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Continental Cars, Inc., A Washington Corporation, Dba Auburn Valley Mazda v. Mazda Motor of America

September 9, 2011

CONTINENTAL CARS, INC., A WASHINGTON CORPORATION, DBA AUBURN VALLEY MAZDA,
PLAINTIFF,
v.
MAZDA MOTOR OF AMERICA, INC., A CALIFORNIA CORPORATION, DBA MAZDA NORTH AMERICAN OPERATIONS,
DEFENDANT.



The opinion of the court was delivered by: A Benjamin H. Settle United States District Judge

ORDER DENYING DEFENDANT'S MOTION TO DISMISS PURSUANT TO FED. R. CIV. P. 12(C)

This matter comes before the Court on Defendant's ("Mazda") motion to dismiss Plaintiff's ("Auburn Valley") case under Federal Rule of Civil Procedure ("Fed. R. Civ. P.") 12(C). Dkt. 22. The Court has considered the pleadings filed in support of and in opposition to the motion and the remainder of the file and hereby denies the motion for the reasons stated herein.

I. PROCEDURAL HISTORY

On May 20, 2011, Auburn Valley filed a motion for preliminary injunction. Dkt. 19.On June 13, 2011, Mazda filed a motion in opposition to the motion for preliminary injunction combined with a motion to dismiss (Dkt. 22) pursuant to Fed. R. Civ. P. 12(C) (judgment on pleadings).

On June 30, 2011, the Court denied Auburn Valley's motion for preliminary injunction and renoted Mazda's motion to dismiss for consideration on its calendar for August 3, 2011. On July 29, 2011, Auburn Valley responded in opposition to Mazda's motion to dismiss. Dkt. 30. On August 3, 2011, Mazda replied. Dkt. 31.

II. FACTUAL BACKGROUND

This case arises out of Mazda's alleged breach of a contract (the "Agreement") that it entered into with Auburn Valley. For a more complete factual background see the Court's order denying Auburn Valley's motion for preliminary injunction. Dkt. 28.

Auburn valley alleges that Mazda breached the Agreement when it terminated Auburn Valley's dealership pursuant to the regulatory scheme of RCW Chapter 46.96. Mazda terminated Auburn Valley's dealership based upon the felony conviction of Auburn Valley's principal owner, Wolfgang "Tito" Roempke ("Roempke"). Although Auburn Valley filed a petition with an administrative law judge ("ALJ") to protest the termination, it concedes that an ALJ found its protest to be untimely and that the ALJ's decision is not subject to challenge in this action. Nonetheless, Auburn Valley filed the instant civil action alleging breach of contract and violation of the Consumer Protection Act ("CPA").

Contrary to Mazda's position, Auburn Valley argues that RCW Chapter 46.96 does not provide the exclusive remedy for challenging its termination as a dealership in the Mazda network. Specifically, Auburn Valley argues that the Agreement contained a condition precedent that operated to prevent Mazda from executing a felony conviction termination of dealership under RCW Chapter 46.96 in this case.

The specific provision that Auburn Valley contends is at issue in this case is found within its agreement with Mazda. Paragraph 22(B) of the Agreement provides as follows:

(i) Immediate Termination. Dealer and Mazda agree that any instance of the conduct is so contrary to the goals, purposes and objectives of this Agreement as to warrant its immediate termination upon written notice by Mazda to Dealer: * * *

(c) Dealer, or any Owner, shareholder, member, partner, director, officer (collectively, "Dealer Party"), or parent company of Dealer, is convicted of a felony or enters a plea of guilty to a felony charge, which results in a significant adverse effect either on Dealer's Business or on the reputation of Dealer, Mazda or Mazda Dealers generally. Provided however, that if the subject Dealer Party owns a minority interest, or no interest, in Dealer, upon written notice from Mazda, Dealer shall have a reasonable period of time as set forth in such notice to disassociate from the Dealer Party in question through means and in a manner acceptable to Mazda.

Id. ¶ 6 (reproducing relevant portion of Dealer Agreement) (emphasis added).

In opposition, Mazda argues that RCW Chapter 46.96 does provide the exclusive remedy for Auburn Valley to challenge its dealership's termination based on a felony conviction of Roempke. Alternatively, it argues that Auburn Valley is prevented from filing this action under the doctrine of res judicata. It also argues that Auburn Valley cannot satisfy the elements required to be successful in its CPA claim.

III. DISCUSSION

Mazda moves the Court for judgment on the pleadings pursuant to Fed. R. Civ. P. 12(C). Dkt. 22. Within its motion Mazda argues that Auburn Valley's breach of contract claim is barred by res judicata and that Mazda has not supplied sufficient facts to support its CPA claim. See id.

Determining Mazda's motion requires the Court to first determine whether RCW Chapter 46.96 provides the exclusive remedy for Auburn Valley to challenge its dealership's termination by Mazda, specifically based upon Roempke's felony conviction. If RCW Chapter 46.96 does not provide an exclusive remedy in cases of felony conviction dealership terminations, the Court must then determine whether Auburn Valley has presented the Court with actionable claims for breach of contract and violations of the CPA.

A. Exclusive Remedies

The Washington Supreme Court recently had occasion to set out the manner by which a court determines whether a statutory scheme provides the exclusive remedy for an aggrieved party to seek relief for harms alleged. See Potter v. Washington State Patrol, 165 Wn.2d 67 (2008). The Potter court was "asked to decide whether the process for redeeming an impounded vehicle as set forth in RCW 46.55.120 [provides] the exclusive remedy for a person whose vehicle is unlawfully impounded." Id. at 72. It held that "RCW 46.55.120 is not exclusive and, therefore, a person whose vehicle is unlawfully impounded may bring a conversion action against the authority that authorized the impoundment." Id. In so holding, the Potter courtreasoned that RCW 46.55.120 only governed redemption of an impounded vehicle and did not pertain to other actions that one might raise in a civil action (i.e., not before an administrative hearing board) such as conversion. See id.

Mazda argues that Potter is inapplicable to this case because Auburn Valley seeks to challenge its dealership's termination based on a felony conviction and that unlike the case in Potter, the regulatory scheme at issue in this case specifically addresses felony conviction terminations. However Mazda's reading of Potter is oversimplified.

In this case, Auburn Valley asserts that it is attempting to enforce its contract rights under the Agreement, which arguably provides Auburn Valley with more protection against a felony conviction termination than provided for by RCW Chapter 46.96. Specifically, Auburn Valley points to paragraph 22(B) of the Agreement, which permits termination based on a felony conviction only in the case where the felony conviction had a "significant adverse effect" on Mazda, Auburn Valley, or other Mazda dealers' businesses or reputations. In contrast, RCW 46.96.070(2)(c) requires only a showing of good cause by the manufacturer to warrant termination.

Auburn Valley concedes that it cannot challenge the ALJ's prior determination that Mazda established good cause under 46.96.070(2)(c), but this is only statutory good cause. Auburn Valley takes the position that Mazda must establish more than statutory good cause to effect the termination based on Roempke's felony conviction because the parties agreed to such a requirement under paragraph 22(B) of their Agreement. Therefore, the real question presented is whether RCW Chapter 46.96.070(2)(c) provides Auburn Valley with an exclusive or cumulative remedy to challenge the instant dealer termination, using the Potter analytical framework.

The Potter court set out the analytical framework to be applied by a court in determining whether or not a Washington statute is meant to provide an exclusive remedy and the implications of finding a statute to provide such an exclusive remedy:

In general, our state is governed by the common law to the extent the common law is not inconsistent with constitutional, federal, or state law. RCW 4.04.010. The legislature has the power to supersede, abrogate, or modify the common law. See State v. Estill, 50 Wn.2d; State v. Mays, 57 Wash. 540, 542 (1910). However, we are hesitant to recognize an abrogation or derogation from the common law absent clear evidence of the legislature's intent to deviate from the common law. "It is a well-established principle of statutory construction that '[t]he common law. . . ought not to be deemed repealed, unless the language of a statute be clear and explicit for this purpose.'" Norfolk Redevelopment & Hous. Auth. v. Chesapeake & Potomac Tel. Co. of Virginia, 464 U.S. 30, 35-36 (1983) (alterations in original) (quoting Fairfax's Devisee v. Hunter's Lessee, 11 U.S. (7 Cranch) 603, 623 (1812)). A law abrogates the common law when "the provisions of a . . . statute are so inconsistent with and repugnant to the prior common law that both cannot simultaneously be in force." State ex rel. Madden v. Pub. Util. Dist. No. 1, 83 Wash.2d 219, 222 (1973). A statute in derogation of the common law "must be strictly construed and no intent to change that law will be found, unless it appears with clarity." McNeal v. Allen, 95 Wash.2d 265, 269, 621 P.2d 1285 (1980).

If a remedy provided by a statute is exclusive, the statute implicitly abrogates all common law remedies within the scope of the statute. To determine whether a statutory remedy is exclusive, the court must first examine the language and provisions of the statute in question. Wilmot v. Kaiser Aluminum & Chem. Corp., 118 Wash.2d 46, 54 (1991). A statute may include an exclusivity provision. Id. at 62, 821 P.2d 18. However, the absence of such an exclusivity provision "does not defeat the case for preemption." Wash. Water Power Co. v. Graybar Elec. Co., 112 Wash.2d 847, 853 (1989). If the language of the statute is inconclusive, the court may look to other manifestations of legislative intent. Wilmot, 118 Wash.2d at 54, 821 P.2d 18.

In the absence of statutory language or provisions clearly establishing the exclusivity of a remedy, we may look to "other manifestations of legislative intent" to determine whether the legislature clearly intended a statute to be an exclusive remedy. Wilmot [v. Kaiser Aluminum & Chem. Corp., 118 Wn.2d 46, 54 (1991)]. In Wilmot, we considered, among other things, the comprehensiveness of the remedy ...


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