Court Opinion

ID: 2994694
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:16:08.361284+00
Date Added: 2024-06-11T13:04:48.955153
License: Public Domain

In the
United States Court of Appeals
For the Seventh Circuit

No. 00-2233

RAY HUTSON CHEVROLET, INCORPORATED,

Plaintiff-Appellant,

v.

GENERAL MOTORS CORPORATION,

Defendant-Appellee.

Appeal from the United States District Court
for the Western District of Wisconsin
No. 99-C-518-S--John C. Shabaz, Chief Judge.

Argued October 24, 2000--Decided December 18,
2000

  Before FLAUM, Chief Judge, and MANION and
EVANS, Circuit Judges.

  EVANS, Circuit Judge. This case, brought
under our diversity jurisdiction,
requires us to interpret a provision of
the Wisconsin Automobile Dealership Law,
sec. 218.01 Wis. Stat. The district judge
granted the motion of the General Motors
Corporation to dismiss the statutory
claims on the basis of language in the
1993 revisions to the law, which he read
to grant GM broad immunity from suit.
Ultimately he dismissed all the claims,
including common law claims, on the basis
of the immunity provision. On this
unsettled question of Wisconsin law we
must surmise how the Wisconsin Supreme
Court would likely interpret the statute.

  Since 1953 Ray Hutson Chevrolet has been
a licensed Chevrolet dealership in
LaCrosse, Wisconsin. In 1966 Hutson built
new dealership facilities in accordance
with GM’s facility space guidelines.
These facilities have proven to be larger
than required to handle the dealership’s
service business. In 1985 Hutson obtained
GM approval to add Nissan service to the
service facility. Though it serviced
Nissans in the GM service facility,
Hutson sold Nissans out of a separate
building because GM does not allow sales
of cars other than GM cars out of GM
dealerships. Even after Nissan service
was added, the service facility was too
large for the business.

  In the spring of 1999 Hutson accepted an
offer from the United States distributor
for Kia vehicles, Kia Motors America,
Inc., to open a Kia franchise at the
Hutson dealership. The plan was to sell
Kias out of the Nissan facility but to
add Kia to the GM service and parts
facility, which GM and Nissan were
already sharing.

  Under the dealership agreement with GM,
Hutson was required to notify GM of these
plans. It did that and furnished all the
information GM requested for its
evaluation of the proposal. GM rejected
the proposal on May 24, 2000, citing
"performance standards." One was the GM
facility standard, which refers to its
policy of not selling competing brands
from its GM sales facilities. But Hutson
claims it was not going to sell Kias out
of the GM sales facility and GM had
recently approved a plan similar to
Hutson’s for another dealership. GM also
cited customer satisfaction standards,
which it says were low and Hutson says
were fine when compared to similar
dealerships. With regard to working
capital standards, which GM also cited,
Hutson agreed to raise its working
capital.

  As a result of GM’s refusal to approve
the Hutson proposal, Kia withdrew its
franchise offer and Hutson says it lost
an opportunity to increase net profits by
several hundred thousand dollars. This
case followed. The district judge granted
a motion to dismiss and a motion for
summary judgment for GM, both of which
depend on the interpretation of a
Wisconsin statute. Our review of those
decisions is de novo. Lexington Ins. Co.
v. Rugg & Knopp, Inc., 165 F.3d 1087 (7th
Cir. 1999). Because the issue involves an
unsettled issue of Wisconsin law, we must
determine what the Wisconsin Supreme
Court would have to say about it.

  In 1937 Wisconsin enacted the Wisconsin
Automobile Dealership Law; its purpose
was to protect dealers from
manufacturers. Forest Home Dodge, Inc. v.
Karns, 29 Wis. 2d 78 (1965). The law was
revised in 1993. The 1993 revisions are
at issue here.

  The 1993 revisions created sec.
218.01(3x), which set out procedures for
challenging a manufacturer’s refusal to
allow a change in ownership, management,
or location of a dealership and, as
relevant here, to add another franchise
to an existing facility. It provided that
if the grantor does not approve the
dealer’s request, it must provide a
written statement, within 30 days, of its
reasons for disapproval. Failure to file
the statement results in approval. A
dealership which is served with a written
statement disapproving its proposal may
file a complaint with the Wisconsin
Department of Transportation and ask for
a determination of whether there is good
cause for permitting the proposed action.
The Office of the Commissioner of
Transportation must promptly schedule a
hearing and decide the matter. Factors
which the commissioner should consider
are set out in the statute.

  Subsection (3x) also has a qualified
immunity provision which provides:

The reasons given for the disapproval or
any explanation of those reasons by the
manufacturer . . . shall not subject the
manufacturer . . . to any civil liability
unless the reasons given or explanations
made are malicious and published with the
sole intent to cause harm to the dealer .
. . .

Hutson says the qualified immunity
provision shields the manufacturer only
from defamation claims which might arise
out of the requirement that the
manufacturer give reasons for the denial
of the request; GM says it provides
qualified immunity as to any cause of
action for damages arising out of its
disapproval of a proposed dealership
change. It was the latter interpretation
which carried the day with the district
court.

  The language of the immunity provision,
like a lot of legislative enactments, is
not as clear as crystal. Hutson’s reading
of the statute requires that we imply
that the legislature meant that the
"publication of the reasons," rather than
simply the reasons themselves, shall not
subject the manufacturer to liability. On
the other hand, if, as GM contends, the
legislature had intended to provide a
broad grant of immunity, it could easily
have done so more clearly.

  Before we try our hand at making sense
out of these provisions, we need to look
at other relevant provisions of the law.
Section 218.01(9), provides a civil cause
of action for various violations of the
law: "Without exhausting any
administrative remedy available under an
agreement or this section, except as
provided in sub. (3)(f) and (fm), a
licensee may recover damages in a court
of competent jurisdiction for pecuniary
loss" and costs and attorney fees if the
loss is caused by certain violations,
including two which are relevant to our
analysis. One is "[b]eing a manufacturer
. . . who fails to comply with the
procedures in sub. (3x) regarding a
dealer’s request for approval of . . .
adding another franchise at the same
location as its existing franchise . . .
." Section 218.01(3)(a)24. Another covers
violations of subsection (3)(a)22, which
in turn refers to section 219.01(2g),
which requires that performance standards
by which dealership performance is
measured must be "fair, reasonable and
equitable."

  Hutson brought its lawsuit based on
violations of subsection (3)(a)22,
requiring fair performance standards, and
(3)(a)11, forbidding unconscionable
practices, rather than subsection
(3)(1)24, regarding failure to comply
with the procedures for evaluation of a
request to add a franchise.

  Even though there is considerable
incongruity in saying that, without
exhausting administrative remedies, a
dealer can bring a suit for damages if a
manufacturer fails to comply with
administrative procedures, it appears
that the parties agree that a suit based
on subsection (3)(a)24 can only be
brought based on a manufacturer’s failure
to do just that. We surmise that the
reason Hutson brought its suit for
damages for violations of subsections
(3)(a)22 and (3)(a)11, rather than for
violations of subsection (3)(a)24, is
that GM had not refused to comply with
administrative procedures; in fact,
Hutson had never instituted
administrative procedures.

  But the parties disagree about whether,
in a situation such as the one here,
subsection (3)(a)24 is an exclusive
remedy. That is, if the dispute involves
a refusal to approve a proposal to add a
franchise to the dealership, does
subsection (3)(a)24, which specifically
covers that situation, occupy the field?
Or, in a situation such as exists between
Hutson and GM in which the manufacturer
cites the dealership’s failure to meet
performance standards as the reason for
the refusal to approve the proposal, can
the dealership also rely on the
subsections of the statute concerning the
unfair application of the performance
standards?

  Looking at the entire scheme, it seems
likely to us that the purpose of
subsection (3x) was to establish an
administrative procedure to deal with
requests to add franchises (and to change
ownership, management, or location of a
dealership). The commissioner of the
Department of Transportation is given
authority to evaluate rejections of these
requests and administrative review of the
commissioner’s decision is provided. If
the manufacturer does not comply with the
administrative procedures, then the
dealer can file a civil action based on
that noncompliance. It is a comprehensive
scheme for dealing with changes to the
dealership; it does not apply directly to
the existing franchise itself. To put
responsibility for evaluating this kind
of change to an existing franchise in the
hands of the department has some logical
appeal. After all, it seems clear that
the dealership’s interest in its existing
franchise is different in kind from its
interest in obtaining a new franchise.
The integrated nature of the scheme leads
us to conclude that subsection (3x)
provides an exclusive procedure for
evaluating a manufacturer’s rejection of
a proposal such as the one here. If the
statute did not provide for an exclusive
procedure, then it seems likely that very
often, as here, the entire administrative
scheme could be ignored and a dealer
could head straight to court, seeking
damages based on the rejection of its
proposal, thus reading the administrative
procedures out of the statute.
  It follows that the civil remedy
provided in subsection (24) is exclusive
even if the rejection of the proposal is
based, as it is here, on performance
standards. We see a difference between
reliance on the imposition of performance
standards on a dealership for purposes of
enforcing or perhaps terminating the
existing franchise agreement, and
areference to performance standards as a
reason for the rejection of the addition
of another franchise to an existing
dealership. The manufacturer could be
saying, as in fact GM seemed to be saying
here, that the dealership’s performance
is acceptable but not good enough to
allow the addition of another franchise.
In fact, GM specifically said in its
letter rejecting the proposal that it was
"concerned that the addition of Kia would
further dilute your focus on Chevrolet."
We do not read the letter to say that the
existing franchise is in immediate
jeopardy.

  The immunity provision fits into this
scheme. Subsection (3x) says, in part,
that the reasons given for disapproving a
proposal "shall not subject the
manufacturer . . . to any civil
liability" unless the reasons or
explanations are malicious and published
with the "sole intent to cause harm to
the dealer . . . ." It is reasonable to
read that provision as an attempt to
ensure that (3x) remains the exclusive
mechanism for resolving disputes like
this one between Hutson and GM. If, as we
conclude, the legislature meant for
disputes regarding the addition of
franchises or changes to existing
franchises to be resolved through the
Department of Transportation, it follows
that the immunity provision is intended
to prevent end-runs around the statutory
scheme. In the absence of the immunity
provision, it seems likely that, rather
than using the administrative procedures
set out in the statute, at least some
dealers would file a miscellany of civil
claims. In short, they would do what
Hutson has done here. On the other hand,
if the immunity provision provides
manufacturers with a broad immunity from
suit so long as they have not acted with
malice, it is consistent with the other
provisions of the statute. It completes
the circle. Our conclusion is that, in
fact, the statute provides manufacturers
with such immunity and bars this civil
suit.
  Accordingly, the judgment of the
district court is

AFFIRMED.