Court Opinion

ID: 2680426
Source: CourtListenerOpinion
Date Created: 2014-06-25 15:00:09.821396+00
Date Added: 2024-06-11T09:40:40.574597
License: Public Domain

13–1886
Giuffre Hyundai v. Hyundai Motor America

          UNITED STATES COURT OF APPEALS
              FOR THE SECOND CIRCUIT
                       August Term, 2013
(Argued: March 20, 2014                    Decided: June 25, 2014)
                       Docket No. 13–1886

GIUFFRE HYUNDAI, LTD., d/b/a GIUFFRE HYUNDAI
             Plaintiff–Appellant,

                                  v.
               HYUNDAI MOTOR AMERICA,
                  Defendant–Appellee.

Before:        STRAUB, SACK, and LOHIER, Circuit Judges.

       Appeal from a judgment of the United States
District Court for the Eastern District of New York (Jack
B. Weinstein, Judge) granting the defendant's motion for
summary judgment and denying the plaintiff's cross-
motion for partial summary judgment. The plaintiff
sought to enjoin the termination of its automobile
dealership contract on the ground that it was entitled to
an opportunity to cure the breach occasioned by a state
court's decision finding that the plaintiff had engaged in
fraudulent and deceptive business practices.
       AFFIRMED.
                               ERIC L. CHASE (Ronald J.
                               Campione, on the brief),
                               Bressler, Amery & Ross, P.C.,
                               New York, NY, for Plaintiff–
                               Appellant.

                                   1
                          FREDERICK LIU, Hogan
                          Lovells US LLP, Washington,
                          DC (John J. Sullivan, Hogan
                          Lovells US LLP, New York,
                          NY, on the brief), for Defendant–
                          Appellee.
SACK, Circuit Judge:
        The plaintiff, Giuffre Hyundai, Ltd. ("Giuffre"),
was an authorized dealer of Hyundai automobiles
pursuant to a contract with that company's domestic
affiliate, Hyundai Motor America ("HMA"). HMA
terminated its contract with Giuffre after a New York
State court concluded that the dealer had engaged in
fraudulent, illegal, and deceptive business practices—a
clear breach of the contract terms. Giuffre responded
by bringing suit in the United States District Court for
the Eastern District of New York seeking to enjoin the
termination. Giuffre relied in pertinent part on section
463 of the New York Vehicle and Traffic Law, which
provides protections to motor vehicle franchisees in
their dealings with automobile manufacturers. Giuffre
claimed that section 463 required HMA to provide it
with notice of and an opportunity to cure the breach
occasioned by the state court's ruling. The district court
(Jack B. Weinstein, Judge) disagreed, concluding that the
breach here was incurable and that HMA was therefore
entitled to terminate the contract immediately,
notwithstanding the terms of the Vehicle and Traffic
Law. Because we conclude that section 463 does not
abrogate the common law with respect to incurable
breaches of contract, we affirm the district court's grant
of summary judgment for HMA.

                       BACKGROUND
      Giuffre Hyundai was a franchised Hyundai
dealer based in Brooklyn, New York. It sold Hyundai

                            2
cars pursuant to a Dealer Sales and Service Agreement
("DSSA") with HMA. That contract included provisions
stipulating that "HMA has selected *Giuffre+ because of
the reputation of its Owner(s) and the General
Manager . . . for integrity and their commitment to fair
dealing." DSSA 10(C)(2). It required Giuffre to refrain
from "engag*ing+ in any misrepresentation or unfair or
deceptive trade practices." Id. HMA reserved the right
to "terminate *the DSSA+ immediately" if
       *Giuffre+ or any Owner, officer, or General
       Manager of *Giuffre+, is convicted of any
       felony or for any violation of law which in
       HMA's sole opinion tends to adversely
       affect    the   operation,     management,
       reputation, business or interests of *Giuffre+
       or HMA, or to impair the good will
       associated with the Hyundai Marks.1 Such
       violations of law may include, without
       limitation, any finding or adjudication by
       any court of competent jurisdiction or
       government agency that *Giuffre+ has
       engaged in any misrepresentation or unfair
       or deceptive trade practice*.+

Id. 16(B)(1)(b).

     Giuffre's Conduct and HMA's Notice of
Termination
       In December 2010, New York's Attorney General
brought a civil suit against Giuffre; its owner, John
Giuffre; and three other dealerships he owned, alleging
that they had engaged in a pattern of fraudulent and

 1
   The DSSA defined the "Hyundai Marks" to include the
various trade and service marks and logos used to market
Hyundai's products. DSSA 20(H).
                             3
deceptive business practices. See People v. Giuffre Motor
Car Co., No. 30163/2010 (N.Y. Sup. Ct. 2010).
        The New York Supreme Court, Kings County,
eventually granted summary judgment for the Attorney
General, ruling that the dealerships had "engaged in
fraudulent and illegal business practices*,+ . . . deceptive
acts*,+ . . . and false advertising" in violation of several
New York statutes and the federal Truth in Lending
Act, 15 U.S.C. § 1601 et seq. See Decision/Order at 7,
Giuffre Motor Car Co., No. 30163/2010 (N.Y. Sup. Ct. Dec.
7, 2011). Concluding that the evidence "describe*d+ a
common practice of strong-arm sales methods and
unethical conduct," id. at 4, the court commented: "The
list of grievances is extensive and unsettling. Multiple
statutory violations appear in several individual
transactions. The Court is struck by the similarity of the
claims being made *by the customers+ and the brazen
nature of the sales persons," id. at 5. In response to what
it called these "credible allegations of deceptive and
fraudulent business practices," the court found that
John Giuffre had "offered nothing more than conclusory
statements in a general denial which is insufficient to
defeat an award of summary judgment." Id. at 7.
       The court enjoined the dealerships from
committing further violations and ordered both
restitution and civil penalties. See Order, Giuffre Motor
Car Co., No. 30163/2010 (N.Y. Sup. Ct. Feb. 22, 2012).
The Attorney General eventually agreed to a total
payment of $500,000 in satisfaction of the judgment. See
Consent Order and Judgment, Giuffre Motor Car Co., No.
30163/2010 (N.Y. Sup. Ct. Sept. 14, 2012).
      HMA apparently learned of the Attorney
General's suit and the court's decision for the first time
from an October 2012 article in the New York Post
headlined "Car biz slapped for fraud." Kevin Sheehan

                             4
and Mitchel Maddux, Car Biz Slapped for Fraud, N.Y.
Post, Oct. 1, 2012. On October 3, 2012, an HMA
executive wrote to Giuffre, enclosing a copy of the
article. The letter notified Giuffre that the court's
findings "are extremely serious and constitute a breach
of *the DSSA+." Letter from Ken Bloech, Regional
General Manager, Eastern Region, HMA, to John
Giuffre (Oct. 3, 2012). Following an exchange of
correspondence among counsel, on December 3, 2012,
HMA sent Giuffre a letter indicating that it would
terminate the DSSA in ninety days. Letter from Ken
Bloech, Regional General Manager, Eastern Region,
HMA, to John Giuffre (Dec. 3, 2012) (the "Notice of
Termination"). The Notice of Termination asserted that
"Giuffre Hyundai is in material and incurable breach of
its obligations under the *DSSA+. HMA cannot and will
not voluntarily allow its products to be sold and
marketed by an organization that has been found to
have preyed on the consuming public . . . in the manner
*Giuffre+ did." Id. at 4.

      Proceedings Before the District Court
       As the termination date approached, Giuffre filed
suit in the United States District Court for the Eastern
District of New York, seeking, among other things, "to
permanently enjoin HMA from terminating *the DSSA+"
and "to declare unlawful HMA's Notice of
Termination." Compl., Giuffre Hyundai, Ltd. v. Hyundai
Motor Am., No. 13-cv-0520 (E.D.N.Y. Jan. 29, 2013), ECF
No. 1. In addition to state and federal statutory and
common law claims not relevant here,2 Giuffre asserted

 2
   The district court's memorandum opinion addressed only
Giuffre's claim under section 463, and Giuffre has
abandoned its remaining claims by failing to give them more
than cursory treatment in its brief on appeal. See Niagara
Mohawk Power Corp. v. Hudson River–Black River Regulating
                            5
that HMA violated section 463 of New York's Vehicle
and Traffic law by failing to provide it with notice of
and an opportunity to cure its breach of the DSSA. Id.
       Section 463 requires a motor vehicle franchisor—
notwithstanding the terms of any contract—to provide
a dealer franchisee written notice "of its intention to
terminate . . . the franchise of such dealer at least ninety
days before the effective date thereof, stating the
specific grounds for such termination." N.Y. Veh. &
Traf. Law § 463(2)(d)(1). The franchisee facing
termination may then challenge the franchisor's
decision by filing suit. Id. § 463(2)(e)(1).
       The issues to be determined in *such+ an
       action . . . are whether the franchisor's
       notice of termination was issued with due
       cause and in good faith. The burden of
       proof shall be upon the franchisor to prove
       that due cause and good faith exist. The
       franchisor shall also have the burden of
       proving that all portions of its current or
       proposed sales and service requirements
       for the protesting franchised new motor
       vehicle dealer are reasonable.

       The determination of due cause shall be
       that there exists a material breach by a new
       motor vehicle dealer of a reasonable and
       necessary provision of a franchise if the
       breach is not cured within a reasonable
       time after written notice of the breach has

Dist., 673 F.3d 84, 107 (2d Cir. 2012) ("It is a settled appellate
rule that issues adverted to in a perfunctory manner,
unaccompanied by some effort at developed argumentation,
are deemed waived." (internal quotation marks omitted)).
                                6
       been received from the manufacturer or
       distributor.

Id. § 463(2)(e)(2).
       HMA moved for summary judgment, and Giuffre
cross-moved for partial summary judgment on its
section 463 claim. The district court granted judgment
for HMA. Giuffre Hyundai, Ltd. v. Hyundai Motor Am.,
No. 13-cv-0520, 2013 WL 1968371, 2013 U.S. Dist. LEXIS
67795 (E.D.N.Y. May 10, 2013). In a discussion confined
to Giuffre's section 463 claim, the court found that the
Vehicle and Traffic Law "does not modify or displace
the state common law principle that a party commits a
material breach of its contract with another party when
it violates a provision going to the root of their
agreement." Id. at *3, 2013 U.S. Dist. LEXIS 67795, at *7–
8. A breach of this kind "is the basis for the aggrieved
party to revoke or terminate the agreement without
providing the other party an opportunity to cure." Id. at
*4, 2013 U.S. Dist. LEXIS 67795, at *8.
        Moreover, the district court reasoned, New York
common law does not require a chance to cure "when
'doing so would amount to a useless gesture.'" Id., 2013
U.S. Dist. LEXIS 67795, at *9 (quoting Grocery Haulers,
Inc. v. C&S Wholesale Grocers, Inc., No. 11 Civ. 3130
(DLC), 2012 WL 4049955, at *15, 2012 U.S. Dist. LEXIS
131598, at *41 (S.D.N.Y. Sept. 14, 2012) (collecting cases))
(some internal quotation marks omitted). Finding that
section 463 did not abrogate the common law in this
respect either, the district court concluded that, after
Giuffre's "egregious breach, further notice and
opportunity to cure were not required because no cure
was possible. . . . Anything less than termination might
have frustrated—*HMA+ could reasonably conclude—
its attempts at rehabilitation of the public's trust in
Hyundai, which was essential for a successful vendor of

                             7
automotive products." Id., 2013 U.S. Dist. LEXIS 67795,
at *10–11.
       On appeal, Giuffre argues that section 463 gives
franchisees an absolute right to an opportunity to cure a
breach of a motor vehicle dealership franchise contract,
and that material disputes of fact exist regarding the
materiality of Giuffre's breach and the sufficiency of
HMA's Notice of Termination. In the alternative,
Giuffre asks us to seek guidance on the meaning of
section 463 from the New York Court of Appeals by
certifying that question to the court.

                     DISCUSSION
       "We review an order granting summary
judgment de novo and resolve all ambiguities and draw
all permissible factual inferences in favor of the party
against whom summary judgment is sought." Lederman
v. N.Y.C. Dep't of Parks & Recreation, 731 F.3d 199, 202
(2d Cir. 2013) (internal quotation marks and brackets
omitted), cert. denied, 134 S. Ct. 1510 (2014). Summary
judgment is appropriate when, "construing the evidence
in the light most favorable to the non-movant, 'there is
no genuine dispute as to any material fact and the
movant is entitled to judgment as a matter of law.'"
Psihoyos v. John Wiley & Sons, Inc., 748 F.3d 120, 123–24
(2d Cir. 2014) (quoting Fed. R. Civ. P. 56(a)).
      The central issue in this appeal is whether HMA's
termination of Giuffre's franchise complied with New
York's Vehicle and Traffic Law. In an action seeking to
enjoin termination of a franchise agreement under
section 463, the franchisor must establish that it acted
with "due cause." N.Y. Veh. & Traf. Law § 463(2)(e)(2).
Due cause exists where there has been "a material breach
by a new motor vehicle dealer of a reasonable and
necessary provision of a franchise if the breach is not
cured within a reasonable time after written notice of the

                            8
breach." Id. (emphases added). While we have not
found or been pointed to a published decision
construing this portion of the statute, there is ample
common law precedent interpreting the operative terms
under New York law. We therefore need not, and
decline to, certify any questions of law to the New York
Court of Appeals. See DiBella v. Hopkins, 403 F.3d 102,
111 (2d Cir.) ("Issues of state law are not to be routinely
certified to the highest court of New York simply
because a certification procedure is available."
(alterations omitted)), cert. denied, 546 U.S. 939 (2005).
Indeed, "it is our job to predict how the forum state's
highest court would decide the issues before us," and,
as a consequence, "we will not certify questions of law
where sufficient precedents exist for us to make this
determination." Id. (internal quotation marks omitted).
       We therefore proceed to address the merits of
Giuffre's appeal. We conclude that HMA's termination
of the DSSA was lawful, that the record presents no
genuine dispute as to any material fact, and that HMA
was therefore entitled to summary judgment.
       New York courts presume that the state's
legislators were "aware of the law in existence at the
time of an enactment and *intended to+ abrogate* + the
common law only to the extent that the clear import of
the language of the statute requires." B & F Bldg. Corp.
v. Liebig, 76 N.Y.2d 689, 693, 564 N.E.2d 650, 652 (1990);
accord Arbegast v. Bd. of Educ. of S. New Berlin Cent. Sch.,
65 N.Y.2d 161, 169, 480 N.E.2d 365, 371 (1985).
Moreover, the legislature itself has instructed that
"*w+ords of technical or special meaning are construed
according to their technical sense, in the absence of
anything to indicate a contrary legislative intent." N.Y.
Stat. Law § 233. Thus, "words *that+ have a distinct and
well-defined meaning in the jurisprudence of the
State . . . must be deemed to have the same meaning

                             9
when used in the statutes." Skeels v. Paul Smith's Hotel
Co., 195 A.D. 39, 42, 185 N.Y.S. 665, 668 (3d Dep't 1921);
accord Moran Towing & Transp. Co. v. N.Y.S. Tax Comm'n,
72 N.Y.2d 166, 173, 527 N.E.2d 763, 767 (1988) (citing
N.Y. Stat. Law § 233).
        New York common law will not require strict
compliance with a contractual notice-and-cure
provision if providing an opportunity to cure would be
useless, or if the breach undermines the entire
contractual relationship such that it cannot be cured. 3
See, e.g., Wolff & Munier, Inc. v. Whiting-Turner
Contracting Co., 946 F.2d 1003, 1009 (2d Cir. 1991)
(compliance with cure provision "is not required where
it would amount to a 'useless gesture'"); Miller v. Wells
Fargo Bank, N.A., No. 13-cv-1541, 2014 WL 349723, at *6
n.6, 2014 U.S. Dist. LEXIS 14060, at *15 n.6 (S.D.N.Y. Jan.
30, 2014) (opportunity to cure is not required where
futile); 7-Eleven, Inc. v. Khan, 977 F. Supp. 2d 214, 230
(E.D.N.Y. 2013) ("Under New York law, the law
governing this case, a contract may be terminated
without notice and opportunity to cure where there is
sufficient evidence of fraud, even where contractual
provisions require such notice."); Southland Corp. v.
Froelich, 41 F. Supp. 2d 227, 246–48 (E.D.N.Y. 1999)
(compliance with cure provision not required where
franchisee's alleged fraud undermined the "very essence
of the contract").
      In particular, "'New York law permits a party to
terminate a contract immediately, without affording the
breaching party notice and opportunity to cure . .
. when the *breaching party's+ misfeasance is incurable

 3
   Contract case law is all the more pertinent here since
section 463 is self-evidently a statute intended to supply
what are essentially mandatory contract terms in agreements
where they do not otherwise exist.
                            10
and when the cure is unfeasible.'" Sea Tow Servs. Int'l,
Inc. v. Pontin, 607 F. Supp. 2d 378, 389 (E.D.N.Y. 2009)
(quoting Needham v. Candie's, Inc., No. 01 Civ.
7184(LTS)(FM), 2002 WL 1896892, at *4, 2002 U.S. Dist.
LEXIS 15144, at *11–12 (S.D.N.Y. Aug. 16, 2002), aff'd, 65
F. App'x 339 (2d Cir. 2003) (citations omitted)); accord
Hicksville Mach. Works Corp. v. Eagle Precision, Inc., 222
A.D.2d 556, 557, 635 N.Y.S.2d 300, 302 (2d Dep't 1995)
(asserted "right to cure" irrelevant where "there was no
evidence in the record to support the proposition that a
cure was possible"); see also Delvecchio v. Bayside Chrysler
Plymouth Jeep Eagle, Inc., 271 A.D.2d 636, 639, 706
N.Y.S.2d 724, 726 (2d Dep't 2000) (employee's
misfeasance was "not . . . curable," and would not have
been subject to a notice-and-cure provision had the
contract contained one). When contracting parties
agree to a notice-and-cure provision, it is reasonable to
assume that they do so with the assumption "that the
breaches which would be used to terminate the contract
would be curable breaches." In re Best Film & Video Corp.,
46 B.R. 861, 874-75 (Bankr. E.D.N.Y. 1985) (emphasis in
original) (quoting Corbin on Contracts, 1982
Supplement by Colin K. Kaufman, Part 2, § 1266, at 369–
70). It is no less reasonable to presume that the
legislature operated under the same expectation in
drafting section 463.
       Even without considering the common law
backdrop against which section 463 was drafted, New
York law is clear that, "*a+lthough statutes will
ordinarily be accorded their plain meaning, . . . courts
should construe them to avoid objectionable,
unreasonable or absurd consequences." Long v. State, 7
N.Y.3d 269, 273, 852 N.E.2d 1150, 1153 (2006) (citation
omitted); N.Y. Stat. Law § 143 ("Generally, statutes will
be given a reasonable construction, it being presumed
that a reasonable result was intended by the

                            11
Legislature."). Section 463 speaks in terms of a
"reasonable time" to cure. It would be patently
unreasonable to require a franchisor to endure an
incurable breach in service of an empty "opportunity" to
cure. Similarly, the legislature is unlikely to have
intended that courts be drawn into such absurdities as
what constitutes a "reasonable time" to accomplish that
which cannot be accomplished. We see no reason to
depart from the common sense common-law doctrine of
incurable breach in interpreting section 463. See H.
Kauffman & Sons Saddlery Co. v. Miller, 298 N.Y. 38, 44,
80 N.E.2d 322, 325 (1948) (rejecting "an interpretation of
*a statute's+ words which would so clearly offend
against common sense").
        Turning to the facts of this case, we conclude that
the state court's judgment established as a matter of law
an incurable, material breach of a reasonable and
necessary provision of the DSSA. See N.Y. Veh. & Traf.
Law § 463(2)(e)(2). This provided HMA with due cause
to terminate the Agreement without further delay.
First, the provision at issue here was self-evidently
reasonable and necessary. We will not ascribe to the
legislature the intent to bar HMA from conditioning its
commercial relationships on basic standards of honesty
and fair dealing. See N.Y. Stat. Law § 152 ("A
construction of a statute which tends to sacrifice or
prejudice the public interests will be avoided.").
       Second, the breach here was material and not
susceptible of cure. The state court judgment
established that Giuffre was "engaged in fraudulent and
illegal business practices . . . deceptive acts . . . and false
advertising" in violation of state and federal law. See
Decision/Order, Giuffre, No. 30163/2010, at 7. Indeed,
the court found that Giuffre and its related dealerships
had "a common practice of strong-arm sales methods
and unethical conduct." Id. at 4. Giuffre never

                              12
appealed or otherwise legally challenged these findings
and conclusions, and the time to appeal that decision
has long since passed. See N.Y. C.P.L.R. § 5513 (time to
appeal is generally thirty days from service of a
judgment on the party bringing the appeal). There was,
therefore, not merely "evidence" of fraudulent conduct
on the part of Giuffre—it was an adjudicated fact.
       That judgment is conclusive evidence of Giuffre's
breach of the unambiguous terms of the DSSA, which
provides that the Agreement may be terminated if
Giuffre "or any Owner, officer, or General Manager of
*Giuffre+, is convicted of any felony or for any violation
of law which in HMA's sole opinion tends to adversely
affect the operation, management, reputation, business
or interests of *Giuffre+ or HMA, or to impair the good
will associated with the Hyundai Marks." DSSA
16(B)(1)(b). Setting aside the references to HMA's "sole
opinion" and "immediate" termination, which Giuffre
contends are displaced by the Vehicle and Traffic Law,
Giuffre remains in clear breach of the DSSA, which
defines the relevant "violations of law" to include "any
finding or adjudication by any court of competent
jurisdiction or government agency that *Giuffre+ has
engaged in any misrepresentation or unfair or deceptive
trade practice." Id. Moreover, because the Agreement
speaks in terms of adjudicated misfeasance, rather than
simple conduct, the breach is not one which subsequent
good behavior could correct.

                      CONCLUSION
       For these reasons, we agree with the district court
that the judgment of the state court was a "reputation
poisoning" incapable of cure. Giuffre Hyundai, No. 13-
cv-0520, 2013 WL 1968371, at *4; 2013 U.S. Dist. LEXIS
67795, at *11; see also In re Best Film & Video Corp., 46 B.R.
at 875 ("Courts, using their good sense, will be able to

                             13
tell breaches which excuse the obligation to give notice
from breaches which do not." (quoting Corbin on
Contracts, 1982 Supplement by Colin K. Kaufman, Part
2, § 1266, at 369–70)). Having provided Giuffre with the
statutorily required written notice of termination ninety
days before terminating the DSSA, HMA was under no
obligation to further extend its dealings with a
franchisee who had been adjudged to have "engaged in
fraudulent and illegal business practices*,+ . . . deceptive
acts*,+ . . . and false advertising."4
         We therefore AFFIRM the judgment of the district
court.

 4
   Giuffre also argues that it was never given sufficient
notice, beyond the 90-day Notice of Termination, to allow an
opportunity to cure. Because we conclude that Giuffre's
breach was incurable, we need not address this argument.
We observe nonetheless that HMA's letter of October 3, 2012,
notified Giuffre that the state court's findings "are extremely
serious and constitute a breach of [the DSSA]" two months
before HMA issued the Notice of Termination. Letter from
Ken Bloech, Regional General Manager, Eastern Region,
HMA, to John Giuffre (Oct. 3, 2012).
                              14