Turner v. Subaru of America, Inc.

566 F. Supp. 143, 1983 U.S. Dist. LEXIS 16463
CourtDistrict Court, W.D. Virginia
DecidedJune 6, 1983
DocketCiv. A. No. 82-0111-L
StatusPublished

This text of 566 F. Supp. 143 (Turner v. Subaru of America, Inc.) is published on Counsel Stack Legal Research, covering District Court, W.D. Virginia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Turner v. Subaru of America, Inc., 566 F. Supp. 143, 1983 U.S. Dist. LEXIS 16463 (W.D. Va. 1983).

Opinion

MEMORANDUM OPINION

TURK, Chief Judge.

Plaintiff, a sole proprietor operating an automobile dealership in Martinsville, Virginia, instituted this action against defendants on June 14, 1982, alleging that they violated the Virginia Retail Franchising Act, Va.Code § 13.1-557 to 13.1-574 (“VRFA”) in connection with incidents that occurred between May 9, 1978 and January 31, 1979.

Defendant Subaru of America, Inc. (“SOA”) is a major, but not the exclusive,, importer of Subaru automobiles into the United States. SOA has in turn entered into contracts with some fifteen distributors, each representing a different geographical area, by which distributors are entitled to grant dealership contracts. SOA supplies the distributors, and the distributors supply the dealers.

SOA entered into a written distributorship agreement with Mid-Atlantic Subaru Star, Ltd. (“MASS”) in 1970. MASS thereby became SOA’s distributor over an area which included Virginia. On April 8, 1977, MASS entered into a written “Subaru Dealership Agreement” with plaintiff. MASS and plaintiff were the sole parties to the agreement. (The agreement, however, was a form contract supplied to MASS by SOA.) It provided for a termination date of December 31, 1977. In addition, the agreement provided that MASS could terminate the agreement, inter alia, in the event of “Termination, expiration, or relinquishment of Distributor’s franchise as a distributor of Subaru Products.” ¶ 17.2.13. On December 16, 1977, MASS and plaintiff entered into an addendum by which the contract’s term was extended until December 31,1978.

On April 20, 1978, SOA incorporated defendant Subaru Atlantic, Inc. (“SAI”) in Maryland, as a wholly owned subsidiary. On May 9, 1978, SOA sent plaintiff a mail-gram indicating that the MASS distributorship agreement had been terminated on May 2,1978. The mailgram further stated: “As you may know, your dealership agreement with Mid Atlantic automatically terminated upon the termination of the Mid Atlantic franchise to distribute Subaru products. This letter is not intended to create, extend, or renew any dealership agreements.” The mailgram notified plaintiff that SAI was the new distributor (no written agreement exists between SOA and SAI), and indicated that Mr. James Welsh, SAI’s general manager, would contact plaintiff “and explain procedures for vehicle purchases and floor plan arrangements, parts purchases and payments, and submission of warranty claims and owner registrations during a sixty day transition period.” Finally, it said:

Upon obtaining distributor licensing or other authority to operate, SAI will make every effgrt [sic] to fulfill your immediate needs for Subaru products. However, a personal visit and a favorable dealer evaluation by a SAI representative will be necessary before SAI can offer to enter into a new dealership agreement with your company after the sixty day transition period.

This mailgram “frightened” and “upset” plaintiff. Turner Dep. at 20, 13. He consulted some of his employees concerning it, but not an attorney. Id. at 44. He just “continued as usual, and waited to see what was going to happen next.” Id. at 13. He expected SAI “to evaluate everything and [145]*145pick up where Mid-Atlantic had left off.” Id. at 23.1

The mailgram did not lead plaintiff to understand that MASS was no longer a dealer because it “didn’t mean there wasn’t going to be some court action, and it didn’t mean it wasn’t still up in the air.” Id. at 43. However, he received a communication from MASS dated May 17, 1978 concerning this “subject”: “Termination of MAS[S] and Your Dealership Agreement.” The letter did not explicitly indicate that Plaintiff had been terminated, or that the dealership contract had been cancelled by MASS, but both of those facts are evident from the letter’s tenor and “subject” heading.

In a letter dated June 27, 1978, SAI contacted “companies ... which were authorized Subaru dealers on May 4,1978” within SAI’s zone of operations. The letter described SAI’s organization and intentions, and indicated:

As you know, we completed a review of your company some weeks ago, and have since been analyzing all of those reports. Within the next few weeks, we will be in contact with you to invite you to Columbia^ Maryland] to discuss what is required in order to enter into a franchise agreement. We will be discussing working capital requirements, facilities, personnel, sales potentials, and new car floor plan requirements amongst other minimum requirements.
Therefore, in order to accomplish the above objectives in the most orderly way possible, we are extending to September 30, 1978, the transition period first mentioned in Harvey Lamm’s mailgram to you dated May 12, 1978, and its several attachments. We must again stress, however, that neither this mailgram nor any prior mailgram or letters are intended to, and they do not, create, extend or renew any dealership agreements.

The letter then indicated what former dealers could expect in terms of shipments over the following several months. Cars would be distributed on what SAI considered to be “a fair and equitable basis,” based on each dealer’s record, inventory, and “a reasonable sales forecast.”

During August 1978, SAI promulgated national “Subaru Dealership Minimum Standards” to which all Subaru dealers would be required to conform.

On September 14,1978, SAI sent plaintiff a letter indicating that the negotiation process for franchise agreements would begin immediately. Three blank forms were sent to plaintiff pertaining to his financial status, with the instructions to complete and return them. The letter said, in addition: “We must again stress that neither this letter nor any prior Mailgrams or letters are intended to, and they do not create, extend or renew any dealership agreements.” Plaintiff says these documents were executed and sent to SAL Turner Dep. at 25-26. (Defendants maintain these were never sent. Coyle Aff., ¶ 7. For the purpose of deciding this motion, the court assumes that plaintiff’s version is correct.)

On September 27, 1978, SAI again wrote to plaintiff in anticipation of an upcoming meeting. Included was a statement informing plaintiff as to his deficiencies in complying with the August 1978 “minimum standards.” Because of the deficiencies, the enclosure stated, SAI could not at that time offer plaintiff a Subaru dealership. However, it said:

By our letter to you of June 27, 1979, we advised your company that Subaru Atlantic, Inc. would attempt to meet your day-to-day needs for Subaru Products through September 30,1978. That voluntary commitment on our part still stands and is hereby extended to January 31, 1979, provided that your company furnishes us with [various requirements].

The deficiencies, and the correction date assigned thereto, were: (1) lack of current financial statement — Nov. 10, 1978; (2) in[146]*146sufficient net working capital — Jan. 31, 1979; (3) insufficient cash — Jan. 31, 1979; and (4) no showroom — Jan. 31,1979. Plaintiff was required to execute, by October 31, 1978, an enclosed letter of intent indicating his intention to remedy the deficiencies by the designated dates. His failure to do so would result in SAI’s decision not to enter into a franchise agreement becoming final on January 31, 1979.

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Bluebook (online)
566 F. Supp. 143, 1983 U.S. Dist. LEXIS 16463, Counsel Stack Legal Research, https://law.counselstack.com/opinion/turner-v-subaru-of-america-inc-vawd-1983.