Filed: Jul. 30, 2014
Latest Update: Mar. 02, 2020
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 13-1696 PRIORITY AUTO GROUP, INC., Plaintiff - Appellant, v. FORD MOTOR COMPANY, Defendant - Appellee. Appeal from the United States District Court for the Eastern District of Virginia, at Norfolk. Rebecca Beach Smith, Chief District Judge. (2:12-cv-00492-RBS-LRL) Argued: May 15, 2014 Decided: June 26, 2014 Amended: July 30, 2014 Before GREGORY, AGEE, and KEENAN, Circuit Judges. Affirmed by published opinion. Judge Agee wrote th
Summary: PUBLISHED UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT No. 13-1696 PRIORITY AUTO GROUP, INC., Plaintiff - Appellant, v. FORD MOTOR COMPANY, Defendant - Appellee. Appeal from the United States District Court for the Eastern District of Virginia, at Norfolk. Rebecca Beach Smith, Chief District Judge. (2:12-cv-00492-RBS-LRL) Argued: May 15, 2014 Decided: June 26, 2014 Amended: July 30, 2014 Before GREGORY, AGEE, and KEENAN, Circuit Judges. Affirmed by published opinion. Judge Agee wrote the..
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PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 13-1696
PRIORITY AUTO GROUP, INC.,
Plaintiff - Appellant,
v.
FORD MOTOR COMPANY,
Defendant - Appellee.
Appeal from the United States District Court for the Eastern
District of Virginia, at Norfolk. Rebecca Beach Smith, Chief
District Judge. (2:12-cv-00492-RBS-LRL)
Argued: May 15, 2014 Decided: June 26, 2014
Amended: July 30, 2014
Before GREGORY, AGEE, and KEENAN, Circuit Judges.
Affirmed by published opinion. Judge Agee wrote the opinion, in
which Judge Gregory and Judge Keenan joined.
ARGUED: Brad D. Weiss, CHARAPP & WEISS, LLP, McLean, Virginia,
for Appellant. Dominic Francis Perella, HOGAN LOVELLS US LLP,
Washington, D.C., for Appellee. ON BRIEF: Michael G. Charapp,
CHARAPP & WEISS, LLP, McLean, Virginia, for Appellant. Kurt D.
Williams, BERKOWITZ OLIVER WILLIAMS SHAW & EISENBRANDT LLP,
Kansas City, Missouri; Christopher T. Handman, Sean Marotta,
HOGAN LOVELLS US LLP, Washington, D.C., for Appellee.
AGEE, Circuit Judge:
In this case, the prospective buyer of a car dealership
sued a manufacturer-franchisor who exercised its right of first
refusal under the franchise agreement, thereby preventing the
prospective buyer from purchasing the dealership. The
prospective buyer, Priority Auto Group, Inc. (“Priority Auto”),
alleged that Ford Motor Company (“Ford”) imposed an unlawful
condition on the sale of the dealership, in violation of
Virginia Code § 46.2-1569(3a), and engaged in tortious
interference with its contract and business expectancy. The
district court dismissed these claims pursuant to Federal Rule
of Civil Procedure 12(c), and Priority Auto now appeals. For
the reasons that follow, we affirm the judgment of the district
court.
I.
Kimnach Ford, Inc., (“Kimnach”) operated an authorized Ford
dealership in Norfolk, Virginia. Subject to certain limitations
not at issue here, the Kimnach-Ford franchise agreement gave
Ford the right of first refusal in the event that Kimnach’s
owner decided to sell the dealership.
In 2010, Kimnach’s owner agreed to sell Kimnach to Priority
Auto under a purchase agreement that conditioned the sale on
Ford approving Priority Auto as a Ford franchisee. Kimnach’s
2
owner notified Ford of the intended sale and requested that Ford
approve Priority Auto as a Ford dealer. Ford declined to do so,
stating instead that it would exercise its right of first
refusal. It then assigned this right to a third party, which
purchased Kimnach, dispersed its assets, and closed the
dealership.
Priority Auto sued Ford in Virginia state court alleging,
in relevant part, that Ford violated Virginia Code § 46.2-
1569(3a) (“Subdivision 3a”), 1 which governs a motor vehicle
manufacturer’s ability to impose conditions on the transfer or
sale of franchises, and also tortiously interfered with its
purchase agreement and business expectancy under Virginia common
law. Specifically, Priority Auto asserted that Ford unlawfully
rejected it as a prospective buyer of the Kimnach dealership
because Ford had not relied on a permitted statutory ground.
Furthermore, Priority Auto contended that although Subdivision
3a states that a manufacturer’s decision to exercise the right
of first refusal does not impose a prohibited condition, Ford
could not rely on that exception because it had not complied
with one of the requirements for exercising that right under
§ 46.2-1569.1. Namely, Priority Auto maintained that Ford did
not give Kimnach’s owner “the same or greater consideration” for
1
Except where noted, all statutory citations are to the
Code of Virginia.
3
the dealership as Priority Auto’s purchase would have provided.
See § 46.2-1569.1(2). Finally, Priority Auto asserted that
Ford’s conduct interfered with its plan to purchase Kimnach, and
constituted tortious interference with a contract and tortious
interference with business expectancy under Virginia common law.
Ford removed the case to the District Court for the Eastern
District of Virginia on the basis of diversity jurisdiction, and
then moved for judgment on the pleadings under Federal Rule of
Civil Procedure 12(c).
The district court referred the case to a magistrate judge,
who conducted a hearing and issued a report recommending that
the district court grant the motion to dismiss. The magistrate
judge concluded that Priority Auto lacked standing to bring a
claim under Subdivision 3a that was predicated on challenging
the sufficiency of the consideration Ford paid to Kimnach’s
owner when it exercised the right of first refusal. The
magistrate judge also concluded that Priority Auto’s tortious
interference claims failed as a matter of law because Ford’s
exercise of the statutory and contractual right of first refusal
could not constitute the necessary element of an improper method
or wrongful means under Virginia law. The district court
adopted the magistrate judge’s findings and recommendations in
full, and dismissed Priority Auto’s claims with prejudice.
4
Priority Auto Group, Inc., v. Ford Motor Co., No. 2:12-cv-492,
2013 U.S. Dist. LEXIS 69216 (E.D. Va. May 15, 2013).
Priority Auto noted a timely appeal, and we have
jurisdiction pursuant to 28 U.S.C. § 1291.
II.
Priority Auto raises two issues on appeal: (1) whether the
district court erred in holding that Priority Auto did not have
standing to sue Ford under Subdivision 3a, and (2) whether the
district court erred in concluding Priority Auto’s tortious
interference claims failed as a matter of law because Ford’s
exercise of the right of first refusal did not constitute an
improper act under Virginia tort law.
This Court reviews de novo a district court’s grant of a
Rule 12(c) motion for judgment on the pleadings. Butler v.
United States, 702 F.3d 749, 751 (4th Cir. 2012). The standard
for Rule 12(c) motions is the same as applied to Rule 12(b)(6)
motions, which should only be granted if, “accepting all well-
pleaded allegations in the plaintiff’s complaint as true and
drawing all reasonable factual inferences from those facts in
the plaintiff’s favor, it appears certain that the plaintiff
cannot prove any set of facts in support of his claim entitling
him to relief.” Edwards v. City of Goldsboro,
178 F.3d 231, 244
(4th Cir. 1999).
5
As a federal court exercising diversity jurisdiction, we
are tasked with applying the law of Virginia as it would be
applied by the Supreme Court of Virginia if the case were before
that court. See Nature Conservancy v. Machipongo Club, Inc.,
579 F.2d 873, 875 (4th Cir. 1978). Although the Supreme Court
of Virginia has not opined on the exact issues and statutory
questions raised in this case, we conclude that well-settled
overarching legal principles allow us to fulfill this charge. 2
A.
Priority Auto first asserts that it has a cause of action
under Subdivision 3a because Ford imposed a prohibited condition
on the sale of the Kimnach dealership. That is to say, Priority
Auto claims Ford is amenable to suit under Subdivision 3a
because Ford exercised its contractual and statutory right of
first refusal in a way that ultimately “exercise[d] [a] right of
first refusal that did not meet the requirements of section
46.2-1569.1.” 3 (Opening Br. 26.) Priority Auto further contends
2
Priority Auto has also moved for this Court to certify
several questions to the Supreme Court of Virginia. Because we
conclude certification is not necessary to resolve the issues
before us, we deny the motion.
3
Priority Auto also asserts that because Ford’s exercise of
the right of first refusal should be deemed ineffective, the
only way Ford could lawfully prevent Priority Auto from
purchasing the Kimnach dealership was if it had complied with
the requirements of § 46.2-1569(3) (“Subdivision 3”) by relying
(Continued)
6
that the district court’s holding that it lacked standing
misapprehended the nature of its claim since it was not
proceeding directly under § 46.2-1569.1 (governing the right of
first refusal), but rather under Subdivision 3a (governing the
imposition of conditions on the sale of a dealership).
Priority Auto’s arguments simply miss the mark. Despite
Priority Auto’s attempts to cast itself as a victim of Ford’s
business machinations, it does not matter how earnestly Priority
Auto wanted to purchase Kimnach, nor does it matter why Ford
opted to exercise its right of first refusal or what Ford (via
its assignee) did with Kimnach after exercising that right. Put
differently, neither the prelude nor the postscript to Ford’s
on one of the listed grounds for rejecting a prospective buyer.
As Ford did not independently satisfy those requirements,
Priority Auto contends Ford is amenable to suit under these
statutes for blocking Priority Auto’s purchase of Kimnach.
The parties do not dispute that Ford did not provide
written notice pursuant to or otherwise rely on one of
Subdivision 3’s grounds for prohibiting Kimnach’s sale to
Priority Auto.
The magistrate judge correctly construed these provisions
in tandem by recognizing that Subdivision 3a “does not grant a
prospective buyer of an automobile dealership the right to sue a
manufacturer that rejects the prospective buyer but also fails
to give the dealer one of four statements of specific grounds
for the rejection [delineated in Subdivision 3] if the
manufacturer exercises its right of first refusal under § 46.2-
1569.1.” (J.A. 949.) Our focus, then, is on whether Priority
Auto may use Subdivision 3a to challenge the validity of Ford’s
exercise of the right of first refusal, and specifically, the
sufficiency of the consideration it paid in attempting to
exercise that right.
7
exercise of the right of first refusal matters for purposes of
determining whether Priority Auto can pursue the particular
challenges it seeks to bring in this case.
Although “statutory standing” is a phrase primarily invoked
in federal courts, the concept is firmly established in Virginia
jurisprudence as well. In Small v. Fed. Nat’l Mortg. Assoc.,
747 S.E.2d 817 (Va. 2013), for example, the Supreme Court of
Virginia described the relevant inquiry as
mak[ing] certain that a party who asserts a particular
position has the legal right to do so and that his
rights will be affected by the disposition of the
case. When a plaintiff files an action under a
particular statute . . . , the standing inquiry does
not turn simply on whether the plaintiff has a
personal stake in the outcome of the controversy, or
whether the plaintiff’s rights will be affected by the
disposition of the case. Rather, the plaintiff must
possess the legal right to bring the action, which
depends on the provisions of the relevant statute.
Id. at 820 (quotation marks and citations omitted).
Our analysis begins with the text of the statute. See
Antisdel v. Ashby, 688 S.E.2d 163, 166 (Va. 2010) (“When the
language of a statute is unambiguous, [the Court] is bound by
the plain meaning of the words used.”). Subdivision 3a
prohibits a manufacturer from “impos[ing] a condition on the
approval of the sale or transfer of the ownership of a
dealership . . . if the condition would violate the provisions
of this title if imposed on the existing dealer.” And under
certain conditions not in dispute here, it authorizes a
8
prospective buyer to file suit for the violation of Subdivision
3 or Subdivision 3a for damages suffered as a result of the
violation of the statute. Lastly, however, Subdivision 3a
specifically provides that “[n]otwithstanding the foregoing, an
exercise of the right of first refusal by the manufacturer . . .
pursuant to § 46.2-1569.1 shall not be considered the imposition
of a condition prohibited by this section.”
Under Subdivision 3a’s plain terms, then, no cause of
action lies when a manufacturer conditions the sale of a
franchise on the exercise of its right of first refusal. That
is precisely what occurred here: Priority Auto attempted to
purchase the Kimnach dealership. Ford, the manufacturer,
“impose[d] a condition on the approval of the sale or transfer
of the ownership of [Kimnach] dealership” by invoking its
contractual right of first refusal—i.e., by requiring that it,
rather than Priority Auto, be given the opportunity to purchase
the dealership. Cf. § 46.2-1569(3a). Moreover, Ford’s exercise
of the right of first refusal “shall not be considered the
imposition of a condition prohibited by” Virginia statute. Id.
As such, Priority Auto has no standing to bring a claim that
Ford’s exercise of the right of first refusal violated
Subdivision 3a because Subdivision 3a expressly prohibits that
argument. Cf.
Small, 747 S.E.2d at 820 (characterizing
9
statutory standing as ensuring that “a party who asserts a
particular position has a legal right to do so”).
As noted, Priority Auto acknowledges that exercising a
right of first refusal would ordinarily not be considered an
improper condition under Subdivision 3a. Nonetheless, Priority
Auto contends that Ford cannot rely on that exemption because
Ford failed to separately satisfy one of the requirements for
exercising a right of first refusal under Virginia Code § 46.2-
1569.1. That is, Priority Auto asserts that a lawful exercise
of the right of first refusal requires meeting all of the §
46.2-1569.1 requirements for the exercise of the right of first
refusal in order to avoid being considered “the imposition of a
condition prohibited by” Subdivision 3a. Citing the requirement
in § 46.2-1569.1(2) that the exercise “will result in the
dealer’s and dealer’s owner’s receiving the same or greater
consideration as they have contracted to receive in connection
with the proposed change of ownership or transfer,” Priority
Auto maintains that Kimnach’s owner actually received less
consideration as a result of its sale to Ford’s assignee than it
would if Priority Auto had purchased the dealership. As a
consequence, Priority Auto concludes Ford did not lawfully
exercise the right of first refusal under § 46.2-1569.1 and that
Subdivision 3a authorizes it to challenge the validity of the
10
consideration Ford provided under § 46.2-1569.1 since that is
pertinent to its Subdivision 3a claim.
Rather than misapprehending the nature of Priority Auto’s
claim, the district court understood fully what Priority Auto
sought to do and why it had to pursue the circuitous argument it
advanced. Moreover, the district court understood that although
Priority Auto purported to proceed under Subdivision 3a, the
legal right it was asserting in order to bring that claim was
actually set forth in § 46.2-1569.1(2), and was designed to
protect the dealer rather than the prospective buyer. The
district court thus appropriately recognized its duty to
interpret statutory provisions in a manner that gives “full
meaning, force, and effect” to related statutes. Antisdel, 688
S.E.2d at 166.
As the district court held, Priority Auto’s understanding
of the statutes “myopically focuses on Virginia Code §§ 46.2-
1569 and 46.2-1569.1 without regard to their harmonization with
each other and with the purpose of the [Motor Vehicle Franchise]
Act.” (J.A. 948.) As noted, § 46.2-1569.1 sets forth four
requirements that a manufacturer must satisfy in order to
exercise its right of first refusal. Three of the requirements,
including the adequacy of the consideration challenged here,
discuss obligations between the manufacturer and the dealer or
dealer’s owner. The fourth requirement—which is not at issue
11
here—entitles the proposed buyer to “reasonable expenses”
incurred prior to the manufacturer’s exercise of its rights. 4
§ 46.2-1569.1(4).
As the magistrate judge observed, this fourth requirement
“is the only one in § 46.2-1569.1 that specifically refers to
prospective buyers and grants them some form of relief.” (J.A.
952.) And “[b]ecause § 46.2-1569.1 grants the prospective buyer
a specific benefit arising from the manufacturer’s exercise of
its right of first refusal, there can be no suggestion that the
other provisions in that section, which are silent as to the
prospective buyer, make a similar grant of benefits to the
prospective buyer.” (J.A. 952.) Simply put, the General
Assembly granted prospective buyers only one right to relief
following a manufacturer’s exercise of the right of first
refusal: a claim for reasonable expenses incurred, pursuant to §
46.2-1569.1(4). And Ford has already satisfied Priority Auto’s
claim for such relief in this case.
Adopting Priority Auto’s interpretation of Subdivision 3a’s
right of first refusal exception would lead to several illogical
results. At the outset, it places a prospective buyer in a much
more significant position to thwart the objectives of permitting
a right of first refusal than the Virginia statutes permit.
4
Priority Auto concedes Ford has paid all its reasonable
expenses due under § 46.2-1569.1(4).
12
See, e.g., Fivebaugh v. Whitehead, 559 S.E.2d 611, 615 (Va.
2002) (“[A] right of first refusal is included in a contract for
the benefit of the person who is given the right.”). The
General Assembly has considered the effect of the exercise of a
right of first refusal on a prospective buyer and has provided
for what it believed to be adequate relief for those interests
in that transaction, as provided in § 46.2-1569.1(4). Allowing
prospective buyers a back door opportunity to recover, pursuant
to Subdivision 3a, more than reasonable expenses under § 46.2-
1569.1 would allow prospective buyers the opportunity to recover
more than what the General Assembly believed they should be
entitled to recover as a result of a manufacturer’s decision to
exercise its right of first refusal. For that reason, too, this
interpretation would render the relief authorized under § 46.2-
1569.1(4) meaningless.
Moreover, Priority Auto’s position would allow a
prospective buyer to “sue a manufacturer for allegedly depriving
the dealer [not the prospective buyer itself] of the
consideration to which it is entitled.” (J.A. 952.) Nowhere
has the Virginia legislature suggested that a prospective buyer
can advance the dealer’s interests when a manufacturer exercises
its right of first refusal, let alone that it can recover the
benefit of its proposed bargain from a manufacturer who invokes
that right.
13
Priority Auto’s position also would allow a prospective
buyer to recover damages via Subdivision 3a based on a claimed
violation of § 46.2-1569.1(2) even where—as by all accounts is
the case here—the dealer is perfectly satisfied with the
consideration it received. Priority Auto is thus seeking to
rely on a statutory provision that does not protect its
interest, but that of the dealer. And it seeks to do so not to
advance the dealer’s interests, but its own. Indeed, Priority
Auto attempts to use § 46.2-1569.1(2) to recover greater relief
than a dealer could conceivably recover under the statute.
Neither Subdivision 3a nor § 46.2-1569.1 supports Priority
Auto’s view, nor do we conclude that is what the General
Assembly intended when enacting these statutes.
Consistent with the district court’s interpretation of
these provisions, we believe the appropriate construction of the
statutes as a whole does not allow a prospective buyer to
challenge, via Subdivision 3a, the validity of the
manufacturer’s exercise of the right of first refusal under
§ 46.2-1569.1. Courts need look no further than to the
manufacturer’s exercise of the right of first refusal to
conclude that no cause of action lies for Priority Auto’s
claimed violation of Subdivision 3a. This understanding of the
statutes permits the protected parties to sue under § 46.2-
1569.1 when they claim that the manufacturer’s exercise of the
14
right of first refusal violated that statute’s requirements.
And it permits the protected parties to sue under Subdivision 3a
for violations arising from an allegedly unlawful imposition of
a condition of sale where the manufacturer has not exercised a
right of first refusal. This reading “give[s] reasonable effect
to every word” in both statutes, Jones v. Conwell, 314 S.E.2d
61, 64 (Va. 1984), reads the “related statutes in pari materia
in order to give . . . consistent meaning to the language used
by the General Assembly, Va. Polytechnic Inst. & State Univ. v.
Interactive Return Serv., Inc.,
626 S.E.2d 436, 439 (Va. 2006),
and ultimately best carries out the legislative intent
underlying each provision. See Boynton v. Kilgore,
623 S.E.2d
922, 925 (Va. 2006) (“When interpreting statutes, courts
‘ascertain and give affect to the intention of the legislature.’
That intent is usually self-evident from the words used in the
statute. Consequently, courts apply the plain language of a
statute unless the terms are ambiguous, or applying the plain
language would lead to an absurd result.” (citations omitted)).
The district court did not err in dismissing Priority
Auto’s statutory claim for lack of standing.
B.
Priority Auto alternatively challenges the district court’s
conclusion that its tortious interference claims failed as a
15
matter of law. In sum, Priority Auto contends that Ford is
amenable to suit for tortious interference because it unlawfully
exercised the right of first refusal by paying inadequate
consideration for the dealership under Virginia Code § 46.2-
1596.1(2) and by exercising the right solely in order to ensure
the Kimnach dealership closed. These arguments lack merit.
Under Virginia law, the tort of intentional interference
with contractual rights or business expectancy consists of the
following prima facie elements: (1) the existence of a valid
contractual relationship or business expectancy; (2) the
putative interferer’s knowledge of the relationship or
expectancy; (3) an intentional interference inducing or causing
a breach or termination of the relationship or expectancy; and
(4) resulting damage to the plaintiff. Lewis-Gale Med. Ctr.,
LLC v. Alldredge, 710 S.E.2d 716, 720 (Va. 2011). In certain
contexts, including interference with prospective businesses and
business expectancies, a plaintiff must also allege as part of
its prima facie case “that the defendant employed improper
methods.”
Id. at 149 (emphasis omitted); see also Duggin v.
Adams,
360 S.E.2d 832, 836 (Va. 1987) (collecting cases); Dunlap
v. Cottman Transmissions Sys., LLC,
754 S.E.2d 313, 318 n.5 (Va.
2014) (describing what constitutes “improper methods” as
including “violence, threats or intimidation, bribery, unfounded
litigation, fraud, misrepresentation or deceit, defamation,
16
duress, undue influence, misuse of inside or confidential
information, or breach of a fiduciary relationship”). The
magistrate judge’s analysis focused on the third element—whether
improper interference had occurred, and in particular whether
Priority Auto properly alleged that Ford engaged in “improper
methods” in thwarting the sale of Kimnach to Priority Auto by
exercise of the right of first refusal.
Priority Auto’s complaint alleged no more wrongful conduct
than Ford exercising its right of first refusal. And while
Priority Auto reasserted the same allegations as above for why
it viewed that exercise as unlawful, it did not point to any
other act as being the basis for its tort claims. 5 Under
Virginia law, when a defendant is “engaged in the lawful
exercise of [its] statutory and contractual rights which
incidentally may have interfered with the [plaintiff’s] private
negotiations[, such conduct] is not actionable and will not
support recovery for tortious interference with contractual
relations.” Charles E. Brauer Co. v. NationsBank of Virginia,
N.A., 466 S.E.2d 382, 387 (Va. 1996); see also Lewis-Gale Med.
5
On appeal, Priority Auto also references additional
materials outside the pleadings to assert Ford’s “improper
methods” in exercising its right of first refusal. We do not
consider these arguments or materials because the district court
specifically refused to convert the Rule 12(c) motion into a
motion for summary judgment or to consider materials that would
require that conversion, and Priority Auto does not challenge
those rulings in this appeal.
17
Ctr., 710 S.E.2d at 722 (“a threat to perform an act one is
legally entitled to perform is not a wrongful act” for purposes
of adequately alleging “improper methods” as part of a claim of
tortious interference). Here, Ford was authorized by both
statute and contract to exercise a right of first refusal that
could “interfere” with Priority Auto’s purchase of the Kimnach
dealership. Ford could conceivably be sued under its contract
with Kimnach or under Va. Code § 46.2-1596.1 if some aspect of
its conduct violated either source of the right it was
exercising. But the exercise of the right cannot itself be an
“improper method” of interference that would make it amenable to
suit in tort. Accordingly, the district court did not err in
dismissing Priority Auto’s claims for tortious interference.
III.
For the reasons set forth above, the judgment of the
district court dismissing Priority Auto’s claims with prejudice
is
AFFIRMED.
18
