EDWIN L. EDWARDS, et al. v. KIA MOTORS OF AMERICA, INC.
No. 06-14306
United States Court of Appeals, Eleventh Circuit
May 17, 2007
D.C. Docket No. 05-01510-CV-5-CLS
EDWIN L. EDWARDS, et al., Plaintiff-Appellant, versus KIA MOTORS OF AMERICA, INC., Defendant-Appellee.
Appeal from the United States District Court for the Northern District of Alabama
(May 17, 2007)
Before HULL and MARCUS, Circuit Judges, and BARZILAY, Judge.
Barzilay, Judge:
This appeal arises from a disagreement concerning the application of the
According to the Appellants, the language of
After thorough review of the record and oral argument, this Court cannot determine with any certainty whether the relevant provisions of the Franchise Act operate to prohibit enforcement of the Release. Since the resolution of this case turns on the interpretation of unsettled Alabama law, we certify this issue to the Alabama Supreme Court. See Pozzi Window Co. v. Auto-Owners Ins., 446 F.3d 1178, 1187 (11th Cir. 2006); Tobin v. Mich. Mut. Ins. Co., 398 F.3d 1267, 1274 (11th Cir. 2005). As to the remaining issues, we affirm.
I. Background
In 2002, Edwards contacted KMA and expressed interest in establishing a Kia automobile dealership in Opelika, Alabama, to which KMA agreed, provided that Edwards first purchase a struggling dealership in Huntsville, Alabama. Edwards consented and entered into a Kia Dealer Sales & Service Agreement (“Dealer Agreement“) with KMA as owner of the Kia dealership in Huntsville, Alabama in August 2002. To operate the Huntsville dealership, Edwards formed a limited liability company called ELL 12, which he owned exclusively.
After sustaining significant losses,4 Edwards identified a potential buyer, Fletcher Automotive No. 18, LLC (“Fletcher“), and in October 2004, they reached a tentative agreement for the sale of the Huntsville dealership. One of the terms in Fletcher‘s agreement with Edwards required that the sale be completed by December 31, 2004. However, pursuant to the Dealer Agreement, Edwards was required to obtain KMA‘s approval before selling the Huntsville dealership to
On July 13, 2005, Edwards and ELL 12 commenced this action in United States District Court for the Northern District of Alabama, notwithstanding the
II. Jurisdiction and Standard of Review
This Court has jurisdiction over appeals from the Northern District of Alabama pursuant to
A. Application of the Franchise Act to the Release
Although the district court decided this case based on the distinction between the terms “waiver” and “release,” see Edwards, No. CV-05-S-1510-NE, slip op. at 12, during oral argument, both parties conceded that the terms “waiver” and “release” can be synonymous.6 Therefore, the Court need not review the district court‘s reasoning on that particular issue. Instead, the relevant inquiry concerns whether the Franchise Act permits an automobile dealer to bring a claim under the Act, despite the fact that both parties already executed a mutual release agreement in which the dealer relinquished all existing legal claims against the manufacturer in exchange for valid consideration.
“As in any case of statutory construction, our analysis begins with the language of the statute.” Hughes Aircraft Co. v. Jacobson, 525 U.S. 432, 438 (1999) (quotations & citation omitted). However, “even when the plain meaning [does] not produce absurd results but merely an unreasonable one plainly at variance with the policy of the legislation as a whole this Court has
Notwithstanding the terms, provisions, or conditions of any dealer agreement or franchise or the terms or provisions of any waiver, and notwithstanding any other legal remedies available, any person who is injured in his business or property by a violation of this chapter by the commission of any unfair and deceptive trade practices, or because he refuses to accede to a proposal for an agreement which, if consummated, would be in violation of this chapter, may bring a civil action in a court of competent jurisdiction in this state to enjoin further violations, to recover the damages sustained by him together with the costs of the suit, including a reasonable attorney‘s fee.
The legislature finds and declares that the distribution and sale of motor vehicles within this state vitally affect the general economy of the state and the public interest and the public welfare, and that in
order to promote the public interest and the public welfare, and in the exercise of its police power, it is necessary to regulate motor vehicle manufacturers, distributors, dealers and their representatives and to regulate the dealings between manufacturers and distributors or wholesalers and their dealers in order to prevent fraud and other abuses upon the citizens of this state and to protect and preserve the investments and properties of the citizens of this state.
KMA argues, however, that Alabama law expressly mandates that “[a]ll receipts, releases and discharges in writing . . . must have effect according to their terms and the intentions of the parties thereto.”
Notwithstanding the terms, provisions, or conditions of any dealer agreement or franchise or the terms or provisions of any waiver, prior to the termination, cancellation, or nonrenewal of any dealer agreement or franchise, the following acts or conduct shall constitute unfair and deceptive trade practices: . . . (3) For any manufacturer, factory branch, factory representative, distributor, or wholesaler, distributor branch or distributor representative: . . . (m) To prospectively assent to a release, assignment, novation, waiver, or
estoppel which would relieve any person from any liability or obligation under this chapter or to require any controversy between a new motor vehicle dealer and a manufacturer to be referred to any person other than the duly constituted courts of this state or the United States, if the referral would be binding on the new motor vehicle dealer.
Taken together,
Although cases from other jurisdictions often enforce similar release agreements, in those instances the retrospective releases or good faith settlements are explicitly excepted from the purview of the franchise regulation in question. See Sportique Motors, Ltd., 195 F. Supp. 2d at 392; Schmitt-Norton Ford, Inc., 524 F. Supp. at 1104-05. Unfortunately, there is no provision in the Franchise Act that instructs the Court as to whether a good faith retrospective release is enforceable or voidable. See
B. Economic Duress
Alternatively, Appellants claim that the Release is voidable because it was obtained through economic duress. Further, Appellants contend that the question of economic duress is a matter for a jury to decide and, therefore, was improperly disposed of on summary judgment. Because the district court properly found that Appellants failed to satisfy the first and third prongs of economic duress, we affirm.
Though Appellants correctly assert that “a question of duress is ordinarily a matter for the jury,” Newburn v. Dobbs Mobile Bay, Inc., 657 So. 2d 849, 851 (Ala. 1995), this tenet does not mean that a claim of economic duress can never be resolved on summary judgment. See Wilson v. S. Med. Ass‘n, 547 So. 2d 510, 514 (Ala. 1989) (holding that summary judgment was proper when plaintiff had not shown “a scintilla of evidence of fraud or duress“). Hence, the fact that Appellants raised a defense of economic duress does not automatically require the district court to deny KMA‘s motion for summary judgment.
The defense of economic distress has three essential elements: “(1) wrongful
economic duress must be based on conduct of the opposite party and not merely on the necessities of the purported victim. The entering into a contract with reluctance or even dissatisfaction with its terms because of economic necessity does not, of itself, constitute economic duress invalidating the contract. Unless unlawful or unconscionable pressure is applied by the other party to induce the entering into a contract, there is not economic compulsion amounting to duress.
Id. (quotations & citations omitted); see Newburn, 657 So. 2d at 852 (“[T]he ‘wrongful act’ prong of the test for economic duress is not satisfied unless the victim has acted in response to unlawful or unconscionable pressure.“). In addition to showing a wrongful act, “the victim must show that he had no reasonable alternative but to agree to the other party‘s terms or face serious financial
1. Wrongful Acts or Threats
There was no “wrongful act” in the context of a duress analysis because KMA did not present unfavorable contractual terms to Appellants before acting wrongfully to coerce their consent. Although KMA‘s purported failure to pay ELL 12 for warranty claims, sales incentives, and advertising costs are wrongful acts, they were not carried out as part of an attempt to induce Appellants to execute the Release. Indeed, the alleged wrongful acts occurred before any mention of the Release. Consequently, a fundamental element of economic duress is missing because KMA never set forth any terms before acting wrongfully to induce Appellants’ acquiescence. “[T]he mere withholding of payment of a debt, without more, is insufficient to constitute economic duress. . . .” Id. (internal citation omitted). Similarly, Appellants’ remaining examples of wrongful acts – improper vehicle allocation, failure to provide marketing support and to locate a purchaser for the Huntsville dealership – do not support a claim of economic duress because they occurred before the Release was introduced. In addition, Appellants “had expressly agreed in the franchise agreement[], at a time when they were under no financial distress whatsoever, that they would not [sell] the business without [KMA‘s] consent.” Brock v. Entre Computer Ctrs., Inc., 933 F.2d 1253, 1260 (4th Cir. 1991). Thus, these wrongful acts do not represent unjustified coercion or extortive measures, nor do they constitute unlawful or unconscionable pressure to induce Appellants into signing the Release.
2. Reasonable Alternatives
As the district court observed, assuming that a lawsuit was economically impractical, the Appellants had reasonable alternatives to executing the Release. See N. Fabrication Co. v. UNOCAL, 980 P.2d 958, 961 (Alaska 1999). Under the circumstances, Appellants could have pursued their letter of inquiry asking whether KMA‘s approval of the sale to Fletcher was conditioned upon the execution of the Release. Although the deadline for closing the sale to Fletcher was approaching, there remained sufficient time for Appellants to attempt negotiations or at least communicate to KMA their concerns about the content and effects of the Release. See Hyman v. Ford Motor Co., 142 F. Supp. 2d 735, 745-46 (D.S.C. 2001). Moreover, Appellants’ “assertions of duress are substantially undermined by the fact that [they were] represented by counsel throughout the termination of the [Dealer] Agreement.” Id. at 746. Accordingly, Appellants’ claim of economic duress fails on the first and third prongs. The district court‘s ruling is affirmed.
Finally, Appellants argue that the district court erred by granting summary judgment of their common law claims, which include fraud, breach of good faith and fair dealing, negligence and wantonness, and negligent and wanton supervision. See Compl. ¶¶ 71-100.8 Appellants allege that these common law claims relate in part to warranty reimbursement and sales incentives, and therefore, fall within the exceptions to the Release.9 See Appellants Br. 31; Appellants Reply Br. 14. This argument is without merit.
The exceptions to the Release are available only for what amounts to reimbursements for warranty services rendered, parts, and incentive or rebate
IV. Conclusion
For the foregoing reasons, we affirm in part and certify the retrospective release issue to the Alabama Supreme Court.
AFFIRMED IN PART AND CERTIFIED TO ALABAMA SUPREME COURT.
I concur in full with Sections I and II of the panel opinion and in full with the result and reasoning in Sections III(B) and (C) on the issues of economic duress and the plaintiffs’ common law claims. However, as to Section II(A), I am inclined to conclude that the release should be enforced in this case for several reasons.
First, under Alabama law, a written release “must have effect according to [its] terms and the intentions of the parties thereto.”
release, acquit and forever discharge one another of and from all claims which have arisen or may ever arise, demands and causes of action arising from, related to, or in any manner connected with the sale and service of Kia Products, including, without limitation, the Dealer Agreement, and from any and all claims for damages, related to or in any manner connected with the Dealer Agreement or the parties’ business relationship. . . . [I]t is understood and agreed that this agreement includes all claims of every nature in kind whatsoever, known or unknown, suspected or unsuspected, arising out of, in connection with, in consequence of, in any way involving, or related to, the Dealer Agreement or the business relationship between or among [ELL 12, Edwards, and Kia] from the beginning of the world through and including the date of the Closing.
Second, I am not persuaded by Plaintiffs’ argument that the remedies provision of the Alabama Motor Vehicle Franchise Act (“Franchise Act“),
This second point is underscored by another provision of the Franchise Act,
Further, Defendant Kia Motors persuasively argues that there is a legal distinction between the terms “release” and “waiver,” and therefore, that the use of the term “waiver” in the remedies provision of the Franchise Act,
For all these reasons, it seems to me that
Notes
Evidentiary Submission Filed In Support of Def. KIA Motors Am., Inc.‘s Mot. For Partial Summary J. Ex. 7 at 1-2.DEALER, DEALER OWNER(S) and KMA do, . . . release, acquit and forever discharge one another of and from all claims which have arisen or may ever arise, demands and causes of action arising from, related to, or in any manner connected with the sale and service of Kia Products, including, without limitation, the Dealer Agreement, and from any and all claims for damages, related to or in any manner connected with the Dealer Agreement or the parties’ business relationship. . . . . [I]t is understood and agreed that this agreement includes all claims of every nature in kind whatsoever, known or unknown, suspected or unsuspected, arising out of, in connection with, in consequence of, in any way involving, or related to, the Dealer Agreement or the business relationship between or among DEALER, DEALER OWNER(S) and KMA from the beginning of the world through and including the date of the Closing.
Evidentiary Submission Filed In Support of Def. KIA Motors Am., Inc.‘s Mot. For Partial Summary J. Ex. 7 at 2.. . . . Notwithstanding anything herein to the contrary, DEALER, DEALER OWNER(S) and KMA expressly agree that the mutual release shall not include or pertain to (a) any credits due to DEALER for warranty claims submitted but not processed as of the date hereof . . . and/or for warranty repairs performed by DEALER for which no claim has yet been submitted by ELL 12 to KMA as of the date hereof...; (b) purchases made related to ELL 12‘s parts account with KMA up until the date of the closing; (c) obligations between the parties arising out of incentive or rebate programs.