Colonial Chevrolet Co., Inc. v. United States
10-647
| Fed. Cl. | Jun 14, 2017Background
- Former GM franchisees (the “GM plaintiffs”) sued the United States claiming a Fifth Amendment taking when the federal government conditioned bailout aid in 2009 on GM terminating dealer franchise agreements.
- GM offered wind-down agreements on June 1, 2009 that included broad releases covering claims "arising out of or relating to" the Dealer Agreements; many plaintiffs signed and received payments.
- The government moved for summary judgment arguing those releases (though executed with Old GM, not the United States) bar plaintiffs’takings claims because the U.S., as majority shareholder of new GM, is a third-party beneficiary.
- Plaintiffs moved under RCFC 56(d) for discovery to: (1) probe the government’s role in drafting/overseeing the wind-down agreements (to challenge the scope or intent of the releases), (2) investigate alleged governmental misrepresentation and duress that would invalidate releases, and (3) obtain data on the federal fleet of GM vehicles to value dealerships.
- The court granted limited discovery into the government’s role in drafting the releases and into the government’s GM fleet, but denied discovery into alleged fraudulent misrepresentation or duress by the government.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs may obtain discovery into the government’s role in drafting the wind-down releases | Need to show intent/scope of releases and whether U.S. was involved in drafting; such evidence could create ambiguity and defeat summary judgment | United States not party to agreements; releases on their face bar claims and third‑party beneficiary status protects U.S. | Discovery allowed, limited to government’s role in drafting/releases to determine scope and intent |
| Whether plaintiffs may obtain discovery into allegations that the government fraudulently misrepresented its role (fraud claim) | Plaintiffs allege concealment of government's role and reliance on public statements (e.g., Obama) to show misrepresentation | Government contends public statements show government disclosed shareholder status; no basis to allege intentional misrepresentation | Discovery denied as plaintiffs failed to show facts supporting fraudulent misrepresentation under Michigan law |
| Whether plaintiffs may obtain discovery into alleged duress (economic coercion) invalidating releases | Short 12‑day turnaround forced signings; plaintiffs lacked time for counsel, so releases were procured under duress | Duress requires an unlawful act by coercer; fear of financial ruin alone insufficient; no allegation of unlawful act | Discovery denied; plaintiffs failed to allege unlawful coercion required by Michigan duress doctrine |
| Whether plaintiffs may obtain discovery about the federal GM vehicle fleet to value dealerships | Fleet size/use affected dealership value and is not fully public; needed for valuation of dealerships that did not sign releases | Government points to public GSA Federal Fleet Report and existing dealer records | Discovery allowed, limited to government’s plan for servicing/ownership of GM vehicles because the Fleet Report lacks the specific GM data plaintiffs need |
Key Cases Cited
- A & D Auto Sales, Inc. v. United States, 748 F.3d 1142 (Fed. Cir. 2014) (describes plaintiffs’ takings theory arising from 2009 GM restructuring)
- Opryland USA, Inc. v. Great Am. Music Show, Inc., 970 F.2d 847 (Fed. Cir. 1992) (discovery must be allowed when reasonably directed to facts essential to oppose summary judgment)
- W. Chelsea Buildings, LLC v. United States, 109 Fed. Cl. 5 (Fed. Cl. 2013) (United States bears burden when asserting third‑party beneficiary rights in private releases)
- United States v. State Farm Mut. Auto. Ins. Co., 936 F.2d 206 (5th Cir. 1991) (principle cited regarding third‑party beneficiary and releases)
- Gortney v. Norfolk & W. Ry. Co., 549 N.W.2d 612 (Mich. Ct. App. 1996) (release interpretation: plain meaning controls; ambiguity permits inquiry into intent)
- Titan Ins. Co. v. Hyten, 817 N.W.2d 562 (Mich. 2012) (elements and strict proof standard for misrepresentation under Michigan law)