when asked to hold contract clauses unenforceable on public policy grounds.'" 6 F.3d at 362 (quoting Moses v. Business Card Express, Inc., 929 F.2d 1131, 1139 (6th Cir. 1991)). The Banek court then made the following observation with regard to the necessity of a fundamental inconsistency between the two laws under examination:

While we agree with plaintiff that the comprehensive and paternalistic franchise investment law represents Michigan public policy, that does not end the inquiry. The more central question in this case is whether the parties have selected, through their choice of law provision, a jurisdiction in which there is a substantial erosion of the quality of protection that the MFIL would otherwise provide. A court may not assume that, merely because Michigan has adopted a franchise statute, the application of Georgia's laws would be contrary to Michigan's public policy.
Tele-Save, 814 F.2d at 1123. Id. at 362. The court then examined the franchise laws of both Georgia and Michigan, finding their provisions to be similar, while not necessarily identical. On this basis, the court determined that application of Georgia law would not be contrary to a fundamental policy of the State of Michigan. Id.

In other decisions, involving both franchise claims and other contractual causes of action, the Court of Appeals has reaffirmed the analysis first enunciated in Tele-Save. In this line of authority, the Sixth Circuit has emphasized that a party attempting to avoid the application of contractual choice-of-law clause must prove more than the existence of a fundamental policy or some other state. The party must also establish that application of the chosen law would be contrary to that policy. See Wallace Hardware Co., Inc. v. Abrams, 223 F.3d 382, 398-99 (6th Cir. 2000) (applying section 187 under Kentucky law); Johnson v. Ventra Group, Inc., 191 F.3d 732, 738-40) (6th Cir. 1999) (applying section 187 under Michigan law); Moses, 929 F.2d at 1139.

In light of this unbroken line of Sixth Circuit authority, this court must reject the arguments of SES against application of the contractual choice-of-law provision. To avoid the effect of this contract, SES must show either that Michigan law has no substantial relationship to the parties or transactions or that application of Michigan law would be contrary to a fundamental policy of the State of Washington, which has a materially greater interest than Michigan in determination of the franchise issue and which, under general conflicts-of-laws principles, would be the state of the applicable law in the absence of the contract. RESTATEMENT (SECOND) of CONFLICT OF LAWS § 187(2). SES meets none of these tests.

First, it is patent that Michigan has a substantial relationship to the transaction and that the choice of Michigan law was reasonable. Where, as here, one of the contracting parties is located in the chosen state, the other party voluntarily chooses to purchase goods shipped from that state, and the injury is felt there, a "sufficiently reasonable basis" for the parties' choice of law exists. Wallace, 223 F.3d at 398; Johnson, 191 F.3d at 739-40. In the present case, it is undisputed that SPX Corporation is located in Kalamazoo, Michigan, that SES sent most of its orders to Michigan, that most of the SPX parts and tools were manufactured in or shipped from Michigan, and that invoices and other paperwork were delivered to Michigan. (See Tuttle Aff., Ex. A to docket # 18). SES cannot satisfy the provisions of section 187(2)(a) of the Second Restatement, as the choice of Michigan law was reasonable.

Second, SES cannot show that application of Michigan law would be contrary to a fundamental interest of the State of Washington under section 187(2)(b). In attempting to meet this burden, SES merely establishes half of the equation: that Washington does indeed have a fundamental interest in the protection of franchisees located in that state. Relying upon Rutter v. BX of Tri-Cities, Inc., 806 P.2d 1266 (Wash.Ct.App. 1991), SES argues that Washington has a fundamental interest in applying its own franchise law. Although the Rutter case is sufficient to establish a fundamental interest of the State of Washington, it does not follow that application of Michigan law would contravene that interest:

The fact, however, that a different result might be achieved if the law of the chosen forum is applied does not suffice to show that the foreign law is repugnant to a fundamental policy of the forum state. If the situation were otherwise, and foreign law could automatically be ignored whenever it differed from the law of the forum state, then the entire body of law relating to conflicts would be rendered meaningless.

Johnson,191 F.3d at 740 (citations omitted). Rather, in order for the chosen state's law to violate the fundamental policy of another state, "it must be shown that there are significant differences in the application of the law of the two states." Tele-Save, 814 F.2d at 1123. In the present case, SES has not even attempted to make such a showing. It has not pointed to any fundamental differences in the franchise laws of Michigan and Washington, such that application of Michigan law would be repugnant to Washington public policy. In fact, on the pivotal issue concerning the definition of a franchise, the two laws are virtually identical. Under the statutes of both states, a franchise is a contract or agreement, express or implied, written or oral, in which (a) the franchisee is granted the right to engage in the business of offering, selling, or distributing goods or services under a marketing plan or system subscribed in substantial part by a franchisor, (2) the operation of the business is substantially associated with the franchisor's trademark or other commercial symbol, and (3) the franchisee pays, agrees to pay, or is required to pay a direct or indirect franchise fee. Compare MICH. COMP. LAWS § 445.1502(3) with WASH. REV. CODE § 19.100.010(4).

Finally, SES has not shown that Washington has a materially greater interest than Michigan in the determination of the franchise question and that Washington law would otherwise be applicable to resolve this dispute. Again, this court must turn to Michigan conflicts-of-laws rules to decide which state law would apply in the absence of a valid choice-of-law provision in the contract. The Michigan Supreme Court, while not completely abandoning the traditional rule that looks to the "law of the place of contracting," has adopted the policy-centered analysis set forth in section 188 of the Restatement (Second) of Conflicts in appropriate cases. Chrysler Corp. v. Skyline Indus. Serv., Inc., 528 N.W.2d 698, 703 n. 28 (Mich. 1995). Applying analysis under section 188, the court should look to the law of the state that has the most significant relationship to the transaction and parties, taking into account the place of contracting, the place of negotiation, the place of performance, the location of the subject matter of the contract, and the place of business of the various parties. See Johnson, 191 F.3d at 741. SES has failed to establish any of these factors. Its affidavits do not establish the place of negotiation or contracting. Apparently, performance of the contract was divided among the states of Michigan, Washington, and Idaho, with no single state predominating. In short, SES has not demonstrated the existence of any of the conditions contemplated by section 187(2) of the Restatement as a prerequisite for rejection of the contractual choice-of-law provision set forth in paragraph 20 of the Service Center Agreement.

Section 188 analysis applies only to cases where the parties have not contractually agreed to a choice-of-law provision. Johnson, 191 F.3d at 741.

This court is therefore constrained by Tele-Save and its progeny to apply Michigan law to determine whether the Service Center Agreement was a franchise. In the final analysis, however, the choice-of-law determination is not case dispositive. As noted above, the franchise acts of both states define franchise in the same way and contain the same three basic requirements. In its motion for partial summary judgment, plaintiff challenges the existence of one essential requirement: the payment of a franchise fee. For the reasons set forth below, the court concludes that SES has failed to raise a triable issue of fact with regard to this crucial element of its claim, under either Michigan or Washington law.

2. Was the Service Center Agreement A Franchise?

Under the Michigan Franchise Investment Law, a "franchise" refers to a contract or agreement, either express or implied, containing certain provisions prescribed by law. MICH. COMP. LAWS § 445.1502(3). Washington law takes the same approach. WASH. REV. CODE § 19.100.010(4); see Corp v. Atlantic Richfield Co., 860 P.2d 1015, 1020 (Wash. 1993) (the franchise is the agreement between the parties and not the business operated by the franchisee). On its face, the Service Center Agreement does not resemble a typical franchise. The word "franchise" is never used, and, contrary to the franchise acts of most states, the parties contemplated a mutual right of termination upon thirty days' notice without cause. Such general indicia, while probative of the intent of the parties, are not dispositive of the ultimate issue, under either Michigan or Washington law. See Watkins Sons Pet Supplies v. Jams Co., 107 F. Supp.2d 883, 888 (E.D.Mich. 1999); Jerome-Duncan, Inc. v. Auto-By-Tel, LLC, 989 F. Supp. 838, 842 (E.D.Mich. 1997), aff'd, 176 F.3d 904 (6th Cir. 1999) (applying Michigan law); Blanton v. Texaco Ref. Mktg., Inc., 914 F.2d 188, 190 (9th Cir. 1990) (applying Washington law). Consequently, the court must turn to the specific provisions of the Act to determine whether the statutory prerequisites for the finding of a franchise have been established.

The Michigan Franchise Investment Law contains three general prerequisites for the finding of a franchise. Plaintiff's motion calls into question defendant's ability to prove one prerequisite: that the putative franchisee is required under the Agreement "to pay, directly or indirectly, a franchise fee." MICH. COMP. LAWS § 445.1502(3)(c). The Washington act contains a similar requirement that the putative franchisee pays, agrees to pay, or is required to pay a franchise fee. WASH. REV. CODE § 19.100.010(4)(a)(iii). Courts interpreting both statutes have held that the existence of a franchise fee is an essential element of a claim under the statute. See Duro-Last Roofing, Inc. v. Mayle, No. 99-1041, 2000 WL 1434583, at * 3-6 (6th Cir. Sept. 13, 2000) (affirming grant of summary judgment under the Michigan act in absence of a franchise fee); Galper v. United States Shoe Corp., 815 F. Supp. 1037, 1042 (E.D.Mich. 1993) (granting summary judgment on claim under Michigan act in absence of a franchise fee); Lobdell v. Sugar `n Spice, Inc., 658 P.2d 1267, 1271 (Wash.Ct.App. 1983).

The Michigan act defines the term "franchise fee" as follows:

a fee or charge that a franchisee or subfranchisor is required to pay or agrees to pay for the right to enter into a business under a franchise agreement, including but not limited to payments for goods and services. The following are not the payment of a franchise fee:
(a) The purchase or agreement to purchase goods, equipment, or fixtures directly or on consignment at a bona fide wholesale price.

MICH. COMP. LAWS § 445.1503(1). The Washington act contains a similar provision, and likewise excludes from the definition of franchise fee "the purchase or agreement to purchase goods at a bona fide wholesale price." WASH. REV. CODE § 19.100.010(12)(a).

It is undisputed that, at the time the parties entered into the Service Center Agreement, no franchisee fee was paid and no franchise existed under the law of either Michigan or Washington. SES paid no fee or charge for the privilege of entering into the agreement, nor does the Agreement itself contemplate the payment of a capital investment fee, a commission, royalty or other payment based upon a percentage of SES's gross or net sales, or any other direct or indirect franchise fee. At the hearing on plaintiff's motion for partial summary judgment, defense counsel was frank to concede that no franchise existed at the time the agreement was signed.

Defendant contends, however, that a franchise fee came into being at some later date, on two different theories. First, defendant points to the proposed agreement tendered by SPX to SES sometime in 1999. The proposed agreement, if adopted, would have marked a total redefinition of the relationship between SPX and SES. The proposed agreement contemplated that SES would purchase "all or substantially all" of SPX's inventory of parts, and it contemplated a commission payable to SPX of five percent of the gross revenue received by SES on all sales and service except warranty service. (Foucault Aff., docket # 27, Ex. B, ¶¶ 1.1, 4). The term of the agreement was for one year, renewable annually (¶ 9.1) and the termination provision was markedly more complex than that contained in the 1998 agreement (¶ 9.2). Among the numerous other new provisions, the proposed agreement contained a mandatory arbitration clause (¶ 19). Focusing upon the proposed five percent commission contemplated in paragraph 4 of the proposed agreement, SES now contends that the commission, which it never agreed to pay or did pay, constituted a franchise fee.

Defendant's contention is utterly frivolous. It is undisputed that the proposed agreement was never entered into. SES nevertheless contends that it was "required to pay" the five percent commission for the privilege of continuing its relationship with SPX. There are two fatal flaws in this argument. First, both the Michigan and the Washington acts make a required payment a franchise fee only if it is required "under a franchise agreement." MICH. COMP. LAWS § 445.1503(1); WASH. REV. CODE § 19.100.010(12). The language of neither statute can be tortured to cover a situation, such as the present one, where a franchise fee does not appear in the franchise agreement, but only in a proposed agreement never adopted by the parties. SES has not cited to this court any case, decided under the franchise law of any state, in which a contract admittedly not a franchise when entered into was deemed to metamorphosize into a franchise by the mere suggestion by one party that a franchise fee be paid.

Second, defendant's position appears to be based upon the assertion that the termination of the 1998 Service Center Agreement was substantially motivated by the refusal of SES to agree to pay the proposed five percent commission. The short answer to this contention is that there is no evidence in the record to support it. The affidavit of Dennis Foucault, the President of SES, avers merely that he was "not willing to have SES enter into the agreement in the form demanded by SPX. SPX then terminated SES as an authorized service center. . . ." (Foucault Aff., docket # 27, ¶ 11). The affidavit neither states nor implies that the provision for a commission, among all the novel provisions of the proposed agreement, was the factor precipitating the termination of the relationship between SPX and SES. In fact, the affidavit does not even say that the refusal of SES to sign the new agreement led to the termination of the 1998 agreement. It merely says that one event followed the other. In the absence of specific evidence of cause and effect, "loose temporal proximity is insufficient to create a triable issue." Hafford v. Seidner, 183 F.3d 506, 575 (6th Cir. 1999).

The record is absolutely devoid of admissible evidence that SPX required SES to pay a commission for the privilege of continuing the relationship between them. In fact, the letter that SES contends was a termination notice (docket # 18, Ex. D) mentions nothing about the proposed commission. To the contrary, the letter relies completely upon SES's alleged delinquency in paying more than $500,000 for parts previously purchased from SPX. The letter contains this sentence: "If SPX does not receive all overdue sums by March 15, 2000, it will immediately stop selling parts to SES and initiate collection efforts, regardless of whether or not the parties have solved their disagreements in the underlying contract negotiations' (Ex. D, emphasis in original). SES has provided the court with no affidavit, contemporaneous document, deposition testimony, or other competent evidence tending to show that the letter of March 6, 2000, was a falsehood and that the real reason for the termination was defendant's refusal to agree to the proposed five percent commission. In these circumstances, defendant's reliance on the five percent commission, proposed but never agreed to or paid, is meritless.

SES contends alternatively that it paid an indirect franchise fee at some unspecified time after execution of the 1998 Service Center Agreement. SES contends that it was required to make lump-sum payments for the privilege of acting as an authorized service center for SPX in territories beyond those contemplated in the 1998 Agreement, in the form of purchases including some obsolete or worthless equipment and inventory. SES contends that the "inflated price" paid for unidentified inventory was a disguised franchise fee.

The position advanced by SES suffers from three independently fatal deficiencies. First, both the original and amended counterclaim (¶ 5) allege that the franchise was the "Service Center Agreement." The only Service Center Agreement before the court is the contract dated February 9, 1998. This contract does not call for the payment of a franchise fee, nor is there any evidence that a fee was paid under this Agreement. There is no evidence that the Agreement was amended in writing, as required by paragraph 19, to include other territories. Rather, defendant's present contention is that the parties entered into some other oral agreement (or series of oral agreements) covering new territories and containing different and additional terms from those embodied in the Service Center Agreement. It is unclear to this court why the franchise law of either Washington or Michigan would apply to these new, unpleaded oral franchises that, by definition, covered territory outside the State of Washington and were not covered by the written Service Center Agreement.

Second and independent is the effect of defendant's admission concerning the value of its purchases under the Service Center Agreement. Pursuant to Rule 36, SPX tendered the following request for admission, and SES responded as indicated.

REQUEST FOR ADMISSION NO. 3 :

Admit that the price You paid for the items You purchased from SPX were at or below the wholesale price for such items.

RESPONSE

Defendant admits that defendant paid at or below the published wholesale price for items purchased from SPX. (See docket # 37). SPX followed up with two interrogatories, requiring identification of all facts and documents upon which SES relied to support a negative answer. SES answered "n/a" to these interrogatories, indicating that it had no contrary evidence. Under both relevant franchise acts, the purchase of goods at a "bona fide wholesale price" cannot constitute payment of a franchise fee. MICH. COMP. LAWS § 445.1503(1)(a); WASH. REV. CODE § 19.100.010(12)(a). Under Rule 36(b), it is now "conclusively established" that SES paid prices at or below the published wholesale price. This admission is fatal to SES's present claim. See American Oil Co. v. Columbia Oil Co., Inc., 567 P.2d 637, 641 (Wash. 1977) (amounts paid for tires, batteries, accessories, and fuel oils at bona fide wholesale prices did not constitute franchise fees under Washington statute, as a matter of law); see also Laurence J. Gordon, Inc. v. Brandt, Inc., 554 F. Supp. 1144, 1159-60 (W.D.Wash. 1983) (amounts paid by purchaser of territory to former district manager for business records, good will, parts, tools and inventory did not constitute franchise fee under Washington franchise law).

Finally, defendant's proofs are simply too vague and conclusory to raise a triable issue of fact on the question of its payment of an indirect franchise fee. "Rule 56(e) provides that judgment `shall be entered' against the nonmoving party unless affidavits or other evidence `set forth specific facts showing that there is a genuine issue for trial.' The object of this provision is not to replace conclusory allegations of the complaint or answer with conclusory allegations of an affidavit." Lujan v. National Wildlife Fed'n, 497 U.S. 871, 888 (1990). The only evidence presented by SES to the court in support of this claim is paragraph 3 of the Foucault Affidavit (docket # 27), set forth verbatim below:

SES began its relationship with SPX by providing warranty service in the region around Spokane, Washington. SES did its work so well that, over time, SPX repeatedly offered SES the opportunity to expand its exclusive territory. By the end of 1999, SES had purchased from SPX the exclusive right to provide warranty work on SPX automotive test equipment throughout most of the continental United States. These purchases came in the form of purchasing inventory owned by SPX and taking on personnel formerly employed by SPX. In order for SES to acquire the right to act as an SPX authorized service center in various parts of the country, SPX would require SES to purchase the entire inventory held by SPX in its various regional service centers. Much of this inventory was worthless. In order to gain entry into a market as the sole SPX authorized service center for a particular area, in many cases SES agreed to purchase this inventory at inflated prices. SES willingly purchased this equipment at these prices, not in order to obtain the inventory, but in order to become the authorized service center for the area. By the end of 1998 SES had replaced the majority of the SPX network of warranty repair technicians with its own network of warranty repair technicians, most of whom were former SPX employees.

The affidavit does not identify the territories allegedly acquired, the inventory purchased by SES, those items of inventory alleged to be "worthless," the price paid by SES, or any other material fact.

To the contrary, the affidavit only sets forth a vague opinion about the value of some unidentified inventory.

Rule 56 demands much more. Conclusory allegations or subjective beliefs set forth in an affidavit fail to create a genuine issue of fact for trial. See Mitchell v. Toledo Hosp., 964 F.2d 577 (6th Cir. 1992); see also Starks v. New Par, No. 98-1300, 1999 WL 357757, at * 5 (6th Cir. May 11, 1999); Greene v. St. Elizabeth Hosp. Med. Ctr., No. 96-4308, 1998 WL 13410, at * 4 (6th Cir. Jan. 7, 1998). It is not enough to say, as SES does, that the payment of a franchise fee is a question of fact and then to advance vague allegations that SPX charged excessive prices for unidentified inventory. Plaintiff's motion for summary judgment was sufficient to meet its initial burden of demonstrating to the court the absence of any evidence tending to show payment by SES of a franchise fee. This shifted to SES the burden of production, requiring SES to submit specific facts which, if believed by the jury, would support a verdict in its favor on this contested issue. See Celotex, 477 U.S. at 331. General allegations are not sufficient. SES must "do more than simply show that there is some metaphysical doubt as to the material facts." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Applying this standard, the federal courts reject vague and conclusory statements, devoid of specific factual support, as insufficient to meet the burden of production. For example, in Williams v. Ford Motor Co., 187 F.3d 533, 543-44 (6th Cir. 1999), the Sixth Circuit held that the trial court properly granted summary judgment in favor of Ford because the affidavit of the plaintiff's expert was conclusory and therefore failed to create a genuine issue of fact for trial. The court stated, "Plaintiff's cannot challenge the motion for summary judgment by relying on allegations contained in their complaint or on affidavits that merely state conclusory allegations." Id. Likewise, in Doren v. Battle Creek Health Sys., 187 F.3d 595, 598 (6th Cir. 1999), the Court of Appeals affirmed a grant of summary judgment in favor of Battle Creek Health Systems upon a claim under the Americans With Disabilities Act because the physician's affidavit and report were "merely conclusory" rather than the "specific facts" required by Rule 56(e). In Hartsel v. Keys, 87 F.3d 795, 804 (6th Cir. 1996), the Court of Appeals found that it was entirely appropriate to "disregard" an affidavit because it consisted of "subjective allegations and vague, conclusory allegations such as `I have witnessed many decisions made by Mayor Michael Keys regarding appointments, personnel, budgeting, funding and the purchase of new equipment. I believe those decisions . . . usually were based on political considerations.'" The Sixth Circuit's recent decision in Stalbosky v. Belew, 205 F.3d 890, 895 (6th Cir. 2000), found that an affidavit stating that an arrest had been "common knowledge" was "too conclusory and vague to successfully counter a motion for summary judgment."

Similarly, SES presents only conclusory statements, devoid of any factual support. If defendant's president were to testify at trial in precisely the same words set forth in paragraph 3 of his affidavit, defendant's counterclaim under the franchise law would not withstand a motion for judgment as a matter of law. Conclusory testimony to the effect that SES was overcharged for unidentified "worthless" or "obsolete" inventory, unsupported by any specific facts concerning the date, place, time and nature of the challenged transactions and the grounds for the opinion concerning value, is insufficient to create a jury submissible issue either at the summary judgment stage or at the close of proofs. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250-53 (1986).

SES had the burden of producing evidence which, if believed by the trier of fact, would support a finding that it paid a franchise fee under the 1998 Service Center Agreement. Despite an ample opportunity to do so, SES has not met this burden of production. The record is devoid of evidence that SES agreed to pay or did pay a franchise fee as defined by Washington or Michigan law. In these circumstances, the evidence must be deemed so one-sided in favor of SPX that no jury verdict on this aspect of the counterclaim could ever stand. SPX is entitled to a summary judgment in its favor on the franchise claims set forth in the original and amended counterclaims.

C. Washington Consumer Protection Act

The original and amended counterclaims assert a cause of action for unfair and deceptive acts and practices under the Washington Consumer Protection Act (CPA). WASH. REV. CODE § 19.86.090 provides a private right of action for a person "who is injured in his or her business or property" by a violation of Wash. Rev. Code 19.86.020. This statute prohibits "unfair or deceptive acts or practices in the conduct of any trade or commerce." SPX has moved for summary judgment on the dual grounds that (1) the Washington CPA does not apply to this transaction by force of the choice-of-law provision found in paragraph 20 of the Service Center Agreement and (2) the undisputed facts do not establish any violation of the Washington CPA, if it does apply to this case.

The first argument advanced by SPX is that the choice-of-law provision in the 1998 Agreement requires application of Michigan law to the claim. This argument, if meritorious, would be claim-dispositive, as the Michigan Consumer Protection Act, MICH. COMP. LAWS §§ 445.901-445.922, applies only to transactions for personal, family or household purposes, and does not extend to business transactions. MICH. COMP. LAWS §§ 445.902(d); see National Fire Ins. Co. of Pittsburgh, Pa. v. Arioli, 941 F. Supp. 646, 655 (E.D.Mich. 1996); Robertson v. State Farm Fire Cas. Co., 890 F. Supp. 671, 679-80 (E.D.Mich. 1995); Zine v. Chrysler Corp., 600 N.W.2d 384, 391-94 (Mich.Ct.App. 1999).

The scope of a contractual choice-of-law provision is a matter of contractual interpretation. The choice-of-law provision in the 1998 Agreement states only that the Agreement "shall be construed in accordance with the laws of the State of Michigan." (¶ 20). Two decisions of the Sixth Circuit are pivotal in determining the scope of this provision. In Moses v. Business Card Express, Inc., 929 F.2d 1131 (6th Cir. 1991), the court faced the question whether the following choice-of-law provision was limited only to contract claims or extended to claims of fraud and misrepresentation: "This Franchise and License Agreement and the construction thereof shall be governed by the laws of the state of Michigan." 929 F.2d at 1139. The Sixth Circuit noted that the clause clearly referred to more than construction of the agreement, "otherwise the first six words would be surplusage." 929 F.2d at 1139-40. The court then made the following observation, which is crucial to the issue now before this court: "If the clause provided merely that its construction would be governed by the law of Michigan, the plaintiffs would have support for their argument that it does not apply more generally." 929 F.2d at 1140. The court then discussed the decision of the Fifth Circuit in Caton v. Leach Corp., 896 F.2d 939 (5th Cir. 1990), in which the choice-of-law clause provided only that the agreement would be construed under the laws of the State of California. The Fifth Circuit held that the parties' "narrow choice of law clause" did not address the entirety of the parties' relationship and thus did not apply to the plaintiff's tort claims. 896 F.2d 943. The Sixth Circuit contrasted the breadth of the language before it with the more narrow provision examined by the Fifth Circuit, concluding that the choice-of-law provision was broad enough to cover the fraud claims, which related to the validity of the contract at issue. 929 F.2d at 1140.

The Court of Appeals again examined this question in Banek, Inc. v. Yogurt Ventures U.S.A., Inc., 6 F.3d 357 (6th Cir. 1993). In that case, the choice-of-law provision stated that "all rights and obligations of the parties hereto shall be governed by and construed in accordance with the laws of the State of Georgia." 6 F.3d at 363. Relying upon Moses, the court found that the choice-of-law provision was "sufficiently broad so as to cover plaintiff's claims of fraud and misrepresentation," which were directly related to the franchise agreement. Id.

Applying the teaching of Moses and Banek, this court finds that the choice-of-law provision found in paragraph 20 of the 1998 Agreement does not cover the statutory claim under the Washington CPA. Unlike the franchise act claim, which involves the nature of the Service Center Agreement itself, the CPA claim is only tangentially related to the contract. The choice-of-law provision is virtually identical to the language examined by the Fifth Circuit in the Caton decision, which the Sixth Circuit distinguished in Moses. Under Moses and Banek, a choice-of-law provision that refers only to the construction of the agreement is not broad enough to cover statutory causes of action only tangentially related to the contract of the parties.

This finding, however, does not automatically result in the application of Washington law. The court must again resort to Michigan conflicts-of-laws rules to determine what law governs defendant's statutory tort claim. For many years, Michigan applied the rule of lex loci delicti, or law of the place of the wrong, to tort actions. See, e.g., Abendshein v. Farrell, 170 N.W.2d 137 (Mich. 1969). The Michigan Supreme Court began to move away from the lex loci delicti rule in Sexton v. Rider Truck Rental, Inc., 320 N.W.2d 843 (Mich. 1982), in favor of lex fori, or law of the forum. Under this approach, Michigan courts will apply Michigan law unless a rational reason to do otherwise exists. In determining whether a rational reason to displace Michigan law exists [courts] undertake a two-step analysis. First [courts] must determine if any foreign state has an interest in having its law applied. If no state has an interest, a presumption that Michigan law will apply cannot be overcome. If a foreign state does have an interest in having its law applied, [the court] must then determine if Michigan's interests mandate that Michigan law be applied, despite foreign interests. Sutherland v. Kensington Truck Serv., Ltd., 562 N.W.2d 466, 471 (Mich. 1997).

The first step is to determine whether a foreign state has an interest in having its law applied. Sutherland, 562 N.W.2d at 471. Here, the State of Washington has a strong and obvious interest in applying its law against deceptive business practices to transactions taking place within its borders. Second, the court must determine whether Michigan's interests nevertheless mandate application of its own law. Id. The present case presents no compelling reason for the application of Michigan law to the statutory tort claim. It is unclear to this court why the State of Michigan would be interested in applying its law to allegedly deceptive acts and practices occurring in the State of Washington. Consequently, applying Michigan conflicts rules, I determine that the Washington CPA should apply.

An action under the Washington CPA consists of five elements. The plaintiff must show (1) an unfair or deceptive act or practice, (2) occurring in the conduct of trade or commerce, (3) affecting the public interest and (4) causing injury to the plaintiff in his business or property. Hangman Ridge Training Stables, Inc. v. Safeco Title Ins. Co., 719 P.2d 531, 535-39 (Wash. 1986). Plaintiff's motion for partial summary judgment calls into question defendant's ability to prove the third element. The Washington Supreme Court has held that a plaintiff may establish the element regarding the public interest by showing that "an act or practice has a capacity to deceive a substantial portion of the public." Saunders v. Lloyd's of London, 779 P.2d 249, 256 (Wash. 1989); see Hangman Ridge, 719 P.2d at 535.

The response of SES to plaintiff's motion on the Washington CPA claim was perfunctory, to say the least. The affidavits filed by SES do not attempt to address any element of its claim under the Washington CPA. Defendant's brief in response to the motion devotes less than a page to its claim under the Washington CPA. Defendant's brief raises two essential arguments. First, SES points out that a violation of the Washington Franchise Act is a per se unfair trade practice under the CPA. As an abstract legal matter, this assertion is true. See Nelson v. National Fund Raising Consultants, Inc., S42 P.2d 473, 477 (Wash. 1992). It is, however, unavailing to SES, for two reasons. First, as this court has found above, SES has not established a violation of the Washington franchise law. Second, even if it had done so, a violation standing alone is insufficient. The Washington Supreme Court has squarely held that a violation of the Franchise Investment Protection Act does not automatically establish a violation of the Consumer Protection Act. Nelson, 842 P.2d at 477. Instead, SES must go on to show that the public interest has been affected. Id. at 477-78.

Under Washington law, only acts that have the capacity to deceive a substantial portion of the public are actionable under the CPA. Hangman Ridge, 719 P.2d at 535. The Washington appellate court has summarized state law on this issue as follows:

Whether the public has an interest in any given action is determined by reference to several factors, depending upon the context in which the alleged acts were committed. Hangman Ridge, 105 Wn.2d at 789-90, 719 P.2d 531. When the transaction is a private dispute, as it is here, and not a consumer transaction, it is more difficult to show public interest in the subject matter. There must be a likelihood additional persons have been or will be injured in the same fashion. Hangman Ridge, 105 Wn.2d at 790, 719 P.2d 531. Relevant factors include:
whether the acts were committed in the course of the defendant's business; whether the defendant advertised to the public; whether the defendant actively solicited the plaintiff, thereby indicating other similar solicitations took place; and whether the parties occupied unequal bargaining positions. Hangman Ridge, 105 Wn.-2d at 790-91, 719 P.2d 531.

Goodyear Tire Rubber Co. v. Whiteman Tire, Inc., 935 P.2d 628, 635 (Wash.Ct.App. 1997). In the present case, the transaction clearly involved "a private dispute" and not a consumer transaction. Therefore, it is more difficult for SES to show a public interest in the subject matter. Id. SES has presented absolutely no proof of a likelihood that additional persons have been or will be injured in the same fashion. Furthermore, it has not shown that SPX engaged in any other similar solicitation or in any way directed its allegedly deceptive practices to the public. In the Goodyear case, the Washington appellate court noted that Goodyear's conduct was not directed at the public and that the tactics complained of had "no deceptive capacity affecting the public in general." For this reason, the court held as a matter of law that Goodyear's alleged unfair and deceptive acts did not affect the public interest. 925 P.2d at 635.

A recent decision of the Ninth Circuit Court of Appeals, a court well-versed in Washington law, is of similar import. In Cassan Enter., Inc. v. Dollar Systems, Inc., Nos. 96-35605. 96-35634, 96-35905, 1997 WL 753394 (9th Cir. Nov. 28, 1997), the Ninth Circuit evaluated claims under the Washington CPA brought by a car rental franchisor. The court noted that only acts or practices having a capacity to deceive a substantial portion of the public are actionable under the Washington statute. Applying this concept, the court held that the franchisor's refusal to reduce its franchise fee and its breach of promise to support the plaintiff's attempts to expand the scope of its business affected only the franchisee:

Isolated communications are not likely to deceive a substantial portion of the public unless they are part of a standard form contract or a standard sales representation. Representations by a franchisor to its franchisee are unlikely to have "deceptive capacity affecting the public in general."

1997 WL 753394, at * 2 (quoting Goodyear, 935 P.2d at 635).

Defendant's only attempt to address this issue consists of its bare assertion that many members of the public stand to be harmed because customers will be left without warranty service as a result of the termination of the Service Center Agreement. This contention is factually and legally insufficient. Factually, defendant has not presented any evidence to the court in support of its speculation concerning the plight of SPX customers. Statements made in attorney's briefs, unsupported by depositions, affidavits, or other admissible evidence, are insufficient to raise a triable issue of fact. See Vivid Technologies, Inc. v. American Science Eng'g, Inc., 200 F.3d 795, 811 (Fed. Cir. 1999); Glover v. NMC Homecare, Inc., 106 F. Supp.2d 1151, 1163 (D.Kan. 2000). Legally, SES has not cited any Washington authority finding that the public interest can be harmed under the CPA in such an indirect fashion. To the contrary, the Washington courts hold that the statute is satisfied only by acts that have the likelihood of harming others "in the same fashion" as the claimant. Goodyear, 935 P.2d at 635. The hypothetical harm to customers served by SES is different in kind from that allegedly suffered by defendant. Consequently, defendant's argument is unsupported in fact and law and must be rejected.

Conclusion

Defendant has failed to raise a triable issue of fact in support of either its franchise act claim or its claim under the Washington CPA. Plaintiff is therefore entitled to a partial summary judgment dismissing these aspects of the counterclaim.


Summaries of

SPX Corporation v. Shop Equipment Specialists

United States District Court, W.D. Michigan, Southern Division
Mar 28, 2001
Case No. 4:00cv 49 (W.D. Mich. Mar. 28, 2001)
Case details for

SPX Corporation v. Shop Equipment Specialists

Case Details

Full title:SPX CORPORATION, Plaintiff, v. SHOP EQUIPMENT SPECIALISTS, INC. a/k/a SHOP…

Court:United States District Court, W.D. Michigan, Southern Division

Date published: Mar 28, 2001

Citations

Case No. 4:00cv 49 (W.D. Mich. Mar. 28, 2001)