Filed 11/26/13 

CERTIFIED FOR PUBLICATION 

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA 

SECOND APPELLATE DISTRICT 

DIVISION SIX 

POWERHOUSE MOTORSPORTS 

GROUP, INC., et al., 

 Plaintiffs and Appellants, 

v. 

YAMAHA MOTOR CORPORATION, 

U.S.A., 

 Defendant and Appellant. 

2d Civil No. B236705 

(Super. Ct. No. CV098090) 

(San Luis Obispo County) 

 For over a decade, Powerhouse Motorsports Group, Inc. (Powerhouse) 

operated a successful retail motorcycle dealership under a dealer/franchise agreement 

(Franchise Agreement) with Yamaha Motor Corporation (Yamaha). In 2008, 

Powerhouse suffered a reversal of fortune and its owner Timothy Pilg closed the 

dealership in June of that year. With the apparent agreement and support of Yamaha, 

Pilg entered negotiations to sell the dealership and franchise to MDK Motorsports 

(MDK). 

 Without informing either Pilg or MDK and contrary to its stated position, 

Yamaha initiated procedures to terminate the Franchise Agreement pursuant to Vehicle 

Code section 3060.1 Before Yamaha served Powerhouse with statutory notice of the 

termination, Powerhouse notified Yamaha it had reached an agreement to sell the 

dealership and franchise to MDK and asked Yamaha to approve the sale. Powerhouse 

 

1 All statutory references are to the Vehicle Code, unless otherwise noted. 
2 

filed a protest to the notice of termination (§ 3060, subd. (b)(2)), and the New Motor 

Vehicle Board (the Board) subsequently granted Yamaha's motion to dismiss the protest 

as untimely. The Franchise Agreement was accordingly terminated, which led MDK to 

cancel its purchase of Powerhouse. 

 Powerhouse and Pilg2 then filed this lawsuit alleging that Yamaha 

unreasonably withheld its consent to the sale of the dealership and franchise in violation 

of section 11713.3. The complaint also includes common law claims for breach of 

contract, intentional interference with contractual relations, and breach of the implied 

covenant of good faith and fair dealing. Powerhouse prevailed in a jury trial and 

recovered a total of $1,336,080 in compensatory and punitive damages. Yamaha appeals, 

contending that the Franchise Agreement was terminated by virtue of the section 3060 

procedure and that such termination precludes Powerhouse from recovery on any of its 

claims. Yamaha also claims the compensatory damages are excessive, the punitive 

damages are improper, and that attorney fees were erroneously awarded. Powerhouse 

cross-appeals, contending the court erred in granting nonsuit on Pilg's section 11713.3 

claim, and in failing to award the attorney fees it incurred in the administrative 

proceedings before the Board and Powerhouse's subsequent request for writ relief from 

the Board's decision. 

 We conclude that Powerhouse's right to seek and recover damages for 

Yamaha's unreasonable refusal to approve the sale of Powerhouse's dealership and 

franchise is not affected by Powerhouse's failure to comply with the section 3060 

procedure for challenging Yamaha's termination of the Franchise Agreement (§§ 3050, 

subd. (e), 11713.3, subd. (d)(1)), nor by the Board's decision regarding the timeliness of 

Powerhouse's protest to the notice of termination. We further conclude that the jury's 

verdict is supported by substantial evidence and that the parties' remaining claims lack 

merit. Accordingly, we affirm the judgment. 

FACTS AND PROCEDURAL HISTORY 

 2 For convenience, we will refer to Powerhouse and Pilg collectively as 

Powerhouse unless otherwise specified. 
3 

 For several years, Timothy Pilg operated a motorcycle and sport vehicle 

dealership under the Powerhouse name. In 1998, Pilg became a franchisee of Yamaha. 

The dealership grew and Powerhouse was incorporated in 2007. After incorporation 

Powerhouse entered into a new Franchise Agreement with Yamaha. Business, however, 

declined and Powerhouse closed its dealership on or about June 16, 2008. It never 

reopened. 

 After closing the dealership, Powerhouse began negotiations for the sale of 

the closed dealership, including the Yamaha franchise, to MDK. On June 19, 2008, Pilg 

contacted Rod Stout, a Yamaha division manager, and asked if Powerhouse could sell the 

franchise even though it had closed. Stout told Pilg that such a sale was possible. 

 On June 21, 2008, Powerhouse reached a verbal agreement with MDK for 

the sale of its assets and, on June 25, Powerhouse and MDK signed a written "term sheet" 

for the sale.3 MDK was an existing and approved Yamaha franchisee operating at 

another location. On June 27, 2008, Pilg informed Luke Dawson, a Yamaha district 

manager, of the terms of the sale. When he informed Regional Sales Manager Rocky 

Aiello of the sale, Dawson obtained information regarding MDK and Yamaha began the 

process of approving MDK as a new franchisee. Stout informed Powerhouse that it 

remained a Yamaha dealer and that Yamaha would consider an application from MDK to 

transfer the franchise to MDK. 

 On July 10, 2008, Powerhouse, Yamaha and MDK representatives attended 

a meeting to discuss and expedite the sale. Dawson was Yamaha's representative. Pilg 

and the CEO of MDK attended the meeting along with other Powerhouse and MDK 

personnel. Dawson represented that he would expedite Yamaha's review and approval of 

the sale and transfer of the franchise. The possibility of entering into an agreement under 

which Powerhouse would reopen its dealership was discussed but not acted upon. 

 3 Technically, the Powerhouse franchise would not be "sold" to MDK. Instead, 

Yamaha would issue a new franchise directly to MDK upon Yamaha's required approval 

of the transaction. As have the parties in their briefs, we will use the term "sale" in this 

opinion. 
4 

 On July 18, 2008, Yamaha manager Stout stated that Yamaha would 

expedite the paperwork and that an interim reopening of the Powerhouse dealership was 

not necessary because MDK was an existing Yamaha franchisee in another location. On 

the same day, Powerhouse and MDK executed a formal agreement for the sale of the 

dealership to MDK. 

 At the same time as these negotiations were ongoing, and unbeknownst to 

Powerhouse or MDK, Yamaha began the section 3060 procedure for terminating the 

Franchise Agreement. The Franchise Agreement gives Yamaha the right to terminate if 

Powerhouse closed its operations for a period of seven consecutive days. (See also 

§ 3060, subd. (a)(1)(B)(v).) On July 11, 2008, when Powerhouse had been closed for 

almost a month, Rocky Aiello signed an internal dealer cancellation request which was 

followed by a notice of termination of the Franchise Agreement as required by section 

3060. The notice was misaddressed and not received by Powerhouse. Another notice of 

termination was sent on July 24, 2008, after the finalization of the Powerhouse/MDK sale 

agreement. Powerhouse received this notice on July 26, 2008. 

 The notice of termination complied with the requirements of section 3060. 

The notice triggered a statutory obligation on the part of Powerhouse to file a protest with 

the Board, a state agency created to enforce the Vehicle Code provisions. Section 3060, 

subdivision (b)(2) provides that, upon a timely protest by a dealer, a franchise may not be 

terminated without the approval of the Board. 

 On July 28, 2008, Pilg telephoned Richard Tilly, Yamaha's Senior Legal 

Counsel, regarding the notice of termination. Tilly was not aware of the pending sale to 

MDK and declined to discuss the termination notice. Tilly advised Pilg to contact an 

attorney. Tilly followed up with a letter to Powerhouse stating that Yamaha was not 

withdrawing or delaying the effectiveness of its notice of termination. Pilg e-mailed 

Dawson for an explanation but received no reply. Aiello was aware that Pilg did not 

understand the effect of the notice of termination and was seeking information from 

Yamaha. 
5 

 MDK sent its franchise application package to Yamaha on August 5, 2008. 

The package was forwarded to Aiello and other Yamaha executives for review, but was 

never fully processed. On August 8, 2008, Yamaha attorney Tilly wrote to Pilg stating 

that submission of the Powerhouse/MDK agreement did not prevent application of the 

termination notice, and informed Pilg that the Franchise Agreement would terminate on 

August 9, 2008, because Powerhouse had failed to file a timely section 3060 protest. 

 Powerhouse filed a late protest to the notice of termination on August 15. 

Yamaha moved to dismiss the protest as untimely. The Board conducted a hearing on 

Yamaha's motion to dismiss and granted the motion, finding that the protest was 

untimely. The opinion of the administrative law judge recited the facts concerning the 

closure of the Powerhouse dealership, the sale of the dealership to MDK, and the conduct 

of Yamaha during the negotiation of the sale. The opinion concluded that Yamaha had 

the burden of establishing it had a good faith belief that Powerhouse had gone out of 

business, and that Powerhouse would not reopen the business even if the dealership were 

sold to MDK. The Board also found that Powerhouse had not established Yamaha 

should be barred on "estoppel" principles from challenging the timeliness of 

Powerhouse's protest. 

 As a consequence of the Board's ruling, MDK cancelled its purchase of 

Powerhouse and Powerhouse was liquidated. Pilg filed for bankruptcy in October 2009 

and the trustee in bankruptcy, Jerry Namba, assumed control over the instant litigation. 

 Powerhouse filed its lawsuit against Yamaha in March 2009. Its operative 

complaint alleges four causes of action by Powerhouse against Yamaha: a violation of 

section 11713.34 (unreasonable withholding of consent to sale of franchise), intentional 

interference with contractual relations, intentional interference with prospective business 

advantage, and breach of contract and the covenant of good faith. It also alleges three 

causes of action by Pilg against Yamaha: violation of section 11713.3, interference with 

prospective business advantage, and intentional interference with contractual relations. 

 

4 See footnote 5, infra. 
6 

Powerhouse also petitioned for a writ of mandate to overturn the Board's decision on the 

timeliness of Powerhouse's protest. 

 The trial court denied the writ of mandate on July 2, 2010. The court found 

Pilg knew that closure of Powerhouse could lead to termination of his franchise, and that 

Powerhouse failed to establish that Yamaha had misled Powerhouse with respect to its 

need to protest Yamaha's notice of termination. 

 After the denial of Yamaha's motion for summary judgment, the case was 

tried by a jury in June 2011. During trial, the trial court granted Yamaha's motion for 

nonsuit on Pilg's section 11713.3 claim. 

 The jury found Yamaha liable on all remaining claims. The jury awarded 

Powerhouse $811,000 in compensatory damages and $140,000 in punitive damages, and 

awarded Pilg $325,080 in compensatory damages and $60,000 in punitive damages. The 

court awarded Powerhouse attorney fees with respect to the section 11713.3 claim but 

denied fees with respect to the administrative proceeding before the Board and 

Powerhouse's request for writ relief from the Board's decision. 

 Yamaha filed motions for a new trial and judgment notwithstanding the 

verdict. After both motions were denied, the parties filed timely notices of appeal and 

cross-appeal. 

DISCUSSION 

Standard of Review 

 Yamaha's principal contention is that the Franchise Agreement was 

terminated as a matter of law due to the closure of the Powerhouse dealership and 

Powerhouse's failure to file a timely protest pursuant to section 3060. We exercise our 

independent judgment in the review of pure questions of law, such as the interpretation of 

statutes, and application of a statute to undisputed facts. (Phillips, Spallas & Angstadt, 

LLP v. Fotouhi (2011) 197 Cal.App.4th 1132, 1138; Kavanaugh v. West Sonoma County 

Union High School Dist. (2003) 29 Cal.4th 911, 916.) 

 To the extent Yamaha challenges the jury verdict on evidentiary grounds, 

we review the judgment under the substantial evidence standard. (Tesoro Del Valle 
7 

Master Homeowners Assn. v. Griffin (2011) 200 Cal.App.4th 619, 634.) We view the 

evidence in the light most favorable to the prevailing party, and resolve all conflicts in the 

evidence in favor of the judgment. (Ibid.) The jury has the power to give whatever 

weight it chooses to the evidence and we will not reweigh the evidence or redetermine 

credibility. (Ibid.; San Diego Metropolitan Transit Development Bd. v. Cushman (1997) 

53 Cal.App.4th 918, 931.) 

The Board's Decision Does Not Preclude Powerhouse's Claims 

 As stated, Yamaha contends the Franchise Agreement was terminated 

through the section 3060 protest procedure and that the termination and the Board's ruling 

preclude all Powerhouse and Pilg claims as a matter of law. Yamaha argues that its 

termination of the Franchise Agreement left Powerhouse with nothing to sell and Yamaha 

with nothing to approve. We conclude, as did the trial court, that the Board's decision 

regarding the timeliness of Powerhouse's section 3060 protest did not terminate the 

franchise as a matter of law and Yamaha remained bound by the mandate of section 

11713.3 subdivision (d)(1) to act reasonably in considering the Powerhouse/MDK sale. 

 Section 3000 et seq. and section 11700 et seq. establish a statutory scheme 

regulating the franchise relationship between vehicle manufacturers and distributors, and 

their dealers. (Tovas v. American Honda Motor Co. (1997) 57 Cal.App.4th 506, 512.) 

The purpose of this scheme is "to avoid undue control of the independent new motor 

vehicle dealer by the vehicle manufacturer or distributor and to insure that dealers fulfill 

their obligations under their franchises and provide adequate and sufficient service to 

consumers generally." (See Historical and Statutory Notes, 65B West's Ann. Veh. Code 

(2000 ed.) foll. § 3000, p. 371; Tovas, at pp. 512-513.) The United States Supreme Court 

has recognized that the "disparity in bargaining power between automobile manufacturers 

and their dealers prompted Congress and some 25 States to enact legislation to protect 

retail car dealers from perceived abusive and oppressive acts by the manufacturers." 

(New Motor Vehicle Bd. v. Orrin W. Fox Co. (1978) 439 U.S. 96, 100-101, fns. omitted.) 

 In regulating the relationship between manufacturers and distributors, 

section 11713.3 sets forth a list of unlawful acts, enables the Board to resolve certain 
8 

disputes, and allows licensees to sue for damages. (See Mazda Motor of America, Inc. v. 

New Motor Vehicle Bd. (2003) 110 Cal.App.4th 1451, 1458.) It provides, inter alia, that 

it is unlawful for a manufacturer or distributor "to prevent or require, or attempt to 

prevent or require" any dealer from selling or otherwise transferring its interest in a 

dealership franchise to another person. (§ 11713.3, subd. (d)(1).)5 It further provides 

that a manufacturer or distributor may require its approval of a franchise sale but such 

approval "shall not be unreasonably withheld." (Ibid.) It is also unlawful for a 

manufacturer or distributor "[t]o prevent, or attempt to prevent, a dealer from receiving 

fair and reasonable compensation for the value of the franchised business." (Id. at subd. 

(e).) 

 Section 3050 gives the Board various "duties," and empowers the Board to 

"[c]onsider any matter concerning the activities or practices" of new motor vehicle 

manufacturers, distributors and dealers. (At subd. (c).) Under section 3050, subdivision 

(d), the Board has the power to "[h]ear and decide, within the limitations and in 

accordance with the procedure provided, a protest presented by a franchisee" pursuant to 

section 3060. Section 3060 provides that "no franchisor shall terminate or refuse to 

continue any existing franchise" unless certain conditions are met, and gives a franchisee 

the right to file a protest with the Board regarding termination. (At subd. (a)(1).) When a 

timely protest is filed, the franchise may not be terminated until the board makes its 

findings. (Id. at subd. (a)(2); Tovas v. American Honda Motor Co., supra, 57 

Cal.App.4th at pp. 512-516.) 

 Although certain portions of sections 3050 and 3060 appear to give the 

Board broad authority to resolve distributor-dealer disputes, a series of appellate 

decisions have limited its power. (Miller v. Superior Court (1996) 50 Cal.App.4th 1665, 

 5 Section 11713.3, subdivision (d)(1) provides in its entirety that it is unlawful for 

any manufacturer or distributor: "Except as provided in subdivision (t), to prevent or 

require, or attempt to prevent or require, by contract or otherwise, any dealer, or an 

officer, partner, or stockholder of a dealership, the sale or transfer of a part of the interest 

of any of them to another person. A dealer, officer, partner, or stockholder shall not, 

however, have the right to sell, transfer, or assign the franchise, or any right thereunder, 

without the consent of the manufacturer or distributor except that the consent shall not be 

unreasonably withheld." 
9 

1675; Hardin Oldsmobile v. New Motor Vehicle Bd. (1997) 52 Cal.App.4th 585, 590 

(Hardin); Mazda Motor of America, Inc. v. New Motor Vehicle Bd., supra, 110 

Cal.App.4th at p. 1457.) Specifically, language in section 3050, subdivision (c), giving 

the Board authority to "[c]onsider any matter concerning the activities or practices" 

(italics added) of a licensee, has been limited to authority to investigate, regulate 

licensing, and resolve disputes between the public and licensees. (Hardin, at p. 590; 

Mazda Motor of America, at p. 1457.) The delegation of greater powers to the Board 

would violate the judicial powers clause of the California Constitution. (Hardin, at p. 

598; Mazda Motor of America, at p. 1457.) 

 In addition, section 3050 was amended in 1997 to add subdivision (e), 

which expressly provides that "[n]otwithstanding subdivisions (c) and (d), the courts have 

jurisdiction over all common law and statutory claims originally cognizable in the courts" 

and "a party may initiate an action directly in any court of competent jurisdiction." This 

amendment preserves the right of dealers and other licensees to file a civil action for all 

common law and statutory claims. (See Tovas v. American Honda Motor Co., supra, 57 

Cal.App.4th at p. 519; DaimlerChrysler Motors Co. v. Lew Williams, Inc. (2006) 142 

Cal.App.4th 344, 352-353.) 

 Yamaha acknowledges limitations on the Board's jurisdiction and concedes 

that a dealer such as Powerhouse may file a civil action asserting statutory and common 

law claims without exhausting administrative remedies, and without filing a protest with 

the Board. Yamaha further concedes that the Board did not have jurisdiction over 

Powerhouse's section 11713.3 statutory claim or its common law claims. 

 Yamaha argues, however, that the Board retains jurisdiction over a section 

3060 protest under section 3050, subdivision (d), and that a dealer must file a timely 

section 3060 protest in order to prevent termination of its franchise and the loss of its 

right to assert other statutory and common law claims in a civil action. In substance, 

Yamaha argues that section 3060 trumps all judicial and statutory limitations on the 

Board's authority and takes precedence over such limitations. 
10 

 We agree that the Board retains jurisdiction to decide the timeliness of a 

dealer protest, but such a determination does not preempt or limit a dealers' section 

11713.3 and common law rights. The Board appears to agree with us. In this case, the 

Board determined that the Powerhouse protest was late but did not assert jurisdiction to 

adjudicate Powerhouse's claims under section 11713.3 and general contract law. While 

section 3060 provides an expeditious method for terminating a franchise under certain 

circumstances, it does not preclude a civil action when the facts show unreasonable 

conduct by the franchisor in violation of other statutes and general contract law. Section 

3050, subdivision (e) provides that "[n]otwithstanding subdivisions (c) and (d), the courts 

have jurisdiction over all common law and statutory claims . . . ." (Italics added.) 

 The Hardin case provides a cogent and persuasive analysis of the pertinent 

issue prior to the enactment of section 3050, subdivision (e). Hardin addressed the 

earlier case of Yamaha Motor Corp. v. Superior Court (1986) 185 Cal.App.3d 1232, in 

which a Yamaha dealer filed a complaint for common law claims similar to those alleged 

by Powerhouse. In rejecting Yamaha Motor Corp.'s holding that the Board had 

jurisdiction over the dispute, the court in Hardin reasoned: "That a litigant must exhaust 

administrative remedies before seeking relief in the courts does not bestow upon the 

administrative agency the jurisdiction to consider and resolve all common law and 

statutory remedies. Prior resort to the administrative agency does not take away from the 

litigant the right to allege and prove claims not under the jurisdiction of the agency and 

does not expand the jurisdiction of the agency to hear and consider those claims." 

(Hardin, supra, 52 Cal.App.4th at p. 593.) 

 The Hardin court concluded that the Board's jurisdiction under section 

3050, subdivision (d), allowed the Board to hear and consider protests only "within the 

limitations and in accordance with the procedure provided" in section 3060. (Hardin, 

supra, 52 Cal.App.4th at p. 593.) The court reasoned that this statutory limitation did not 

give the Board jurisdiction to consider common law or statutory claims merely because 

some facts forming the foundation for such claims can be asserted as part of a statutory 

protest claim under section 3060. (Id. at pp. 593-594.) 
11 

 We also find unpersuasive Yamaha's argument that the Board's decision 

rejecting Powerhouse's claim is entitled to substantial deference. The authority of the 

Board to consider similar arguments does not expand its constitutional jurisdiction. Also, 

the degree of "respect" accorded the agency's interpretation depends on the 

circumstances. An administrative agency's interpretation of a statute is entitled to 

significant deference only if "'. . . the agency has expertise and technical knowledge, 

especially where the legal text to be interpreted is technical, obscure, complex, openended, or entwined with issues of fact, policy, and discretion. . . .'" (Yamaha Corp. of 

America v. State Bd. of Equalization (1998) 19 Cal.4th 1, 7, 12.) Here, the ruling did not 

require technical knowledge and was not obscure, complex or entwined with other issues. 

 Yamaha relies on Sonoma Subaru, Inc. v. New Motor Vehicle Bd. (1987) 

189 Cal.App.3d 13 for the proposition that a notice of termination must be treated as final 

and effective when a timely protest is not filed by the dealer. In Sonoma Subaru, the 

court refused to incorporate a "good cause" exception to the section 3060 time deadline 

because it would frustrate the intent of the Legislature. (Id. at pp. 20-22.) Nothing in the 

opinion, however, supports the conclusion that the expedited protest procedure set forth 

in section 3060 gives the Board authority to resolve common law and statutory claims 

involving a substantive dispute between a franchisor and franchisee. As Hardin clearly 

states, "The jurisdiction of the New Motor Vehicle Board [ ] has limits." (Hardin, supra, 

52 Cal.App.4th at p. 587.) Jurisdiction to resolve such disputes is with "any court of 

competent jurisdiction." (§ 3050, subd. (e).) 

Substantial Evidence Supports the Jury's Factual Findings 

 Substantial evidence supports the jury's factual findings that Yamaha 

unreasonably withheld its consent to Powerhouse's sale of the Franchise Agreement to 

MDK. Substantial evidence shows that Yamaha repeatedly informed Powerhouse that a 

sale could be approved despite the section 3060 proceedings, but refused to consider 

approval of the MDK sale despite a prior franchisor-franchisee relationship between 

Yamaha and MDK and the submission of substantial documentation supporting approval 

of the sale. In fact, Yamaha does not offer substantial argument to the contrary and, 
12 

instead, relies on its position that the Franchise Agreement was terminated in its entirety 

when Powerhouse failed to file a timely protest under section 3060. 

No Instructional Error 

 Yamaha argues that it is entitled to a new trial because the trial court failed 

to instruct the jury on the effect of Powerhouse's failure to file a timely protest of 

Yamaha's notice of termination. We disagree. 

 Upon request, a trial court must give the jury correct, nonargumentative 

instructions on every theory of the case supported by substantial evidence. (Soule v. 

General Motors Corp. (1994) 8 Cal.4th 548, 572.) "Instructions should state rules of law 

in general terms and should not be calculated to amount to an argument to the jury in the 

guise of a statement of law. [Citations.] Moreover, it is error to give, and proper to 

refuse, instructions that unduly overemphasize issues, theories or defenses either by 

repetition or singling them out or making them unduly prominent although the instruction 

may be a legal proposition. [Citations.]" (Fibreboard Paper Products Corp. v. East Bay 

Union of Machinists (1964) 227 Cal.App.2d 675, 718.) 

 Yamaha's proposed jury instruction began with a summary of the section 

3060 notice of termination and protest procedure but continued by stating: "Yamaha is 

allowed to end its relationship with [a] dealer after it receives the Notice of Termination, 

if the dealer fails to file a timely protest with the Board. . . . [¶] Plaintiffs failed to file a 

timely protest with the Board . . . and Plaintiffs' Yamaha Dealer Agreement was 

terminated at that time." The trial court concluded that this language was not neutral, and 

gave an instruction regarding the section 3060 procedure without language stating that 

the Franchise Agreement "was terminated" when Powerhouse failed to file a timely 

protest. We agree with the trial court that Yamaha's proposed instruction was 

argumentative and that the instruction actually given fully and adequately instructed the 
13 

jury on the relevant law.6 (See Major v. Western Home Ins. Co. (2009) 169 Cal.App.4th 

1197, 1217.) 

Contract Claim Not Barred by Material Breach by Powerhouse 

 Yamaha contends the closure of the Powerhouse dealership constituted a 

material breach of the Franchise Agreement that barred Powerhouse's claim for breach of 

contract and the implied covenant of good faith and fair dealing. We disagree. 

 The law implies in every contract a covenant of good faith and fair dealing 

providing that no party to the contract will do anything that would deprive another party 

of the benefits of the contract. (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713, 

720.) The covenant cannot impose duties beyond the express terms of the contract, but, 

when a contract gives one party a discretionary power affecting the rights of the other, 

that party must exercise its discretion in good faith and in accordance with fair dealing. 

(Peak-Las Positas Partners v. Bollag (2009) 172 Cal.App.4th 101, 106.) 

 The closure of the Powerhouse dealership is specified in the Franchise 

Agreement as a ground for termination, but section 11713.3 prohibits Yamaha from 

taking action to prevent Powerhouse from selling its franchise and imposes a duty on 

Yamaha to act reasonably in connection with a sale. Here, substantial evidence supports 

the jury's finding that Yamaha acted in bad faith by encouraging Powerhouse to complete 

a sale to MDK, representing that it would consider the sale even if consummated after the 

 6 The jury was instructed: "When a distributor wishes to terminate a dealer 

agreement (aka franchise) it is required by law to give a Termination Notice that 

conforms to Vehicle Code section 3060. 

"The first page of the written notice shall contain the following statement: 

'NOTICE TO DEALER: You have the right to file a protest with the NEW 

MOTOR VEHICLE BOARD in Sacramento and have a hearing in which you may 

protest the termination of your franchise under provisions of the California Vehicle Code. 

You must file your protest with the board within 10 calendar days after receiving this 

notice or within 10 days after the end of any appeal procedure provided by the franchisor 

or your protest right will be waived.' 

"A dealer wishing to challenge the franchise termination has the right to have the 

propriety of the termination reviewed by the New Motor Vehicle Board. In order to 

obtain review by the New Motor Vehicle Board the dealer must file a protest with the 

New Motor Vehicle Board within the time period for a protest stated in the Termination 

Notice. In this case that period was 10 days." 
14 

closure of Powerhouse's dealership, and informing Powerhouse that a reopening of its 

dealership was not required to obtain Yamaha's approval. 

Intentional Interference with Contractual Relations 

 Citing Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 

Cal.4th 503 (Applied Equipment), Yamaha contends that it cannot be sued for 

interference with the proposed Powerhouse/MDK contract because it was not a "stranger" 

to that contract. Yamaha argues that the claim is barred because Yamaha had a legitimate 

interest in the contract based on its right to approve a successor dealer and as the 

distributor of Yamaha products to a new franchisee. We disagree. 

 The tort of intentional interference with contractual relations requires (i) a 

contractual relationship between a plaintiff and a third party, (ii) defendant's knowledge 

of the contract, (iii) defendant's intent to disrupt performance of the contract, and (iv) 

conduct by defendant preventing performance of the contract. (CACI No. 2201; Pacific 

Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.) In Applied 

Equipment, our Supreme Court held that "the tort cause of action for interference with a 

contract does not lie against a party to the contract." (Applied Equipment, supra, 7 

Cal.4th at p. 514.) But, the court also stated that the duty not to interfere with the 

contract "falls only on strangers-interlopers who have no legitimate interest in the scope 

or course of the contract's performance." (Ibid.) Yamaha argues that Applied Equipment 

should be extended to include nonparties such as Yamaha who have a "legitimate interest 

in the scope or course of the contract's performance." 

 In Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal.App.4th 344, the 

court acknowledged this broader language in Applied Equipment, but declined to extend 

the holding of that case which excluded only parties to the contract from asserting an 

intentional interference claim. Woods stated that Applied Equipment used the term 

"stranger to a contract" "interchangeably with the terms 'noncontracting parties' . . . and 

'third parties.'" (Id. at p. 353.) Applied Equipment never "considered the potential 

liability of noncontracting parties who had some general economic interest or other stake 
15 

in the contract." (Id. at p. 352.) No published California case has disagreed with Woods

or expanded the scope of Applied Equipment.7

 We also decline to extend the holding of Applied Equipment. The evidence 

shows that Yamaha was the distributor and that Yamaha would supply new motor 

vehicles to any successor dealer at prices and terms determined by Yamaha and the 

dealer. There is no evidence that Yamaha had any right to determine the vehicles sent to 

the dealer, approve or disapprove any business practice of the dealer, assume any 

financial obligations to the dealer, or otherwise review any part of the dealer's operations. 

Nor did Yamaha have any rights to determine the terms or conditions of the 

Powerhouse/MDK contract apart from approval of the sale and review of MDK's 

financial stability as a Yamaha dealer. 

No Error in Award of Compensatory Damages 

 Yamaha contends that a portion of the compensatory damage award 

included a loss Powerhouse did not incur. Yamaha argues that the damages awarded 

were based on the full amount Powerhouse would have received under its agreement with 

MDK, but that there was no evidence that Powerhouse made any effort to mitigate its 

damages by selling its inventory after the MDK sale was aborted. 

 We agree with Yamaha that a plaintiff cannot be compensated for damages 

that were not incurred or could have been mitigated by reasonable effort or expenditures. 

(Lu v. Grewal (2005) 130 Cal.App.4th 841, 849-850.) Whether a plaintiff acted 

reasonably to mitigate damages, however, is a factual matter to be determined by the trier 

of fact, and is reviewed under the substantial evidence test. (Green v. Smith (1968) 261 

Cal.App.2d 392, 397.) The burden of proving a plaintiff failed to mitigate damages, 

 7 We acknowledge that a federal district court case dealing with facts similar to 

the instant case supports Yamaha's position to some extent. In Fresno Motors, LLC v. 

Mercedes-Benz USA, LLC (E.D. Cal. 2012) 852 F.Supp.2d 1280, a new car dealer sued 

Mercedes Benz for tortious interference with the dealer's contractual relationship with a 

prospective purchaser of the dealership. We conclude that Fresno Motors is inapposite 

and relies, not on California precedent, but rather a Ninth Circuit case that did not rely on 

or cite Applied Equipment and did not concern the immunity of a noncontractual party 

from a claim of intentional interference with contract relations. (Marin Tug & Barge, 

Inc. v. Westport Petroleum, Inc. (9th Cir. 2001) 271 F.3d 825, 832-834.) 
16 

however, is on the defendant, not the other way around. (Lu, supra, at pp. 849-850; 

Millikan v. American Spectrum Real Estate Services California, Inc. (2004) 117 

Cal.App.4th 1094, 1105; Jackson v. Yarbray (2009) 179 Cal.App.4th 75, 97.) 

 Yamaha's argument that Powerhouse failed to mitigate damages ignores its 

burden of proof and the standard for review. The jury was properly instructed on 

Powerhouse's duty to mitigate its damages. Yamaha fails to demonstrate that in awarding 

compensatory damages the jury did not take into account the efforts of Powerhouse to 

mitigate damages. 

No Error in Award of Punitive Damages 

 Yamaha contends that the $200,000 award of punitive damages to 

Powerhouse and Pilg was improper because punitive damages cannot be recovered for 

breach of contract, and because there is insufficient evidence to support the award. We 

disagree. 

 Civil Code section 3294, subdivision (a) permits an award of punitive 

damages "for the breach of an obligation not arising from contract, where it is proven by 

clear and convincing evidence that the defendant has been guilty of oppression, fraud, or 

malice." Civil Code section 3294, subdivision (b), provides that a corporate employer is 

not liable for punitive damages based upon the acts of its employees unless the acts were 

committed, authorized, or ratified by a corporate officer, director, or managing agent. 

 As with compensatory damages, we review an award of punitive damages 

under the substantial evidence test. (County of San Bernardino v. Walsh (2007) 158 

Cal.App.4th 533, 545; Kelly v. Haag (2006) 145 Cal.App.4th 910, 916.) We consider the 

evidence in the light most favorable to the prevailing party, giving that party the benefit 

of every reasonable inference, and resolve evidentiary conflicts in support of the 

judgment. (Shade Foods, Inc. v. Innovative Products Sales & Marketing, Inc. (2000) 78 

Cal.App.4th 847, 891.) 

 Yamaha argues that the punitive damage award was derived from Yamaha's 

conduct which was expressly permitted by the Franchise Agreement and section 3060. 
17 

We have previously addressed that issue at length and further note that Powerhouse's 

intentional interference and section 11713.3 claims are based on tort liability. 

 Yamaha also argues that the punitive damage award fails because there is 

no substantial evidence permitting the jury to find that Rocky Aiello, Yamaha regional 

manager, was a "managing agent" of Yamaha. Again, we disagree. 

 The term "managing agent" includes "only those corporate employees who 

exercise substantial independent authority and judgment in their corporate decisionmaking so that their decisions ultimately determine corporate policy." (White v. 

Ultramar, Inc. (1999) 21 Cal.4th 563, 566–567.) "[T]o demonstrate that an employee is a 

true managing agent . . . , a plaintiff seeking punitive damages would have to show that 

the employee exercised substantial discretionary authority over significant aspects of a 

corporation's business." (Id. at p. 577.) But, the determination of whether certain 

employees are managing agents "'. . . does not necessarily hinge on their "level" in the 

corporate hierarchy. Rather, the critical inquiry is the degree of discretion the employees 

possess in making decisions . . . .'" (Kelly–Zurian v. Wohl Shoe Co. (1994) 22 

Cal.App.4th 397, 421.) 

 Here, there was substantial evidence for a reasonable jury to conclude that 

Rocky Aiello was a "managing agent" of Yamaha for purposes of an award of punitive 

damages. The evidence established that Aiello was the "Regional Sales Manager for the 

Western Region" which included California and three other states. His region included 

between 140 and 240 dealerships. He managed a group of "district managers" and, as he 

testified, was "ultimately responsible for the total well-being of Yamaha Motor 

Corporation Dealers." Further, evidence shows that Aiello was directly involved in the 

Powerhouse/MDK sale and was responsible for the decision to terminate the dealership. 

No Error in Award of Attorney Fees 

 The trial court awarded Powerhouse attorney fees under section 11726 in 

the total amount of $533,350. Yamaha contends attorney fees were not recoverable 

because there is no evidence supporting a jury finding that Yamaha willfully failed to 

comply with the Vehicle Code as required by section 11726. We disagree. 
18 

 Section 11726 provides that "[a]ny licensee suffering pecuniary loss 

because of any willful failure by any other licensee to comply with" various provisions of 

the Vehicle Code including section 11713.3 "may recover damages and reasonable 

attorney fees therefor in any court of competent jurisdiction." Yamaha argues that there 

was no willful violation because it complied with the requirements of section 3060 in 

seeking to terminate the Franchise Agreement and reasonably believed that its conduct 

was not wrongful in any manner. 

 Although there are no published cases regarding an attorney fee award 

under section 11726, an appeal of an award of attorney fees is generally reviewed under 

the abuse of discretion standard. (See, e.g., Moran v. Oso Valley Greenbelt Assn. (2001) 

92 Cal.App.4th 156, 160.) We conclude that an award of attorney fees was authorized by 

section 11726 and there was no abuse of discretion by the trial court. As the trial court 

stated, "willful" conduct is defined as "intentional wrongful conduct, done either with a 

knowledge that serious injury to another will probably result, or with a wanton and 

reckless disregard of the possible results." (Calvillo-Silva v. Home Grocery (1998) 19 

Cal.4th 714, 735, fn. omitted, overruled on another ground in Aguilar v. Atlantic 

Richfield Co. (2001) 25 Cal.4th 826, 853, fn. 19.) As the trial court further concluded, 

willfulness was embodied in the jury's finding that Yamaha "intend[ed] to disrupt" 

performance of the Powerhouse/MDK agreement, and that Yamaha acted with "malice, 

oppression, or fraud." The evidence in this case supports the conclusion that Yamaha 

acted willfully with knowledge of its obligations under section 11713.3 and knowledge of 

the dire financial consequences of its actions. 

POWERHOUSE AND PILG CROSS-APPEAL 

No Error in Granting Nonsuit on Pilg's Section 11713.3 Claim 

 Pilg contends the trial court erred in granting Yamaha's motion for nonsuit 

on the fifth cause of action brought by Pilg for violation of section 11713.3. We 

disagree. 

 A defendant is entitled to a nonsuit when, as a matter of law, the evidence 

presented by the plaintiff is insufficient to allow a jury to find in plaintiff's favor. 
19 

(Saunders v. Taylor (1996) 42 Cal.App.4th 1538, 1541; see Code Civ. Proc., § 581c.) 

The trial court must interpret all of the evidence most favorably to the plaintiff's case and 

most strongly against the defendant, and must resolve all presumptions, inferences, 

conflicts and doubts in favor of the plaintiff. (Saunders, at p. 1541.) We review the 

court's ruling de novo, applying the same standard. (Lund v. Bally's Aerobic Plus, Inc.

(2000) 78 Cal.App.4th 733, 737.) 

 Section 11713.3, subdivision (d)(1) provides that it is unlawful for a 

manufacturer or distributor of new motor vehicles to prevent or attempt to prevent "a 

dealer, or an officer, partner, or stockholder of a dealership" to sell or transfer "a part of 

the interest of any of them to another person." The statute concerns the sale or transfer of 

an "interest" in a new motor vehicle dealership and, more specifically, the franchise to 

sell the vehicles of a particular manufacturer or distributor. Pilg was an officer and 

shareholder of Powerhouse, but Powerhouse owned the dealership and the Yamaha 

franchise. Pilg was not transferring any interest in the dealership or franchise, and the 

claims against Yamaha concerned Yamaha's interference in the sale of the Powerhouse 

franchise, not Pilg's interest as an officer and shareholder of Powerhouse. 

 The Powerhouse/MDK sale included the leasehold interest of Powerhouse 

in the building occupied by the Powerhouse dealership and, as owner of the building, Pilg 

was Powerhouse's lessor. Contrary to Pilg's assertion, his interest in the building did not 

constitute an "interest" in the Powerhouse dealership which was being sold to MDK. Pilg 

may have suffered economic detriment from Yamaha's action but the intent of section 

11713.3 is to protect new motor vehicle dealers against overreaching by manufacturers 

and distributors. It does not encompass every type of economic detriment. 

 Because we affirm the trial court's granting of nonsuit, we do not address 

the proper jury instruction regarding the causation element of Pilg's claim. 

No Error Regarding Award of Attorney Fees 

 The trial court awarded attorney fees to Powerhouse under section 11726 

for violation of section 11713.3, but denied attorney fees incurred in the protest 

proceeding before the Board and in bringing a writ of mandate to overturn the Board's 
20 

ruling. Powerhouse contends the trial court erred by not awarding fees for the Board 

proceeding. We disagree. 

 As previously stated, section 11726 permits recovery of attorney fees 

because of a "willful failure" by a licensee to comply with provisions of the Vehicle Code 

or any "decision rendered by the board." Here, the record shows that Yamaha fully 

complied with the statutory requirements of section 3060 regarding its notice of 

termination, including giving the required notice of Powerhouse's right to file a protest. 

Powerhouse did not file a protest within the statutory period. Powerhouse did not suffer a 

loss due to the willful failure of Yamaha to comply with section 3060 or any decision by 

the Board. Moreover, a licensee is entitled only to reasonable attorney fees under section 

11726. The trial court awarded attorney fees and there is no basis in the record to 

conclude the amount was not reasonable, or that the court abused its discretion. 

 The judgment is affirmed in all respects. Powerhouse is awarded costs on 

appeal. 

 CERTIFIED FOR PUBLICATION. 

 PERREN, J. 

We concur: 

 GILBERT, P. J. 

 YEGAN, J. 
21 

Martin J. Tangeman, Judge 

Superior Court County of San Luis Obispo 

______________________________ 

 Baker & Hostetler, Maurice Sanchez; Gibson, Dunn & Crutcher, Theodore 

J. Boutrous, Jr., Marjorie Ehrich Lewis, Blaine H. Evanson, Bradley J. Hamburger for 

Appellant Yamaha Motor Corporation, U.S.A. 

 Diane M. Matsinger; Andre, Morris & Buttery, Dennis D. Law, Collette A. 

Hillier for Appellants Powerhouse Motorsports Group, Inc., and Jerry Namba, as 

bankruptcy trustee, successor in interest to Timothy L. Pilg.