Opinion ID: 819854
Heading Depth: 3
Heading Rank: 2

Heading: Glassman’s Contract Argument

Text: The issue in this case is whether the 2010 Amendment requires Kia to give Glassman notice. Glassman contends that it does and has advanced both a contract argument and a statutory argument to support its position. We tackle first the contract argument and ultimately find that it fails. Glassman contends that the parties agreed to comply with subsequent changes to the Act, including the 2010 Amendment, when they stated that Kia could establish new dealers in Glassman’s Area of Primary Responsibility “[a]s permitted by applicable law.” As a preliminary matter, it is not at all clear that this provision is even relevant here. By its terms, it applies only when the new dealer would be located within Glassman’s Area of Primary Responsibility. “Area of Primary Responsibility” is solely a contractual term and is distinct from the statutory term “relevant market area.” Glassman has never explicitly asserted that the proposed new dealer would be within its Area of Primary Responsibility, and Kia has assured us that it will not. Additionally, when read in context, this phrase seems directed more toward reinforcing the nonexclusive nature of Glassman’s distribution rights than toward restricting Kia’s right to establish new dealers. No. 12-1202 Kia Motors America v. Glassman Page 6 Furthermore, although the parties have not agreed what state’s law governs their agreement,4 it is a generally accepted rule of construction that “changes in the law subsequent to the execution of a contract are not deemed to become part of [the] agreement unless its language clearly indicates such to have been [the] intention of [the] parties.” 11 Richard A. Lord, Williston on Contracts § 30:23 (4th ed. 1990); see also Rutherford Farmers Coop. v. MTD Consumer Grp., Inc., 124 F. App’x 918, 920 (6th Cir. 2005) (applying Tennessee law and quoting Williston). Contracting parties are free to agree that their rights and duties will track the law as it changes, but because the terms of their bargain could be significantly altered, they must make their intent to do so clear. “[A]pplicable law” could just as easily refer to the anti-encroachment statute in effect when the contract was signed as to the current anti-encroachment statute. Cf. Energy Reserves Grp., Inc. v. Kan. Power and Light Co., 459 U.S. 400, 416 (1983) (The parties agreed that “any contractual terms [were] subject to relevant present and future state and federal law.”) We find here no clear indication that by saying Kia could establish new dealers “[a]s permitted by applicable law” the parties intended to incorporate future changes in the law and thus interpret that phrase to refer to the law in effect when the contract was signed. Glassman’s argument that the Agreement as a whole controverts this interpretation is alluring but ultimately fails. Glassman points out that numerous provisions in the Agreement define the parties’ duties according to what the law requires. Two provisions in particular require Glassman to comply with applicable consumer-protection laws and applicable safety and emission-control laws. Kia agrees that these provisions require Glassman to comply with current laws, not just the laws in effect when the Agreement was signed. Therefore, argues Glassman, the Agreement should be interpreted to also require Kia to comply with the current anti-encroachment law. 4 The Agreement provides that it shall be governed by and construed according to California law, but the parties have indicated that this choice-of-law provision might be rendered void by Michigan Compiled Laws Section 445.1573(h). No. 12-1202 Kia Motors America v. Glassman Page 7 But we cannot ignore the important distinction between the provision at issue here and the other provisions that reference applicable law. Those other provisions primarily concern Glassman’s responsibility, as a car dealer, to comply with generally applicable laws and regulations. In contrast, the provision at issue here directly concerns the relationship between Kia and Glassman. The 2010 Amendment would alter a key aspect of the parties’ bargain—the nonexclusive nature of Glassman’s distribution rights and Kia’s right to establish new dealers. Amendments to consumer-protection and emission-control laws, on the other hand, alter Glassman’s responsibilities vis-à-vis the general public; they do not significantly change the parties’ bargain. Therefore, there is a fundamental difference between the provision at issue here and the other provisions that incorporate applicable law, and our interpretation does not conflict with the rest of the Agreement.