Key v. Chrysler Motors Corp.

accrue interest at a rate of percent fifteen

(15%)per annum.

IT IS SO ORDERED. J.,

MINZNER, participating.

918 P.2d 350 Company,

Jack KEY and Jack Motor

Inc., Plaintiffs-Respondents, CORPORATION,

CHRYSLER MOTORS

Defendant-Petitioner.

No. 22587.

Supreme Court New Mexico.

May 1996. Chavez, Reeves, Greenfield, standing. Acosta & We also conclude that failed Walker, P.A., Reeves, Barney James William to state a cause action under the Act. Anderson, Cruces, R. Therefore, Las for Petitioner. judgment we vacate the entered in favor of remand instructions Firm, P.C., Tucker, Tucker Law Steven L. Chrysler. judgment enter Fe, P.A., Roggow, Santa Cresswell & Cresswell, Cruces, Jerry Charles W. Las

Severson, Paso, TX, Respondents. El I. BACKGROUND Andrews, P.A., Montgomery & Sarah M. Because facts of this case have been Fe, Manello, Singleton, Santa Goldstein & fully presented in Appeals opin- the Court of P.C., Cultice, Robert D. Carpen- Robert B. ion, repeat except they we will not them as ter, Boston, MA, for amicus curiae AAMA & argu- are relevant to our discussion of the MAM. ments made to this Court on This certiorari. Widland, P.C., Kent, Kent & Jason W. Chrysler’s ap- suit arose out of refusal to Krahenbuhl, Albuquerque, Glen A. for ami- prove Chrysler/Plymouth the transfer cus curiae NMADA. Key, already franchise to who owned and operated Jeep/Eagle Chrys- franchise with OPINION seeking expand existing ler and was to MINZNER, Justice. Key alleges Chrysler’s rejec- business. Key Key Company, Jack and Jack Motor application acquire tion of Chrys- his to Chrysler (Key) Corporation Inc. sued Motors ler/Plymouth franchise violated the Act. (Chrysler), Chrysler alleging that had unrea Key Chrysler pursuant then sued to the Act. sonably withheld consent to the transfer requires The Act that the manufacturer’s a Chrysler/Plymouth dealership franchise [to “consent transfer a franchise] shall not (Borman) Company from the Borman Motor 57-16-5(L). unreasonably withheld.” Section Key in to violation the New Mexico Motor Chrysler rejected Key potential as a franchi- Act, Franchising Vehicle Dealers NMSA see because he failed to meet his Minimum 1978, §§ (Repl.Pamp.1995) -16 (MSR) Responsibility Jeep/Ea- Sales for the (the Act). trial, After a bench the district gle existing line of vehicles sold under his granted Key court concluded that the Act Chrysler’s franchise. The MSR is measure standing, Chrysler found that had acted un ability. of a dealer’s sales It is derived from Act, reasonably in violation of the and award registrations new vehicle within the dealer’s $300,000 Key compensatory ed in damages territory by multiplied sales figure a second $125,000 attorney Chrysler ap in fees. Chrysler’s on larger based sales within a pealed Appeals Court of on three encompassing sales zone (1) the dealer’s sales Key standing issues: whether had to sue territory. (2) The record Act, indicates that in re- under the whether the trial court viewing applications prospective applied fran- proper legal finding standard chisees who had dealerships, Chrys- Chrysler unreasonably withheld consent transfer, (3) ler used a dealer’s Key’s MSR evaluate sales whether own performance, but negligence used different criteria for demanded a reduction of the dam ages Key cross-appealed, reviewing prospective arguing award. franchisees. The trial excluding that the trial court court found that a dealer’s erred evi MSR profits damages. dence of lost future be a reasonable criterion in evaluating The prospective franchisee; however, Appeals Key Court of Chrysler affirmed. in this case 267, Corp., Motors N.M. geographic 889 P.2d local and economic factors dis- (Hartz, J., (Ct.App.) dissenting), accuracy Key’s torted its in evaluating sales granted, cert. N.M. performance. 889 P.2d 1233 The trial court found that granted registration certiorari address the fraudulent in New Mexico of ve- first two issues. We conclude Act that the hicles owned Texas residents distorted does not afford to all registrations the number total new vehicle Therefore, County, franchisees. mathematically we overrule the in Dona Ana so that Appeals’ granting Court rationale in applying regis- number of new vehicles warranties, frauds, prevent unfair county formula tered into the MSR discriminations, Key’s percent- impositions representative practices, true age Consequently, the trial sales. court of our other abuses citizens. Chrysler’s proved

found reliance on Appeals ma- Section 57-16-1. The Court reject Key poten- as a the inaccurate MSR jority interpretation agreed tial franchisee was unreasonable violated Legislature’s intent. 119 N.M. at 57-16-5(L). Section at 882. P.2d interpreted 57-16- trial court Hartz, however, noted Judge that the 5(L) statutory duty impose a “by recovery damages injury limits for an reasonably, specific to act which included the anything reason this act.” forbidden duty to use of an MSR in the ensure accurate J., (Hartz, Key, 119 at 889 P.2d at 887 subject Chrysler area. had unilateral control 57-16-13). dissenting) (discussing Section dealers, over the to select standards used provides He observed that Section 57-16-9 upper in the and as such had the hand selec- as follows: process. tion the trial court concluded contrary Anything to the notwithstand- Chrysler’s that even if committee did MSR ing, be the it shall extenuating affecting not know factors about unlawful for manufac- turer, representative or distributor without Key’s territory, duty had a it to ascertain the fail on then due cause to to renew terms held, accuracy. MSR’s The court trial equally available to all its motor vehicle Appeals majority agreed, the Court of that dealers, franchise to re- to terminate a Chrysler’s failure to use an accurate toMSR unless the strict the a judge Key’s application legal below the fell transfer of dealer shall receive reasonable required standard under the statute. fair compensation value the business. the for of Chrysler argues Key that On certiorari added.) (Emphasis standing lacked to sue under the because 279, Legislature Judge Hartz the did not intend to a Id. at 889 P.2d at 887. precluded of to a that a cause action franchisee. reasoned suing a Chrysler Legislature that manufacturer for refus- reasons intend- pow- ing to to transfer the franchise when the dealer ed redress the historical imbalance compensa- “fair er between automobile manufacturers and had received and reasonable Id., 277-78, franchisees, tion.” 119 N.M. at 889 P.2d at their and that over- riding purpose protecting is 885-86. He concluded that Section 57-16-9 franchisees “liability proposed Chrysler only asks us eliminated transfer- clear. to conclude that holding altogether” the dealer re- franchises have ee ... when had franchisees valid 280, adequate compensation. under ceived Id. at to sue manufacturers the Act. Key pleaded nor 889 P.2d at 888. neither reading argues plain proper proved that Borman failed to receive policy Act’s declared makes it clear that the compensation. Id. at 889. 889 P.2d Legislature intended Act to Mexico Judge on facts Hartz concluded that these pre-franchise govern relationships, including have Id. did not a cause action. obtaining pursuant franchise. policy Act’s follows: The declared is as majority opinion construed Section The n limiting only selling dealer’s The of motor vehi- 57-16-9 as distribution and sale action, general dispositive and thus as not vitally cles affects the this state P.2d at public state cause of action. Id at economy of the and the inter- majority remaining It 881. is- est welfare of its citizens. is the viewed in hold- policy purpose sue whether the trial court erred of this state and the of this relying on power ing Chrysler liable “for the inaccu- police act to the state’s exercise actually system know the distributing and rate when did not ensure a sound MSR rendering the Id. at regulating facts MSR inaccurate.” motor vehicles and manufacturers, distributors, majority representa- P.2d at 883. The conclud- pro- ed that “because determined tives dealers those vehicles to calculating the MSR and the compliance elements for vide for with manufacturer’s measuring perfor- formula for dealer’s requiring sales trine that the claimant must have a mance, Chrysler obligation case; had an personal make stake in the of a outcome inquiries reasonable about whether local con- allege injury must both claimant fact and a ditions rendered which it MSR relied traceable causal connection between the inaccurate.” Id. injury challenged claimed and the conduct. Moore, 12 James W. Moore’s Federal Prac Hartz, hand, Judge on the other noted ¶ tice, 3], supra, at 1-13 1-14. 300.02[2.— that: Furthermore, seeking acquire plaintiff 57-16-5(L) When Section states that a standing under a “must statute demonstrate manufacturer’s consent transfer of a sought ... ‘the protected interest franchise “shall not be with- by complainant arguably within the held,” imposing it is tort standard of protected zone of regulated interests to be saying “reasonableness.” It ” Id. at (quoting the statute.’ 1-16 Asso manufacturer’s reasons denial must be Processing Orgs., ciation Data Serv. Inc. requiring sound It is reasons. the manu- 150,153, v. Camp, 397 U.S. 829- facturer to an objectively make reasonable (1970)). Thus, 25 L.Ed.2d 184 doc both business decision. saying Rather than plaintiffs trines allow in the enforce that the manufacturer must act with “due courts, if it is derived from common law or care,” saying it is that the manufacturer Key statute. Whether we ask if had stand act must with “due cause.” See ing to sue or whether ask if we the Act (manufacturer cannot restrict the transfer provided Key action, with a cause of we must cause”). of a franchise due “without The Legislature’s look to the expressed intent as requirements of “due care” and “due in the Act or authority. other relevant overlap will substantially, they cause” but generally Toyota Knauz v. Motor Sales congruent. are not Inc., 1327, F.Supp. 720 1328-31 USA 282, Key, 119 N.M. at 889 P.2d at 890. Hav- (N.D.Ill.1989) (statute’s private creation of ing require construed the Act to the manu- right protected not all parties does allow to facturer to act with “due cause” rather than protest wrongs preserved; all causes are tied care,” Judge “due Hartz noted that the trial classes). specific wrongs against to particular findings Chrysler’s court’s indicate use of negligent MSR was for of lack an reasons, following For the we conclude independent 284-85, investigation. Id. at 889 that grant the Act not to standing does all P.2d at 892-93. He reasoned that prospective franchisees. We conclude findings Court’s and conclusions did es- whole, taking taken as into consideration any duty tablish had to make an both counterpart its federal and statutes 285, independent investigation. Id. at 889 states, from other the Act cannot be said to P.2d at 893. Key He if concluded even protection every pur- afford Act, had a cause of action under the “it would chaser of automobile franchise. The rele- appropriate to remand further find- provisions sufficiently explic- vant neither are ings by the district court.” Id. it nor are the purposes sufficiently Act’s definite to that result. We overrule II. STANDING of Appeals interpretation Court in its first We- determine whether there is a the Act protection. such Howev- significant having difference between stand- er, we also consider whether stated a ing having to sue and a cause of action under cause of action under the Act as an the Act. We conclude that there not. complaining about actions taken the franchisor. We conclude not. did A action is defined as an explain We below. “aggregate operative give facts which rise right to a enforceable in the 2 courts.” A. The Text the Act and a Moore, James W. Moore’s Federal Practice Preliminary Construction ¶ 2.06e, (2d 1995); at 2-56 ed. Original Ballet Theatre, v. statutes, Russe Ballet 133 F.2d 189 In interpreting we seek to (2d Cir.1943). Similarly, give Legislature’s intent, doc effect

769 any transferring part of the interest of language or determining intent we look history any person party; or any of them to other used and consider the statute’s dealer, however, officer, background. provided, rel. v. that no State ex Klineline Blackhurst, 732, 735, partner P.2d or have the 106 N.M. 749 stockholder shall (1988). statutory sell, assign 1114 Rules construction or the franchise or transfer language is management dictate when a statute’s power or control thereun- unambiguous conveys a clear clear the manufactur- der without the consent of er, except must be meaning, representative and definite the statute or distributor ordinary meaning. Drap- given plain and its that consent shall not be Co., Casualty er v. Mountain States Mut. withheld [.] 775, 777, P.2d 116 N.M. added.) (Emphasis Section 57-16-5. (1994). provisions apply act shall this parts of a statute ... all and dealers persons, all manufacturers together legislative to ascertain agreements must be read be- and to all written oral Quintana Dep’t manufacturer, rep- intent. v. New Mexico distributor or tween Corrections, 224, 225, P.2d 100 N.M. a motor vehicle dealer resentative with (1983). to, including, are to read the stat not limited but franchise entirety part ute and construe each ... offering, agreement every part produce agreements connection with other in which the all other such Accep manufacturer, representa- a harmonious whole. General Motors distributor 72, 76, Anaya, Corp. 103 N.M. any tance direct or indirect interest. tive exer “[C]ourts P.2d must added.) (Emphasis 57-16-2. plain meaning applying cise caution relief, judicial In addition beguiling simplicity rule. mask Its injured in his any person who shall be statute, why apparently host of reasons a by property anything of business or reason face, unambiguous may for clear on its and in may in this act sue therefor forbidden legitimate give one or another rise to reason recover actual the district court and shall nonfrivolous) (i.e., opinion differences of con sustained, damages by him and cost meaning.” cerning ex rel. the statute’s State suit, attorney’s including a reasonable 346, 353, Gallegos, 117 N.M. 871 Reiman v. fee____ 1352, (1994); v. P.2d 1359 see also Miller added.) (Emphasis 57-16-13. Section 253, Dep’t Transp., N.M. New Mexico 106 (1987) (“Statutes 1374, 1376 255, are 741 P.2d “person” Key is a as described indeed way in a their to be read that facilitates (“ 57-16-3(C) ‘person’ the Act. their operation and the achievement of person, partnership, every natural means case, and goals.”). In this taken as a whole association, trust, any corporation, estate or background against of its and federal sought acquire an legal entity”). He “give[s] counterparts, Act rise to state dealership fran- existing Chrysler automobile nonfrivolous) (i.e., legitimate differences by for sale Borman. Due chise offered concerning meaning.” opinion the statute’s franchising, a franchise business nature Helman, 353, at 1359. 117 N.M. at 871 P.2d contingent upon approval by the transfer franchisor, case, Therefore, Chrysler. in this provisions are a number There clearly a “franchise offer- transaction was standing on issues raised relevant 57-16-2. ing” as used in the Act. Section appeal. They include: govern does manufac- the Act not manufacturer, any dis- It unlawful for franchisees, dealings prospective with turers’ representative to: or tributor protec- terms explicit nor does pro- for that class. New Mexico’s

tion terms, links by standing in but it attempt vides for broad prevent prevent L. standing to and articulates any forbidden conduct motor vehicle contract or otherwise specific terms. officer, Com- any forbidden conduct partner or stockhold- dealer or (“any injured ... person § selling pare 57-16-13 any dealer from er of motor vehicle 770 by anything

... may reason ... forbidden dealers and manufacturers. See 15 U.S.C. sue”) (“unlawful 1222; § any Corp., 57-16-5 v. man- Motors Stansifer (“It ”) (“un- (9th Cir.1973) ufacturer ... to ... and 487 F.2d is obvious ”). lawful for apply dealer to ... that the Act not until a manufac does created.”); relationship turer-dealer been The Act provide any does not standard Ford, see also Colonial Inc. Ford Motor against specific by which a manufac- (10th Cir.) Co. F.2d (improper might turer challenged by prospective be prospective coercive demands made franchisee or measured a court. Read as prior franchisee formal con execution of whole, regulates the Act the relations be- tract were deemed involved in the franchise dealers, tween manufacturers and their provide protection in order to fed under the also dealer conduct toward their customers. execution), statute, eral notwithstanding timing of part Proscribed acts on the manufacturers’ ts. 444 U.S. cer refusing include to deliver vehicles within a 73, 62 L.Ed.2d 48 receipt reasonable time after of the dealer’s order; using deceptive false or advertising; counterpart, Unlike its federal Mexi- discriminating price protects consumers, manufacturers, between dealers with co’s Act respect to parts; establishing vehicles and Acceptance and dealers. General Motors additional Corp., franchise for the same line or at N.M. P.2d at 173. served; make in already preventing the area policy, may Given its declared the Act any dealer changing capital thought protection from struc- both act” “dealer dealership; ture of imposing his unreason- akin to the federal law “consumer protection agree able restrictions on the dealer in the fran- act.” We with the Court of agreement; terminating chise Appeals majority poli- a franchise or that the above-stated cause; refusing cy, to renew it without due coupled language with the broad of Sec- preventing (“fran- transferring the dealer from (“person”) tions 57-16-13 and 57-16-2 consent, franchise without offering”), which not be chise legislative evinces a intent to 57-16-5, §§ withheld. make remedies available wide range to a -8, Similarly, potential plaintiffs. -9. prohibited dealers are 119 N.M. at compelling buyer purchase Nevertheless, a new car P.2d 879. we do “extras”; using deceptive provisions provide false or advertis- believe that the Act’s un- service; ing; failing perform warranty limited franchisees. selling as new used car showroom mod- jurisdictions In several other courts have § provi- el. See 57-16-4. None the Act’s standing prospective purchasers denied proscribe relating procuring sions automobile franchises. See Statewide Rent- dealership. Any a pro- of action a A-Car, Am., Inc. F.Supp. v. Subaru 704 spective purchaser under the Act would need 183, (D.Mont.1988); Knauz, 184-85 720 by implication. to be derived The basis for 1328-31; Motors, F.Supp. at Beard Inc. v. implication such an is tenuous. Distrib., Inc., Toyota 428, Motor 395 Mass. 303, (1985); 480 N.E.2d 305-07 Roberts v. Comparable Legislation

B. 532, Corp., General Motors 138 N.H. 643 956, (1994); The Act was modeled Tynan after feder A.2d 958-60 v. General counterpart, Corp., 654, al the N.J.Super. Automobile Dealer Suits Motors 248 591 A.2d Manufacturers, 1024, Against 1027-31, denied, §§ 15 U.S.C. 1221- 127 N.J. certification (1994), 548, (1991), by Congress 1225 which was enacted 606 A.2d 362 on other modified (1992) Cong., grounds, in 1956. See H.R. No. 84th 2nd 127 N.J. 604 A.2d 99 (1956), curiam). reprinted (per Sess. in 1956 Appeals majority U.S.C.C.A.N. The Court of counterpart protects 4596. The federal mo concluded that other states’ statutes involve injury tor vehicle standing provisions dealers from because of an containing limiting more inequality bargaining power in their language Mexico’s, relative than lessening New thus to automobile manufacturers. It the Id. instructive value of these statutes and shorter, defined, narrowly specifi more interpreting and the cases them. 119 N.M. cally regulates only dealings between car at P.2d agree. 889 at 880. We

771 Montana, in franchis- Illinois, Massachusetts, proved a law the field of and uniform In Franchise and ing in The Uniform character- 1987. See Jersey, statutory provisions New ULA, Act, 115 at belonging Opportunities Business 7A to franchi- right of action as ize the (1995 Part). Cum.Ann.Pocket See 815 111. or motor vehicle dealers. sees (Smith-Hurd 1994); Mass. Comp.Stat. 710/13 Drafting The Committee NCCUSL 93B, (Law.Co-op.1994); § ch. 12A Ann.Laws that balances to construct act worked (1995); § Ann. 61-A-210 Mont.Code franchisees, franchisors, the interests of 1989). (West § 56:10-29 N.J.Stat.Ann. provides act sensi- public and —an states, Legislature appears these franchising arrangements____ ble law action to have limited cause of law, instances, many misses a Current franchises. of fran- fair between interests balance ignores chisor franchisee and often Court, Hampshire Supreme con consumers, altogether oth- the interests of granted right a struing a statute that particular franchise in the er franchisees “any person injured,” denied action to so in that system, prospective franchisees ground plaintiffs system. injury Legislature’s not within the intent was Roberts, drafting the statutes. A.2d Id., Note, Prefatory at 116. The Uniform (the Dealership Act claim based on the minimum standards Act codifies certain standing). lack of properly dismissed for conduct, practices, governs franchise sales specifically “[t]he clear The court noted remedy a provides private both provi intent of non-consumer-oriented power. public investigatory enforcement prop protect the investment and sions is provides Act 201 of the Uniform already erty interests of are deal those who faith, “honesty in fact duty requiring good Id. 643 A.2d at 959. On ers.” of reasonable commercial observance hand, comparable legislation Florida dealing Id. of fair in the trade.” standards “any person.” grants of action to yet adopted the Uni- at 125. No state (1993). Additionally, ch. 320.697 Fla.Stat. however, Act; reflects the Uniform Act form specifically addresses the the Florida statutory body state law. growing prospective franchisee of franchise. See legislation relat have enacted Some states (1993). Accordingly, ch. 320.643 Fla.Stat. originat ing to to address issues franchises court, interpreting the Florida stat federal power fran ing between in the imbalance ute, prospective franchisee stand granted a limited to franchisee that are not chisor and GMC, Pontiac, ing. Mike Smith Inc. See, dealerships. e.g., 16 C.F.R. automobile Am., Inc., N. F.3d Mercedes-Benz of (1994); 436.1, .2, §§ .3 Haw.Rev.Stat. — (11th Cir.1994), U.S. cert. (1993); Ill.Comp.Stat. seq. 482E-1 et -, L.Ed.2d 659 (Smith-Hurd 1994); Mich.Comp. 705/1-4 Pennsylvania Similarly, in the federal district (West 1989); seq. § 445.1501 et Laws Ann. plaintiff granted standing to the based court (1994); seq. et N.Y.Gen. Minn.Stat. 80C.01 “any statutory right conferred to upon a (Consol.1994); §§ Bus.Law 683 § person.” Pa. 818.20 63 Cons.Stat.Ann. (1989); § S.D.Codi N.D.Cent.Code BMW, Big Apple Inc. v. (Supp.Pamp.1995); (1994). §§ Ann. 37-5A-16 to -28 fied Laws Am., Inc., N. 974 F.2d 1382- BMW of and franchisees Recognizing that franchisors (3rd Cir.1992), 507 cert. U.S. bargaining power, generally unequal have see 1262, 122 L.Ed.2d Pruitt, Cause Disclosure and Good Mark legislation comparable that conclude We Franchise Legislation: “Where’s Beef’ only un- and provides (imba no conclusive answer (1985) Regulation?, 90 Com.L.J. 563 in- next review more direction. We certain in character informational power lance of is legislation. clusive it an sales and becomes before franchise once the of contractual control imbalance Legislation More Inclusive C. consummated), these been agreements have protect franchisee’s attempt to a enactments of Commission- National Conference (NCCUSL) holding to a stan- franchisors ap- investment Laws Uniform State ers on practice good-faith dealings. ry outstanding warranty upon of fair dard and claims Sample requirements Id. at 565. vari- a relationship. termination of (1) requiring ous statutes include franchisors franchising We conclude the law register appropriate agency to with the state developing range statutory a within wide grant before a franchise in order to legislatures schemes. have tar- Sometimes equal public notice for to members of franchises; geted particular types of more purchase options prevent and to unfair com- recently, provide there have been efforts to see, (2) 80C.02; petition, § e.g., Minn.Stat. integrated approach a more to common requiring completely franchisors to disclose problems. general public can no We detect permit necessary prospec- all information to policy supports particular a construction to tive franchisees make informed decisions provi- New Mexico Act’s see, 80C.06; prior purchase, to e.g., id. at sions. we note that the more in- (3) prohibiting franchisors from termi- legislation yet any clusive does not reveal nating good the franchise business without greater statutory recognition trend toward cause, thereby protecting the franchisee’s prospective right acquire of a franchisee’s see, investments, e.g., business id. suggests a franchise. This fact that the Act (Subd. 3). § 80C.13 probably protect not such a intended right. comprehensive California has enactment franchises; governing its Franchise Invest- D. Cause Action governs prepurchase

ment Law cul- actions franchise, minating in formation of a its while considering variety After of stat governs dealings Franchise Relations Act af- utory approaches implemented juris in other purchase. Cal.Corp.Code §§ ter See 31000 dictions, we conclude that Mexico’s Act (West Cum.1995) to 31019 1977 & Cal. not Legis does conclusion that the (West §§ Bus. Prof.Code prospective lature intended allow franchi Cum.1995). Legis- &1987 As the California damages pro sees recover loss of noted: lature spective franchise. N.J.Stat.Ann. Cf. (“A 56:10-29 motor vehicle franchisee It the intent of this law to bring against action motor vehicle prospective each franchisee with infor- franchise, granted franchisor which has necessary intelligent mation to make an enjoin any person any ... violation regarding decision being franchises of- recover, act appropriate, of this and to where Further, fered. is the intent of law this damages by the sustained franchisee as a prohibit the sale of franchises where act.”). result of a violation this Without such sale would lead to fraud or a likeli- explicit support, more textual we cannot con promises hood the franchisor’s would clude that the Act affords of relief to fulfilled, protect and to the franchi- every person acquire wishing to an automo by providing understanding sor a better dealership. generally Gladys bile relationship between the franchisor (fran Glickman, (1995) Franchising § 4.03[1] regard franchisee their busi- ordinarily only by chisors are limited antidis relationship. ness crimination selecting and antitrust laws in Cal.Corp.Code § 31001. rejecting potential franchisees and franchi sees). note that New Mexico plaintiffs may does have Such seek relief under Franchise Termination Act. NMSA common-law remedies such as inter tortious §§ (Repl.Pamp.1995). 57-23-1 to -8 Howev- ference with economic - er, (Second) purpose extremely relationships. its 4 limited. Restatement of See primarily § Franchise Termination Act ensures Torts 766 In tort of the intentional tractors, that of “farm prospective advantage, interference with a franchisees/dealers tractors, implements, utility farm imposition liability the basis industrial for the re tractors, (intent repair parts,” quires proof improper attachments motive harm) 57-23-2(E), by are improper reimbursed franchi- or utilization of some means. Tools, Milchem, for their leftover invento- M & M Inc. Rental v. sors/manufaeturers performance as a dealer. Inc., 449, 454, his P.2d characterized N.M. potential fran- Dairy reading, the lost such (Ct.App.1980); see also Anderson Under Co., 155, 159, the harm suffered 637 P.2d is a measure of land Ins. 97 N.M. chise (Second) (1981) right. (adopting a matter of substantive Restatement rather than propri- requiring improper right motive or is the approach Torts The matter of substantive Chrysler’s in order to establish liabili conduct to- improper ety means under the Act of ty). even in the absence of a If we were to construe ward its franchisee. Act, prospective purchaser fashion, however, Key’s complaint action under in that we prove the legislation recover if he or she can difficulty run into the that motive. existence of a malicious provide, adopted Mexico has does Act, general duty of as does the Uniform recognize can a cause of Nor we Rather, specifically iden- good faith. the Act solely existing action in based on his part on the of the particular tifies If the stat as a dealer or franchisee. status franchisee as forbidden. franchisor toward its interpreted literally, Key’s status as ute were complaint Key’s as stat- In order to construe sue, standing to a dealer would his Act, we ing a' cause of action under Legislature would mean the but that result the state- that we would need at least believe distinguished existing from those had dealers duty, provided in the general ment of other kind of business. who were Act, language specific or directed Uniform unlikely to be an Such a distinction seems perfor- franchisor’s choice of service Knauz, F.Supp. legislative choice. See have neither. mance standards. We (Illinois applicable to at 1327 statute held not applicant already had a fran a dealer who injury in By expanding definition of Beard, manufacturer); another chise from oppor- a lost property to include business “illogical” (describing as 480 N.E.2d at 306 acquire an franchise from tunity to additional purchas granting prospective the result of franchisor, signifi- we would not one’s own dealership standing a motor vehicle er of modify existing common law. cantly already time only if it was a dealer at the sue expectancies most points out that the Prosser sale). of future contractu- protected often are those al., Page Keeton et existing al relations. See W. is an franchisee at 1005 such, group and Keeton on Torts Chrysler. he is within the Prosser As (5th 1984), Prospective Legislature “Interference with bargaining power ed. whose Also, famil- Advantage.” profits is a possible loss sought enhance. It is to view of contract damages in breach alleging the Act for- iar element Key’s complaint as that attempt has been made foreclosing op- It is when an from an cases. bids a manufacturer beyond the carry liability for interference acquire a franchise unreason- portunity context, into such areas as withholding proposed to a commercial ably consent depri- organizations from exclusion social have construed the Act more transfer. We contest, winning a chance of Appeals, and vation of the narrowly than did Court that'they “embark- have felt were Key’s complaint fails that courts conclude that thus we By Id. at 1006. equally ing upon uncharted seas.” It a cause of action. to state existing an alleging recognizing status as complaint as possible to read his existing franchise seeking purchase from Act forbids a manufacturer that franchisor, advance the we would to measure quota a sales that fails employing protecting dealers. Legislature’s purpose in fairly accurately, performance a dealer’s Nevertheless, statutory under the current quota, Chrysler a sales used such that scheme, say we cannot that the lost busi- Key’s damages consist of result, prohibited conduct. Our statute engaged he lost an opportunity. As a ness specific language general or lacks sufficient expand his opportunity to Key’s com- support a determination franchise from to by acquiring an additional the Act. of action under read, Key’s plaint states a cause gist of franchisor. So provi- by comparing different We illustrate that his franchisor misin- complaint would be inaccurately regarding termination. sions sales record and terpreted his commonly provide given pursuant para- dealer Franchise acts renewal was V; may graph that a not manufacturer terminate or (3)The refuse to renew a franchise without due motor vehicle dealer new has See, e.g., § cause. 57-16-9. a valid substantially Often complied not with reason- ground for termination when a fran- performance by occurs able criteria established quotas chisee fails to meet sales estab- the the manufacturer and communicated to by agreement. Among lished the 62B the franchise dealer. those factors deter- mining performance Am.Jur.2d Private Franchise shall Contracts criteria be the upon relevancy deter- the Courts called manufacturer’s sales inappro- particular miné has within the and the whether franchisor acted state mar- priately quota ket area. inquire into whether the sales reasonable, objective is “fair and and nondis- 357-C:7(II)(b). criminatory, arbitrary capri- and not Key partic- the believe that Act affords We (footnotes omitted). cious, or coercive.” Id. protection existing ular on based his Additionally, quotas uni- applied need be relationship ongoing Chrysler. We do franchisees, formly taking to all into account Key’s complaint stating not construe as conditions, quo- local failure because to meet particular pro- cause action based on the tas be attributed to economic or market provided by relationship tection Act. Id.; beyond factors the franchisee’s control. equate wrongful are not able to We termi- Corp., Swartz v. Motors 297 nation, against specif- provides which Act (D.N.J.1969) (sales F.Supp. quota protection, ic opportunity with the loss of an incorporated agreement in- franchise held acquire an additional The franchise. valid for failure to take local conditions into not it does define “due cause” relates as account). termination. Absent definition such as that by provided Hampshire, we would be Hampshire legislature The New de- imposing Chrysler obligations of which it good purposes fined cause of termination Corp., had no notice. Brewer v. Exxon Cf. comply to include a failure to with a term (E.D.Tenn.1985) (because F.Supp. 76, the franchise. N.H.Rev.StatAnnot. 357- purported statute to restrict contrac- C:7(II) (1995). legislature The dealt awith rights, tual not was entitled to broader performance failure in or sales service clearly by construction than was warranted follows: terms). next address the effect of (b) by If the failure new vehi- motor by Section 57-16-9 on action dealer, (a), cle in subparagraph relates to against dealer its franchisor on the service, performance his or sales then basis the franchisor with- cause, 1(c), good subparagraph as used in proposed held consent to a transfer. shall be defined as the failure of new effectively carry motor vehicle dealer to III. 57-16-9 AND ITS EF- SECTION performance provisions out the fran- FECT AON DEALER’S STATU- chise if: TORY OF CAUSE ACTION (1) The new motor vehicle dealer Anything contrary notwithstand- apprised writing manufacturer in ing, it shall unlawful .the for the manufac- failure, turer, of such the notification stated representative or distributor without provided that notice was of failure of cause to fail to due renew on terms then law, performance pursuant to this equally available to all its motor vehicle dealers, the new motor vehicle was afford- to terminate a franchise to re- opportunity ed a reasonable to exert of a strict transfer unless failures; good faith efforts to correct his dealer shall fair receive and reasonable compensation for the value of the business. (2) Such failure thereafter continued Section 57-16-9. period began within the more which days than Appeals majority before date notifica- Court of construed termination, cancellation, tion of non- applying Section 57-16-9 as restrict franchise and unreason- action if it sent to transfer the bringing an dealer already un- on transfer are compensa- able restrictions received fair and reasonable 57-16-5(L) and -8. under unlawful be- lawful Sections despite tion the manufacturer’s “nothing contrary” to there is to the at 889 P.2d at havior. 119 N.M. (“we provision ap- phrase the first 57-16-9 more which conclude Section dissent, Judge suggested Hartz only plies. the In his reasonably applies to restrict exist- damages, itself, a limit on preventing 57-16-9 sets ing dealership thus the ex- Section consequential damages that bringing despite action excludes isting dealer from behavior, recover, liability may and eliminates long so dealer the manufacturer’s unlawful altogether. Key, proposed transferee fair and reason- to a as the dealer has received However, 889 P.2d at 888. compensation.”). According to the ma- 119 N.M. able argument Association’s illus- jority, provision only limits as the Dealers trates, limits this construction of the statute this issue for two rea- dealer. We address group provided to the core protection sons. protect. We address this issue Act seeks First, both and Amicus New Mexico arguments it has central to the because been (Dealers Automotive Dealers Association As- us, Appeals and to to the made Court sociation) contend that Section 57-16-9 does supports of the issue our resolution because not turn manufacturer’s forbidden Key lacks and has conclusion that conduct because the dealer re- into lawful to state a cause of action under failed According to compensation. fair ceived Act. them, interpreted Section 57-16-9 should be way is to limit Another to read the statute provide that even if a manufacturer’s con- due cause” to qualification of “without Act, permitted is otherwise under this duct appears. phrase in which it the immediate terminate, for a manufacturer to is unlawful example: For renew, fran- or refuse transfer of a fail to contrary Anything to the notwithstand- if receive fair com- chise the dealer does not for the manufac- They ing, it shall be unlawful pensation. contend that when dealer- terminated, turer, representative without ship lawfully and the seller distributor is terms then compensa- cause to fail to renew on and reasonable due also receives fair vehicle tion, equally available to all its motor not have a cause then the dealer would dealers, to termi- effect, cause] even with due they suggest [or In that Sec- of action. or to restrict the transfer conduct unlawful nate a franchise tion 57-16-9 makes certain the dealer shall re- of a franchise unless to that conduct defined as unlaw- addition compensation for and reasonable ceive fair ful elsewhere the Act. of the business. the value 57-16-9, provision found in Section interpretation would 57-16-9. This equal- then that a failure “to renew on terms (1) must have mean that the manufacturer dealers,” ly all motor vehicle available to equally terms cause not to renew on due appear in the Act. If does not elsewhere (2) dealers, and the manu- available to other provision, stopped after that Section 57-16-9 provide compen- required to facturer is, anything would be clear. That its effect franchise is termi- to dealers when the sation contrary notwithstanding, it would be nated, when consent to transfer manufacturer, due for the without unlawful has reasonable when the manufacturer even cause, a franchise on terms to fail to renew con- support his actions. This grounds to equally to other dealers. then available interpretation ar- is similar to the struction provision regarding when the Dealers Association. gued cause” is read connection “without due provision Hampshire Act has regarding ter- The New language that follows with the transfer, requires compensation for and restrictions on mination termination for good-faith of a the event provisions Act’s later become self-contradic- § 357- good cause. See N.H.Rev.Stat.Annot. tory. of the franchise without Termination C:7(VI). requires Hampshire The New already unlawful under Section due cause inventory, supplies, 16—5(F); for the dealer’s unreasonably withholding payments con- 57— even dealership facilities or the reasons con- deal- similar to reasons we have payments year. parties er’s lease for a Section 357- strued Section 57-16-9. The have C:7(VI), (VII). position energy This is to the devoted time similar considerable issue, advanced Amicus that New Mexico’s and we that this Sec- conclude resolution of requirement. tion 57-16-9 is an supports Key additional issue our conclusion that lacks standing and failed to of has state a cause that We conclude Section 57-16- action under the Act. 9 was intended to forbid conduct that otherwise lawful under the Act. This inter IV. THE RELEVANT STANDARD pretation is more consistent with the Act’s FOR EVALUATING REFUSAL interpretations intent than of the other CONSENT TO yet of Section 57-16-9 have that been ad does not specific The Act include, might vanced. Such conduct for ex standard; guidejines a reasonable it define ample, legitimate exercise of a franchisor’s merely requires a may that manufacturer purpose for improper interest or in an unreasonably withhold consent to a franchise unreasonable manner. Kestenbaum v. Cf. 57-16-5(L). transfer. Section Fla.Stat. Cf. Brewing Corp., 514 F.2d Falstaff (establishing ch. presumption 320.643 a (5th Cir.1975) (franchisor to restrict unreasonableness if a manufacturer with price its may franchisee seek for the fran holds consent a from franchisee who is chise “in reasonable value order to insure good uniformly- moral character meets purchaser that a will have chance to applied qualifications). standards or Amicus investment.”), a realize reasonable on return his for the Manufacturers Association have t. 424 U.S. cer urged interpret this “un Court to the term (1976); Coulson, 47 L.Ed.2d 349 Frank requiring showing reasonable” as bad Corp., Inc.-Buick v. Motors General faith or some unlawful motive. ex Absent (5th Cir.1974) 202, 207 (automobile F.2d man intent, press legislative we into do not read insuring ufacturer’s interest in that automo higher the statute a than standard “reason financially bile dealers are sound does not able.” That make would a cause of action encompass an privilege absolute to limit a equivalent under the Act the of the common- price dealer’s of dealership). for sale So Key law might brought, action have did but construed, Section 57-16-9 itself would not not. preclude a cause of action these facts. To Appeals Chrysler the extent that the majority argues appropriate legal Court that opinion might permit whether, be read to otherwise standard should been have based proscribed upon upon the Act under fair the facts at the known time the decision compensation and reasonable to withhold consent the transfer was dealer, made, However, it person is overruled. so con a reasonable could have con- strued, Key materially Section 57-16-9 is further cluded evidence of was deficient with legislative purpose integrates respect the vari to one more of appropriate, provisions performance-related Chrysler ous of the Act. Section 57-16-9 criteria uses balances the interests dealers and manu evaluate transfers.

facturers; may in fact stem from claims fact that it was unaware of local conditions patterns inaccurate, such as Kestenbaum v. that rendered its MSR and thus Falstaff Coulson, Brewing Corp. Inc., and Frank should not be held for accountable facts courts required which were to balance which it did not and was not made know competing interests of the manufacturer and aware. proposed its dealer transfer. Chrysler’s argument We fol- understand 57-16-9 reinforces our conclusion that lows. Ap- The trial court and the Court of particular intended to redress conse peals applied wrong legal standard, quences inequality bargaining pow legal standard, under the correct there was er between manufacturers dealers. insufficient evidence as matter of law next support Key.

We examine the agree relevant standard for a verdict for evaluating part Chrysler’s argument. refusal to We do so consent. We believe justify existed to dis- applied the correct sufficient not have trial court employment. charging from its Kestenbaum we also believe legal standard. one of at 287. That test is recovery un- Id. at 766 P.2d there was evidence Pennzoil standard, objective at the time Legislature reasonableness had the der the correct acted, as to adduced at trial not on evidence bring a cause of action as authorized in fact exist. grounds did or did not the whether franchisee or had been selling dealer. v. Pennzoil By analogy to Kestenbaum Co., Chrysler’s refusal the reasonableness of require the manu- the Act to

We construe Chrysler depended upon to whether 57-16- consent facturer to act with due cause. See into the cir- (manufacturer investigated further should have cannot restrict the transfer cause”). underlying The trial the MSR. “In cumstances due of a franchise “without Chrysler relied findings of fact that more court’s particular, the due-cause formulation not its an inaccurate MSR do manufacturer need clearly indicates that the withholding Chrysler’s of con- investigation conclusion that any independent not undertake un- proposed transfer was sent to Borman’s applicant for the to determine whether requires only that The Act reasonable. qualified.” 119 N.M. at franchise is to (Hartz, J., grounds had reasonable believe dissenting). Al- 889 P.2d at 890 upon it acted was data which might imposed that the MSR though Legislature have justify withholding of consent to its L. sufficient obligation, it has not. See Jerome such an Whether, the circum- transfer. under Withered, No-Assignment-without-Con- stances, relationship Key including own to Agreements, in Franchise sent Clause (1984) (in figures knowledge of the sales L.J., 1,18-19 light and its Franchise area, Chrysler in relevant wrongful other dealers franchisee of a consequences to the reliability of the transfer, investigated the not should have it does seem denial of consent ques- reported data is determinative an undue bur- MSR should not create unfair and trial court. fact not addressed require it to take tion of upon franchisor to den investigative steps to corroborate reasonable differ- might supported have The evidence it upon which relies derogatory information is, might example, for findings. That ent franchise). denying consent to transfer the on these facts have been unreasonable alleg- Key’s complaint establishing emphasize the index. construe due cause as We also standard, of a successful sales es other facts indicative objective with that consistent an relationship Co., satisfactory and a 108 record v. Pennzoil adopted Kestenbaum circumstances, these (1988), the franchisor. Under cert. 766 P.2d 280 N.M. unreasonably Chrysler might have acted 104 L.Ed.2d U.S. give it did not required of Pennzoil when opportunity What was comment, justify his sales record. explain, or was fact- v. Pennzoil Co. in Kestenbaum us, read as a seems of em turned on the contract specific and whole, consent as require the franchisor’s proved that ployment. There Kestenbaum and to the manufacturer fairly, protection for treated have entitled to be he was not be require that consent specifies of the some opportunity to know withheld, deal- protection for him, given a chance charges against read, appear to have the Act does not himself, er. supervisors could not So and his defend for bene- requirement just imposed for either cause there was determine whether Key lacks conclude that fairly fit. We hearing and con until the termination action, not Chrysler’s and he has story. challenge Id. side of the sidering Kestenbaum’s under a cause of action liability did stated Pennzoil’s 766 P.2d at 282. standing as a lacks provision. Because investigate, but rather duty to on a not turn not stated a franchisor and has prospective inadequate sum on an on its blind reliance franchisee, pro- further of action as a negli investigation that had been mary anof Therefore, necessary. we ceedings are established The test gently undertaken. the trial court to permit need not remand whether Co. was v. Pennzoil Kestenbaum findings conclusions on enter amended grounds to believe Pennzoil had reasonable objective FROST, C.J., the basis of an standard of due and BACA and Chrysler’s FRANCHINI, JJ., cause for actions. concur. RANSOM, J., specially concurs. V. CONCLUSION RANSOM, (specially concurring). Justice Despite the fact that most of the Act’s majority I concur in opinion except provisions directly govern situations between the discussion under Part III as to the effect manufacturers, dealers, consumers, car of Section 57-16-9. This discussion admit- application persons” Act’s to “all tedly dispositive is not purportedly only including offering” “franchise indicates the “supports a conclusion that [a Legislature’s provide greater intent to pro- standing.” lacks I agree transferee] do not tection for New Mexico citizens. See 57- qualification that the of “without due cause” 16-2. the New Mexico Act is broader necessarily only is to be limited to the imme- scope act, than the federal and we are not phrase is, diate appears. which it That I persuaded that provides the federal act agree do not we should if decide it is unlaw- adequate basis to exclude claim. How- ful with or without due cause for the manu- ever, statutes other states facturer to terminate franchise or restrict concluding basis for that the Act contains an the transfer of a franchise unless the dealer ambiguity. We resolve ambiguity shall compensa- receive fair and reasonable against principle the broad pro- that the Act tion. every prospective vides franchi- majority’s interpretation runs con- see, grants every prospective franchisee a trary to the structure of the sentence which cause of action for a manufacturer’s unrea- reads that “it shall be unlawful for the manu- sonable refusal to consent to a franchise facturer ... without due cause to fail to transfer to that In franchisee. ..., renew ... terminate or to restrict.” requiring reasonableness of the manufactur- say The statute does not “it shall be unlawful precluding consent, er but transfer without cause,” to fail to renew without thereby due we conclude that the Act balances the inter- bringing play into “the rule of the last ante- ests of manufacturers and dealers. fur-We phrase cedent.” Both the “without due ther specific conclude that the Act is not cause” and the clause “unless the dealer shall enough the cause of action receive fair compensation” and reasonable pled disagree other basis. We appear apply to me to to each of the three Appeals majority the Court of that Section renew, terminate, listed acts —to fail to permits 57-16-9 proscribed otherwise con- argument restrict. No has been advanced upon duct under the Act fair and reasonable the fair and compensation reasonable compensation dealer. applies only clause to restrictions on transfer N.M. at 889 P.2d at 881. believe to the exclusion of a failure to renew or to a applied trial court an incorrect standard in fact, termination. In interpretation evaluating Chrysler’s conduct and determin- adopted by majority urged by none forbidden, ing that it was but we conclude parties or amici in this case. requisite has not shown the injury. We should await the case in which a fran- (right action; damages). presents chisor or franchisee disposi- to us a persuaded We are not that New Mexico’sAct issue, properly raised, briefed, tive and ar- supports Key’s claim as a gued, regarding whether a franchisor existing performance whose was the basis of restrict a transfer only even with due cause Chrysler’s refusal to acquisi- consent to his by paying compensation notwithstanding — tion of an additional franchise. we 57-16-5(L) requires the franchi- reverse the decision of Appeals, the Court of transfer, sor’s consent to a “except that con- judgment court,

vacate the of the trial sent shall not be withheld.” judgment remand with instructions enter Chrysler. appellate No costs are award- ed.

IT IS SO ORDERED.

Case Details

Case Name: Key v. Chrysler Motors Corp.

Court Name: New Mexico Supreme Court

Date Published: May 31, 1996

Citation: 918 P.2d 350

Docket Number: 22587

Court Abbreviation: N.M.