vs. ) CASE NO. 80-1331
) KAWASAKI MOTORS CORP., U.S.A. )
Respondent. )
Pursuant to notice, a hearing was held before Charles C. Adams, a Hearing Officer with the Division of Administrative Hearings. This hearing was conducted on October 1 and 2, 1980, in Gainesville, Florida.
For Petitioner: Herbert T. Schwartz, Esquire
For Respondent: Eurich Z. Grifin, Esquire
James M. Shuler, Esquire Carlton, Fields, Ward, Emmanuel,
Smith & Cutler, P.A. Post Office Box 3239 Tampa, Florida 33601
The issue here presented concerns the attempted cancellation of the dealer franchise held by Ken's Kawasaki, Inc., petitioner, to sell Kawasaki motorcycles; specifically, Kawasaki Motors Corp, U.S.A., is taking action which would bring about the cancellation of Petitioner's motorcycle franchise. The alleged authority for considering the propriety of this action is as found in Section 320.641, Florida Statutes (1979).
The Petitioner, Ken's Kawasaki, lic., is a licensed-franchised Kawasaki motorcycle dealer in Gainesville, Alachua County, Florida. Its dealer license is as authorized by the State of Florida, Department of Highway Safety and Motor Vehicles, Division of Motor Vehicles, and its franchise is as issued by the Respondent, Kawasaki Motors Corp, U.S.A.
The dispute arises following action on January 31, 1980, when the Respondent sent a letter to the petitioner indicating that the Sales and Service Agreement (franchise) between the parties would be terminated effective April
30, 1980. The reason for this termination, as expressed in the correspondence directed to the Petitioner, was the belief held by the Respondent that the terms and conditions of the aforementioned Sales and Service Agreement, in particular paragraph 26, subsection 4, allowed for the termination or cancellation if there was a "discontinuance if the operation of dealer's business for a period of five
(5) consecutive days unless such discontinuance is the result of a national disaster," which term was felt to have occurred.
In response to this notification of cancellation, the Petitioner through one of its owners filed a verified complaint before the State of Florida, Department of Highway Safety and Motor Vehicles, Division of Motor Vehicles. This complaint was referred to the State of Florida, Division of Administrative Hearings, for consideration pursuant to Section 120.57(1), Florida Statutes, and the hearing was conducted on October 1 and 2, 1980, in Gainesville, Florida. (The procedural conduct of that hearing is as set forth in the transcript of the hearing.)
The history of the Petitioner's franchise with Respondent began on February 3, 1978, with the acceptance by those parties of a Kawasaki 1978 Model Year Authorized Dealer's Sales and Service Agreement. This agreement terminated on September 30, 1978. This franchise was then extended to include the period December 31, 1981, in keeping with a Kawasaki Authorized Dealer's Sales and Service Agreement which was executed on January 29, 1979, and this is the agreement which was in effect at the time of the entry of the termination letter dated January 31, 1980.
In the spring of 1979, Kenneth Meyers, a principal in the Petitioner's corporation, informed Jimmy Capps, who was the District Manager for the Respondent in the Georgia - and Florida area, that the Petitioner intended to sell Ken's Kawasaki, Inc., motorcycle business.
In pursuit of its decision to sell, the petitioner listed its business with a number of real estate agencies in the Gainesville, Florida, area. Among those brokers was Sherwood Commercial Brokers and within that brokerage firm Walter E. Murphree, Jr., was a principal.
In September, 1979, the brokerage firm referred George O. Hack to Meyers as a prospective purchaser of the Petitioner's motorcycle business.
During the same month, on September 13, 1979, District Manager Capps visited the petitioner's business location to discuss with the Petitioner the fact that the dealership was "out of trust". ("Out of trust" means that the inventory of the dealership subject to a floor plan financing arrangement, has been sold without obtaining the title documents held as security for the floor plan financing and without accounting for the proceeds, and was therefore in violation of the financing arrangement.) In this instance, some of the motorcycles that had been financed by the Respondent through a floor plan had been sold "out of trust".
Again in September, 1979, Meyers contacted Capps in Atlanta, Georgia, and indicated that George O. Hack, James W. Opp, and Walter E. Murphree, Jr., had shown an interest in acquiring the petitioner's business. This contact occurred subsequent to the entry between the Petitioner and Hack, Opp and Murphree as principals in Gainesville Motorcycle Corporation, Inc., into an arrangement referred to as a "Contract for Purchase and Sale of Assets" of the Petitioner corporation. None of the principals in Gainesville Motorcycle had held any position with the petitioner prior to this contract agreement.
To effectuate the purpose of transferring the franchise from the petitioner to Gainesville Motorcycle Corporation, Inc., an arrangement was made by Hack to have a meeting with Capps to discuss the acceptance by the Respondent Gainesville Motorcycle Corporation, Inc., as franchisee of the Respondent. This meeting was held on October 22, 1979, in Gainesville, Florida. In the course of the meeting, a discussion was held on the requirements of the Respondent which must be met before the prospective franchisee would be accepted. This included the necessity to execute an application provided by the Respondent and the necessity to demonstrate the financial liquidity of Gainesville Motorcycle Corporation, Inc., in the person of its principals, by having them provide sound financial statements to the Respondent.
One of the principals of Gainesville Motorcycle Corporation, Inc., Hack, owned and operated a Yamaha dealership in Gainesville, Florida, and this was a matter of which Capps either knew about prior to the meeting or learned of in the course of the meeting. In dealing with this subject as it related to the possibility that two motorcycle lines would be sold from one store, Capps made known that the acceptability of his circumstance would be dependent on the expectation by the Respondent that the Kawasaki line of product would be promoted on an equal basis with the existing Yamaha line.
The idea of selling other manufacturers' motorcycles from the same store in which the Kawasaki product line was being offered is not foreign to the Respondent. The arrangement for the sale of two product lines from one store, to include the Kawasaki line, is acceptable, subject only to equal treatment in the promotion and sales of the Kawasaki product line when contrasted with that of the competing motorcycle product.
Sometime in late October, 1979, Hack forwarded three financial statements for the principals Hack, Opp and Murphree to the Respondent in Atlanta, Georgia, together with an application for franchise in the name "Gainesvi1le Motorcycle Corporation". (This application of Gainesville Motorcycle Corporation was not presented as evidence in the hearing.)
After receiving the material from the Gainesville Motorcycle Corporation and its principals, a decision was made by the Respondent not to approve their request for franchise and this decision was based upon the unacceptable financial position of those principals. The decision not to accept was communicated by letters addressed to those three principals, dated November 2, 1979.
Subsequent to the receipt of the letters, Hack contacted the Respondent to ascertain if it was a possibility that other materials could be submitted in support of the application which would cause the Respondent to change its position on the franchise question. Hack was told that the Respondent would evaluate additional information if it was presented.
On November 5, 1979, William A. Parsons, attorney representing the Petitioner, wrote to the Respondent to advise the Respondent that a closing on the pending sale of the Petitioner's business was scheduled for November 19, 1979, and in particular, requesting information from the Respondent.
In response to Parsons's correspondence, the Respondent wrote to him on November 8, 1979, and advised Parsons that the sale of the franchise to Hack, Opp, Murphree or anyone in general had not been approved at that time.
On November 8, 1979, another dealer visit was made by Capps to the petitioner's location. Further discussion was held between Capps and Meyers on the reason for disapproval of the Gainesville Motorcycle group's reguest for franchise, and Capps also determined in the course of that visit that some of the other floor plan financers of the petitioner, namely, ITT Diversified Credit, had removed one of the Petitioner's motorcycles and other items associated with the business; the effect of that action by ITT being to place the Petitioner in the position of no longer having available inventory in motorcycles to be sold.
On November 17, 1979, the petitioner closed the doors to its Kawasaki motorcycle store for the purpose of taking inventory and had not reopened at the time of the hearing in this cause, October 1 and 2, 1980. At no time since the November 17, 1979, date has the Petitioner been engaged as a Kawasaki dealer.
Notwithstanding the communication through the letter of November 8, 1979, from the Respondent to attorney Parsons indicating that the Hack, Opp, and Murphree group had not been approved as a Kawasaki franchise dealer, the
parties to the purchase contract went to the closing scheduled for November 19, 1979, and on that date through a telephone call directed to officials within the Respondent corporation in Atlanta, Georgia, the parties to the closing were informed that the Hack group had not been approved as prospective franchisees to sell Kawasaki motorcycles, in substitution for the Petitioner corporation.
In late November, 1979, Meyers contacted Gary Warren, who operated a Suzuki motorcycle dealership in Gainesville, Florida, to determine if Warren was interested in buying the petitioner's business. Warren thereafter determined to make an application to the Respondent to be granted the Kawasaki franchise for Gainesville, Florida, and agreed with Meyers that he would discuss the possibility of purchasing some of the merchandise items held by Ken's Kawasaki.
On November 30, 1979, the Respondent forwarded the necessary material to Warren for Warren to make an application to be the Kawasaki franchise dealer.
On December 1, 1979, Hack, Opp and Murphree entered into an arrangement with the Petitioner's landlord by which these parties agreed to lease, with the option to buy, those premises which were then occupied by the Petitioner, on the condition that the new group pay those arrearages in rent then owed by the Petitioner to the landlord.
After reviewing Warren's application to become a Kawasaki dealer, Warren was informed that he had been approved. This approval was made known in late December, 1979.
Also in late December, 1979, Hack informed Capps that the Yamaha dealership would be moved Petitioner's premises around Christmas of that year.
Capps came to Gainesville on January 23, 1980, to enter into a mutual commitment agreement leading to the completion of arrangement s to establish Warren as the local Kawasaki dealer. (During that same trip, Capps went to the location of the Petitioner's dealership and discovered that the Yamaha dealership was in place at that location and there were no signs indicating that the Kawasaki dealership was still in operation at that locale. On that date, the mutual commitment agreement was executed and in provisions of that document was an agreement that Warren would buy his parts kit, accessory kit, and special tools from the Petitioner and that the dealership would operate as "Suzuki- Kawasaki of Gainesville".
In pursuit of the agreement to purchase the parts kit, accessory kit and special tools from tie petitioner, discussion was held between Meyers and Warren. Prior to the discussion, Warren had been solicited by ITT Diversified Credit to buy certain products which they had removed from the Petitioner's business. In addition, the petitioner's landlord took Warren to a storage facility where some of the Petitioner's parts and accessories had been stored. Warren was concerned about the Petitioner's merchandise and for that reason asked Meyers to provide bills of sale and to conduct an inventory prior to any purchase by Warren. No bills of sale were forthcoming and Meyers having placed the value of the goods above their fair market value, Warren declined to purchase any of the items owned by the Petitioner in association with its Kawasaki dealership.
After receipt of the January 31, 1980, letter or termination end prior to filing his protest to the the cancellation on April 26, 1980, meetings were held between Meyers and the principals of Gainesville Motorcycle Corporation on the subject of filing the protest and after discussion the decision was made to have Hack, on behalf of Gainesville Motorcycle Corporation, finance the protest with the expectation that the Gainesville Motorcycle Corporation would gain the award of the Kawasaki motorcycle franchise through the present action.
It is not the intention of Kenneth Meyers to continue to operate the Kawasaki motorcycle business in keeping with his existing franchise issued by the Respondent and Meyers, in making this statement, is authorized to speak for the Petitioner.
At present, Kawasaki motorcycles are not being sold from any Kawasaki dealership located in Gainesville, Florida, and this has been the case since November 17, 1979. This lack of sales has not been the result of the Respondent failing to deliver products to the Petitioner.
There was no showing in the course of the hearing that the Respondent failed to fairly evaluate the applications of Gainesville Motorcycle Corporation and Gary Warren, prior to determining to accept Warren as the replacement dealer for the Petitioner.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action.
In the course of numbering the Respondent's exhibits, some of those exhibits, namely, Respondent's Exhibits 6 and 7, had been exhibits to the deposition of George O. Hack taken on September 22, 1980. In accepting those exhibits in the course of the hearing, it was necessary to mark them and remove them for copying so that the originals to the deposition could remain with the deposition. Through this process a mistake was made and two additional exhibits unassociated with that deposition were numbered as Respondent's Exhibits 6 and
Based upon the full consideration of the facts found therein and the Conclusions of Law reached it is RECOMMENDED that the Petitioner, Ken's Kawaski, Inc.'s complaint for unfair cancellation of its dealer franchise agreement be DISMISSED and the cancellation of the Petitioner's franchise agreement with Respondent, Kawasaki Motors Corp, U.S.A., be UPHELD. 1/
DONE AND ENTERED this 3rd day of November 1980, in Tallahassee, Florida.
CHARLES C. ADAMS
Filed with the Clerk of the Division of Administrative Hearings this 3rd day of November, 1980.
1/ Counsel have provided Proposed Findings of Fact, Conclusions of Law and Recommendations and these proposals have been reviewed prior to the entry of this Recommended Order. To the extent that those proposals are consistent with this Recommended Order, they have been utilized. To the extent that those proposals are inconsistent with this Recommended Order, they are hereby rejected.
Herbert T. Schwartz, Esquire Schwartz & Wilson
Eurich Z. Griffin, Esquire and
James M. Shuler, Esquire Carlton, Fields, Ward, Emmanuel,
Smith & Cutler, P.A. Post Office Box 3239 Tampa, Florida 33601
