Daimler Trucks North America LLC et al v. McComb Diesel, Inc. et al

Filing 116

ORDER finding that Oral Argument on the parties' motions for summary judgment and motion in limine will be set for hearing by the Court in a separate Order. Signed by Honorable David C. Bramlette, III on 1/13/2016 (ECW)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF MISSISSIPPI
WESTERN DIVISION
DAIMLER TRUCKS NORTH AMERICA LLC;
WESTERN STAR TRUCK SALES, INC.; and
DETROIT DIESEL CORPORATION
VS.

PLAINTIFFS

CIVIL ACTION NO: 5:15-cv-30(DCB)(MTP)

McCOMB DIESEL, INC., and
FRANCISCO JOSE MONTALVO

DEFENDANTS
ORDER

This cause is before the Court on plaintiffs Daimler Trucks
North America LLC (“Daimler”) and Western Star Truck Sales, Inc.
(“Western Star”)’s

motion for summary judgment regarding right of

first refusal (docket entry 91), on plaintiff Detroit Diesel
Corporation

(“Detroit

Diesel”)’s

motion

for

summary

judgment

regarding right to withhold consent (docket entry 92), and on
defendants McComb Diesel, Inc. (“McComb Diesel”) and Francisco
Montalvo (“Montalvo”)’s motion for summary judgment (docket entry
94).

Having carefully considered the motions and responses, the

memoranda and the applicable law, and being fully advised in the
premises, the Court finds as follows:
Plaintiff Western Star is a manufacturer of over-the-road
heavy trucks, which contracts with authorized dealerships to sell
and service its vehicles.

Defendant McComb Diesel and plaintiff

Western Star are parties to a contract whereby McComb Diesel is
authorized

to

sell

and

service

Western

dealership in Magnolia, Mississippi.

Star

trucks

from

a

McComb Diesel owns three

subsidiaries: Fiber Plus, LLC (“Fiber Plus”), Harvest Haul, Inc.
(“Harvest

Hall”),

and

Magnolia

Motors.

According

to

the

plaintiffs, none of these subsidiaries sell or service Western Star
vehicles.

Instead, Fiber Plus and Harvest Haul provide commercial

trucking services to the forestry industry using fleets of trucks
that they own, and Magnolia Motors provides financing and leasing
services.

On October 31, 2014, McComb Diesel, Fiber Plus, Harvest

Haul, and Magnolia Motors entered into an Asset Purchase Agreement
(“APA”) with Old River of McComb (“Old River”) to sell all four
companies to Old River in a package sale for a lump sum of slightly
less than six million dollars.
Western Star alleges that when it learned of the proposed
sale, it attempted to exercise a right of first refusal contained
in the APA between Western Star and McComb Diesel.

Further,

Western Star alleges that the right of first refusal covers the
“dealership business or assets” operated by McComb Diesel, and does
not cover McComb Diesel’s subsidiaries’ businesses.

Western Star

states that McComb Diesel, instead of conveying its “dealership
business or assets” to Western Star as required by the agreement,
insisted that Western Star also purchase the subsidiaries that are
unrelated to its “dealership business.”

This suit ensued.

Plaintiffs Daimler and Western Star’s motion for summary
judgment raises three legal issues:
(1) Did McComb Diesel’s attempt to sell the dealership and

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unrelated companies as a package sale trigger Western Star’s right
of first refusal?
(2) If Western Star’s right of first refusal was triggered,
did Western Star timely exercise its right of first refusal under
Mississippi law?
(3) If Western Star’s right of first refusal was triggered and
timely exercised, what property must McComb Diesel convey to
Western Star?
The plaintiffs contend that McComb Diesel’s proposed package
sale did not trigger Western Star’s right of first refusal since
McComb Diesel’s intent to sell encumbered and unencumbered assets
does not show a manifested intent to convey the “dealership
business or assets” alone.

Alternatively, Western Star asserts

that it timely exercised its right of first refusal, that Western
Star

and

Daimler

are

entitled

to

summary

judgment

on

their

contract-based cause of action for specific performance, and that
McComb Diesel is required to convey to Western Star the “dealership
business or assets” only.
McComb Diesel responds that the plaintiffs’ right of first
refusal was triggered by the APA between McComb Diesel and Old
River.

See Western Star Agreement XIV(B)(3).

Further, McComb

Diesel contends that the right of first refusal was triggered
because the terms of the APA were commercially reasonable.

See

West Tex. Transmission, L.P. v. Enron Corp., 907 F.2d 1554, 1563

3

(5th Cir. 1990)(“[T]he owner of property subject to a right of first
refusal remains master of the conditions under which he will
relinquish

his

commercially

interest,

reasonable,

as

long

imposed

as

those

in

good

conditions
faith,

and

are
not

specifically designed to defeat the preemptive rights.”).
McComb Diesel also asserts that the APA was not designed to
destroy

Western

Star’s

right

of

first

refusal,

that

it

was

presented to Western Star for its review and option to purchase,
and

that

it

negotiations

was

the

between

result
Lee

of

White

good
of

faith

Old

and

River

arm’s

and

length

Montalvo.1

According to the defendant, Western Star attempted to exercise its
right of first refusal “to acquire only the assets of McComb Diesel
... [t]hen, when it realized that Harvest Haul and Fiber Plus were
assets of McComb Diesel, Western Star purported to exercise its
right of first refusal to acquire only the ‘assets that are related
to and necessary for the operation of the dealership in Magnolia,
Mississippi.’”
McComb

Diesel

further

argues

that

because

the

business

operations of McComb Diesel, Harvest Haul, Fiber Plus and Magnolia
Motors are completely integrated and generate profit and value for
each other, it is commercially reasonable for McComb Diesel to
insist that the assets be purchased together, and to insist that
Western Star’s right of first refusal include all assets.

1

Montalvo is the sole owner of McComb Diesel.
4

McComb

Diesel also asserts that if the Court finds that Western Star
timely exercised its right of first refusal, the Court should order
Western Star to perform its duty to purchase McComb Diesel’s assets
for $5,955,729.00, the amount offered by Old River in the APA.
Plaintiff Detroit Diesel2 also moves for summary judgment,
asserting a right to withhold consent to defendant McComb Diesel’s
attempted sale of its Detroit Diesel dealership to Old River.
Plaintiffs Daimler and Western Star on one hand, and defendants
McComb Diesel and Montalvo on the other, are parties to a Dealer
Sales and Service Agreement (“DSSA”). Under the terms of the DSSA,
McComb Diesel operates a Western Star dealership. Complementary to
the DSSA, Detroit Diesel and McComb Diesel are parties to a Direct
Dealer Agreement (“DDA”), pursuant to which McComb Diesel sells and
services certain Detroit Diesel products, namely certain types of
diesel engines.

The DDA sets forth the responsibilities of the

parties, including the sale of new parts and equipment manufactured
by Detroit Diesel.

The responsibilities of McComb Diesel include

“providing prompt, efficient and courteous service to owners and
users of the [Detroit Diesel] Products, ... actively and regularly
pursu[ing] Product sales and service functions” and “perform[ing]
all service operations in a good and workmanlike manner.”

DDA,

Art. 7.1.1, 7.1.2.

2

Plaintiffs Western Star and Detroit Diesel are both wholly
owned subsidiaries of plaintiff Daimler.
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Detroit Diesel alleges that on November 4, 2014, McComb Diesel
provided Western Star with an executed agreement for the proposed
sale, and that defendant Montalvo sought Detroit Diesel’s consent
for the proposed sale.

Further, Detroit Diesel avers that during

the evaluation process, Daimler discovered that Old River’s primary
business was sales and services of another competing brand, Volvo,
and Daimler informed Montalvo that it preferred not to have dealers
with competing brands be candidates for expansion.

Following a

meeting at which Daimler expressed to Montalvo its concern over the
extent of Old River’s Volvo dealerships, Western Star advised
McComb Diesel of its intention to exercise its right of first
refusal to purchase the dealership.
Detroit Diesel seeks summary judgment in the form of a
declaratory ruling that it had the right to withhold consent to
McComb Diesel’s proposed sale of its Detroit Diesel dealership, and
that its exercise of that right was not unreasonable. In response,
McComb Diesel states that Detroit Diesel did not participate in
Daimler’s review of the APA, did not conduct an independent review,
and refused to consent to the APA without offering any explanation,
all of which McComb Diesel argues was arbitrary and unreasonable.
Detroit Diesel has filed a motion to strike McComb Diesel’s
response as untimely.
Defendant McComb Diesel has also filed a motion for summary
judgment against the plaintiffs, seeking judgment in its favor on

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the following claims as put forward by the plaintiffs:
(1) that Western Star’s right of first refusal was not
triggered by the execution of the APA, or
(2) that, in the alternative, Western Star’s right of first
refusal was triggered by the execution of the APA, but Western Star
is not required to purchase all of the assets covered by the APA,
and
(3) Detroit Diesel has grounds to terminate the Detroit Diesel
Agreement, because McComb Diesel allegedly failed to seek Detroit
Diesel’s approval of the sale to Old River.
McComb Diesel contends that there are no genuine issues of
material fact as to any of these three claims by the plaintiffs,
and that it is entitled to judgment as a matter of law.
McComb Diesel has also brought the following counterclaims
against the plaintiffs, seeking declaratory and injunctive relief:
(1) that McComb Diesel has a right to close the APA, because
Western Star failed to timely and/or effectively exercise its right
of first refusal, and failed to act reasonably and in good faith by
refusing to approve Old River as a Western Star dealer, or
(2) that, in the alternative, Western Star timely exercised
its right of first refusal and is obligated to purchase all of the
assets covered by the APA for the price agreed to by Old River and
McComb Diesel, and
(3) Detroit Diesel violated Miss. Code Ann. § 63-17-73(d)(I)

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by threatening to terminate the Detroit Diesel Agreement without
due cause or good faith.
McComb Diesel alleges that there are no genuine issues of
material fact as to the first two counterclaims, and that it is
entitled to judgment as a matter of law.
Federal Rule of Civil Procedure 56(a) provides that summary
judgment is appropriate “if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.”

Fed.R.Civ.P. 56(a).

If the

movant meets this burden, “the nonmovant must go beyond the
pleadings and designate specific facts showing that there is a
genuine issue for trial.”

Little v. Liquid Air Corp., 37 F.3d

1069, 1075 (5th Cir. 1994).
To rebut a properly supported motion for summary judgment, the
opposing party must show, with “significant probative evidence,”
that there exists a genuine issue of material fact.

Hamilton v.

Segue Software, Inc., 232 F.3d 473, 477 (5th Cir. 2000). “A genuine
dispute of material fact means that evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”
Royal v. CCC & R Tres Arboles, L.L.C., 736 F.3d 396, 400 (5th Cir.
2013)(quotation omitted).

However, if the evidence is merely

colorable, or is not significantly probative, summary judgment is
appropriate.

Cutting Underwater Techs. USA, Inc. v. ENI U.S.

Operating Co., 671 F.3d 512, 516 (5th Cir. 2012)(citing Anderson v.

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Liberty Lobby, Inc., 477 U.S. 242, 249 (1986)).

In deciding

whether summary judgment is appropriate, the Court views facts and
inferences in the light most favorable to the nonmoving party. RSR
Corp. v. Int’l Ins. Co., 612 F.3d 851, 858 (5th Cir. 2010).
The plaintiffs request oral argument on their motion for
summary judgment regarding right of first refusal and motion for
summary judgment regarding right to withhold consent.

Local

Uniform Rule 7(b)(6)(A) provides:
The court will decide motions without a hearing or oral
argument unless otherwise ordered by the court on its own
motion, or in its discretion, upon written request made
by counsel in an easily discernable manner on the face of
the motion or response.
L.U.CIV.R. 7(b)(6)(A). The Court finds that oral argument would be
helpful in this case, given that the parties’ motions request
declaratory relief and, to some extent, injunctive relief, as well
as contract interpretation.

The Court shall therefor hear oral

argument on the plaintiffs’ motions for summary judgment.

The

Court shall also hear oral argument on the defendants’ motion for
summary judgment and on the

plaintiffs’ omnibus motion in limine

(docket entry 113).
The Court shall therefore set this matter for oral argument
and notify the parties of suggested hearing dates.
SO ORDERED, this the 13th day of January, 2016.

/s/ David Bramlette
UNITED STATES DISTRICT JUDGE
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