Opinion ID: 2633276
Heading Depth: 3
Heading Rank: 2

Heading: The New Dodge Dealership

Text: At trial ACC claimed that in the negotiations leading up to the May 28 agreement, DCMC employees made three promises to ACC not to establish another Dodge dealership in Anchorage. ACC argues both that the superior court erred in failing to read the agreement to include these three alleged promises and also that the same statements constituted tortious misrepresentations. The three alleged statements and the court's rulings were as follows: (i) A March 1999 email by David King, DCMC's in-house counsel, to ACC's attorney: My clients have not informed me of any plans for additional dealerships in Alaska. The superior court found that this statement was true, because DCMC did not have a concrete plan to add a dealership when it made this statement. It also found that the statement was so hedged that ACC was not justified in relying on it, and that ACC did not in fact rely on it, in that it kept seeking more formal assurances from DCMC. (ii) A statement in the May 21, 1999 letter to ACC by DCMC manager Carl Fleck: As to awarding a Dodge Sales and Service agreement to Johnson Jeep, I can confirm that DaimlerChrysler has no plan to add Dodge to the [Johnson Jeep] dealership. This was in response to a request by ACC to add language clarifying that the agreements between ACC, DCMC, and Johnson Jeep would not include the Dodge franchise. [18] The superior court characterized Fleck's statement as merely address[ing] [ACC President] Udd's oft-stated concern and understanding of the scope of the discussions that had been ongoing for over a year. Udd wanted to protect his Dodge franchise from [Johnson Jeep]. (iii) A statement to ACC on a conference call by the same DCMC manager, the day ACC signed the agreement, allegedly to the effect that DCMC would not establish a Dodge dealership in south Anchorage. Fleck, the manager, testified that his statement was simply a confirmation that Johnson Jeep would not be getting a Dodge franchise, rather than a promise not to open an entirely new dealership. The court found Fleck's evidence more credible than ACC's. The Court finds that it is not credible that Fleck, at this stage of the lengthy discussions regarding the realignment of vehicle lines between [Johnson Jeep] and ACC, and especially at the end of a brief, unexpected phone call, would agree to forego the placement of a Dodge dealership in south Anchorage. These three statements are the basis of several issues on appeal. First, there is ACC's claim that the statements amount to additional promises that ought to be incorporated in the May 28 letter agreement. The only statement of the three that could possibly be construed as a promise (as opposed to a statement of present intention) is Fleck's statement on the May 28 phone call, which is number (iii) in the list above. But the superior court found, based on Fleck's testimony at trial, that Fleck made no such promise on the phone call. This is a factual finding reviewed for clear error. [19] Since the finding is supported by at least some evidence, we will not disturb it here. The more difficult issue raised by ACC is whether the superior court properly considered whether the three statements might amount to a misrepresentation. Alaska cases follow the Restatement (Second) of Torts on what constitutes a fraudulent misrepresentation. [20] The Restatement identifies several elements of intentional misrepresentation: (1) a misrepresentation of fact or intention, (2) made fraudulently (i.e., with scienter), (3) for the purpose of inducing another to act in reliance, (4) with justifiable reliance by the recipient, (5) causing loss. [21] The superior court rejected the misrepresentation claim related to the King email (paragraph (i), above) because it found the statement was technically true, because the statement was so hedged that ACC was not justified in relying on it, and because the court found that ACC did not in fact rely on the statement, in that ACC kept seeking more formal assurances from DCMC. Whether the statement was misleading in spite of its being technically true is open to question; the problem of half-truths is discussed more below. But the finding that ACC did not justifiably rely on any misleading statement by King was an adequate basis to reject any misrepresentation claims based on the King email. ACC does not challenge the finding that it continued to seek assurances that there would be no new dealerships, and from this fact the superior court plausibly inferred that ACC did not actually rely on the King email. Moreover, the court did not err in finding that, even if there had been actual reliance by ACC on King's hedged statements, such reliance would have been unreasonable. Although some courts appear to hold that determinations as to whether reliance was justified can be a question of law reviewed de novo, [22] our own precedents suggest that it is a question of fact, [23] and it seems that most jurisdictions that have addressed the issue say it is either a purely factual issue or a mixed question of law and fact, to be reviewed for clear error in either event. [24] We will therefore extend deference to the superior court's determination and reverse only if reasonable minds could not disagree that reliance was justified. [25] Under this standard, we think it was reasonable for the superior court to conclude that someone in ACC's shoes would have acted unreasonably in relying on King's statements as precluding new DCMC dealerships in south Anchorage. Since actual reliance and justifiable reliance are both prerequisites to claims of negligent and intentional misrepresentation, [26] the court did not err in rejecting ACC's claims that the King email was a misrepresentation. [27] The superior court's treatment of the other two statements (the Fleck letter and the May 28 conference call with Fleck) is more problematic. The court did not directly address whether these statements were intentional or negligent misrepresentations, although it did find that Fleck's statements were merely true statements that DCMC did not intend to give Johnson Jeep the Dodge line. What is problematic is that the superior court did not appear to appreciate that a statement can be literally true and yet still be an actionable misrepresentation. Section 529 of the Restatement (Second) of Torts says: A representation stating the truth so far as it goes but which the maker knows or believes to be materially misleading because of his failure to state additional or qualifying matter is a fraudulent misrepresentation. [28] Under this standard, a partial disclosure is fraudulent if the person making the statement knows or believes that the undisclosed facts might affect the recipient's conduct in the transaction in hand. [29] The Restatement gives some examples, including a prospectus that fails to list all the company's debts; a statement that a title to land has been upheld by a particular court without mentioning that the court's decision has been appealed; and a statement that tenants in a building all pay a certain rent, without mentioning that the rent is still subject to approval by a rent control agency. [30] In addition, this court has held that a defendant's offer to pay property taxes on the plaintiffs' behalf might have implied that the plaintiffs owned the land, such as to give rise to at least a question of fact as to whether the defendant misled the plaintiffs about the status of their ownership interest. [31] Here it appears that ACC was concerned that Johnson Jeep would get a Dodge dealership, apparently without adequately considering whether DCMC might withhold Dodge from Johnson Jeep and yet still open an entirely new Dodge dealership in Anchorage soon thereafter. DCMC may have known that a new Dodge dealership was a distinct possibility (even though it had not yet developed concrete plans), and that ACC would never sign the May 28 agreement if it appreciated the possibility of a new dealership. DCMC might therefore have decided to exploit ACC's tunnel vision by crafting its reassurances to ACC to cover Johnson Jeep and no more. These anyway are ACC's allegations, supported by at least some evidence, and there is little or nothing in the superior court opinion that rejects this version of the facts. [32] Under this scenario, would DCMC's statements about withholding Dodge from Johnson Jeep, combined with King's earlier denial of knowing about any expansion, be misleading because of [DCMC's] failure to state additional or qualifying matternamely, the likely possibility of a new Dodge dealership in Anchorage in the near future? Did DCMC know or believe that the undisclosed facts might [have] affect[ed] the recipient's conduct in the transaction in hand? The superior court seemed to focus on the literal truth of DCMC's statements, and does not appear to have considered these questions, even though ACC's pre-trial papers presented them in a straight forward fashion. [33] Although the question of whether a misrepresentation exists is normally a question of fact, we think the superior court's failure to make factual findings appropriate to the relevant legal test (here, Section 529 of the Restatement (Second) of Torts) was an error of law, just as erroneous jury instructions are an error of law. [34] We appreciate that, even in ACC's version of events, these two statements were probably less radically incomplete than the illustrations provided in the Restatement (e.g., a company that fails to list all its debts), particularly since at least one of them, the May 21 letter, appears to have been made in response to a specific question by ACC about Johnson Jeep. Still, the question of whether the statements were fraudulent under the relevant standard is a question for the trier of fact, which in this case was the superior court. Finally, DCMC argues that any oral misrepresentations about new dealerships are irrelevant, because ACC's basic sales and service agreements give DCMC the right to place new Dodge dealerships in Anchorage, and these same agreements cannot be amended except in writing. Yet the question is not whether DCMC retained a right, notwithstanding any oral misstatements, to establish another dealership in Anchorage under the sales and service agreementsif it were, DCMC might well be right to argue that any such statements would be irrelevant. Instead, the question is whether DCMC's alleged oral statements (which DCMC appears to have been reluctant to commit to writing) were a fraud inducing ACC to enter into the May 28 letter agreement. Put differently, an oral statement that would be unenforceable as a promise under the terms of Contract A may yet be a tortious misstatement if it induces the recipient of the statement to enter into Contract B. For these reasons, we vacate the superior court's decision as to the claims that the two Fleck statements were negligent and/or intentional misrepresentations, and remand this part of the case for further consideration.