Opinion ID: 1192553
Heading Depth: 3
Heading Rank: 4

Heading: Key's Cause of Action

Text: After considering the variety of statutory approaches implemented in other jurisdictions, we conclude that New Mexico's Act does not support a conclusion that the Legislature intended to allow prospective franchisees to recover damages for loss of a prospective franchise. Cf. N.J.Stat.Ann. § 56:10-29 (A motor vehicle franchisee may bring an action against the motor vehicle franchisor which has granted its franchise, or any other person ... to enjoin any violation of this act and to recover, where appropriate, any damages sustained by the franchisee as a result of a violation of this act.). Without more explicit textual support, we cannot conclude that the Act affords a right of relief to every person wishing to acquire an automobile dealership. See generally 1 Gladys Glickman, Franchising § 4.03[1] (1995) (franchisors ordinarily are limited only by antidiscrimination and antitrust laws in selecting franchisees and rejecting potential franchisees). Such plaintiffs may seek relief under common-law remedies such as tortious interference with prospective or existing economic relationships. See 4 Restatement (Second) of Torts § 766 (1979). In the tort of intentional interference with a prospective advantage, the basis for the imposition of liability requires proof of improper motive (intent to harm) or utilization of some improper means. See M & M Rental Tools, Inc. v. Milchem, Inc., 94 N.M. 449, 454, 612 P.2d 241, 246 (Ct.App.1980); see also Anderson v. Dairyland Ins. Co., 97 N.M. 155, 159, 637 P.2d 837, 841 (1981) (adopting Restatement (Second) of Torts approach requiring improper motive or improper means in order to establish liability). Thus, even in the absence of a right of action under the Act, a prospective purchaser may recover if he or she can prove the existence of a malicious motive. Nor can we recognize a cause of action in Key based solely on his existing status as a dealer or franchisee. If the statute were interpreted literally, Key's status as a dealer would support his standing to sue, but that result would mean the Legislature had distinguished existing dealers from those who were in any other kind of business. Such a distinction seems to be an unlikely legislative choice. See Knauz, 720 F.Supp. at 1327 (Illinois statute held not applicable to a dealer applicant who already had a franchise from another manufacturer); Beard, 480 N.E.2d at 306 (describing as illogical the result of granting a prospective purchaser of a motor vehicle dealership standing to sue only if it was already a dealer at the time of the prospective sale). However, Key is an existing franchisee of Chrysler. As such, he is within the group whose bargaining power the Legislature sought to enhance. It is possible to view Key's complaint as alleging that the Act forbids a manufacturer from foreclosing an opportunity to acquire a franchise by unreasonably withholding consent to a proposed transfer. We have construed the Act more narrowly than did the Court of Appeals, and thus we conclude that Key's complaint fails to state a cause of action. It is equally possible to read his complaint as alleging that the Act forbids a manufacturer from employing a sales quota that fails to measure a dealer's performance fairly and accurately, that Chrysler used such a sales quota, and that Key's damages consist of the lost business opportunity. As a result, he lost an opportunity to expand his existing franchise by acquiring an additional franchise from that franchisor. So read, the gist of Key's complaint would be that his franchisor misinterpreted his sales record and inaccurately characterized his performance as a dealer. Under such a reading, the lost potential franchise is a measure of the harm suffered rather than a matter of substantive right. The matter of substantive right is the propriety under the Act of Chrysler's conduct toward its franchisee. If we were to construe Key's complaint in that fashion, however, we run into the difficulty that the legislation New Mexico has adopted does not provide, as does the Uniform Act, a general duty of good faith. Rather, the Act specifically identifies particular conduct on the part of the franchisor toward its franchisee as forbidden. In order to construe Key's complaint as stating a cause of action under the Act, we believe that we would need at least the statement of a general duty, as provided in the Uniform Act, or specific language directed at the franchisor's choice of service and performance standards. We have neither. By expanding the definition of injury in business or property to include a lost opportunity to acquire an additional franchise from one's own franchisor, we would not significantly modify the existing common law. Prosser points out that the expectancies most often protected are those of future contractual relations. See W. Page Keeton et al., Prosser and Keeton on Torts § 130, at 1005 (5th ed. 1984), Interference with Prospective Advantage. Also, loss of profits is a familiar element of damages in breach of contract cases. It is when an attempt has been made to carry liability for interference beyond the commercial context, and into such areas as exclusion from social organizations or deprivation of the chance of winning a contest, that courts have felt that they were embarking upon uncharted seas. Id. at 1006. By recognizing Key's status as an existing dealer seeking to purchase an existing franchise from its franchisor, we would advance the Legislature's purpose in protecting dealers. Nevertheless, under the current statutory scheme, we cannot say that Chrysler has engaged in prohibited conduct. Our statute lacks sufficient general or specific language to support a determination that Key's complaint states a cause of action under the Act. We illustrate by comparing different provisions regarding termination. Franchise dealer acts commonly provide that a manufacturer may not terminate or refuse to renew a franchise without due cause. See, e.g., § 57-16-9. Often a valid ground for termination occurs when a franchisee fails to meet the sales quotas established by the franchise agreement. See 62B Am.Jur.2d Private Franchise Contracts § 598 (1990). Courts called upon to determine whether a franchisor has acted inappropriately inquire into whether the sales quota is fair and reasonable, objective and nondiscriminatory, and not arbitrary and capricious, or coercive. Id. (footnotes omitted). Additionally, quotas need to be applied uniformly to all franchisees, taking into account local conditions, because failure to meet quotas may be attributed to economic or market factors beyond the franchisee's control. Id.; Swartz v. Chrysler Motors Corp., 297 F.Supp. 834, 838 (D.N.J.1969) (sales quota incorporated in franchise agreement held invalid for failure to take local conditions into account). The New Hampshire legislature has defined good cause for purposes of termination to include a failure to comply with a term of the franchise. N.H.Rev.Stat.Annot. § 357-C:7(II) (1995). The legislature dealt with a failure in sales or service performance as follows: (b) If the failure by the new motor vehicle dealer, in subparagraph (a), relates to his performance in sales or service, then good cause, as used in subparagraph I(c), shall be defined as the failure of the new motor vehicle dealer to effectively carry out the performance provisions of the franchise if: (1) The new motor vehicle dealer was apprised by the manufacturer in writing of such failure, the notification stated that notice was provided of failure of performance pursuant to this law, and the new motor vehicle dealer was afforded a reasonable opportunity to exert good faith efforts to correct his failures; (2) Such failure thereafter continued within the period which began not more than 180 days before the date notification of termination, cancellation, or non-renewal was given pursuant to paragraph V; and (3) The new motor vehicle dealer has not substantially complied with reasonable performance criteria established by the manufacturer and communicated to the dealer. Among those factors determining performance criteria shall be the relevancy of the manufacturer's sales within the state and the particular market area. Section 357-C:7(II)(b). We believe that the Act affords Key particular protection based on his existing and ongoing relationship with Chrysler. We do not construe Key's complaint as stating a cause of action based on the particular protection provided that relationship by the Act. We are not able to equate wrongful termination, against which the Act provides specific protection, with the loss of an opportunity to acquire an additional franchise. The Act does not define due cause as it relates to termination. Absent a definition such as that provided by New Hampshire, we would be imposing on Chrysler obligations of which it had no notice. Cf. Brewer v. Exxon Corp., 626 F.Supp. 76, 80 (E.D.Tenn.1985) (because statute purported to restrict existing contractual rights, it was not entitled to a broader construction than was clearly warranted by its terms). We next address the effect of Section 57-16-9 on any cause of action by a selling dealer against its franchisor on the basis that the franchisor unreasonably withheld consent to a proposed transfer.