Valley Stream Foreign Cars, Inc. v. American Honda Motor Co., Inc.

Filing 15

ORDER granting in part and denying in part 8 Motion to Dismiss for Failure to State a Claim For the reasons set forth herein, defendant's motion to dismiss is denied with respect to plaintiff's claim for breach of the implied covenant of good faith and fair dealing, and granted in all other respects. SO ORDERED. Ordered by Judge Joseph F. Bianco on 9/22/2016. (Shea, Zoe)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
_____________________
No 15-CV-5314 (JFB)(GRB)

_____________________

VALLEY STREAM FOREIGN CARS, INC. D/B/A SOUTH SHORE HONDA,
Plaintiff,
VERSUS

AMERICAN HONDA MOTOR CO., INC.,
Defendant.
___________________
MEMORANDUM AND ORDER
September 22, 2016

___________________

JOSEPH F. BIANCO, District Judge:
Plaintiff Valley Stream Foreign Cars, Inc.
d/b/a South Shore Honda (“plaintiff” or
“South Shore Honda”) brings this action
against defendant American Honda Motor
Co., Inc. (“defendant” or “American Honda”)
alleging breach of contract, breach of the
implied covenant of good faith and fair
dealing, and violation of the New York
Franchised Motor Vehicle Dealer Act.
Defendant moves to dismiss plaintiff’s
complaint pursuant to Rule 12(b)(6) of the
Federal Rules of Civil Procedure. For the
reasons set forth herein, the Court denies in
part and grants in part defendant’s motion to
dismiss. In particular, the Court concludes
that plaintiff has failed to state plausible
claims for breach of contract and for the
violation of the New York Franchised Motor
Vehicle Dealer Act, but has stated a plausible

claim for breach of the implied covenant of
good faith and fair dealing.
I.
A.

BACKGROUND
Factual Background

The following facts are taken from the
complaint (“Compl.”). The Court assumes
these facts to be true for purposes of deciding
this motion and construes them in the light
most favorable to plaintiff, the non-moving
party.
American Honda is the authorized
distributor of Honda vehicles, parts, and
accessories throughout the United States.
(Compl. ¶¶ 4-5.) American Honda distributes
new Honda vehicles through a network of
authorized dealers that are responsible for
selling Honda vehicles to retail customers,
performing authorized warranty service on

Honda vehicles, and selling Honda parts. (Id.
¶ 5.) Plaintiff is an authorized Honda dealer
that has operated in Valley Stream, New
York since at least 2003 under the name
“South Shore Honda.” (Id. ¶¶ 2-3, 6.)

and/or amended by American Honda from
time to time.” (Id. at 34.)
This case arises out of a dispute over a
practice known as wholesaling, which is
governed by
American Honda’s
Wholesaling Policy (the “Wholesaling
Policy”), a document that is separate from the
Dealer Agreement. American Honda adopted
a revised Wholesaling Policy in March 2004.
(See Wholesaling Policy at 2.) The
Wholesaling Policy defines wholesaling as
“the sale or lease and delivery of new Honda
. . . Vehicles to persons other than (1) the
ultimate end user of such vehicles, or (2)
leasing companies that do not engage in
activities described more fully below in
1.1(b), or (3) another authorized Honda . . .
Dealer.” (Id. § 1.1.) 1 The preamble states that
American Honda “believes that such
wholesaling is inconsistent with the Honda .
. . Automobile Dealer Sales and Service
Agreement” which limits “authorized Honda
. . . Dealers to retail sales and retail leases
from the authorized Honda . . . Dealers’
premises and prohibits the creation of
additional dealership locations.” (Id. at 1.)
The Wholesaling Policy provides two
examples of wholesaling: (1) “[t]ransfers to
third-party resellers who sell or lease the new
Honda . . . Vehicle to end users as new
vehicles”; and (2) transfers to third-party
leasing companies that operate showrooms
and/or “otherwise engage in sales, lease or
service activities typically done by
authorized Honda . . . Dealers,” such as
“third-party leasing companies that display
new Honda . . . Vehicles on their premises or
hold new Honda . . . Vehicles in stock,
advertise for sale or lease of new Honda . . .
Vehicles from their premises, or accessorize
new Honda . . . Vehicles for sale or lease to

On or about January 10, 2003, American
Honda and South Shore Honda entered into a
Honda Automobile Dealer Sales and Service
Agreement (the “Dealer Agreement”). (Id. ¶
6.) The Dealer Agreement granted plaintiff
the right to sell and service Honda products
as a Honda dealer. (Id ¶ 7.) Article I of the
Dealer Agreement states that “[t]his Dealer
Agreement, together with the Attachments
hereto, which are incorporated by this
reference and the Policies and Procedures, set
forth the rights and obligations of Dealer and
American Honda with respect to current and
potential customers and each other.” (Dealer
Agreement at 1.) The Dealer Agreement
grants South Shore Honda “the non-exclusive
right to sell and service Honda Products at
[its] Authorized Location.” (Id.) Article III
states that South Shore Honda agrees to
“[p]romote, sell and service Honda Products
and serve American Honda customers
according to the terms and conditions of this
Dealer Agreement” and “[a]bide by all other
terms and conditions of this Dealer
Agreement, and American Honda’s Policies
and Procedures.” (Id. at 2.) Article 24.20
defines “Policies and Procedures” as “the
policies and procedures prepared by
American Honda in its sole discretion based
upon American Honda’s evaluation of
Dealer’s business, American Honda’s
business, its Dealer body, and the
marketplace, and which may be established

1

The Wholesaling Policy applies to Honda and Acura
vehicles and dealerships. The ellipses in the portions
of the Wholesaling Policy that are quoted indicate the

exclusion of references to Acura, which are not
relevant to this action.

2

end users,” (Id. §§ 1.1(a)-(b).) The
Wholesaling Policy also states that
wholesaling does not include transfers of
used vehicles, transfers to third parties who
are end users and not resellers or lessors of
new vehicles, and “[t]ransfers to leasing
companies that do NOT operate showrooms
or otherwise engage in sales, advertising
and/or service activities typically done by
authorized Honda . . . Dealers.” (Id. § 1.1(c)
(emphasis in original).)

action to prevent such Wholesaling.” (Id. §
4.5 (emphasis in original).)
Plaintiff alleges that authorized Honda
dealers located outside of plaintiff’s Area of
Statistical Analysis (“ASA”) 2 are engaging in
wholesaling by “utilizing . . . intermediaries
to sell their Honda vehicles to customers who
reside within [p]laintiff’s ASA” and that,
despite receiving information about this
wholesaling, American Honda “has not
initiated audits of those [d]ealers or otherwise
taken any steps to curtail the [w]holesaling.”
(Compl. ¶¶ 27-28.) Plaintiff claims that
American Honda has “failed to strictly
enforce its Dealer Agreement” and that this
has “negatively skew[ed]” American
Honda’s “evaluation of [p]laintiff’s retail
sales performance” and caused plaintiff to
lose “numerous sales of Honda vehicles in its
ASA and the profits generated from those
sales,” totaling at least $12 million. (Id. ¶¶ 30,
34-35, 40.)

Section Two of the Wholesaling Policy
states that, “effective November 1, 1995,”
American Honda “will strictly enforce the
Dealer Agreement and require that Honda . .
. Dealers not engage in Wholesaling of
Honda . . . Vehicles.” (Id. § 2.) Section Three
is entitled “Enforcement of Wholesaling
Policy,” and describes processes for
circumstances in which wholesaling has
occurred or is alleged to have occurred. It
includes processes for the submission of
reports by dealers to American Honda and for
American Honda to conduct periodic audits
of dealers, as well as the procedures for
American Honda to make findings and for
dealers to respond to such findings. (Id. § 3.)
Section Four describes American Honda’s
“Remedies in the Event of a Violation,”
which include adjusting a dealer’s allocation
of vehicles, charging back incentives and
marketing assistance, and not considering the
dealer for any additional dealership locations
for five years. (Id. §§ 4.1-4.4.) It also contains
a provision stating that American Honda
“considers any Wholesaling to be
inconsistent with the Dealer Agreement” and
thus, “reserves its rights to take appropriate

B. Procedural History
Plaintiff commenced this action in
Nassau County Supreme Court on August 17,
2015. American Honda removed the case on
September 15, 2015. On December 9, 2015,
American Honda filed the instant motion to
dismiss. On February 2, 2016, plaintiff filed
its opposition to defendant’s motion to
dismiss. On February 16, 2016, defendant
filed its reply. Oral argument was held on

2

The Dealer Agreement states that the ASA is “the
geographical area used by American Honda and
modified in its sole discretion from time to time for
analyzing the representation provided by Dealer, in

which Dealer’s advertising, sales and service
performance is evaluated by American Honda.”
(Dealer Agreement at 32.)

3

court to draw the reasonable inference that
the defendant is liable for the misconduct
alleged. The plausibility standard is not akin
to a ‘probability requirement,’ but it asks for
more than a sheer possibility that a defendant
has acted unlawfully.” Id. at 678 (quoting and
citing Twombly, 550 U.S. at 556-57 (internal
citation omitted)).

March 16, 2016. The Court has considered all
of the parties’ submissions.
II.

STANDARD OF REVIEW

In reviewing a motion to dismiss pursuant
to Federal Rule of Civil Procedure 12(b)(6),
the Court must accept the factual allegations
set forth in the complaint as true and draw all
reasonable inferences in favor of the nonmoving party. See Cleveland v. Caplaw
Enters., 448 F.3d 518, 521 (2d Cir. 2006);
Nechis v. Oxford Health Plans, Inc., 421 F.3d
96, 100 (2d Cir. 2005). “In order to survive a
motion to dismiss under Rule 12(b)(6), a
complaint must allege a plausible set of facts
sufficient ‘to raise a right to relief above the
speculative level.’” Operating Local 649
Annuity Trust Fund v. Smith Barney Fund
Mgmt. LLC, 595 F.3d 86, 91 (2d Cir. 2010)
(quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 555 (2007)). This standard does not
require “heightened fact pleading of
specifics, but only enough facts to state a
claim to relief that is plausible on its face.”
Twombly, 550 U.S. at 570.

The Court notes that, in adjudicating this
motion, it is entitled to consider “any written
instrument attached to the complaint as an
exhibit or incorporated in the complaint by
reference, as well as documents upon which
the complaint relies and which are integral to
the complaint.” Subaru Distributors Corp. v.
Subaru of Am., Inc., 425 F.3d 119, 122 (2d
Cir. 2005).
III.

DISCUSSION

A. Incorporation by Reference
Plaintiff asserts that the Court should
decide as a threshold issue whether American
Honda’s Wholesaling Policy is incorporated
by reference to the parties’ Dealer
Agreement. Plaintiff states that, if the Court
decides that the Wholesaling Policy is
incorporated by reference to the parties’
Dealer Agreement, it will proceed on its
breach of contract claim and withdraw its
claim for breach of the implied covenant of
good faith and fair dealing. Alternatively, if
the Court finds that the Wholesaling Policy is
not incorporated by reference to the Dealer
Agreement, plaintiff will pursue a claim for
breach of the implied covenant of good faith
and fair dealing, and will withdraw its claim
for breach of contract.

The Supreme Court clarified the
appropriate pleading standard in Ashcroft v.
Iqbal, setting forth a two-pronged approach
for courts deciding a motion to dismiss. 556
U.S. 662 (2009). The Supreme Court
instructed district courts to first “identify[ ]
pleadings that, because they are no more than
conclusions, are not entitled to the
assumption of truth.” Id. at 679 (explaining
that though “legal conclusions can provide
the framework of a complaint, they must be
supported by factual allegations”). Second, if
a complaint contains “well-pleaded factual
allegations, a court should assume their
veracity and then determine whether they
plausibly give rise to an entitlement to relief.”
Id. A claim has “facial plausibility when the
plaintiff pleads factual content that allows the

Plaintiff states that it does not take a
position on whether or not the Dealer
Agreement and the Wholesaling Policy are
incorporated by reference, but nevertheless
presents case law supporting a finding that
4

Worldwide,
LLC,
No.
13-CV-261
(DLI)(RML), 2014 WL 4828816, at *3
(E.D.N.Y. Sept. 29, 2014) (“To incorporate a
document by reference, New York law
requires that the document be referenced
beyond all reasonable doubt.”); Federated
Mut. Ins. Co. v. Woodstock ’99, LLC, 140 F.
Supp. 2d 225, 228 (N.D.N.Y. 2001) (before a
document will be deemed incorporated by
reference, “the document to be incorporated
must be identified with sufficient specificity”
and “there must be a clear manifestation of an
intent to be bound by the terms of the
incorporated instrument”).

the Wholesaling Policy is not incorporated by
reference. (See Pl.’s Opp’n. at 4-6.)
Defendant’s position is that the incorporation
by reference issue is “largely irrelevant”
because incorporation by reference is not the
“only way in which material outside the four
corners of a contract can create an obligation”
and that the “real question is whether a
franchisee’s promise to comply with policies
that may be established by the franchisor
from time to time is binding under New York
law.” (Def.’s Reply at 4-5 (emphasis
omitted).) The Court addresses, as a
threshold issue, whether the Wholesaling
Agreement is incorporated by reference to
the Dealer Agreement.

Here, the Wholesaling Policy is not
identified or described in the Dealer
Agreement beyond all reasonable doubt.
Article I of the Dealer Agreement states that
“[t]his Dealer Agreement, together with the
Attachments hereto, which are incorporated
by this reference and the Policies and
Procedures, set forth the rights and
obligations of dealer and American Honda
with respect to current and potential
customers and each other.” (Dealer
Agreement at 1.) This clause clearly states the
intention of the parties to incorporate the
attachments to the Dealer Agreement by
reference. It also specifically identifies and
excludes policies and procedures from this
class of incorporated documents. Moreover,
the Dealer Agreement was executed in or
about September/October 2003, whereas the
revised Wholesaling Policy was adopted in
March 2004. (Wholesaling Policy at 2.) It is
common sense that a document not yet in
existence could not be identified in the Dealer
Agreement beyond all reasonable doubt.
Though the Wholesaling Policy states that
American Honda will “strictly enforce the
Dealer Agreement” “[e]ffective November 1,
1995,” it is not clear to the Court whether the
Wholesaling Policy existed as a previous
draft or in another form prior to its adoption
date. Thus, the reference in the Dealer

Whether an extrinsic document is deemed
to be incorporated by reference is a matter of
law. See Sea Trade Co. Ltd. v. FleetBoston
Financial Corp., No. 03-CV-10254 (JFK),
2007 WL 1288592, at *4 (S.D.N.Y. May 1,
2007) (citing Camferdam v. Ernst & Young
Int’l, Inc., No. 02-CV-10100 (BSJ), 2004 WL
307292, at *12 (S.D.N.Y. Feb. 13, 2004)).
Under New York law, “[t]he doctrine of
incorporation by reference requires that the
paper to be incorporated into the written
instrument by reference must be so described
in the instrument that the paper may be
identified beyond all reasonable doubt.”
Kenner v. Avis Rent A Car Sys., Inc., 678
N.Y.S.2d 213, 214 (App. Div. 1998)
(quotation omitted); see also PaineWebber
Inc. v. Bybyk, 81 F.3d 1193, 1201 (2d Cir.
1996) (“[T]he paper to be incorporated into a
written instrument by reference must be so
referred to and described in the instrument
that the paper may be identified beyond all
reasonable doubt.”) (emphasis in original). It
“must be clear that the parties to the
agreement had knowledge of and assented to
the incorporated terms.” Bybyk, 81 F.3d at
1201 (quoting Lamb v. Emhart Corp., 47
F.3d 551, 558 (2d Cir. 1995)); see also Adam
Developers Enters., Inc. v. Arizon Structures
5

no obligation to enforce the Wholesaling
Policy.

Agreement to “policies and procedures” is no
more than a “vague allusion[] to general
classes of documents” and is not sufficient to
incorporate the Wholesaling Policy by
reference. 4Connections LLC v. Optical
Commc’ns Grp., Inc., 618 F. Supp. 2d 178,
183 (E.D.N.Y. 2009) (stating that “vague
allusions to general classes of documents is
insufficient to incorporate referenced
documents”) (internal quotations omitted);
see also Ward v. TheLadders.com, Inc., 3 F.
Supp. 3d 151, 163 (finding that a statement in
the contract at issue—“may contain other
terms and conditions”—was not sufficient to
incorporate extrinsic representations into the
contract); Sea Trade Co. v. FleetBoston Fin.
Corp., No. 03-CV-10254 (JFK), 2007 WL
1288592, at *4 (S.D.N.Y. May 1, 2007)
(finding a document containing additional
terms and conditions was not incorporated by
reference into the contract because the
contract made “reference only to general
‘regulations’ and ‘rules’” and did not
“expressly name the Terms and Conditions as
the document that contained the applicable
regulations”). Accordingly, the Court finds
that the Wholesaling Policy is not
incorporated by reference to the Dealer
Agreement.

“Under New York law, a covenant of
good faith and fair dealing is implicit in all
contracts during the course of contract
performance.” Tractebel Energy Mktg., Inc.
v. AEP Power Mktg., Inc., 487 F.3d 89, 98
(2d Cir. 2007). The covenant “embraces a
pledge that neither party shall do anything
which will have the effect of destroying or
injuring the right of the other party to receive
the fruits of the contract” and “[i]n some
cases, the covenant may even require
affirmative steps to cooperate in achieving
the contract’s objective.” Id. (internal
quotation marks and citation omitted).
However, “[t]he implied covenant can only
impose an obligation consistent with other
mutually agreed upon terms in the contract. It
does not add [ ] to the contract a substantive
provision not included by the parties.”
Broder v. Cablevision Sys. Corp., 418 F.3d
187, 198-99 (2d Cir. 2005) (internal
quotation marks and citation omitted).
“In determining whether a party has
breached the obligation or covenant of good
faith and fair dealing, a court must examine
not only the express language of the parties’
contract, but also any course of performance
or course of dealing that may exist between
the parties.” Tractebel Energy Mktg., Inc. v.
AEP Power Mktg., Inc., 487 F.3d at 98.
“Thus, whether particular conduct violates or
is consistent with the duty of good faith and
fair dealing necessarily depends upon the
facts of the particular case, and is ordinarily a
question of fact to be determined by the jury
or other finder of fact.” Id. (internal quotation
marks and citation omitted).

Plaintiff states that, if the Court finds that
the Wholesaling Policy is not incorporated by
reference to the Dealer Agreement, it will
pursue only its claim for breach of the
implied covenant of good faith and fair
dealing. The Court thus dismisses plaintiff’s
contract claim and considers plaintiff’s claim
for breach of the implied covenant of good
faith and fair dealing.
B. Implied Covenant of Good Faith and
Fair Dealing

The Court finds that plaintiff has stated a
plausible claim for breach of the implied
covenant of good faith and fair dealing.
Plaintiff alleges that American Honda’s

Defendant moves to dismiss plaintiff’s
claim for breach of the implied covenant of
good faith and fair dealing, arguing that it has
6

refusal to enforce the Wholesaling Policy has
prevented plaintiff from exercising its right to
earn profits from the sale of Honda vehicles.
In the Wholesaling Policy, American Honda
explicitly acknowledges the potential harm
wholesaling can inflict on American Honda
and its dealers, stating that “wholesaling is
inconsistent with the Honda . . . Dealer Sales
and Service Agreement” and that “transfers
to intermediaries are detrimental to the best
interest of [American Honda] since they
undermine [American Honda’s] authorized
Honda . . . Dealer network, . . . impair the
ability of [American Honda] to provide the
highest level of customer satisfaction, create
situations that tarnish the reputation of the
Honda . . . Division and Honda’s . . .
authorized Dealers for quality automobiles
and service, and lead to lost sales.” (Dealer
Agreement at 1.) Taking plaintiff’s
allegations as true, American Honda has
received reports of wholesaling, but has
chosen to abandon its stated intention to
enforce the Wholesaling Policy in order to
prevent acknowledged economic and
reputational harm. This is sufficient to
support a plausible claim that defendant is
acting “arbitrarily or irrationally” in violation
of the implicit covenant of good faith and fair
dealing in the Dealer Agreement. See Dalton
v. Educational Testing Serv., 663 N.E.2d
289, 291-92 (1995) (stating that the implied
obligation of each promisor to exercise good
faith includes “a promise not to act arbitrarily
or irrationally”).

American Honda argues, the implied
covenant of good faith and fair dealing
cannot create new contractual rights and
“[i]mposing an obligation on a franchisor to
‘strictly enforce’ its contractual rights against
all franchises would obviously add a new,
substantive, and burdensome contractual
provision.” (Def.’s Reply at 4.) In concluding
that plaintiff has sufficiently stated a claim
for breach of the implied covenant of good
faith and fair dealing, the Court does not find
that plaintiff necessarily has a right to the
“strict” enforcement of the Wholesaling
Policy. Instead, the Court finds plaintiff has
adequately alleged American Honda has
arbitrarily acted counter to its stated interest
and the interest of its dealers by “[t]aking no
steps to enforce its Wholesaling Policy” and,
despite being made aware of wholesaling,
“continu[ing] to turn a blind eye to the
Wholesaling.” (Compl. ¶¶ 31-32 (emphasis
added).) Thus, the complaint does not simply
allege a lack of strict enforcement, but rather
a complete abandonment of any enforcement.
If the practice of wholesaling is known and
widespread, and American Honda is not
taking any steps to curtail it, a plausible claim
for breach of the covenant of good faith and
fair dealing exists given the devastating
economic and reputational impact that this
practice is alleged to have on American
Honda and its dealers. Where a contract
contemplates the exercise of discretion,
“[c]ourts have equated the covenant of good
faith and fair dealing with an obligation to
exercise that discretion reasonably and with
proper motive, . . . not . . . arbitrarily,
capriciously, or in a manner inconsistent with
the reasonable expectations of the parties.”
Fishoff v. Coty Inc., 634 F.3d 647, 653 (2d
Cir. 2011) (internal quotation marks and
citation omitted). 3 Accordingly, defendant’s

American Honda argues that the
Wholesaling Policy does not impose upon it
an enforcement obligation and that choosing
not to “strictly enforce” the Wholesaling
Policy is an “exercise of . . . discretion.”
(Def.’s Mot. to Dismiss at 10.) Furthermore,
3

American Honda urges the Court to consider a line
of three cases in which courts have declined to find
that franchisors were obligated to enforce franchise

standards against particular franchisees. The Court
does not find these cases persuasive. First, it is not

7

motion to dismiss plaintiff’s claim for breach
of the implied covenant of good faith and fair
dealing is denied. 4

additional dealerships, making it unlawful for
a franchisor to “enter into a franchise
establishing an additional new motor vehicle
dealer or relocating an existing new motor
vehicle dealer into the relevant market of an
existing franchise motor vehicle dealer of the
same line make unless the franchisor
provides notice pursuant to the terms of this
subdivision.” N.Y. V.T.L. § 463 (2)(cc)(1). A
dealer may sue to protest the addition of the
new franchised dealership “following receipt
of such notice.” (Id.) A “franchise,” is “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 . . . .” (Id. § 462(6).) The RMA
is defined as a “radius of six miles of the

C. Franchised Dealer Act
Plaintiff argues that it plausibly states a
claim against American Honda for the
violation of New York’s Franchised Motor
Vehicle Dealer Act (the “VTL”) §
463(2)(cc)(1) in alleging that American
Honda permitted and sanctioned wholesaling
by other Honda Dealers and their
intermediaries, which created additional de
facto Honda dealership locations within
plaintiff’s relevant market area (the “RMA”).
Defendant argues that plaintiff’s claim for the
violation of the VTL must fail because there
is no allegation that American Honda served
statutory notice or entered into any written
agreement to establish an additional Honda
Dealer in the RMA as required by the statute.
Section 463(2)(cc)(1) regulates the
locations at which a franchisor can establish

4
American Honda also argues that South Shore has
not alleged prohibited wholesaling in violation of the
Wholesaling Policy, since it merely alleges that
“intermediaries” are being used to sell vehicles to
customers in plaintiff’s ASA, and that certain
intermediaries (i.e., brokers) do not engage in
prohibited wholesaling. As a threshold matter, the
Court concludes that the complaint, by using the term
“wholesaling” is clearly referencing only the
prohibited conduct under the Wholesaling Policy. In
short, the allegations regarding the Wholesaling Policy
itself and the alleged violations of that Policy are
sufficiently pled in the complaint to survive a motion
to dismiss. The Court also notes that, to the extent
American Honda asserts it does not have sufficient
notice of the intermediaries plaintiff claims are being
used in violation of the Wholesaling Policy, plaintiff
states that it has given American Honda the names of
more than 40 intermediaries that are in violation of the
Wholesaling Policy. In any event, the Court concludes
the complaint need not contain the identities of these
alleged intermediaries or detail their activities to state
a plausible claim.

clear from the plaintiff’s reply brief or the opinions in
Kilday v. Econo-Travel Motor Hotel Corporation, 516
F. Supp. 162, 163 (E.D. Tenn. 1981) and Costello v.
Lungaro, 54 F.3d 776, 1995 WL 290249 (6th Cir.
1995) (unpublished disposition), how the language in
the applicable agreements compares to the language in
the Dealer Agreement and the Wholesaling Policy at
issue here. Although the Operations Manual at issue in
Staten Island Rustproofing Staten Island Rustproofing
Inc. v. Ziebart Rustproofing Co., Bus. Franchise Guide
(CCH) ¶ 8492 (E.D.N.Y. 1985) contains similar
language regarding the necessity of establishing
standards of performance for franchises, the manual
does not describe the specific economic and
reputational harm a particular practice would cause the
franchise and the franchisees in the absence of
enforced standards, nor does the franchisor undertake
to “strictly enforce” those standards to prevent the
acknowledged harm. Moreover, the courts in Kilday,
Costello, and Staten Island Rustproofing addressed
claims of breach of contract and breach of fiduciary
duty, which, as discussed infra, the Court does not
reach in evaluating defendant’s motion to dismiss.

8

intended site of the proposed or relocated
dealer.” (Id. § 462(15)(a).)

Lovells US LLP, 875 Third Avenue New
York, New York 10022.

Plaintiff’s complaint does not allege that
American Honda has established, intends to
establish, or has given any notice of the
creation of an additional authorized
dealership within six miles of plaintiff.
Plaintiff concedes that none exists “to the
best of [its] knowledge.” (Pl.’s Opp’n. at 15.)
The Court rejects plaintiff’s argument that an
allegation that American Honda created de
facto Honda dealership locations by
permitting other Honda Dealers in plaintiff’s
RMA to use “intermediaries” to sell vehicles
to customers located in plaintiff’s RMA is
sufficient to state a claim for violation of the
VTL; the statute on its face requires an
allegation of written notice, which plaintiff
has plainly failed to allege.
IV. CONCLUSION
For the foregoing reasons, defendant’s
motion to dismiss is denied with respect to
plaintiff’s claim for breach of the implied
covenant of good faith and fair dealing, and
granted in all other respects.
SO ORDERED.
______________________
JOSEPH F. BIANCO
United States District Judge
Dated: September 22, 2016
Central Islip, New York
* *
*
Plaintiff is represented by Steven Cohn and
Alan Scott Zigman, Law Office of Steven
Cohn, P.C., 1 Old Country Road Suite 420
Carle Place, New York 11514. Defendant is
represented by John J. Sullivan, Hogan
9