Reno Dealership Group, LLC v. General Motors, LLC

• Court: Court of Appeals for the Ninth Circuit
• Decided: January 18, 2023
• Docket: 21-55609
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS JAN 18 2023 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

RENO DEALERSHIP GROUP, LLC, a No. 21-55609 limited liability company, D.C. No. 2:21-cv-00696-MCS-PD Plaintiff-Appellant,

v. MEMORANDUM*

GENERAL MOTORS, LLC, a Delaware limited liability company; ROBERT COFFEY, an individual,

Defendants-Appellees.

Appeal from the United States District Court for the Central District of California Mark C. Scarsi, District Judge, Presiding

Argued and Submitted May 17, 2022 Pasadena, California

Before: MILLER and COLLINS, Circuit Judges, and KORMAN,** District Judge.

Plaintiff Reno Dealership Group, LLC (“RDG”) timely appeals from the

district court’s dismissal with prejudice of RDG’s operative complaint against

Defendants General Motors LLC (“GM”) and Robert Coffey, who is alleged to be

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. ** The Honorable Edward R. Korman, United States District Judge for the Eastern District of New York, sitting by designation. the “Western Regional Director” for GM. The district court had subject matter

jurisdiction under 28 U.S.C. § 1332(a), and we have appellate jurisdiction under 28

U.S.C. § 1291. We review de novo the district court’s dismissal of the complaint

for failure to state a claim upon which relief may be granted. See Curtis v. Irwin

Indus., Inc., 913 F.3d 1146, 1151 (9th Cir. 2019). “We review the denial of leave

to amend for an abuse of discretion, but we review the question of futility of

amendment de novo.” Wochos v. Tesla, Inc., 985 F.3d 1180, 1197 (9th Cir. 2021)

(citation omitted). We affirm.

I

The district court correctly held that the operative complaint failed to state a

claim against GM for breach of the Dealer Sales & Services Agreement

(“Agreement”) between RDG and GM.

A

RDG contends that the Agreement imposed obligations on GM to regulate or

supervise false advertising or unfair competition by other GM dealerships. Under

Michigan law—which applies to the construction of the Agreement—the asserted

existence of such a contractual obligation raises a question of law. Innovation

Ventures v. Liquid Mfg., 885 N.W.2d 861, 870 (Mich. 2016). “Absent an

ambiguity or internal inconsistency, contractual interpretation begins and ends with

the actual words of a written agreement.” Id. (citation omitted). “If the contractual

2 language is unambiguous, courts must interpret and enforce the contract as written,

because an unambiguous contract reflects the parties’ intent as a matter of law.”

Phillips v. Homer (In re Egbert R. Smith Trust), 745 N.W.2d 754, 758 (Mich.

2008). Construed in accordance with its plain language, the Agreement does not

impose the obligations RDG asserts.

The operative complaint invokes §§ 5.1.1, 5.1.5, and 5.1.6 of the Agreement,

but these provisions do not support RDG’s theory. By its terms, § 5.1.1 primarily

sets forth various obligations of “Dealer” (i.e., RDG) with respect to the

promotion, sales, and service of GM products, including the obligation to “comply

with the retail sales standards established by [GM].” The only obligation that

§ 5.1.1 imposes on GM is the duty to “consult with the appropriate dealer council

and the national dealer council before amending the retail sales standards.”

Section 5.1.5 requires GM to “conduct general advertising programs to promote

the sale of Products for the mutual benefit of [GM] and Dealers,” to “make

available to Dealer advertising and sales promotion materials,” and to “advise

Dealer of any requirements or applicable charges.” Section 5.1.6 requires Dealer

“to advertise and conduct promotional activities that are lawful” and states that

“Dealer will not advertise or conduct promotional activities in a misleading or

unethical manner” or in a way “harmful to the reputation of Dealer, [GM], or its

Products.” RDG does not contend that any of these specific obligations that are

3 imposed on GM was breached. And nothing in the language describing GM’s

specific duties concerning general advertising programs, promotional materials,

and program requirements imposes on GM a contractual obligation to RDG to

supervise or regulate the conduct of other dealers.

RDG nonetheless argues that, because GM’s comparable contracts with

other dealers presumably require those dealers to likewise refrain from misleading

and unethical advertising, GM must be understood to have a contractual obligation

owed to RDG to enforce those prohibitions on such advertising. This contention

fails. Even granting RDG’s assumption about what the other dealers’ contracts

say, the result is simply a series of contracts in which each dealer has obligations to

GM, and GM in turn has particular obligations to each respective dealer. RDG still

cannot point to any contractual language that even arguably says that GM has

made any promises to RDG about how GM will enforce its rights, under other

dealers’ contracts, with respect to those other dealers’ advertising. Although RDG

cites the preamble to the Agreement, its general statements about the purposes and

objectives of the Agreement do not create obligations that otherwise lack any basis

in the operative language of the Agreement.

Nor can RDG argue that it is a third-party beneficiary of the other dealers’

contractual obligations towards GM with respect to their advertising and

promotion. Under Michigan law, a third-party beneficiary must be “directly

4 referred to in the contract, before the third party is able to enforce the contract.”

Schmalfeldt v. North Pointe Ins., 670 N.W.2d 651, 654 (Mich. 2003) (citing Mich.

Comp. Laws § 600.1405). RDG has not alleged that it is directly referred to in

Defendant GM’s contracts with other dealers. On the contrary, the operative

complaint alleges that RDG’s Agreement “is the same agreement [GM] enters into

with all of its authorized dealers,” and the text of that Agreement unambiguously

states that it is “not enforceable by any third parties and is not intended to convey

any rights or benefits to anyone who is not a party to this Agreement.”

B

RDG also alleges that GM breached the Agreement by “failing to deliver

new motor vehicles to [RDG] in a fair and equitable manner.” Specifically, RDG

alleges that GM failed to make new vehicles available in a timely manner and that

when vehicles arrived, they were often “damaged” or “in poor condition.”

In contending that GM had an obligation to timely supply new vehicles,

RDG relies primarily on §§ 6.1 and 6.4.1 of the Agreement. Section 6.1 states that

GM “will endeavor to distribute new Motor Vehicles among its dealers in a fair

and equitable manner.” However, that provision contains express cautionary

language noting that “[m]any factors affect the availability and distribution of

Motor Vehicles to dealers, including . . . weather and transportation conditions,

governmental regulations, and other conditions beyond the control of General

5 Motors.” Section 6.1 further states that “GM reserves to itself discretion in

accepting orders and distributing Motor Vehicles, and its judgments and decisions

are final” (emphasis added). Section 6.4.1 provides that GM will “make available”

a “mix of models and series of Motor Vehicles,” but this obligation is expressly

“subject to Article 6.1.” At most, the operative complaint alleges that GM ineptly

managed the flow of new vehicles through ports of entry, resulting in substantial

delays that imposed significant hardships on RDG and other dealers. These

allegations fail to establish that GM did not “endeavor” to distribute vehicles fairly

and equitably, especially given GM’s reservation of final “discretion” in

distributing vehicles.

RDG also relies on § 5.3, which states that GM will provide “reasonable

support to assist Dealer’s attainment of customer satisfaction.” But the highly

general obligation to provide “reasonable support” to assist in attaining customer

satisfaction does not override the Agreement’s specific provisions concerning

delivery of vehicles by GM. See, e.g., DeFrain v. State Farm Mut. Auto. Ins., 817

N.W.2d 504, 509 n.22 (Mich. 2012).

RDG’s further theory that the mere delivery of a vehicle with damage

constitutes a breach of the Agreement finds no support in the contractual language.

On the contrary, § 7.1 of the Agreement expressly contemplates that transportation

vehicle damage and other vehicle quality issues will inevitably arise, and it

6 contains a specific provision requiring GM to cover the costs of “transportation

damage repairs” and other specified issues identified in dealer inspections. The

operative complaint contains no allegations that GM refused to cover appropriate

repairs. To the extent that GM delivered damaged vehicles that it paid to repair,

that does not constitute a breach of the Agreement.

II

The district court correctly held that the operative complaint fails to state a

claim of negligence against GM or Coffey.

To state a claim of negligence under Michigan law, a plaintiff must

demonstrate, inter alia, that “the defendant owed the plaintiff a legal duty.”

Loweke v. Ann Arbor Ceiling & Partition Co., 809 N.W.2d 553, 556 (Mich.

2011).1 RDG cites no authority that would support recognizing a novel duty owed

by a manufacturer to its dealers to supervise the promotional activities of its other

dealers. Moreover, Michigan law generally declines to recognize a tort-based duty

1 The parties’ principal briefs do not expressly address the question of which State’s law applies to RDG’s negligence claim. RDG appears to assume that the negligence claim is governed by Michigan law, because it cites almost exclusively Michigan caselaw. GM, without objection, construes RDG’s brief as resting upon Michigan law. Accordingly, we will assume without deciding that RDG’s opening brief is correct that Michigan law governs its negligence claim. To the extent that RDG’s reply brief could be construed to suggest that Nevada tort law governs the elements of RDG’s negligence claim, we deem any such argument to be forfeited. See Smith v. Marsh, 194 F.3d 1045, 1052 (9th Cir. 1999) (holding that “arguments not raised by a party in its opening brief are deemed waived”).

7 among contracting parties to exercise reasonable care to avoid “‘intangible

economic losses,’” and RDG did not cite below any basis for finding “an

independent legal duty distinct from the duties arising out of the contractual

relationship.” Rinaldo’s Constr. Corp. v. Mich. Bell Tele. Co., 559 N.W.2d 647,

658 (Mich. 1997) (citation omitted). For the first time on appeal, RDG contends

that Nevada Administrative Code § 482.120’s prohibition on “indirectly”

“caus[ing]” the misleading advertising of vehicles supports recognition of a

manufacturer’s tort duty to one dealer to stop another dealer’s misleading

advertising. Even assuming that this argument has not been forfeited by RDG’s

failure to raise it below, a prohibition against causing misleading advertising does

not, without more, give rise to an affirmative negligence-based duty to intervene to

stop a dealer’s misleading advertising, much less to do so to prevent economic

losses to that dealer’s competitors.

RDG likewise fails to support its contention that GM had a tort-based duty

towards its dealers to exercise reasonable care to avoid economic losses associated

with the delivery of vehicles. RDG points to no precedent that would support

recognition of such a duty by a manufacturer, and it did not cite below any basis

for such a duty that would be distinct from the manufacturer’s contractual

obligations. For the first time on appeal, RDG points to statutory duties imposed

by Nevada and Michigan law on vehicle manufacturers with respect to the delivery

8 or distribution of vehicles. See MICH. COMP. LAWS § 445.1574(a); NEV. REV.

STAT. § 482.36388. Even assuming that this argument has not been forfeited, it

provides no basis for reversal here. Although a statutory violation may establish

that a duty of care that is owed has been violated, it does not, without more,

establish that such a tort duty is owed to a particular plaintiff in the first place. See

Sabbagh v. Hamilton Psych. Servs., PLC, 941 N.W.2d 685, 701–02 (Mich. App.

2019). Although the cited statutes create certain obligations respecting the

delivery of vehicles, we have not been cited any authority that would support the

view that these statutory obligations give rise to a tort duty on the part of a

manufacturer to avoid economic harms to dealers in connection with such delivery.

III

Beyond its reliance on the newly cited statutes and regulations discussed

above, RDG has not provided any other basis for concluding that the district court

erred in denying leave to amend. Accordingly, RDG’s operative complaint was

properly dismissed with prejudice for failure to state a claim.2

AFFIRMED.

2 We therefore do not address whether the district court erred in relying on the alternative ground that, by filing its opposition to Defendants’ motion to dismiss over a week late, RDG should be deemed, under the district court’s local rules, as having consented to the granting of that motion.