Volkswagen of America, Inc. v. Maverick Auto Group 2 LLC, et al

Filing 26

ORDER signed by Judge John A. Mendez on 12/10/2014 GRANTING plaintiff's 19 Motion for Summary Judgment. This matter is TERMINATED. (Marciel, M)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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VOLKSWAGEN OF AMERICA, INC.,

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Plaintiff,

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v.
MAVERICK AUTO GROUP 2, LLC dba
VOLKSWAGEN OF FAIRFIELD and
RAHIM HASSANALLY,

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Defendants.

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Case No. 2:13-CV-00802-JAM-EFB
ORDER GRANTING PLAINTIFF’S
MOTION FOR SUMMARY JUDGMENT

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This matter is before the Court on Plaintiff Volkswagen of

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America, Inc.’s (“Plaintiff”) Motion for Summary Judgment (Doc.

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#19).

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Fairfield (“Defendant Fairfield”) and Rahim Hassanally (“Defendant

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Hassanally”) (collectively “Defendants”) oppose Plaintiff’s motion

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(Doc. #21).

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reasons, Plaintiff’s motion is GRANTED. 1

Defendants Maverick Auto Group 2, LLC dba Volkswagen of

Plaintiff filed a reply (Doc. #25).

For the following

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I.

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FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff is the exclusive distributor of Volkswagen of

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America vehicles within the United States.

Defendants’ Response to

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Plaintiff’s Statement of Undisputed Facts (“DRSUF”) ¶ 1.

On

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was originally
scheduled for November 19, 2014.
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January 12, 2011, Plaintiff and Defendant Fairfield entered into a

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Volkswagen Dealer Agreement (“Dealer Agreement”) authorizing

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Defendant Fairfield as a Volkswagen of America Dealer.

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As part of the Dealer Agreement, Defendant Fairfield agreed to

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construct a new or renovated Volkswagen dealership facility by

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January 12, 2013, that complied in full with all of Plaintiff’s

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requirements for a “White Frame Facility.”

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Agreement further provided for a $600,000 Capital Contribution from

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Plaintiff to Defendant Fairfield.

DRSUF ¶ 3.

DRSUF ¶ 2.

DRSUF ¶ 4.

The Dealer

Defendants allege

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that Plaintiff also made oral representations to Defendants that

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the Volkswagen dealership in Napa, California would be moved to a

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location outside Defendant Fairfield’s marketing area.

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Statement of Undisputed Facts (“DSUF”) ¶ 1.

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allege that Plaintiff made representations that Defendant Fairfield

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would be receiving an increased allocation of inventory from

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Plaintiff.

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representations were part of the January 12, 2011 agreement between

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Plaintiff and Defendants.

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DSUF ¶ 2.

Defendants’

Defendants further

Defendants allege that these oral

DSUF ¶¶ 1-2.

Also on January 12, 2011, Defendant Hassanally entered into a

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personal guarantee (“Guarantee”) in which he agreed to be liable to

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Plaintiff for all indebtedness of Defendant Fairfield to Plaintiff

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arising out of the Dealer Agreement.

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DRSUF ¶ 9.

On February 9, 2012, Plaintiff sent Defendants a letter

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reminding them of the upcoming construction deadlines and the need

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to meet those deadlines or face repayment of the Capital

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Contribution.

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Defendants a letter informing them that Defendant Fairfield was in

DRSUF ¶ 11.

On March 20, 2012, Plaintiff sent

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breach of the Dealer Agreement due to its failure to meet the

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interim construction deadlines set forth in the agreement.

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¶ 13.

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interim construction deadlines to accommodate Defendants’ needs.

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DRSUF ¶ 14.

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letter in which it granted Defendant Fairfield a one-time extension

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of the final deadline to complete construction of the new facility,

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now requiring that construction be completed by June 12, 2013.

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DRSUF ¶ 16.

DRSUF

In this same letter, Plaintiff agreed to extend two of the

On September 5, 2012, Plaintiff sent Defendants a

On October 17, 2012, Plaintiff sent Defendants a

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letter in which Plaintiff expressed concern over Defendant

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Fairfield’s lack of progress towards completion of the new

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facility.

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continued lack of progress would constitute an anticipatory breach

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of the Dealer Agreement by Defendant Fairfield.

DRSUF ¶ 19.

Plaintiff also expressed its position that

DRSUF ¶ 19.

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On February 20, 2013, Plaintiff sent Defendants a letter

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requesting adequate assurances that construction of a White Frame

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compliant facility would be completed by June 12, 2013.

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¶ 21.

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Plaintiff’s February 20th letter.

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Defendant Fairfield maintained that Plaintiff had made oral

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representations to Defendants about its plans to relocate the Napa

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dealership outside of the Fairfield marketing area, and that the

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amount of inventory allocated to Defendants’ dealership would be

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increased.

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DRSUF

On March 6, 2013, Defendant Fairfield responded to
DRSUF ¶ 22.

In this letter,

DRSUF ¶ 23.

On March 14, 2013, Plaintiff responded to Defendants’ letter,

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informing Defendant Fairfield that it had failed to provide

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adequate assurances, and giving it until March 25, 2013 to do so.

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DRSUF ¶ 25.

On March 22, 2013, Defendants sent Plaintiff a letter,
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asking for more time and reiterating their position regarding the

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relocation of the Napa dealership and increased vehicle allocation

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issues.

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Defendants a letter, demanding immediate repayment of the $600,000

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Capital Contribution.

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$600,000 to Plaintiff.

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DRSUF ¶¶ 26-27.

On April 1, 2013, Plaintiff sent

DRSUF ¶ 28.

Defendants have not repaid the

DRSUF ¶ 29.

On April 24, 2013, Plaintiff filed the Complaint (Doc. #1) in

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this Court.

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action: (1) Breach of Contract against Defendant Fairfield; and

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Plaintiffs’ Complaint includes the following causes of

(2) Breach of Guarantee against Defendant Hassanally.

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II.

OPINION

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A.

Defendants’ Late-filed Opposition

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As discussed in the Court’s November 14, 2014 minute order

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(Doc. #22), Defendants’ opposition was filed eight days late.

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Defendants filed a response (Doc. #24) to the Court’s minute order,

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attempting to explain the tardiness of their filing.

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Court prefers to adjudicate cases on their merits, the Court finds

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that Defendants have, barely, met the standard for excusable

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neglect under Rule 6(b)(1)(B) of the Federal Rules of Civil

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Procedure (“FRCP”).

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opposition and the supporting documents.

Because the

The Court will consider Defendants’ late-filed

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B.

Analysis

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The parties’ sole dispute revolves around the two oral

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promises allegedly made by Plaintiff to Defendants prior to the

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execution of the written agreement.

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Plaintiff agreed to move a Volkswagen dealership from Napa, CA to

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an alternate location.

First, Defendants contend that

Second, Defendants maintain that Plaintiff
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promised to increase the number of vehicles allocated to

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Defendants’ dealership.

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these alleged oral promises is inadmissible because the Dealer

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Agreement contained a merger clause, and because the oral promises

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are fundamentally inconsistent with the terms of the written

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contract.

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clause does not bar Court’s consideration of the collateral oral

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terms.

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Plaintiff argues that any evidence of

Mot. at 12, 17.

Defendants respond that the merger

Opp. at 7.

California law restricts the admissibility of parol evidence

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where a written contract exists.

Specifically, the parol evidence

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rule provides that terms “set forth in a writing intended by the

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parties as a final expression of their agreement with respect to

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such terms as are included therein may not be contradicted by

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evidence of any prior agreement or of a contemporaneous oral

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agreement.”

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noted that “the parties' inclusion of an integration clause in the

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written contract is but one factor” in determining the

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admissibility of parol evidence.

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F.3d 848, 859 (9th Cir. 1995).

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merger clause is persuasive evidence of full integration.”

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Coast Pipe Lining, Inc. v. Pipe Shield USA, Inc., 2013 WL 6442603

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at *4 (C.D. Cal. Dec. 9, 2013).

Cal. Civ. Proc. Code § 1856(a).

The Ninth Circuit has

Sicor Ltd. v. Cetus Corp., 51
Nevertheless, “an integration or
Cent.

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The Agreement contains such a merger clause, which provides as

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follows: “This instrument contains the entire agreement between the

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parties.

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expressly set forth or referred to herein were made or relied upon

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in entering into this Agreement.”

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Provisions, Article 17(4).

No representations or statements other than those

Collins Dec., Ex. 1, Standard

This clause is “persuasive evidence”
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that the Agreement was fully integrated, and that no parol evidence

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may be considered by the Court.

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6442603 at *4.

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Cent. Coast Pipe Lining, 2013 WL

However, as noted by the Court in its November 20, 2013 Order,

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the analysis does not end here.

Rather, the Court must consider

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the nature of the alleged collateral terms, and “determine whether

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the parties intended [them] to be a part of their bargain.”

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Gerdlund v. Elec. Dispensers Int'l, 190 Cal.App.3d 263, 271 (1987).

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Importantly, “proof of a collateral agreement which contradicts an

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express provision of the written agreement” is never admissible, as

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“it cannot reasonably be presumed that the parties intended to

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integrate two directly contradictory terms in the same agreement.”

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Gerlund, 190 Cal.App.3d at 271.

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that parol evidence may admitted only “to prove the existence of a

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separate oral agreement as to any matter . . . which is not

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inconsistent with [the written agreement’s] terms.”

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Cal.App.3d at 271.

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Therefore, the overarching rule is

Gerlund, 190

The Dealer Agreement provides that “Dealer shall repay the

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entire $600,000 Capital Contribution to VWoA, immediately upon

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written notice from VWoA, if for any reason Dealer fails to comply

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in full with the Construction Deadlines, or the White Frame

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Commencement Date fails to occur by the deadline[.]”

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Ex. 1, Addendum at 6(b).

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reason” language is fundamentally inconsistent with the collateral

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terms allegedly agreed upon by the parties.

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Plaintiff argues that “the plain language of the agreement makes

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repayment contingent upon the timely building of the White Frame

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Facility” and the unconditional nature of the “for any reason”

Collins Dec.,

Plaintiff argues that this “for any

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Specifically,

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language forecloses the existence of additional obligations by

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Plaintiff, such as the relocation of the Napa dealership, or an

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increased vehicle allocation to Defendants.

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Inexplicably, Defendants do not address this argument in their

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opposition.

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Mot. at 21.

The Court concludes that the “for any reason” language of the

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written agreement is wholly incompatible with the oral terms

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alleged by Defendants.

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repayment of the Capital Contribution to be excused by Plaintiff’s

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failure to relocate the Napa dealership, or by Plaintiff’s failure

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to effect an increased vehicle allocation to Defendants’

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dealership, they would not have included the written provision

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quoted above.

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reason” is that Defendants’ failure to comply with the applicable

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deadlines would result in the unconditional repayment of the

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Capital Contribution.

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“inconsistent with [the Agreement’s] terms,” its admissibility is

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statutorily barred.

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Proc. Code § 1856(a).

If the parties intended Defendants’

The clear and unambiguous meaning of “for any

Because the proffered parol evidence is

Gerlund, 190 Cal.App.3d at 271; Cal. Civ.

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Defendants’ reliance on the Court’s November 20, 2013 Order,

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which denied Plaintiff’s motion for judgment on the pleadings, is

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unavailing.

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evidence rule, as well as the following conclusion: “Although the

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written agreement between Plaintiff and Defendants included an

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integration clause, this clause would not necessarily exclude

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evidence that the agreement included additional material terms.

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. . .

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contradict the terms of the written agreement, such parol evidence

Included in this Order was a discussion of the parol

As long as the additional terms agreed upon do not

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may still be admissible.”

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contrary notwithstanding, this Order does not control the issue

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presently before the Court.

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definitive statement that the Court would consider the alleged oral

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agreement: rather, it was an invitation for Defendants to develop –

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through discovery – evidence of additional oral terms which did not

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contradict the written agreement.

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have failed to present such evidence.

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Order at 7.

Opp. at 8.

Defendants’ argument to the

It was far from a

As discussed above, Defendants

The inadmissibility of Defendants’ proposed parol evidence is

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dispositive on both of Plaintiff’s claims.

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not dispute any of the 29 facts set forth in Plaintiff’s separate

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statement of undisputed facts.

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undisputed that Plaintiff requested adequate assurances from

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Defendants, pursuant to California Commercial Code § 2609, due to

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Defendants’ lack of progress towards complying with its facility

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obligations.

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Defendant Fairfield’s response “did not state that Fairfield would

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construct the White Frame compliant facility by the extended

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deadline.”

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adequate assurances that it would comply with the extended

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deadline, Plaintiff demanded repayment of the $600,000 Capital

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Contribution, pursuant to the terms of the Agreement.

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Defendant Fairfield’s failure to repay the Capital Contribution is

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in violation of the Dealer Agreement, and Defendant Fairfield has

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breached the contract.

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judgment on its first cause of action for breach of contract

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against Defendant Fairfield is GRANTED.

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DRSUF ¶ 21.

DRSUF ¶ 24.

Notably, Defendants do

See generally, DRSUF.

It is

It is similarly undisputed that

After Defendants failed to provide

DRSUF ¶ 28.

Accordingly, Plaintiff’s motion for summary

Similarly, it is undisputed that Defendant Hassanally signed a
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personal guarantee, in which he agreed to be “liable to VWoA for

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all indebtedness of Fairfield to VWoA arising out of [the Dealer

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Agreement].”

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Plaintiff the amount owed by Defendant Fairfield is a breach of

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that guarantee.

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judgment on its second cause of action for breach of guarantee

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against Defendant Hassanally is GRANTED.

DRSUF ¶9.

Defendant Hassanally’s failure to pay

Accordingly, Plaintiff’s motion for summary

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III. ORDER
For the foregoing reasons, Plaintiff’s Motion for Summary
Judgment is GRANTED.
IT IS SO ORDERED.
Dated:

December 10, 2014

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