Smith's Sports Cycles, Inc. v. American Suzuki Motor Corporation.
2011 Ala. LEXIS 181
| Ala. | 2011Background
- Smith's Sports Cycles, Inc. operated a Suzuki dealership in Tuscaloosa under a 1989 franchise agreement; Smith also sold other manufacturers' products.
- Suzuki issued a Notice of Default and Opportunity to Cure on April 17, 2006 listing six default areas, mainly dealership appearance, with 180-day cure period.
- Suzuki reiterated in a June 27, 2006 letter that Smith remained in default; on October 20, 2006 Suzuki issued a Notice of Termination based, in part, on appearance and facility condition.
- Smith sued Suzuki for breach of contract and Franchise Act violations; the trial court, in a 12-day bench trial, entered judgments for Suzuki on both claims and terminated the franchise effective 42 days after judgment.
- The trial court held Suzuki satisfied notice and cure requirements and that there was good cause and good faith for termination under the Franchise Act; smith appeals.
- On appeal, the court affirmed, holding the appearance problems were continuous and evolving, permitting termination despite knowledge more than 180 days earlier, and that Suzuki acted in good faith.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether termination complied with § 8-20-5(b)(1) | Smith contends 180-day window bars stale breaches. | Suzuki argues continuous/evolving breaches permit termination despite earlier knowledge. | Term maintained; continuous breaches allowed termination within § 8-20-5(b)(1). |
| Whether Smith breached § 1.4 and § 3.3 | Smith asserts no substantial breach of appearance or service-area standards. | Suzuki proved deteriorating appearance and disorganized service area breached the contract. | Evidence supported breaches of § 1.4 and § 3.3; termination grounded. |
| Whether Suzuki acted in good faith under the Franchise Act | Smith contends lack of good faith in termination. | Suzuki acted in good faith and in compliance with notice and cure requirements. | Findings of good faith are supported; termination upheld. |
| Whether the trial court erred by granting JMOL on Smith's breach claim | Smith argues the court should have found a breach by Suzuki. | Suzuki contends there was no substantial evidence of Suzuki breach. | No reversible error; evidence insufficient to support Suzuki breach claim. |
Key Cases Cited
- Espinoza v. Rudolph, 46 So. 3d 403 (Ala. 2010) (ore tenus standard; de novo review of law)
- Walters v. Chevron U.S.A., Inc., 476 F. Supp. 353 (N.D. Ga. 1979) (continuous breaches; 180-day/notice rationale)
- Mobil Oil v. Gruber, 570 F. Supp. 1088 (D.C. Mich. 1983) (each new ongoing breach can be a ground for termination)
- Amoco Oil Co. v. D.Z. Enters., Inc., 607 F. Supp. 595 (E.D.N.Y. 1985) (ongoing trademark violations; repeated breaches as grounds)
- Carroll Kenworth Truck Sales, Inc. v. Kenworth Truck Co., 781 F.2d 1520 (11th Cir. 1986) (good faith standard under UCC; definition of good faith)
- Sutherlin Toyota, Inc. v. Toyota Motor Sales USA, Inc., 549 So. 2d 460 (Ala. 1989) (Franchise Act purpose and scope of regulation)