Mercedes-Benz USA LLC v. Star Automobile Company et al
Filing
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ORDER granting 4 Motion for TRO. Ordered by Judge C. Ashley Royal on 6/3/11 (lap)
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF GEORGIA
ATHENS DIVISION
MERCEDES-BENZ USA, LLC,
Plaintiff,
v.
STAR AUTOMOBILE COMPANY;
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Case No. 3:11-cv-73 (CAR)
PETER W. MANKINS; and KRZYSZTOF )
LENCHKOSZ,
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Defendants.
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ORDER FOR PRELIMINARY INJUNCTION
Currently before the Court is Plaintiff Mercedes-Benz USA, LLC’s (“MBUSA”)
Motion for Temporary Restraining Order and Preliminary Injunction [Doc. 4] seeking a
preliminary injunction against the sale of Defendant Star Automobile Company’s (“Star”)
Mercedes-Benz of Athens dealership to Defendants Peter W. Mankins and Krzysztof
Lenchkosz (the “Buyers”). After review of the entire record and hearing from the parties at
the hearing held before this Court on June 1, 2011, the Court finds that MBUSA will suffer
immediate and irreparable injury if this Motion is not granted. Thus, Plaintiff’s Motion
[Doc. 4] is GRANTED.
The Court makes the following factual findings:
1. Plaintiff MBUSA distributes Mercedes-Benz passenger cars and light trucks in
the United States through a network of independent dealers, who in turn sell the vehicles
to customers.
2. Defendant Star is an authorized dealer of Mercedez-Benz vehicles doing
business as Mercedes-Benz of Athens.
3. To be an authorized Mercedes-Benz dealer, MBUSA and Star entered into two
agreements: the Mercedes-Benz Passenger Car Dealer Agreement and the Mercedes-Benz
Light Truck Dealer Agreement (collectively, the “Dealer Agreements”). For purposes of
this litigation, the Dealer Agreements contain identical operative terms.
4. The Dealer Agreements give MBUSA a right of first refusal over the sale of a
dealership. The Agreements contain the following pertinent language:
B. Right of First Refusal or Option to Purchase
1. Rights Granted
If a proposal to sell Dealer’s principal assets or transfer the
majority ownership interest in Dealer is submitted by Dealer to MBUSA . . .
MBUSA has a right of first refusal or option to purchase such assets or
ownership interest . . . . MBUSA’s exercise of its right or option under this
Section IX.B supersedes Dealer’s right to transfer its interest in, or
ownership of, the dealership. MBUSA’s right or option may be assigned by
it to any third party and MBUSA hereby guarantees the full payment to
Dealer of the purchase price by such assignee.
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3. Right of First Refusal
If Dealer has entered into a bona fide written buy/sell agreement
for its dealership business or assets, MBUSA’s right under this Section
IX.B is a right of first refusal, enabling MBUSA to assume the buyer’s
rights and obligations under such buy/sell agreement, and to cancel this
Agreement and all rights granted Dealer. . . .
If, as a result of MBUSA’s exercise of its right of first refusal,
Dealer is contractually obligated to reimburse the initial buyer for
reasonable attorney’s fees, broker’s fees, title searches, property
inspections, and other similar costs and fees that the buyer incurred in
connection with the buy/sell agreement, MBUSA shall reimburse Dealer for
such costs and fees in an amount up to but not exceeding Fifty Thousand
Dollars ($50,000.00). Dealer shall provide MBUSA with all documents
substantiating such costs and fees as MBUSA may reasonably request.
5. On April 1, 2011, Defendant Star entered into a Dealership Asset Purchase
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Agreement with the Buyers intending to sell the Mercedes dealership together with their
Nissan and Volkswagon dealerships as a package deal to the Buyers.
6. The Asset Purchase Agreement contemplated a June 1, 2011 closing date.
7. MBUSA wishes to enjoin the sale in order to exercise its contractual right of
first refusal.
The Court makes the following conclusions of law:
1. Due to the complexity of the issues involved in deciding this case, the Court
must preserve the status quo until the Court can “fully and fairly adjudicate” the interplay
between Georgia’s Motor Vehicle Franchise Practices Act, O.C.G.A. §10-1-620 to 10-1670, and the contractual rights contained in the Dealer Agreements. Northeastern Fl.
Chapter of Ass’n of Gen. Contractors of Am. v. City of Jacksonville, Fl, 896 F.2d 1283,
1284 (11th Cir. 1990) (“The chief function of a preliminary injunction is to preserve the
status quo until the merits of the controversy can be fully and fairly adjudicated.”).
2. MBUSA is likely to succeed on the merits of its claim. See, e.g., Parker v. State
Bd. of Pardons and Paroles, 275 F.3d 1032, 1034-35 (11th Cir. 2001) (A “preliminary
injunction is appropriate where the movant demonstrates that: (a) there is a substantial
likelihood of success on the merits[.]”). Not only do the Dealer Agreements grant
MBUSA a right of first refusal, but Georgia law also grants MBUSA a statutory right of
first refusal. See O.C.G.A. § 10-1-663.1. Under both New Jersey law, which governs the
Dealer Agreements, and Georgia law, deals like the one in this case violate rights of first
refusal. See Guaclides v. Kruse, 170 A.2d 488, 494 (N.J. App. 1961) (a property owner
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may not “impair or destroy the preemptive right [of first refusal] to purchase the part by
sale or agreement to sell the whole to some third person[.]”); Mazzeo v. Kartman, 560
A.2d 733 (N.J. App. 1989) (right of first refusal is a “valuable perogative,” and seller
breaches the right of first refusal when it accepts an offer on property without first
offering to the right-holder); Hinson v. Roberts, 256 Ga. 396, 397 (1986) (“the
preemptive right of first refusal may not be defeated by the offer of a third party to
purchase the land in question as part of a package transaction”). Thus, it is likely that the
package deal selling the Nissan and Volkswagon dealerships (over which MBUSA has no
power) together with the Mercedes dealership violates MBUSA’s contractual right of first
refusal.
2. MBUSA would likely suffer irreparable harm in the absence of injunctive
relief. See, e.g., Parker, 275 F.3d at 1034-35 (preliminary injunction appropriate where
“(b) the preliminary injunction is necessary to prevent irreparable injury”). If the Court
were to allow the sale of Star’s Mercedes dealership to close, MBUSA would lose its
right of first refusal under the Dealer Agreements. Under such circumstances, monetary
damages would be difficult, if not almost impossible, to calculate; thus, an injunction is
the appropriate remedy. See, e.g., Guaclides, 170 A.2d at 497 (enjoining property owner
from selling burdened property without according right-holder ability to exercise its right
of first refusal); Radio WEBS, Inc. v. Tele-Media Corp., 249 Ga. 598, 602, 604 (1982)
(holding that trial court should have enjoined package sale that included assets burdened
by right of first refusal).
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3. The harm suffered by MBUSA by denying an injunction would likely exceed
any damage the preliminary injunction may cause Defendants. See, e.g., Parker, 275 F.3d
at 1034-35 (preliminary injunction appropriate where “(c) the threatened injury outweighs
the harm that the . . . preliminary injunction would cause to the non-movant”). If the
Court does not enjoin the sale of the dealership, MBUSA would lose its right of first
refusal under the Dealer Agreements, a loss that would be nearly impossible to
compensate with monetary damages. As to Star, although there will be a delay in the
transfer of the dealership, Star continues to benefit from the ownership and operation of
the dealership and is in no worse position. Moreover, MBUSA stands prepared to perform
under the terms of the right of first refusal in the Dealer Agreements.
4. Preliminarily enjoining the sale to maintain the status quo until the Court can
fully and fairly resolve the issues in this case would not be against the public interest.
See, e.g., Parker, 275 F.3d at 1034-35 (preliminary injunction appropriate where (d) “the
preliminary injunction would not be averse to the public interest”). Indeed, enjoining the
sale is in furtherance of the public’s interest in preserving and maintaining contractual
relations. For all of the above reasons, the Motion for Temporary Restraining Order and
Preliminary Injunction is hereby granted.
IT IS, THEREFORE, ORDERED, ADJUDGED and DECREED that:
1)
Defendant Star Automobile Company and Defendants
Peter W. Mankins and Krzysztof Lenckosz are hereby enjoined
from closing the Asset Purchase Agreement between them dated
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April 1, 2011, that includes the assets of the Mercedes-Benz of
Athens dealership.
2)
Defendant Star Automobile Company will not sell,
transfer, or otherwise encumber the Mercedes-Benz of Athens
dealership or the dealership’s assets, including the dealership’s
property, tangible assets, intangible assets, contractual rights
and obligations, or goodwill.
3)
Nothing in this Order shall prohibit Defendant Star
Automobile Company from continuing normal dealership
operations.
4)
This Order does not extend or abate Defendants’
obligation to file responsive pleadings pursuant to Rule 12 of
the Federal Rules of Civil Procedure.
5)
As stated in the hearing, the parties are to submit their
briefs regarding the security requirement set forth in Fed. R.
Civ. P. 65(c) within five (5) days of the date of this Order.
6)
This Preliminary Injunction will remain in effect until
further Order of this Court.
SO ORDERED, this the 3rd day of June, 2011.
S/ C. Ashley Royal
C. ASHLEY ROYAL, JUDGE
UNITED STATES DISTRICT COURT
SSH
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