Action Nissan, Inc. v. Hyundai Motor America (Inc)

Court of Appeals for the Eleventh Circuit·Decided August 21, 2024·No. 22-13153·Unpublished

Opinion

[DO NOT PUBLISH]

In the

United States Court of Appeals For the Eleventh Circuit

No. 22-13153

ACTION NISSAN, INC., d.b.a. Universal Hyundai, WILLIAM NERO, Plaintiffs-Appellees,

versus HYUNDAI MOTOR AMERICA,

Defendant-Appellant,

GENESIS MOTOR AMERICA,

Defendant.

2 Opinion of the Court 22-13153

Appeal from the United States District Court for the Middle District of Florida D.C. Docket No. 6:18-cv-00380-WWB-EJK

Before WILLIAM PRYOR, Chief Judge, ROSENBAUM and ABUDU, Circuit Judges. PER CURIAM:

This appeal involves a contract dispute between a national automobile distributor, Hyundai Motor America, (“HMA”), and a car dealership, Action Nissan, Inc., and its owner, William Nero (collectively, “Action Nissan”). The case proceeded to trial, and the jury returned a verdict in Action Nissan’s favor on its breach-ofcontract and breach-of-the-implied-covenant-of-good-faith-and- fair-dealing claims and awarded the business $16 million in damages . After trial, HMA moved for judgment as a matter of law and for a new trial. The district court denied both motions.

On appeal, HMA argues that it is entitled to judgment as a matter of law or a new trial because: (1) the district court’s jury instruction regarding HMA’s obligation under the parties’ agreement included a legally flawed interpretation of a key provision in the contract; and (2) the court’s curative instruction regarding HMA’s assertion of an impossibility defense was misleading, prejudicial , and harmful because it deprived HMA of a central and critical theory of defense. After a thorough review of the record, and

USCA11 Case: 22-13153 Document: 47-1 Date Filed: 08/21/2024 Page: 3 of 23

22-13153 Opinion of the Court 3

with the benefit of oral argument, we affirm the district court’s judgment. I. FACTUAL & PROCEDURAL BACKGROUND Since 1998, Action Nissan, a registered and Florida-based motor vehicle dealer d/b/a Universal Hyundai, has specialized in the sale and service of Hyundai-branded vehicles it obtains from its national distributor, HMA.

In 2006, Action Nissan sued HMA in a separate and unrelated dispute. In August 2009, as a resolution to that lawsuit, HMA and Action Nissan entered into a confidential settlement agreement (the “2009 Agreement”). The instant case revolves around the interpretation of Section 10 of that Agreement which reads, in part:

10. New Luxury Line-make Established by HMA - For a period of ten (10) years after the Effective Date of this Agreement (“the Luxury ROF Period”), HMA agrees that Nero shall have a right of first refusal to be appointed as a dealer for two (2) open points for any new luxury motor vehicle line-make, if any, established by Hyundai Motor Corporation (“HMC”) or any entity in which HMC is the majority owner or has a controlling interest (all herein referred to as “HMC”) and for which HMA or a subsidiary or division of HMA or any entity controlled by HMA (all herein referred to as “HMA”) is granted the rights of distribution in the United States. Nero’s rights of first refusal to be appointed a dealer for such new luxury line-make shall be in a county of his choosing as among the following counties in

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Florida: Broward, Palm Beach, Orange, Osceola, Seminole, Hillsborough, Pasco and Pinellas (“the Eight-County Area”).

(emphasis added). Florida law governs the interpretation of the 2009 Agreement.

In 2008, HMA introduced the Genesis model, a luxury vehicle , as part of its existing Hyundai brand. HMA distributed the Genesis vehicles in the United States through its existing Hyundai dealer network. In 2016, HMA added two new vehicles to the Genesis model. Also in 2016, HMA created a subsidiary company, Genesis Motor America (“GMA”), to oversee the development and distribution of the Genesis vehicles.

In December 2017, GMA applied to the Florida Department of Highway Safety and Motor Vehicles (“DHSMV”) for a distribution rights license for the Genesis models. The DHSMV denied GMA’s application in July 2018 on the ground that a distribution system for Genesis vehicles already existed through current Hyundai dealers.

During the DHSMV application process, on January 26, 2018, HMA and GMA issued a press release, announcing their decision to create a “distinct and properly-sized Genesis retail network .” In the press release, HMA and GMA announced that they would select dealers in the Hyundai dealer network with a Genesis Participation Agreement and offer them the “first opportunity to apply for the Genesis franchise.” In response to HMA and GMA’s announcement, Action Nissan sent letters to HMA on January 29,

22-13153 Opinion of the Court 5

2018, February 14, 2018, and February 28, 2018, attempting to exercise its right of first refusal pursuant to the 2009 Agreement. HMA never responded to any of Action Nissan’s letters. It did, however, send a letter dated March 2, 2018, to all existing Florida Hyundai dealers, including Action Nissan, offering them an opportunity to apply to become an authorized Genesis dealer. Along with the March 2, 2018, letter, HMA and GMA provided a list of “Initial Markets” that dealers could express interest in occupying, which included several geographic regions in Florida and the Eight- County Area mentioned in the parties’ 2009 Agreement.

States then began denying GMA’s applications for Genesis distribution rights on the same grounds that Florida’s DHSMV would; namely, that existing Hyundai dealerships already had the rights to distribute certain Genesis vehicles, so they cannot lose those rights to a new network of Genesis-specific dealerships. In May 2018, HMA and GMA sent a letter to Florida Hyundai dealers explaining that all existing Hyundai dealers would have the opportunity to enter an agreement to sell vehicles from the new Genesis line-make. By December 2018, almost all or all the existing Florida Hyundai dealers entered into agreements to sell the vehicles.

During HMA and GMA’s outreach to dealers, GMA applied again to the Florida DHSMV for a distributor license. On October 30, 2018, the DHSMV issued GMA a distributor license for the new Genesis line-make. By January 2019, the Florida DHSMV had licensed Hyundai dealers to sell vehicles from the new Genesis line- make in Florida.

6 Opinion of the Court 22-13153

On March 12, 2018, Action Nissan sued HMA for breach of contract and breach of the implied covenant of good faith and fair dealing, arguing that HMA violated Action Nissan’s right of first refusal under the 2009 Agreement. In the alternative, Action Nissan brought a claim for anticipatory breach based on HMA’s failure to provide assurance that it would honor Action Nissan’s right of first refusal, or to otherwise respond to the three letters it sent HMA when it attempted to exercise its right of first refusal in early 2018.

Following discovery, the parties cross-moved for summary judgment. The district court found that there were genuine issues of material fact regarding the meaning of “line-make,” “rights of distribution,” and “open point” in the 2009 Agreement that a jury should resolve. However, the district court precluded HMA from presenting a legal impossibility defense based on the DHSMV’s denial of GMA’s December 2017 application because the relevant Florida licensing laws and regulations did not change between the time the parties executed the 2009 Agreement and the time that performance under the Agreement became ripe, thus making the DHSMV’s adverse July decision foreseeable.

During the week-long trial, each party presented voluminous evidence regarding their respective interpretations of the terms “line-make,” “rights of distribution,” and “open point” within the terms of the 2009 Agreement. Action Nissan introduced evidence that the Initial Markets included in the March 2018 letter were open points. It also introduced evidence that two Genesis-

22-13153 Opinion of the Court 7

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