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Grimes Buick-Gmc, Inc. v. Gmac, LLC

United States District Court, Ninth Circuit

September 23, 2013



CHARLES C. LOVELL, Senior District Judge.

Before the Court is a Motion to Dismiss (ECF No. 7) filed by Defendant GMAC, LLC ("GMAC"). The motion is opposed by Plaintiff Grimes Buick-GMC, Inc. ("Grimes"). This is a diversity jurisdiction case between citizens of two states, 28 U.S.C. § 1332(a), but besides asserting common law claims and a claim under the Montana Motor Vehicle Dealer Act, Mont. Code Ann. §§ 61-4-101, et seq., Plaintiff's complaint also asserts a claim arising under a law of the United States, 28 U.S.C. § 1331, the Federal Automobile Dealer's Day in Court Act ("FADDCA"), 15 U.S.C. § 1221.

A. Legal Standard.

The legal standard governing Plaintiff's complaint is provided by Federal Rule of Civil Procedure 8(a), which requires a plaintiff to plead each claim with sufficient specificity to "give the defendant fair notice of what the... claim is and the grounds upon which it rests." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Federal Rule of Civil Procedure 8(a)(2) requires only "a short and plain statement of the claim showing that the pleader is entitled to relief...."

Under Federal Rule of Civil Procedure 12(b)(6), a court reviewing the pleaded facts on a motion to dismiss assumes that all the allegations in the complaint are true. See Ashcroft v. Iqbal, 556 U.S. 662, 664, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). However, factual allegations that consist of "threadbare recitals of a cause of action's elements, supported by mere conclusory statements" need not be assumed to be true. Id. at 663. Factual allegations must sufficiently elevate the claim beyond the level of sheer speculation. See 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004). The factual allegations must be sufficient to make the claim "plausible on its face." Twombly, 550 U.S. at 556-57. In addition, a court should construe the facts in the light most favorable to the plaintiff. Love v. United States, 915 F.2d 1242, 1245 (9th Cir. 1988).

A well-pleaded complaint may go forward even when "recovery is very remote and unlikely." Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974). "Dismissal under Rule 12(b)(6) is appropriate only where the complaint lacks a cognizable legal theory or sufficient facts to support a cognizable legal theory." Mendiondo v. Centinela Hosp. Med. Ctr., 521 F.3d 1097, 1104 (9th Cir. 2008). In determining whether a claim is plausible in the context of the complaint requires the court "to draw on its experience and common sense." Iqbal, 556 U.S. at 664.

Courts reviewing a motion to dismiss "may not consider any material beyond the pleadings." Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990). However, when extra material is submitted as part of the complaint or relied upon in the complaint, a court may consider it. See Lee v. City of Los Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). In addition, the reviewing court may take judicial notice of facts "not subject to reasonable dispute." Fed.R.Evid. 201. Applying this latter rule in reverse, a court may disregard allegations in a complaint that are contradicted by taking judicial notice of other facts. Daniels-Hall v. Nat'l Educ. Ass'n, 629 F.3d 992, 998 (9th Cir. 2010).

Dismissal of a complaint with leave to amend should be granted even when leave to amend is not requested. Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). Only when a court is satisfied that no cure of deficiencies is possible should the court order dismissal without leave to amend. Jackson v. Carey, 353 F.3d 750, 758 (9th Cir. 2003).

B. Plaintiff's Claims.

Grimes alleges that it was engaged in the business of operating an automobile dealership selling General Motors automobiles as a franchisee under a Dealer Agreement. In May, 2009, GMAC was allegedly "a wholly owned subsidiary of General Motors" or "was currently owned 49% by General Motors". (ECF No. 1, ¶ 11.) GMAC acted as General Motors' automotive finance arm by providing most General Motors and its dealerships with "a broad range of financial products." (ECF No. 1, ¶ 12.) Grimes alleges that at all times pertinent to its Complaint, "GMAC was under the control, or was the actual or apparent agent of General Motors." (ECF No. 1, ¶ 13.) Grimes entered into a Loan Agreement with GMAC that gave Grimes a line of credit to finance new and used motor vehicles.

Grimes alleges GMAC acted wrongfully and in bad faith in Spring and Summer 2009, resulting in the constructive termination of Grimes' General Motors franchise. According to Grimes, a series of events began in early April 2009, when, for the first time in 50 years, a Grimes check written to a lender or finance company was returned for insufficient funds. (ECF No. 1, ¶¶ 21-22.) The check was written by Grimes to GMAC in the amount of $75, 000. Grimes now claims that there was only a small insufficiency and that Grimes corrected it promptly so that a cleared payment was received by GMAC within 72 hours. (ECF No. 1, ¶ 23.) Grimes claims that GMAC's response to this insufficient funds check incident was to use it as a pretext to prevent Grimes from conducting its dealership business, forcing Grimes to sell the dealership in a distress sale. (ECF No. 1, ¶ 83.)

Grimes alleges that GMAC acted as the agent of General Motors in a scheme generally to reduce the General Motors dealer network and specifically to eliminate Grimes as a General Motors dealer. (ECF No. 1, ¶ 17.) Grimes makes the following additional factual allegations in support of its claims:

Claim 1. Breach of Contract. Grimes alleges that GMAC's conduct breached the Loan Agreement (ECF No. 1, ¶¶ 46-48). GMAC allegedly lowered the amount of financing available to Grimes and shortened the amount of time within which new and used cars had to be paid, reduced Grimes' ability to acquire vehicles through the GMAC auction, and refused to finance used vehicles without an actual lien release (which could at times take one to three weeks to obtain).

Claim 2. Breach of Good Faith and Fair Dealing (MCA 28-1-211) (ECF No. 1, ¶¶ 49-55). In response to the insufficient funds check, GMAC required Grimes to pay off any other vehicles sold during that period, reduced the number of new and used vehicles that could be financed, required enhanced documentation for existing vehicles, reduced the release period on sold vehicles from three working days to the day of sale, rescinded Grimes' ability to use "Smart Cash" transactions and demanded that all sold units be paid by cashier's check, required that April interest be paid before the normal due date, increased Grimes' interest rate by nearly 70%, placed Grimes on suspension and eliminated Grimes' ability to order inventory, diverted dealership income from factory rebates and holdback accounts to the GMAC loan balance, required Grimes to establish a new checking account giving sole access to GMAC and requiring that all cash from vehicle sales be deposited in the new checking account, took physical possession of vehicle titles and keys (including vehicles that were not financed through GMAC), caused General Motors to put parts on COD, making customer repairs more difficult, swept Grimes' checking account on a daily basis, implemented new financial requirements that reduced Grimes ability to make dealer trades, to sell new vehicles, and to accept trade-ins, required Grimes to pay $27, 000 for GMAC employees ("keepers") placed at Grimes to control the dealership, charged Grimes for unnecessary audits, demanded control of Grimes' parts account, demanded $200, 000 ...

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