LEE DODGE, INC. et al v. KIA MOTORS AMERICA, INC.

Filing 33

OPINION. Signed by Judge Joel A. Pisano on 8/31/2011. (gxh)

NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
____________________________________
:
LEE DODGE, INC. D/B/A BROOKLYN :
AUTO GROUP, KIA D/B/A BROOKLYN :
AUTO GROUP, and ROBERT A. LEE, JR., :
individually,
:
:
Plaintiffs,
:
Civil Action No. 10-5939 (JAP)
:
v.
:
:
OPINION
KIA MOTORS AMERICA, INC.,
:
:
Defendant.
:
___________________________________ :

PISANO, District Judge.
Before the Court is Defendant Kia Motors America, Inc.‟s (“KMA”) motion for summary
judgment and relief from the automatic stay. Plaintiffs Lee Dodge Inc. d/b/a Brooklyn Auto
Group, Kia d/b/a Brooklyn Auto Group (“Lee Dodge”) and Robert A. Lee, Jr. (“Mr. Lee”)
oppose the motion. For the following reasons, the Court will grant KMA‟s motion.
I.

BACKGROUND
KMA, which has a regional office located in East Brunswick, New Jersey, distributes

new vehicles under the Kia brand. Between May and August of 2010, Mr. Lee, who is the
principal and sole owner of Lee Dodge, an automobile dealer located in Brooklyn, New York,
sought approval from KMA to become an authorized Kia franchisee in Brooklyn by submitting
an “Application for Kia Sales and Service Agreement” (the “Application”). Kia approved the
Application subject to two conditions: (1) Lee Dodge was required to obtain floor plan financing,
and (2) Lee Dodge was required to commence Kia sales and service operations by October 29,

2010. Lee Dodge obtained a letter of conditional approval from Ally Bank (formerly “GMAC”)
for floor plan financing on August 11, 2010. Its financing was suspended, however, on October
11, 2010 and Lee Dodge was unable to commence Kia sales and service operations by October
29. KMA informed Mr. Lee on that date that, because Lee Dodge had not fulfilled its
conditional obligations, KMA would not issue a fully executed Dealer Sales and Service
Agreement.
On November 12, 2010, Plaintiffs filed a Complaint in this Court alleging that KMA had
breached its contract approving of Lee Dodge as a Kia franchisee (Count 4) and violated the
New York Franchised Motor Vehicle Dealer Act (the “Franchised Dealer Act”) (Count 5). In
addition, Plaintiffs allege that KMA violated the Automobile Dealer‟s Day in Court Act (the
“ADDCA”), 15 U.S.C. § 1221 et seq. (Count 6), breached a covenant of good faith and fair
dealing (Count 7), and committed fraud (Count 8). Finally, Plaintiffs assert a claim under a
theory of promissory estoppel (Count 9).1 KMA answered on December 7, 2010 and filed a
counterclaim for payment on parts and tools delivered to Plaintiffs.2 KMA filed its motion for
summary judgment on January 14, 2011, essentially stating that the parties had not realized a
franchisor-franchisee relationship because Plaintiffs failed to fulfill the conditions of their
agreement and, therefore, its actions were lawful. Plaintiffs respond that there are genuine issues
of material fact that preclude summary judgment and that Lee Dodge was and remains a Kia
franchise.

1

The first three counts of the Complaint are not substantive claims but rather requests for
remedies (declaratory judgment, specific performance, and injunctive relief), and as such, fail to
state a claim.
2

In this Opinion and accompanying Order, the Court grants summary judgment against
Plaintiffs on all substantive counts of their Complaint. Neither party, however, has addressed
KMA‟s counterclaim, so it persists.
2

II.

STANDARD OF REVIEW
To prevail on a motion for summary judgment, the moving party must establish “that

there is no genuine issue as to any material fact and that the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). The district court must determine whether disputed issues
of material fact exist, but the court cannot resolve factual disputes in a motion for summary
judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S. Ct. 2505, 91 L. Ed. 2d
202 (1986).
In determining whether a genuine issue of material fact exists, the court must view the
facts in the light most favorable to the non-moving party and extend all reasonable inferences to
that party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct.
1348, 89 L. Ed. 2d 538 (1986); Stephens v. Kerrigan, 122 F.3d 171, 176-77 (3d Cir. 1997). The
moving party always bears the initial burden of demonstrating the absence of a genuine issue of
material fact, regardless of which party ultimately would have the burden of persuasion at trial.
Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). Once the
moving party has met its opening burden, the non-moving party must identify, by affidavits or
otherwise, specific facts showing that there is a genuine issue for trial. Id. at 324. Thus, the nonmoving party may not rest upon the mere allegations or denials of its pleadings. Id. “[T]he plain
language of Rule 56[] mandates the entry of summary judgment, after adequate time for
discovery and upon motion, against a party who fails to make a showing sufficient to establish
the existence of an element essential to that party's case, and on which that party will bear the
burden of proof at trial.” Id. at 322.
Once the moving party has demonstrated to the court the absence of a material fact at
issue, the Supreme Court has stated that the non-moving party “must do more than simply show

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that there is some metaphysical doubt as to the material facts....” Matsushita, 475 U.S. at 586-87
(citations omitted). In other words, “[i]f the evidence [submitted by the non-moving party] is
merely colorable ... or is not significantly probative ... summary judgment may be granted.”
Anderson, 477 U.S. at 249-50 (citations omitted).
The Supreme Court has specifically recognized that “[o]ne of the principal purposes of
the summary judgment rule is to isolate and dispose of factually unsupportable claims or
defenses, and [ ] that [the rule] should be interpreted in a way that allows it to accomplish this
purpose.” Celotex, 477 U.S. at 323-24. Thus, “[w]hen the record is such that it would not
support a rational finding that an essential element of the non-moving party's claim or defense
exists, summary judgment must be entered for the moving party.” Turner v. Schering-Plough
Corp., 901 F.2d 335, 341 (3d Cir. 1990).
III.

DISCUSSION
In its statement of material facts not in dispute, (Docket Entry no. 10-4), KMA proffers

three documents signed by both parties and dated September 30, 2010: a letter agreement
detailing the significance of the October 29 sales and service deadline (the “Letter Agreement”),
see Decl. of Melanie Dougherty (Docket Entry no. 10-2) (hereinafter the “Dougherty
Declaration), Exh. C, a “Kia Dealer Sales and Service Agreement” (the “Dealer Agreement”),
see id., Exh. D, and an “Amendment & Addendum to Kia Dealer Sales and Service Agreement”
(the “Addendum”), see id., Exh. E. Plaintiffs do not dispute the authenticity of these documents.
Opp‟n at 2.
As explained in the Letter Agreement, the October 29 deadline was paramount. Under
the Franchised Dealer Act, a franchisor must provide notice and opportunity to protest to existing
dealers for certain new dealer appointments within the relevant market area. N.Y. Veh. & Traf.

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L. § 463(2)(cc)(1). The notice requirement does not apply, however, to “the addition of a new
motor vehicle dealer or the establishment of a replacement new motor vehicle dealer . . . at or
within two miles of a location at which a former licensed new motor vehicle dealer for the same
line make of new motor vehicle had ceased operating within the previous two years.” N.Y. Veh.
& Traf. L. § 463(2)(cc)(2)(ii). A prior Kia dealer located within two miles of Mr. Lee‟s
proposed sales and service locations had terminated its franchise relationship on October 31,
2008. Both parties understood that the two-year, two-mile exemption to the notice requirement
“should apply to [Mr. Lee‟s] prospective appointment if [the] dealership commences authorized
Kia operations . . . no later than October 29, 2010.” Letter Agreement, Dougherty Decl., Exh. C.
Therefore, the parties agreed that the operations deadline was a condition to the effectiveness of
the Dealer Agreement and Addendum; the Letter Agreement specifically provided that “[t]he
Dealer Agreement and Addendum will not become effective unless [Mr. Lee] satisf[ies] this
provision.” Id.
The Addendum contained its own language which also emphasized the October 29
deadline:
By no later than October 29, 2010, DEALER shall (a) secure any new motor
vehicle dealer licenses and any other approvals (from the State of New York or
otherwise) necessary to commence authorized new Kia sales and service
operations at the Temporary Facility, and (b) commence authorized, licensed Kia
operations at such Temporary Facility. DEALER acknowledges and agrees that
the Dealer Agreement and this Addendum shall not become effective unless
DEALER timely satisfies the deadline . . . .
Dougherty Decl., Exh. E, ¶ C. Indeed, Plaintiffs acknowledged the “critical” nature of the
October 29 deadline in their Complaint:
During discussions with Defendant Kia Motors and/or its representatives,
Defendant Kia Motors represented to Mr. Lee that the timing for the opening of
his Kia dealership was critical since the prior Kia dealer in the Brooklyn market

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area had voluntarily terminated its Kia Dealer Sales and Service Agreement
effective October 31, 2008.
Compl., ¶ 12. Thus, it is undisputed that the October 29 deadline was agreed to by all parties,
that its importance was recognized by all parties, and that all parties understood that the Dealer
Agreement and its Addendum would not become effective unless Lee Dodge commenced Kia
operations by the deadline.
In its statement of material facts not in dispute, KMA avers that “Lee Dodge failed to
commence Kia sales operations by October 29, 2010.” (Docket Entry no. 10-4). In its
opposition to KMA‟s motion for summary judgment, Plaintiffs profess to “lack knowledge or
information sufficient to form a belief” as to whether this occurred. Opp‟n at 3. Local Civil
56.1(a) provides that “any material fact not disputed shall be deemed undisputed for purposes of
the summary judgment motion.” Indeed, Plaintiffs have not disputed KMA‟s averment and have
offered no evidence that Lee Dodge did in fact commence Kia operations by October 29, 2010.
Thus, the Court shall deem KMA‟s averment an undisputed material fact for purposes of the
summary judgment motion.
Under New York law,3 where there is “a condition precedent to the formation or
existence of the contract itself . . . no contract arises unless and until the condition occurs.”
Oppenheimer & Co., Inc. v. Oppenheim, Appel, Dixon & Co., 660 N.E.2d 415, 418 (N.Y. 1995)
(internal quotation marks omitted). Failure to satisfy a condition precedent to the formation of a
contract entitles a defendant to summary judgment for a claim that the contract was breached.
Joemark Enterprises, LLC v. City of Newburgh, 878 N.Y.S.2d 907 (N.Y. App. Div. 2009). In
this case, it is undisputed that Lee Dodge did not commence Kia operations by October 29, 2010,
3

Plaintiffs bring their action under the New York Franchised Motor Vehicle Dealer Act
for a dealership that was to be based in the state of New York. KMA does not dispute that New
York law applies in this case, and concedes that there is no conflict between New York law and
the potentially applicable laws of other states. Therefore, the Court will apply New York law.
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and so the Dealer Agreement did not become effective. The Dealer Agreement, had it become
effective, was the only document that would have authorized Lee Dodge as a Kia dealer. See
Dealer Agreement, Dougherty Decl., Exh. D at 1 (“Based upon the representations and promises
of DEALER as set forth herein, COMPANY agrees to appoint DEALER as an authorized Kia
Dealer and welcomes DEALER to the COMPANY‟s network of authorized dealers of Kia
Products.”); see also Application, Dougherty Decl., Exh. A at 6 (“No act other than the written
execution of a Kia Dealer Sales and Service Agreement by an Executive Officer of Kia shall
constitute approval of this application by Kia.”). Because the Dealer Agreement never became
effective, Plaintiffs‟ claim for a breach of that contract fails as a matter of law.
For a franchise to exist under the Franchised Dealer Act, there must be:
a written arrangement for a definite or indefinite period in which a manufacturer
or distributor grants to a franchised motor vehicle dealer a license to use a trade
name, service mark or related characteristic, and in which there is a community of
interest in the marketing of motor vehicles or services related thereto at
wholesale, retail, by lease or otherwise and/or pursuant to which a franchised
motor vehicle dealer purchases and resells or offers (as agent, principal, or
otherwise) products associated with the name or mark or related components of
the franchise.
N.Y. Veh. & Traf. L. § 462(6). The written agreement in this case that grants licenses, provides
common interest in marketing of automobiles and services, and authorizes purchases and sales is
the Dealer Agreement. See Dealer Agreement, Dougherty Decl., Exh. D at Part 2, Art. I. As
described above, however, the Dealer Agreement never became effective. Therefore, Lee Dodge
was never a franchise under the Franchised Dealer Act and lacks standing to make claims under
the Franchised Dealer Act. See Tri-County Motors, Inc. v. Am. Suzuki Motor Corp., 494 F.
Supp. 2d 161, 176 (E.D.N.Y. 2007) (finding no standing under the Franchised Dealer Act for
lack of a franchise). Accordingly, these claims must be dismissed.

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Notwithstanding the language of the Letter Agreement and Addendum, Plaintiffs claim
that Lee Dodge actually was a franchise and authorized dealer based on various documents and
transactions outside the scope of the Dealer Agreement, including a “franchise approval letter”
referenced by the New York Department of Motor Vehicles, correspondence from KMA
referring to Lee Dodge as a Kia dealer, and the acquisition of Kia parts and tools. Under New
York law, “[a] familiar and eminently sensible proposition of law is that, when parties set down
their agreement in a clear, complete document, their writing should as a rule be enforced
according to its terms.” W.W.W. Associates, Inc. v. Giancontieri, 77 N.Y.2d 157, 162 (N.Y.
1990). Extrinsic evidence “as to what was really intended but unstated or misstated is generally
inadmissible to add to or vary the writing.” Id. None of the documents or transactions that
Plaintiffs submit as evidence of creating a franchise, then, abrogate the unambiguous language of
the Letter Agreement and Addendum, signed by all parties, that conditions the effectiveness of
the Dealer Agreement on the commencement of Kia operations by the October 29 deadline.
Plaintiffs also claim that, because the initial location of Lee Dodge‟s Kia operations was
intended to be temporary, the agreements were ambiguous as to whether sales must have
commenced before the October 29 deadline. Plaintiffs claim that the parties never contemplated
that “customary” Kia operations would take place at the temporary location. Plaintiffs‟
contentions, however, are based on extrinsic evidence and not on any ambiguity in the
agreements. In fact, the Addendum addresses the temporary location, and specifies that
“DEALER shall conduct Kia operations at the temporary facilities” pending relocation to a
permanent facility. Addendum, Dougherty Decl., Exh. E, ¶ A. “It is well settled that extrinsic
and parol evidence is not admissible to create an ambiguity in a written agreement which is
complete and clear and unambiguous upon its face.” W.W.W. Associates, 77 N.Y.2d at 163

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(internal quotation marks omitted). Neither the Addendum nor the Letter Agreement are
ambiguous regarding the commencement of Kia operations before October 29, 2010. Plaintiffs‟
supposed “contemplations” are outside of the agreements and, therefore, Plaintiffs‟ arguments
fail.
Plaintiffs‟ other claims fail as well. Plaintiffs claim that KMA violated the ADDCA.
The ADDCA allows “[a]n automobile dealer” to bring suit against a manufacturer for “failure . .
. to act in good faith in performing or complying with any of the terms or provisions of the
franchise, or in terminating, canceling, or not renewing the franchise with said dealer . . . .” 15
U.S.C. § 1222. The Third Circuit has clarified:
There are four elements of an ADDCA cause of action: (1) the plaintiff must be
an automobile dealer; (2) the defendant must be an “automobile manufacturer”
engaged in commerce; (3) there must be a manufacturer-dealer relationship
embodied in a written franchise agreement; and (4) the plaintiff must have been
injured by the defendant's failure to act in good faith.
Northview Motors, Inc. v. Chrysler Motors Corp., 227 F.3d 78, 93 (3d Cir. 2000) (citations
omitted). Plaintiffs‟ ADDCA claim fails as a matter of law because, as discussed above, there is
no “manufacturer-dealer relationship embodied in a written franchise agreement.” Furthermore,
the ADDCA “protect[s] dealers . . . only against those breaches of good faith evidenced by acts
of coercion or intimidation.” Id. (internal quotation marks omitted). Plaintiffs neither allege nor
provide any evidence of acts of coercion or intimidation. Accordingly, Plaintiffs‟ ADDCA claim
fails as a matter of law.
Plaintiff also claims that KMA breached the covenant of good faith and fair dealing.
“Although an obligation of good faith and fair dealing is implied in every contract, that
obligation may not be implied when it would be inconsistent with other terms of the contract
between the parties.” Chrysler Credit Corp. v. Dioguardi Jeep Eagle, Inc., 596 N.Y.S.2d 230

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(N.Y. App. Div. 1993) (citations omitted). Any obligation to recognize a franchise relationship
between the parties in this case when Plaintiffs failed to fulfill a condition to the formation of the
relationship would be inconsistent with the unambiguous terms of the Letter Agreement and
Addendum. Therefore, this claim fails as a matter of law.
Plaintiffs also assert a claim under a theory of promissory estoppel. “A cause of action
for promissory estoppel must allege „a clear and unambiguous promise by [a] defendant[] upon
which the plaintiff[s] reasonably and foreseeably relied to [their] detriment.” Gotham Boxing
Inc. v. Finkel, 856 N.Y.S.2d 498 (N.Y. Sup. Ct. 2008) (quoting 401 Hotel, L.P. v. MTI/The
Image Group, Inc., 251 A.D.2d 125, 126 (N.Y. App. Div. 1998)). Plaintiffs claim that they
relied to their detriment on the promise made under the Dealer Agreement to establish Lee
Dodge as a franchise. No reading of the undisputed facts in this case, however, allows the Court
to conclude that Plaintiffs‟ reliance on promises made in the Dealer Agreement were either
reasonable or foreseeable when the Letter Agreement and Addendum clearly state that the Dealer
Agreement was not effective without commencing Kia operations before the October 29
deadline. Accordingly, Plaintiffs‟ claim under promissory estoppel must be denied as a matter of
law.
Finally, Plaintiffs assert a claim of fraud based on KMA‟s representations that it
approved Lee Dodge as a Kia franchisee. Under New York law, “[t]he essential elements of a
cause of action sounding in fraud are a misrepresentation or a material omission of fact which
was false and known to be false by defendant, made for the purpose of inducing the other party
to rely upon it, justifiable reliance of the other party on the misrepresentation or material
omission, and injury.” Orlando v. Kukielka, 836 N.Y.S.2d 252 (N.Y. App. Div. 2007). In the
documents accepted as undisputed fact in this case, every “approval” of Lee Dodge as a

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franchisee is specified as contingent upon its commencement of Kia operations by October 29,
2010. The Court must conclude, as a matter of law, that KMA made no misrepresentations or
material omissions of fact to Plaintiffs. Accordingly, Plaintiffs‟ fraud claim fails.
IV.

CONCLUSION
The Court concludes that KMA never granted Lee Dodge a Kia franchise and so

Plaintiffs‟ claims fail as a matter of law. An appropriate order shall issue.

/s/ JOEL A. PISANO
United States District Judge
Dated: August 31, 2011

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