Jaguar Land Rover North America, LLC v. Manhattan Imported Cars, Inc.

Filing 71

MEMORANDUM OPINION. Signed by Chief Judge Deborah K. Chasanow on 9/14/10. (Chasanow, Deborah)

Jaguar Land Rover North America, LLC v. Manhattan Imported Cars, Inc.

Doc. 71

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND JAGUAR LAND ROVER NORTH AMERICA, LLC : v. MANHATTAN IMPORTED CARS, INC. :

: : :

Civil Action No. DKC 08-1599

MEMORANDUM OPINION Presently pending and ready for resolution in this breach of contract case are (1) a motion for summary judgment filed by Plaintiff Jaguar Land Rover North America, LLC (Paper 61) and (2) a motion to seal exhibits filed by Defendant Manhattan

Imported Cars, Inc.

(Paper 65).

The issues are fully briefed

and the court now rules pursuant to Local Rule 105.6, no hearing being deemed necessary. For the reasons that follow,

Plaintiff's motion will be granted in part and denied in part. Defendant's motion will be granted. I. Background The Defendant, facts the viewed in the light are most as favorable to the

non-moving

party,

follows.

Plaintiff

Jaguar Land Rover North America, LLC ("JLRNA") is a limited liability company organized and existing under the laws of the State of Delaware with its principal place of business in New Jersey. (Paper 1 ¶ 1). Plaintiff is the exclusive distributor

Dockets.Justia.com

of

Jaguar

and

Land

Rover

products

in

the

United

States.

(Id. at ¶¶ 10, 12).

Defendant Manhattan Imported Cars, Inc.

("Manhattan") is incorporated in the State of Maryland with its principal place of business and in Rockville. shareholder (Id. is at ¶ 2)

Manhattan's

president

sole

John

Jaffe.

Manhattan operates as a Land Rover and Jaguar dealer pursuant to agreements between Manhattan and JLRNA or its predecessors.

(Paper 66 at 2.)1 dealer. decision Manhattan (Id.). in 2008

Manhattan also operates as a Lincoln-Mercury The to parties' suspend "Business dispute arises from JLRNA's to

certain Builder

incentive Program"

payments and

under

its

JLRNA's

failure to reimburse a number of Manhattan's warranty claims The Business Builder Program is an incentive program under which a dealer can earn bonus payments of up to six percent of the Manufacturer's Suggested Retail Price ("MSRP") from JLRNA for each Jaguar or Land Rover it sells if the dealer meets

1

Prior to 2008, Land Rover vehicles were distributed in the United States by Land Rover North America, Inc. ("LRNA"), a subsidiary of Ford Motor Company. Jaguar vehicles were distributed by the Jaguar division of Ford. A single Ford business unit called "Aston Martin Jaguar Land Rover" was responsible for distribution of both brands. In 2008, Ford sold the Jaguar and Land Rover brands to Tata Motors Ltd, an Indian company. 2

certain criteria, including facility-related requirements. facility-related percent of MSRP. 2). incentive payments can total up to

The three

(Paper 62, Exhibit 19, at 2 and Exhibit 20, at

To qualify for the facility-related incentive payments,

dealers must have either an approved facility or an approved facility plan that details the process by which the dealer will obtain or construct an approved facility. (Paper 62,

Exhibit 19, at 3 and Exhibit 20, at 3). typically include project milestones,

Approved facility plans culminating with the

opening of an approved facility at milestone five.

If a dealer

misses any project milestone by more than ninety days, it can be classified as "at risk" and JLRNA has the option to suspend that dealer's incentive payments. Exhibit 20, at 4). The key events relevant to the present motions began in 2006. Mercury Prior to 2006, Defendant operated Jaguar and Lincoln franchises in one "dualled" location in Rockville, (Paper 62, Exhibit 19, at 4 and

Maryland.

(Paper 62, at 5, Paper 66, at 3).

In May of 2006,

Defendant acquired a Land Rover franchise from third party Land Rover Rockville and executed a Land Rover Dealer Agreement with JLRNA's predecessor Land Rover North America ("LRNA").

(Paper 62, at 5-6, Paper 66, at 3-4). 3

Because LRNA was a not a

party

to

Defendant's it was "Land terms also

buy-sell necessary Letter

agreement for of LRNA

with and

Land

Rover to

Rockville, execute contained

Defendant ("LOI") rights

the

Rover

Intent" parties'

which and At the

governing

the

responsibilities after Defendant acquired the franchise.

same time, Defendant and Jaguar Cars signed an "Amendment to the Jaguar Performance Agreement" ("PA") to reflect the addition of the Land Rover franchise to Defendant's facility. at 5-6, Paper 66, at 3-4). Defendant on May 2, 2006. (Paper 62,

The LOI and PA were signed by (Id.). On May 16, 2006, Defendant

closed on its buy-sell agreement with Land Rover Rockville and proceeded to execute the Land Rover Dealer Agreement with LRNA pursuant to which Defendant was authorized to commence

operations as a Land Rover dealer. The Land of Rover LOI and

(Paper 62, at 9). PA both outlined that the were

Jaguar

renovations

Defendant's

dealership

facilities

necessary in order for Defendant to qualify for facility-related Business Builder incentive payments. The parties' original plan

called for Defendant to operate at its existing location on Old Georgetown Road in Rockville with certain initial renovations to the design and décor to accommodate Jaguar and Land Rover's requirements followed by construction of a larger facility to 4

house

only

Land

Rover

and

Jaguar

vehicles.

(Paper

62,

Exhibits 15 and 17).

The LOI and PA included a set of common

milestones that culminated with a January 1, 2008, deadline for Defendant to have completed all site work and renovations and be open for business as a Jaguar/Land Rover Centre. agreement Lincoln also contained wherein a paragraph entitled to (Id.). Each of

"Relocation "relocate

Mercury"

Defendant

agreed

[its]

Lincoln Mercury operations out of the 11617 Old Georgetown Road facility" by either January 1, 2008, or, at the latest, July 1, 2008. (Paper 62, Exhibit 17 ¶ 3 and Exhibit 15 ¶ 4). The

relocation paragraph included the following language: You understand that [Land Rover and Jaguar] would not have entered into this Agreement, but for your commitment to relocate your Lincoln Mercury operations out of the 11617 Old Georgetown Road facility. If you fail to relocate your Lincoln Mercury operations out of the Old Georgetown Road facility under the terms of this agreement, you further understand that any such failure may result in your immediate ineligibility to receive payments under the Business Builder incentive program (or such other similar incentive program as may be subsequently adopted) to the extent that such an incentive program requires an approved facility or has other facility prerequisites. (Id.).

5

Although Defendant successfully completed the first project milestone, by early 2007 it had fallen behind and sought to reach an agreement deadlines. with Plaintiff to extend new the remaining in a

milestone

Plaintiff

proposed

deadlines

February 16, 2007, email and followed up with a revised LOI and PA for Defendant's consideration on April 5, 2007. Exhibits 23 and 24). (Paper 62,

In the proposed amendments, Plaintiff

extended the deadline for completion of the renovations from January 2008 until September 2008. (Id.). Defendant did not

sign the new agreement and instead requested a meeting with Plaintiff, which took place in August 2007. At that time,

Defendant apprised Plaintiff of an opportunity it was pursuing to relocate the Jaguar Land Rover dealership to the ground floor of a mixed-use, high-rise project being developed near the White Flint metro station To in Montgomery County (the "White of Flint this

Project").

facilitate

Defendant's

pursuit

opportunity, Plaintiff again revised the project milestones and sent proposed amendments to Defendant in late October 2007.

(Paper 62, Exhibit 25).

These proposed amendments gave the

parties until September 2008 to evaluate the White Flint Project opportunity, but gave Plaintiff sole discretion in deciding

whether to pursue the opportunity and retained the requirement 6

that Defendant remove the Lincoln Mercury franchise by September 2008. (Id.). These amendments were also rejected by Defendant (Paper 62, Exhibit 26). The parties met

in November 2007.

again in February 2008 to attempt to negotiate new deadlines, and following that meeting Plaintiff sent the third revised LOI and PA to Defendant. (Paper 62, Exhibits 27 and 28). This

third revision extended the deadline for removal of the Lincoln Mercury franchise until December 2008. (Paper 62, Exhibit 27).

In an email dated April 15, 2008, Defendant informed Plaintiff that it would not sign the proposed amendments and stated its belief that the agreements made two years ago were "obsolete." (Paper 62, Exhibit 29). By letter dated April 30, 2008, Plaintiff gave Defendant notice of its intention incentive to suspend, for as of July Land 1, Rover 2008, and

facility-related

payments

any

Jaguar vehicles sold.

(Paper 62, Exhibit 30).

In response,

Defendant's lawyers sent a letter dated May 30, 2008, claiming that Plaintiff's suspension of the payments violated Maryland law and threatened legal action. (Paper 62, Exhibit 31).

Also at issue here is Plaintiff's warranty reimbursement policy. Count VII of Defendant's counterclaims alleges in part

that Plaintiff failed to reimburse Defendant's warranty claims 7

in accordance with the parties' agreements. 76).

(Paper 11 at ¶¶ 74-

Plaintiff's warranty reimbursement policies and procedures

include specific details and a timeline for dealer's submission of claims and returned parts. Typically, a dealer will not be

reimbursed for warranty claims if the displaced parts are not returned to Plaintiff in a timely manner. Defendant alleges,

however, that Plaintiff granted a one-time waiver of the return deadline for Defendant's warranty claims from August 2006 to March 2008. (Paper 66, at 45).

On June 19, 2008, Plaintiff filed its complaint seeking a declaratory judgment that its suspension of Defendant's

incentive payments was lawful.

(Paper 1).

Defendant answered (Paper 11).

on July 23, 2008, and asserted eight counterclaims.2

Defendant's remaining counterclaims seek (1) reformation of the parties' agreements to require Plaintiff to make the facilityrelated payments irrespective of whether Defendant has an

approved facility or facility plan (count II); (2) damages for breach of contract (count III); and (3) damages for violation of sections 15-207(b) and (d); section 15-206.1, and section 15212.1 of the Maryland Transportation Code (counts IV-VII). On

2

Defendant voluntarily dismissed counts I and counterclaims on May 1, 2009. (Papers 49 and 50). 8

VIII

of

its

October 30, 2009, Plaintiff filed a motion for summary judgment on its request for a declaratory 61). judgment and Defendant's this motion.

counterclaims. (Paper 65).

(Paper

Defendant

opposes

In addition, Defendant filed a consent motion to

seal certain exhibits filed in support of its opposition to Plaintiff's motion for summary judgment. II. Motion for Summary Judgment A. Standard of Review has moved for summary judgment pursuant to (Paper 65).

Plaintiff

Federal Rule of Civil Procedure 56.

It is well established that

a motion for summary judgment will be granted only if there exists no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. See

Fed.R.Civ.P. 56(f); Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Emmett v. Johnson, 532 F.3d 291, 297 (4th Cir. 2008). other words, if there clearly exists factual issues In

"that

properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party," summary judgment is inappropriate. Anderson v. Liberty Lobby, Inc., 477

U.S. 242, 250 (1986); JKC Holding Co. LLC v. Washington Sports Ventures, Inc., 264 F.3d 459, 465 (4th Cir. 2001).

9

When ruling on a motion for summary judgment, the court must construe the facts alleged in the light most favorable to the party opposing the motion. See Scott v. Harris, 550 U.S. A party who bears the

372, 378 (2007); Emmett, 532 F.3d at 297.

burden of proof on a particular claim must factually support each element of his or her claim. 323. Celotex Corp., 477 U.S. at

"[A] complete failure of proof concerning an essential

element . . . necessarily renders all other facts immaterial." Id. Thus, on those issues on which the nonmoving party will

have the burden of proof, it is his or her responsibility to confront the motion for summary judgment with an affidavit or other similar evidence in order to show the existence of a

genuine issue for trial. Corp., 477 U.S. at 324. will not suffice F.3d to 307,

See Anderson, 477 U.S. at 254; Celotex "A mere scintilla of proof, however, summary Cir. judgment." 2003). Peters must v. be

prevent 314

Jenney,

327

(4th

There

"sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson, 477 U.S. at 249.

"If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." (citations omitted). Id. at 249-50.

10

B. 1.

Analysis Declaratory Judgment

Plaintiff seeks a declaratory judgment that Defendant is not entitled to facility-related incentive payments under the terms of the parties' agreements and, therefore, Plaintiff was entitled to suspend its payment of these incentives in July 2008. Defendant counters that the relevant portion of the

parties' written agreement is no longer in effect. Pursuant to the Declaratory Judgment Act, 28 U.S.C. § 2201, the court must consider three factors in determining whether to grant declaratory relief: (1) the complaint must allege an actual controversy between the parties of sufficient immediacy and reality to warrant issuance of a declaratory judgment; (2) the court must possess an independent basis for jurisdiction over the parties; and (3) the court must decide whether to exercise its discretion to determine or dismiss the action. Proa v. NRT Mid Atlantic, Inc., 477 F.Supp.2d 677, 680

(D.Md. 2007)(internal citations omitted).

Here, the first two

requirements are not disputed by the parties and are clearly met. Plaintiff has established an actual controversy, see Volvo

Constr. Equip. North America, Inc. v. CLM Equip. Co., 386 F.3d 581, 593 (4th Cir. 2004)(finding an actual controversy where a 11

Volvo dealer sought declaratory relief in order to avoid the accrual of potential damages for past actions related to its dealer agreement), and this court has diversity jurisdiction

over the parties.

The remaining question is whether Plaintiff

has made its case on the merits. The (Paper parties 62, agree that the Land Rover Dealer Letter Agreement of Intent

Exhibit

18),

the

Land

Rover

(Paper 62, Exhibit 17), the Jaguar Dealer Agreement (Paper 62, Exhibit 13), the Amendment to the Jaguar Performance Agreement (Paper 62, Exhibit 15), and the Business Builder Program rules (Paper 62, Exhibits 19 and 20) constitute agreements between the parties. Their disagreement relates to whether all of these

agreements remain in effect and whether they accurately reflect the content of the parties' contract. Plaintiff contends that

all of the agreements remain in effect and that they must be viewed in concert to understand fully the parties' rights and obligations. (Paper 70, at 3-5). Defendant counters that the

Land Rover LOI was superseded by the later dated Land Rover Dealer Agreement, which had an integration clause nullifying any prior agreements between the parties. Defendant also asserts that the (Paper 66, at 9-10). agreements do not

written

12

accurately reflect the terms of the parties' contract and should be reformed. (Id. at 29).

Whether an agreement is integrated and the effect of an integration clause are preliminary questions of interpretation determined by the court. See Shoreham Developers Inc. v.

Randolph Hills Inc., 248 Md. 267, 271-272 (1967)(interpreting meaning of integration clause in one of two written instruments between the parties); see also Restatement (Second) of Contracts §§ 209(2), 210(3) (1981).3 The presence of an express

integration clause does not resolve definitively the question of whether the parties' agreement is a complete integration. As

noted in Shoreham, "even the sentence `This contract contains the final and entire Agreement between the parties,' may embody a recital of facts which may be untrue." 248 Md. at 272. The

circumstances of the instruments' drafting and the content of the written instruments provide guidance to interpret the scope of the parties' agreement.

The parties assume without any discussion that Maryland contract law applies. Maryland generally applies the principle of lex loci contractus, whereby the law of the jurisdiction where the contract was made controls its validity and construction. Kramer v. Bally's Park Place, Inc., 311 Md. 387, 390 (1988). The contract at issue was formed when the documents were signed by Defendant in Rockville, Maryland, thus Maryland contract law governs questions of validity and interpretation. 13

3

Where several instruments are made a part of a single transaction they will all be read and construed together as evidencing the intention of the parties in regard to the single transaction. This is true even though the instruments were executed at different times and do not in terms refer to each other. Rocks v. Brosius, 241 Md. 612, 637 (1966); see also Bachmann v. Glazer & Glazer, Inc., 316 Md. 405, 415 (1989). Here, although several of the documents contain integration clauses, the totality of circumstances indicates that the Three

agreements were meant to be read and construed together.

of the agreements, the Land Rover LOI, the Jaguar PA, and the Land Rover Dealer Agreement were submitted to Defendant for

signature at the same time. 2006 email from Plaintiff

(Paper 70, Exhibit 44 (April 21, to Defendant enclosing "agreement

package" containing the standard Land Rover Dealer Agreement, Land Rover Standard Terms and Conditions, Land Rover LOI, and Jaguar PA)). The Land Rover Dealer Agreement was executed a few

days later than the Land Rover LOI only because it could not take effect until Defendant had finalized its buy sell agreement with a third party. Defendant argues that the language in the May 16, 2006, Land Rover Dealer Agreement, 14 stating that it "cancels,

supersedes

and

annuls

any

prior

contract,

agreement,

or

understanding" between Land Rover and Defendant means that the Land Rover LOI, dated May 2, 2006 was cancelled by the execution of the Land Rover Dealer Agreement. will only But be Maryland read to has long or

recognized

that

such

clauses

annul

cancel a prior agreement where the later agreement was executed by the same parties and related to the exact same subject

matter.

See G.M. Pusey & Assocs., Inc. v. Britt/Paulk Ins.

Agency, Inc., 2008 WL 2003747, *5 (D.Md. 2008)(citing Hercules Powder Co. v. Harry T. Campbell Sons Co., 156 Md. 346 (1929)). Here each agreement does not cover the same subject matter and the Land Rover Dealer Agreement on its own is insufficient to explain the full extent of the parties' obligations. Rover LOI and the Jaguar PA discuss facility The Land specific

requirements, whereas the Land Rover Dealer agreement governs the terms of the franchise-dealer relationship. Further together is evidence found in that the the agreements of the are Land to be viewed Dealer

terms

Rover

Agreement itself.

In Article 4, the Dealer Agreement states

that the facility requirements are governed by "the attached Dealer's Facility and Location Exhibits." at Art 4.3-4.4). (Paper 62, Exhibit 18

Yet, no Dealer Facility or Location Exhibits 15

were

attached

to

the

Dealer

Agreement.

Indeed

the

only

agreements discussing facility requirements are the Land Rover LOI and Jaguar PA. (See Paper 62, Exhibits 15 and 17). For all

of these reasons, the parties' written agreement, viewed as a collective agreement. When considering the written agreements as whole, the whole, constitute the parties fully integrated

express language of the parties' contract authorized Plaintiff to suspend the incentive payments. The Land Rover LOI, the

Jaguar PA and the Business Builder Program rules all make clear that failure to satisfy the facility requirements will result in a suspension of the facility-related incentive payments. (See

Paper 62, Exhibit 15, at 3; Exhibit 17, at 3; Exhibit 19, at 4, and Exhibit 20, at 4). In accordance with this language,

Plaintiff was entitled to suspend incentive payments in 2008 after Defendant failed to meet many facility-related project

milestones. 2. Breach of Contract

Plaintiff also seeks summary judgment on Defendant's breach of contract counterclaim (count III). This counterclaim is the The crux of

reverse of Plaintiff's declaratory judgment claim.

Defendant's argument is that it was entitled to facility-related 16

incentive

payments

according

to

the

parties'

agreement

and

Plaintiff's suspension of those payments constituted a breach of contract. To prevail in an action for breach of contract, a plaintiff must prove that the defendant owed the plaintiff a contractual obligation and that the defendant breached that obligation. Under the

Taylor v. NationsBank, N.A., 365 Md. 166, 175 (2001).

objective theory of contracts, which applies in Maryland, [A] court is to determine from the language of the agreement, what a reasonable person in the position of the parties would have understood the contract to mean at the time the contract was entered into; when the language of the contract is plain and unambiguous, there is no room for construction as the courts will presume that the parties meant what they expressed. Mathis v. Hargrove, 166 Md.App. 286, 319 (2005). As explained above, under the express language of the LOI and PA, Defendant facility had plan to in have order an to approved receive facility or an

approved

facility-related

incentive payments.

Defendant's facility did not adhere to the Plaintiff was entitled the terms of the

requirements laid out in the LOI and PA. to suspend the incentive payments

under

parties' contract, and was not in breach of them.

17

3. In

Reformation count II of its counterclaims, Defendant seeks

reformation of the parties' agreement so that (1) Plaintiff is contractually obligated to continue to make full payments to Defendant under the Business Builder incentive program and (2) Defendant will not be obligated to remove the Lincoln Mercury franchise or make any of the other facility modifications Plaintiff now

outlined in the Land Rover LOI and Jaguar PA.

seeks summary judgment on this count arguing that Defendant has not set forth a factual or legal basis to justify reformation. Reformation is an equitable remedy that is only warranted when one of two circumstances exists: "either there must be

mutual mistake, or there must be fraud, duress, or inequitable conduct." Maryland Port Admin. v. John W. Brawner Contracting

Co., 303 Md. 44, 59 (1985); see also Julian v. Buonassissi, 414 Md. 641, n.15 (2010)("when a competent person signs a contract or disposes of his or her property in the absence of fraud, misrepresentation, mistake, undue influence, or fiduciary

relations, the contract will be enforced.")

"The burden on a

party seeking reformation is substantial and must overcome the rebuttable presumption that deliberately prepared and executed

18

written

instruments

accurately

reflect

the

parties'

true

intentions." Here

28 Williston on Contracts § 70:209 (4th ed.) is no evidence of mutual mistake; Plaintiff

there

seeks to enforce the agreements as written. therefore, inequitable identify conduct some evidence to of

Defendant must duress, issue or of

fraud, a

sufficient

create

genuine

material fact.

To that end, Defendant asserts that Plaintiff

made a number of inaccurate or false statements throughout the parties' negotiations that ultimately persuaded Defendant to

sign the agreements.

Defendant relies primarily on affidavits

of its employees as evidence of Plaintiff's statements and oral promises. has not Assuming these statements are true, Defendant still set forth evidence sufficient to establish fraud,

duress, or inequitable conduct in the formation of the contract, and thus reformation is not warranted. Defendant argues that Plaintiff made misrepresentations

about the future profitability of the Land Rover dealership that induced Defendant to purchase the franchise from a third party and sign the Land Rover Dealer Agreement and Land Rover LOI. Estimates or projections of future profits are statements of opinion, however, and not fact. Snyder v. Herbert Greenbaum &

Assocs., 38 Md.App. 144, 148-49 (1977); Polson v. Martin, 228 19

Md.

343,

346

(1962). from

Although this

not court

binding

authority,

a

unpublished

opinion

considering

alleged

violations of the Maryland Franchise Registration and Disclosure Law in instructive on this point. See Flynn v. Everything

Yogurt, Civ. A. No. HAR92-3421, 1993 WL 454355, (D.Md. September 14, 1993). In Flynn, the court considered alleged violations of

the Maryland Franchise Registration and Disclosure Law, Md. Code Ann. § 14-227-229, which regulates fraud, deceit, and untrue statements or omissions of material fact in connection with an offer to sell or the sale of a franchise. The plaintiffs in

Flynn asserted that the franchisor, Everything Yogurt, had made misrepresentations when convincing the plaintiffs to purchase a franchise, including inaccurate projections of future profits. Id. at *2. claim though The court granted defendant's motion to dismiss this that the did projections not of future fraud earnings, or even

holding

inaccurate,

constitute

inequitable

conduct in violation of the statute. v. Aamco Transmissions, Inc., 717

Id. at *8; see also Layton F.Supp. 368, 371 (D.Md.

1989)(holding that projections cannot constitute fraud because they are not susceptible to exact knowledge at the time they are made).

20

Plaintiff's Rover's future

allegedly profitability

inaccurate and

projections planning

of

Land

inaccurate

volumes

could only be considered fraudulent if there was evidence that the plaintiff knew they were inaccurate at the time they were made. Here, Defendant has adduced no evidence that Plaintiff Moreover, John Jaffe,

knowingly offered inaccurate projections.

the president and sole stakeholder of Manhattan, testified that he considered that the even planning Defendant volumes knew to be "guestimates" were just

indicating

these

numbers

opinions and not fact.

(See Paper 70, Exhibit 46).

Without any

evidence of intent to deceive, these statements of opinion do not justify reformation. Defendant's remaining bases for reformation relate to

actions taken after the agreements were signed. Defendant asserts that the agreements should be

Specifically, reformed to

reflect revised post 2006 Jaguar and Land Rover planning volumes for automobile sales and to reflect Plaintiff's alleged waiver of the milestone that deadlines the Lincoln in the facility franchise plan be and the

requirement

Mercury

relocated.

(Paper 66 at 29). Defendant's arguments reflect a misunderstanding of the

purpose and limits of reformation. 21

Reformation is a two step

process.

The party seeking reformation must establish that (1)

the contract as written should not be enforced, either because of a mutual mistake, or duress or inequitable conduct, and (2) "there is clear, convincing and satisfying proof of a mutual understanding expressed." Md. 518, and bargain that has not been accurately

City of Baltimore v. De Luca-Davis Constr. Co., 210 (1956). Reformation is a not a vehicle for

524,

rewriting contracts to reflect changed circumstances since the time of contract formation. See Janusz v. Gilliam, 404 Md. 524,

534 (2008)("no party has a right to rescind or modify a contract merely because that he he or or she she finds, has in the a light of changed

conditions,

made

bad

deal.")(internal

quotations citations omitted). Here, Defendant has produced no evidence that the parties agreed to terms different from those contained in the written agreements. Plaintiff proposed amendments on several occasions, Defendant

but Defendant refused to sign any of the proposals.

seeks to insert new terms, to which Plaintiff has not assented, into the parties' original agreement to reflect events occurring after the contract's formation. Reformation cannot be applied

to alter contractual terms in this fashion.

22

4.

Maryland Transportation Code Violations also seeks summary judgment on each of

Plaintiff

Defendant's counterclaims asserting violations of the Maryland Transportation Sections Code. Defendant 15-207(d), has alleged and violations of of the

15.207(b),

15-206.1,

15-212.1

Transportation Code. a. Sections 15.207(b) and 15.207(d)

Subsections 15.207(b) and 15.207(d) of the Transportation Code prohibit and franchisors from from or coercing dealers into to making remove or

agreements existing operations hardship

coercing or to

requiring

dealers

franchises in on a the

alter

dealership

facilities

manner dealer.

that

imposes Subsection

substantial b states

financial that "a

manufacturer, distributor, or factory branch, whether directly or through an agent, employee, affiliate, or representative, may not coerce any dealer to or make any agreement or with the

manufacturer,

distributor,

factory

branch

their

agent,

employee, affiliate, or representative." § 15-207(b) (2010).

Md. Code Ann., Transp.

Subsection d elaborates on the types of

agreements that cannot be forced upon dealers through coercion and states that:

23

A manufacturer, distributor, or factory branch, whether directly or through an agent, employee, affiliate, or representative, may not require or coerce a dealer, by franchise agreement or otherwise, or as a condition to the renewal or continuation of a franchise agreement, to: (1) Exclude from the use of the dealer's facilities a dealership for which the dealer has a franchise agreement to utilize the facilities; or (2) Materially change the dealer's facilities or method of conducting business if the change would impose substantial financial hardship on the business of the dealer. Md. Code Ann., Transp. § 15-207(d) (2010). Coercion in the

statute is defined as "(i) a means to compel or attempt to compel by threat of harm, breach of contract, or other adverse consequences." (amended 2009). Md. Code Ann., Transp. § 15-207(a)(2)(i) (2006) Coercion does not include "to argue, urge, § 15-207(a)(2)(ii).4

recommend, or persuade."

The meaning of subsection 15-507(d)(2) was interpreted by the Maryland Court of Special Appeals in Antwerpen Dodge Ltd. v. Herb Gordon Auto World, Inc., 117. Md.App. 290, 310 (1997).

4

Subsection 15-107(a) was amended effective June 1, 2009 and the definition of coercion was modified. Because the events at issue took place prior to June 1, 2009, the prior version of the statute, quoted here, is applicable. 24

In order for coercion to exist within the meaning of this definition, the manufacturer must specifically undertake to change the dealer's conduct. This concept of coercion is similar to that utilized in the Automobile Dealers' Day in Court Act, 15 U.S.C. § 1221, et seq. (Federal Dealers' Act). Specifically, the concept of coercion requires, at the very least, a demand by a manufacturer that is accompanied by a threat of sanctions for noncompliance. The similarities between the Maryland Transportation Code and the Automobile Dealers' Day in Court Act ("ADDCA") were

confirmed in Colonial Dodge Inc. v. Chupler Corp., 11 F.Supp.2d 737, 744 (D.Md. 1996), aff'd, 121 F.3d 697 (4th Cir. 1997)("While there are slight differences between the state and federal

statutes, "coercion" under both the State Act and the ADDCA embodies the same concept, and accordingly the same analysis applies.") In Colonial Dodge, Chrysler and Dodge dealers in

Maryland asserted that they had been coerced into building a new showroom and coerced into abandoning their opposition to the placement of new dealerships in the area. Id. at 744. The

court determined that there was insufficient evidence that the dealer was "confronted with a wrongful demand accompanied by a threat of sanctions for noncompliance" and found no violation of the statutes. Id. at 746.

25

It is generally accepted that a distributor's enforcement of the terms of its bargained-for agreement with a dealer is not "coercion." See, e.g., Wagner & Wagner Auto Sales, Inc. v. Land

Rover North America, Inc. 539 F.Supp.2d 461, 473-74 (D. Mass), aff'd on other grounds, 547 F.3d 38 (1st Cir. 2008)(holding that franchisor's demands that the dealer comply with the facility obligations from its LOI did not constitute coercive conduct under ADDCA); Empire Volkswagen, Inc. v. World-Wide Volkswagen Corp., 814 F.2d 90, 96-97 (2d Cir. 1987)(collecting cases holding that threats to take action authorized by parties' contract do not constitute coercion). Court of Appeals for In Empire Volkswagen for example, the the Second Circuit, held that the

franchisor (World-Wide Volkswagen) could enforce the terms of its agreement with the dealer (Empire Volkswagen) to construct a separate facility for Volkswagen-Porsche-Audi cars without

violating ADDCA so long as the contract terms were valid and reasonable. Here, Id. Defendant argues that Plaintiff's insistence that

Defendant remove the Lincoln Mercury franchise from its facility violates the Maryland law because Defendant is being coerced to remove a pre-existing franchise (§ 15-507(d)(1)) and to make material facility changes that will have an adverse financial 26

impact on Defendant (§ 15-507(d)(2)).

Specifically Defendant

argues that the provisions in the Jaguar PA and Land Rover LOI relating to the removal of the Lincoln Mercury franchise

constitute wrongful demands, as did Plaintiff's later assertions that it intended to enforce these facility requirements.

(Paper 66 at 22). notification that

Defendant further argues that Plaintiff's it would withhold the facility-related

incentive payments if Defendant did not comply was a threat of sanctions. not coerce (Id.). Plaintiff responds by arguing that it did but rather it sought to enforce the

Defendant,

parties' valid contract.

Plaintiff also argues that it has not

insisted that Defendant de-dual its facility, instead it has insisted that Defendant agree to and perform in accordance with an "approved facility plan", of which de-dualing is only one component. (Paper 70, at 6). conduct does not violate § 15-207 of the

Plaintiff's

Transportation Code. stated that

As discussed above, the parties' agreement had to meet specified facility

Defendant

requirements in order to qualify for certain incentive payments for sales of Land Rover or Jaguar models. reasonable contract term to which This requirement is a Defendant assented.

Accordingly, Plaintiff's attempts to enforce this term, whether 27

by

requesting

that

Defendant

comply

or

by

suspending

the

incentive payments, do not constitute coercion. b. Section 15.206.1 15.206.1 of or the Maryland Transportation (or their Code or

Section requires a

manufacturer

distributor

agents

employees) to act in good faith "(1) in acting or purporting to act under the terms, provisions, or conditions of any franchise agreement; or (2) in any transaction or conduct governed by this subtitle." faith is Md. Code Ann., Transp. § 15-206(b) (2010). defined as "honesty in fact and the Good of

observance

reasonable commercial standards of fair dealing in the trade." § 15-206.1(a). The legislative history indicates that "the

intent of the bill is to take the definition of `good faith' under the Uniform Commercial Code (§ 2-103 of the Commercial Law Article) and apply it specifically to manufacturers in their dealings with franchised dealers." good faith obligation does not (Paper 62, Exhibit 12). impose new or The

additional

obligations on the franchising party, but rather "requires only that one party to a contract not frustrate the other party's performance." Lanham Ford v. Ford Motor Co., 273 F.Supp.2d 691,

694 (D.Md. 2003), aff'd, 101 Fed.Appx 381 (4th Cir. 2004), cert. denied, 543 U.S. 957. 28

Although there is little case law applying the good faith requirement of the Maryland Transportation Code, Defendant notes that several an other states on have passed analogous statutes and

imposing

obligation

automobile

manufacturers

distributors to act in good faith (or not act in bad faith). (See Paper 66 at n.15)(citing statutes from Alabama, Georgia, Illinois, Maine, Missouri, New Hampshire, and South Carolina.) These state's interpretations of the good faith obligation, In a

while not binding, provide a useful benchmark for analysis. Georgia and Maine, actions for were example, not in the bad courts faith held that

franchisor's motivated American by

where See

they

were v.

legitimate Motor

business 982

interest. 881,

Hickman

Honda

Co.,

F.Supp.

885-886

(N.D.Ga.

1997)( interpreting Ga. Code Ann. § 10-1-631 and holding that "Honda's rejection of the proposed franchise transfer of Town & Country was made with a legitimate business interest in mind and did not violate the statute), aff'd, 138 F.3d 958 (11th Cir. 1998); Schott Motorcycle Supply, Inc. v. American Honda Motor Co., 976 F.2d 58, 63 (1st Cir. 1992)(interpreting Me. Rev. Stat. 10 § 1174.1 and finding no bad faith where dealer had made predictions about future profitability that proved inaccurate where dealer presented no evidence 29 that franchisor was not

acting in accordance with legitimate business interests); see also Diversified Foods, Inc. v. First National Bank of Boston, 605 A.2d 609, 614 (Me. 1992)(finding summary judgment

appropriate on bad faith claim under § 1-203 of U.C.C. where there were no facts [a for "which directly, acted other or through with inference ulterior in

indicate motives,

that or

defendant] anything

dishonestly, than

business

reasons

exercising their rights under [an] agreement."). Defendant argues that Plaintiff violated its good faith

duties by not engaging in fair dealing and by failing to act with honesty in fact in requiring the removal of the Lincoln Mercury franchise and suspending the incentive payments.

(Paper 66, at 17).

In support Defendant highlights a case from

the United States Court of the Appeals for the Seventh Circuit, Shor-Line Rambler, Inc. v. American Motor Sales, 543 F.2d 601 (7th Cir. 1976). In Shor-Line Rambler, the Seventh Circuit

upheld a jury verdict finding that a manufacturer had acted in bad faith when it put unreasonable demands on a dealer to build new facilities, increase credit, and make extensive personnel changes and then terminated the franchise agreement when the dealer failed to satisfy these demands. situation in Shor-Line Rambler 30 is Id. at 603-604. The

distinguishable,

however,

because in that case there was not a pre-existing contractual agreement changes. whereby Here, the dealer was obligated to to make facility facility

Defendant

had

consented

certain

requirements in the Land Rover LOI and Jaguar PA. Defendant immediately facility also argues payments that when because Plaintiff missed the did its not first

suspend

Defendant

milestone,

Plaintiff

thereby

waived

facility

requirements and could not enforce them at a later time without acting in bad faith. (Paper 66, at 17). This position is not

supported by the evidence.

The plain language of the Business

Builder Incentive program manual states, "any waivers granted will be temporary and will have to be renewed each calendar quarter." provided (Paper 62, Exhibit 20, at 10). any evidence that Plaintiff Defendant has not to waive this

intended

requirement indefinitely.5

To the contrary, on April 30, 2008

Plaintiff sent a letter providing written notice that it would begin enforcing the milestone provisions at the beginning of the following quarter. (Paper 62, Exhibit 30, Paper 66, at 18).

5

In a footnote, Defendant argues that Plaintiff's failure to establish a new timeline for its facility plan milestones also constituted a breach of the agreement. (Paper 66, at n.17). Yet, Defendant has elsewhere conceded that Plaintiff attempted to negotiate new milestones but Defendant rejected Plaintiff's proposals. (Paper 66 and n. 18, Paper 62, Exhibit 30). 31

Plaintiff's

prior

lenience

with

respect

to

the

facility

requirements did not make its subsequent decision to enforce them an act of bad faith. In sum, Defendant has produced no

evidence that Plaintiff failed to act in good faith. c. Section 15-212.1

Section 15-212.1 requires a manufacturor or distributor to pay a dealer's claims "for any incentive or reimbursement

program sponsored by the manufacturer, . . ., or distributor, under the terms of which the dealer is eligible for

compensation." Defendant has

Md. Code Ann., Transp. § 15-212.1(a) (2010). asserted two violations of Section 15-212.1:

Plaintiff's failure to pay facility-related incentive payments and Plaintiff's failure to reimburse all of Defendant's warranty claims. With positions respect are to the in incentive detail payments, in the the parties' of the

explained

analysis

declaratory judgment and breach of contract claims.

For the

same reasons that Defendant's breach of contract claim fails, Defendant's claim that Plaintiff's failure to make facility-

related incentive payments violated section 15-212.1 also fails. The warranty reimbursement claim bears further analysis. Defendant has identified $129,734.76 worth of unpaid warranty 32

reimbursement claims that it contends Plaintiff is obligated to pay under § 15-212.1. summary payment judgment for any (Paper 66, at n. 40).6 that Defendant warranty is Plaintiff seeks a not entitled to

ruling its

unpaid

reimbursement

claims.

Plaintiff contends that no payments are due because Defendant has not complied with the policies and procedures of Plaintiff's warranty program which require submission of warranty claims and return of warranty parts in accordance with a specified

timetable. For a portion of the unpaid claims, Plaintiff has met its burden of establishing that Defendant is not entitled to relief. Specifically, Defendant has admitted that for $73,802.05 of it unpaid claims, it does not have parts to return. Exhibit 48, Deposition of David Bohn). (Paper 70, is not

Defendant

entitled to reimbursement for the return of parts it does not have. (See, e.g., Paper 62, Exhibit 33 (Jaguar Warranty

Policies and Procures Section G: and Exhibit 35 (Land Rover

Displaced Parts Procedures) Policies and Procedures

Warranty

Section G:

Displaced Parts Procedures)).

Defendant initially asserted $132,860.20 in outstanding warranty claims, but has conceded that two previously paid claims were included in this total due to an accounting error. (Paper 66, at n.40). 33

6

The status of the remaining $55,932.71 in warranty claims is unclear. Although the parties have provided a list of the

outstanding warranty claims, (Paper 62, Exhibits 37 and 38), Defendant has not indicated for which of the claims it has no parts to return and for which of the claims it has a part but Plaintiff has refused to accept it. In addition, Defendant

identified some evidence that Plaintiff granted a waiver of its submission deadlines so that Defendant could submit late claims. (See Paper 66, Exhibit JJ (Jaffe Deposition), Exhibit KK,

Exhibit TT). which of the

The scope and details of this waiver, including unpaid claims it would cover, are not fully

explained on the record. has supplied Plaintiff

It is also unclear whether Defendant with the return labels needed to

facilitate submission of the warranty parts. and Exhibit JJ (Jaffe Deposition)). Although demonstrated Defendant that it is has not to clearly

(Paper 66, at 46

and

succinctly

entitled

warranty

reimbursements,

there is sufficient evidence that a reasonable jury could reach a verdict in favor of Defendant. Therefore, summary judgment in

favor of Plaintiff will not be granted on this count.

34

III. Motion to Seal Defendant has filed a motion to seal several documents

(Paper 65) in connection with its response to the motion for summary judgment. The motion must comply with Local Rule

105.11, which provides: Any motion seeking the sealing of pleadings, motions, exhibits or other papers to be filed in the Court record shall include (a) proposed reasons supported by specific factual representations to justify the sealing and (b) an explanation why alternatives to sealing would not provide sufficient protections. The Court will not rule upon the motion until at least 14 days after it is entered on the public docket to permit the filing of objections by interested parties. Materials that are the subject of the motion shall remain temporarily sealed pending a ruling by the Court. If the motion is denied, the party making the filing will be given an opportunity to withdraw the materials. Local Rule 105.11. There is also a well established common law Nixon If

right to inspect and copy judicial records and documents. v. Warner Commc'ns, interests Inc., 435 U.S. 589, 597 right (1978). of

competing

outweigh

the

public=s

access,

however, the court may, in its discretion, seal those documents from the public=s view. 235 (4th Cir. 1984). In re Knight Publ'g Co., 743 F.2d 231,

35

Furthermore, prior to sealing any documents, the court must provide notice of counsel=s request to seal and an opportunity to object to the request before making its decision. Id. Either

notifying the persons present in the courtroom or docketing the motion Areasonably in advance of deciding the issue@ will satisfy the notice requirement. consider less drastic Id. at 234. alternatives, Finally, the court should such as filing redacted

versions of the documents. appropriate, the court

If the court decides that sealing is provide reasons, supported by

should

specific factual findings, for its decision to seal and for rejecting alternatives. Id. at 235. All are documents

Defendant seeks to seal four exhibits.

that Plaintiff produced with "confidential" or "attorney's eyes only" designations during discovery and they contain Plaintiff's sensitive and confidential financial data. four exhibits are: (1) 2006 Release (Paper 65 ¶ 2). Land Rover The

Planning

Volumes, (2) 2008 Release Land Rover Planning Volumes, (3) 2008 Release Jaguar Planning Volumes, and (4) 2008 Jaguar Forecast. (Id. at ¶ 6). at ¶ 5). Defendant argues that these documents should be sealed to protect their sensitive and confidential financial information 36 Plaintiff has consented to the motion. (Id.

and further notes that Plaintiff only agreed to produce these documents if their contents would be protected. (Id. at ¶ 7).

Defendant argues that alternatives to sealing are not suitable because the information in the documents must be reviewed as a whole to provide proper context. (Id.).

Defendant has provided an adequate justification for its request to seal the four exhibits. seal will be granted. IV. Conclusion For the foregoing reasons, Plaintiff's motion for summary judgment will be granted in part and denied in part. Therefore, the motion to

Defendant's motion to seal will be granted. will follow.

A separate Order

/s/ DEBORAH K. CHASANOW United States District Judge

37