Powerhouse Motorsports Group, Inc. v. Yamaha Motor Corp., USA
221 Cal. App. 4th 867
| Cal. Ct. App. | 2013Background
- Powerhouse operated a Yamaha motorcycle dealership under a franchise agreement; it closed in June 2008 and entered negotiations to transfer the franchise to MDK, an existing Yamaha dealer.
- Yamaha, without notifying Powerhouse or MDK of hostile intent, initiated a Vehicle Code §3060 termination procedure for closure of operations and served a termination notice; Powerhouse received notice and filed a late protest to the New Motor Vehicle Board (the Board).
- The Board dismissed Powerhouse’s protest as untimely; as a result MDK canceled the purchase and Powerhouse was liquidated; Pilg later filed bankruptcy and the trustee continued the litigation.
- Powerhouse sued Yamaha in state court asserting (i) violation of §11713.3 (unreasonable withholding of consent to sale), (ii) intentional interference with contractual relations and prospective economic advantage, and (iii) breach of contract and the covenant of good faith and fair dealing; Pilg brought related claims but his §11713.3 claim was nonsuited.
- A jury returned verdicts for Powerhouse and Pilg awarding compensatory and punitive damages; the trial court also awarded attorney fees under Vehicle Code §11726 for Powerhouse’s §11713.3 claim.
- On appeal Yamaha argued the Board’s §3060 termination precluded Powerhouse’s court claims and challenged damages and fees; the Court of Appeal affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Board’s §3060 protest dismissal and termination preclude Powerhouse’s §11713.3 and common-law claims | Powerhouse: Board’s timeliness ruling does not extinguish statutory/common-law rights; courts retain jurisdiction under §3050(e) | Yamaha: Franchise terminated as a matter of law via §3060; no franchise remained to sell or approve, so court claims are barred | Held: Board’s timeliness ruling does not preempt court claims; §3050(e) preserves court jurisdiction and §11713.3 duties survive §3060 procedure |
| Whether Yamaha unreasonably withheld consent to the MDK sale under §11713.3(d)(1) | Powerhouse: Yamaha represented sale could be approved, encouraged sale, then refused to consider MDK despite MDK’s qualifications and submitted materials | Yamaha: Termination via §3060 justified refusal; once terminated there was nothing to approve | Held: Substantial evidence supported jury finding Yamaha unreasonably withheld consent; Yamaha’s §3060 defense did not negate §11713.3 duties |
| Validity of intentional interference with contractual relations claim against Yamaha | Powerhouse: Yamaha knowingly disrupted the Powerhouse–MDK sale and intended to prevent performance | Yamaha: Applied Equipment bars interference claims against non-strangers/parties with legitimate interests; Yamaha had a legitimate interest as franchisor | Held: Claim permitted; Applied Equipment was not extended to bar liability here because Yamaha’s role did not make it a contracting party with authority over contract terms beyond approval rights |
| Damages, punitive damages, and attorney fees (mitigation; punitive; §11726 fees) | Powerhouse: Jury reasonably awarded compensatory and punitive damages and fees for willful §11713.3 violation | Yamaha: Damages excessive, mitigation required, punitive not allowed for contract, managing-agent requirement not met, and no willful violation to support §11726 fees | Held: Jury award supported by substantial evidence; mitigation was a jury issue; punitive damages permissible for torts on the record and evidence supported managing-agent finding; §11726 fees proper because Yamaha acted willfully in violating §11713.3 |
| Whether Pilg’s individual §11713.3 claim should proceed | Pilg: As officer/shareholder he was injured by Yamaha’s actions and protected by §11713.3 | Yamaha: §11713.3 protects dealers/franchise interests; Pilg did not personally transfer franchise interest | Held: Nonsuit affirmed — Pilg had no separate protected interest in the franchise transfer and could not maintain the §11713.3 claim |
Key Cases Cited
- Phillips, Spallas & Angstadt, LLP v. Fotouhi, 197 Cal.App.4th 1132 (discussing standard for independent review of legal questions)
- Kavanaugh v. West Sonoma County Union High School Dist., 29 Cal.4th 911 (standards for independent review)
- Tesoro Del Valle Master Homeowners Assn. v. Griffin, 200 Cal.App.4th 619 (substantial-evidence review of jury findings)
- Tovas v. American Honda Motor Co., 57 Cal.App.4th 506 (franchise statutory scheme and dealer protections)
- New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (legislative intent behind dealer-protective statutes)
- Hardin Oldsmobile v. New Motor Vehicle Bd., 52 Cal.App.4th 585 (limits on Board jurisdiction under §3050/3060)
- Mazda Motor of America, Inc. v. New Motor Vehicle Bd., 110 Cal.App.4th 1451 (Board jurisdiction and limitations)
- Miller v. Superior Court, 50 Cal.App.4th 1665 (administrative exhaustion and Board power limits)
- Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal.4th 503 (limits on interference tort vs. contracting parties)
- White v. Ultramar, Inc., 21 Cal.4th 563 (definition of managing agent for punitive damages)
- Calvillo-Silva v. Home Grocery, 19 Cal.4th 714 (definition of willful conduct for fee awards)