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Smith v. FCA U.S. LLC

United States District Court, D. Arizona

March 24, 2016

Alfonzo Smith, Plaintiff / Counter-Defendant,
v.
FCA U.S. LLC, Defendant / Counter-Plaintiff.

ORDER

Neil V. Wake United States District Judge.

TABLE OF CONTENTS

I. INTRODUCTION…………..……. 1

II. LEGAL STANDARD………….……..……. 1

III. MATERIAL FACTS………………...….... 2

A. Smith’s Relationship with Chrysler Before Arizona………………… 2

B. Smith’s Relationship with Chrysler in Arizona: Contracts and Policies….……….… 3

1. Contract between Chrysler and the Arizona dealership….……. 3
2. Contract between the Arizona dealership and Smith…….……. 4
3. Contract between Chrysler and Smith…….…… 5
4. Managerial policies………………………………….……. 6

C. Smith’s Relationship with Chrysler in Arizona: the Circumstances..… 6

D. Smith’s Response to Termination……………………….. 8

IV. ANALYSIS……………..…….….… ..... 8

A. Dealer or No Dealer……………….……….... 10

1. Determination of dealer status is not formalistic….……..…… 11
2. The touchstone inquiry here is whether Smith was deemed essential to the dealership’s operation…..… ..... 13
a. Smith applied for the dealership as an individual……... 14
b. Chrysler entered into the arrangement with the dealership in reliance on Smith’s role…………. 14
c. At termination, Smith was a long-time manager and majority shareholder…………….… 16
d. Without Smith, Chrysler’s arrangement with the dealership would have been illegal……….……….. 16

B. Duty of Good Faith Under the Federal Dealers’ Act…..………….… 17

C. Requirements Under the Arizona Statutes…………………………… 19

1. Notice and ensuing procedural rights………………….… 19
2. Chrysler’s ownership interest in the dealership……………..… 19

D. Common-Law Duty of Good Faith and Fair Dealing………….….… 21

E. Declaratory Judgment…………………..…. 22

Before the Court are Plaintiff’s Motion for Summary Judgment on Liability (Doc. 165), Defendant’s Motion for Summary Judgment (Doc. 134), and the parties’ accompanying statements of facts and briefs.[1] For the reasons that follow, Plaintiff’s motion will be granted in part and denied in part, and Defendant’s motion will be denied.

I. INTRODUCTION

In 2002, Alfonzo Smith became general manager and part owner of a Chrysler-brand dealership. Chrysler owned the rest of the dealership’s stock. Smith and Chrysler agreed that Smith would gradually purchase the remaining stock from Chrysler, so that he could become the dealership’s full owner. Chrysler retained all voting rights in the dealership until Smith purchased all the stock.

In 2012, Chrysler terminated Smith’s involvement in the dealership. Smith had acquired most, but not all, of the dealership’s stock.

Smith claims Chrysler’s termination violated the common-law duty of good faith and fair dealing as well as federal and state statutes protecting automobile dealers.[2]Chrysler claims there was no bad faith and that the statutes protecting automobile dealers do not apply to Smith. Both parties seek summary judgment.

II. LEGAL STANDARD

A motion for summary judgment tests whether the opposing party has sufficient evidence to merit a trial. Summary judgment should be granted if the evidence reveals no genuine dispute about any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a). A material fact is one that might affect the outcome of the suit under the governing law, and a factual dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).

The movant has the burden of showing the absence of genuine disputes of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). However, once the movant shows an absence of evidence to support the nonmoving party’s case, the burden shifts to the party resisting the motion. The party opposing summary judgment must then “set forth specific facts showing that there is a genuine issue for trial” and may not rest upon the pleadings. Anderson, 477 U.S. at 256. To carry this burden, the nonmoving party must do more than simply show there is “some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986).

In deciding a motion for summary judgment, the Court must view the evidence in the light most favorable to the nonmoving party, must not weigh the evidence or assess its credibility, and must draw all justifiable inferences in favor of the nonmoving party. Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477 U.S. at 255. Where the record, taken as a whole, could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial. Matsushita, 475 U.S. at 587.

III. MATERIAL FACTS

The following facts are drawn from Plaintiff’s Statement of Facts and exhibits (Doc. 166), Defendant’s Statement of Facts and exhibits (Docs. 135, 150, 151, 152), and the parties’ pleadings (Docs. 19, 48, 50.). The facts are undisputed except where otherwise noted.

A. Smith’s Relationship with Chrysler Before Arizona

In 1981, Smith acquired a Chrysler-brand dealership in Virginia. (Doc. 135 at ¶ 9.) He paid for the acquisition himself, after borrowing money and selling personal assets. (Id. at ¶ 10.) He was the dealership’s sole owner. (Id. at ¶ 13.)

In 1984 or 1985, Smith decided he wanted a larger Chrysler-brand dealership in Virginia. (Id. at ¶¶ 14-15.) Rather than pay for the acquisition himself, he used Chrysler’s “Marketing Investment” program. (Id. at ¶¶ 16-17.) Under the program, Smith contributed 25% of the required capital, while Chrysler contributed the remaining 75%. (Id. at ¶ 18.) Smith acquired common stock in the dealership, and Chrysler controlled the voting stock. (Id. at ¶¶ 21-22.)

B. Smith’s Relationship with Chrysler in Arizona: Contracts and Policies

In 2002, Smith took advantage of the Marketing Investment program again, this time in an effort to acquire a Chrysler-brand dealership in Arizona named Superstition Springs Chrysler Jeep Inc. (“the ...


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