CORMAC J. CARNEY, District Judge.
Plaintiffs Fresno Motors, LLC and Selma Motors, Inc. (collectively, "Plaintiffs") brought this action against Mercedes-Benz USA, LLC ("MBUSA"), alleging that MBUSA tortiously interfered with Plaintiffs' contractual right to purchase the assets of Mercedes-Benz of Fresno, a local Mercedes-Benz dealership ("Fresno Dealership"), from Asbury Fresno Imports, LLC ("Asbury"). (Dkt. No. 1.) In the operative First Amended Complaint ("FAC"), Plaintiffs allege that it executed an Asset Purchase Agreement ("APA") with Asbury to acquire certain assets in Asbury's Fresno Dealership, including Asbury's leasehold interest in the dealership
Based on these allegations, Plaintiffs assert five causes of action against MBUSA under California law: (1) intentional interference with existing contractual advantage; (2) intentional interference with prospective economic advantage; (3) unfair and deceptive business acts and practices under California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof.Code §§ 17200, et seq.; (4) violation of California Vehicle Code section 11713.3(t); and (5) fraudulent concealment. (Dkt. No. 23.) Plaintiffs request, inter alia, compensatory, statutory, and punitive damages as well as restitution. (FAC, Prayer.)
On November 18, 2011, MBUSA filed its renewed motion to dismiss the FAC pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (Dkt. No. 29.) The Court converted the motion to a summary judgment motion under Rules 12(d) and 56 because the Court determined that the material facts of the case were undisputed, the success of Plaintiffs' claims hinged on determination of legal issues, and additional evidence, where needed, could be submitted without further discovery. (Ct. Order, Dkt. No. 52, Jan. 12, 2012.) Presently before the Court is MBUSA's converted summary judgment motion, filed on February 3, 2012. (Dkt. No. 56.) After considering the undisputed evidence presented by the parties and the arguments of their counsel, the Court concludes that summary judgment is warranted in favor of MBUSA on all of Plaintiffs' claims.
This suit arises out of Plaintiffs' unsuccessful attempt to purchase the Fresno Dealership from Asbury pursuant to the APA. Mercedes-Benz, a Delaware corporation licensed by the California Department of Motor Vehicles, is a subsidiary of Daimler AG and distributes Mercedes-Benz vehicles manufactured by Daimler AG. (FAC ¶ 3 & Exh. A[APA], Appx.)
Prior to the events underlying this action, Asbury entered into the Dealer Agreements with MBUSA on January 1, 2007. (PCDA; LTDA.) The agreements were valid from the date of execution to December 31, 2011. (PCDA, at vi; LTDA, at vi.) As an appointed Mercedes-Benz dealer, Asbury had a nonexclusive right to buy and resell Mercedes-Benz vehicles. (PCDA, at ii; LTDA, at ii.) The scope of Asbury's other functions, as an authorized dealer, also included the servicing, rental, and leasing of Mercedes-Benz vehicles; use and display of Mercedes-Benz marks and products; and financing or insurance services. (PCDA, at 37; LTDA, at 37.) The agreements further incorporated standard provisions that furnished detailed guidance regarding the parties' rights and obligations as to the acquisition, delivery, and inventory of Mercedes-Benz vehicle products; the dealer's marketing and sales of Mercedes-Benz vehicles; the dealer's service obligations, along with MBUSA's obligations to provide service manuals and materials and field personal assistance; the dealer's service and parts organization requirements; the dealer's customer satisfaction obligations; the dealer's location and facilities requirements; MBUSA's warranty obligations; the dealer's financing, capital, and accounting requirements; and the dealer's sales reporting requirements. (PCDA, at 1-20; LTDA, at 1-20.) Moreover, the agreements permitted MBUSA to monitor the dealer's performance by periodically evaluating the dealer's service and parts performance, the dealer's customer satisfaction performance, and the dealer's facilities as well as by inspecting the dealer's accounts and records on a reasonable basis. (PCDA, at 12-15, 19-20; LTDA, at 12-15, 19-20.)
The agreements additionally specified the terms and conditions for assignment. The dealer could not transfer ownership of
(PCDA, at 21, 22; LTDA, at 21, 22.) Concomitant with its right of first refusal, MBUSA was permitted to assign its right or option: "MBUSA's right or option may be assigned by it to any third party and MBUSA hereby guarantees the full payment to Dealer of the purchase price by such assignee." (PCDA, at 21; LTDA, at 21.)
Asbury operated the Fresno Dealership on premises that it leased from the Landlord under the Lease Agreement for a term of fifteen years, beginning on April 1, 2003. (Young Decl., Exh. 13 [Lease].) Asbury also had two ten-year renewal options under the Lease. (Id. at 2, sec. 1.13.) The Lease listed Asbury as the "Tenant" and the "Guarantor." (Id. at 1, sec. 1.4.) The Lease further provided that Asbury could not assign or sublease the Fresno Dealership premises without the Landlord's prior written consent except under certain conditions. (Id. at 10, sec. 7.1.) The Landlord's consent to any assignment or sublease, however, could not be construed as:
(Id. at 11, sec. 7.2.)
Asbury and Selma Motors executed the APA on March 27, 2009, for the sale of certain assets in the Fresno Dealership, including Asbury's leasehold interest under the Lease Agreement. (APA.) The APA provided that Asbury would either (a) assign the lease to Selma Motors or (b) execute a sublease. (APA, at 3, sec. 2.05.) Specifically, section 2.05 of the APA states that at the closing, Asbury (the Seller) shall deliver, and Selma Motors (the Buyer) shall accept, a leasehold interest in the leased real property of the Fresno Dealership premises as follows:
(Id.) Selma Motors' obligation to purchase the dealership assets was subject to several conditions, including approval from MBUSA and consent from the Landlord:
(Id. at 7.) Similarly, Asbury's obligation to sell the dealership assets was subject to several conditions, including consent and release from MBUSA, assignment and assumption of liabilities by Selma Motors, and consent from the Landlord:
(Id.) The termination date of the APA was initially set for April 17, 2009. (Id. at 11-12, secs. 11.01(b), (c), (g).) This date was extended to June 15, 2009 by a first, second, and third amendment to the APA. (FAC, Exhs. B-D; Nelson Decl. ¶¶ 5, 9, 10 & Exhs. B-D; UF Nos. 3, 7, 8.)
Subsequent to executing the APA, Selma Motors assigned its rights and obligations under the APA to Fresno Motors. (FAC ¶ 19 & Exh. C [2nd Am. to APA]; Nelson Decl. ¶ 9 & Exh. C [same]; UF No. 7.) In the assignment, the parties (which included Asbury, Selma Motors, and Fresno Motors) agreed to the following:
(2nd Am. to APA.)
Pursuant to the Dealer Agreements, MBUSA had a contractual right of first refusal or option to purchase the Fresno Dealership assets that superseded Asbury's right to transfer interest or ownership of the dealership. (PCDA, at 21, 22; LTDA, at 21, 22; see also supra Part II(A).) MBUSA also had a statutory right
On or about June 15, 2009, MBUSA notified Asbury and Selma Motors of its exercise of first refusal by sending a letter to Asbury and Selma Motors via facsimile and overnight delivery. (FAC, Exh. E [Letter]; Nelson Decl. ¶¶ 13, 15 & Exhs. F-G; UF Nos. 11, 13.) MBUSA stated that pursuant to its Dealer Agreements with Asbury and Vehicle Code sections 11713.3 et seq., it was exercising its right of first refusal with respect to the APA and would "purchase the assets of the Fresno Dealership as more fully set forth in the terms and condition of the Sale Agreement on the same terms and for the same consideration as set forth in the Sale Agreement." (Letter.)
On June 19, 2009, MBUSA and Asbury entered into an "Acknowledgment of and Agreement with Respect to Exercise of Right of First Refusal." ("Acknowledgement Agreement" or "Ack. Agrmt."). (FAC, Exh. F [Ack. Agrmt.]; Nelson Decl., Exh. T [same]; Burkhalter Decl., Exh. E [same].)
(Id.; see also UF No. 51.) The agreement further provided that Asbury would terminate the APA with respect to Fresno Motors, but that such termination "will not be deemed a termination of the Fresno Motors APA as such terms and conditions now apply to MB as a result of its exercise of its right of first refusal as well as to any proposed assignee of MB," and that "MB will continue to be bound by the terms and conditions under the Fresno Motors APA as if it were an original party to same as a buyer...." (Ack.Agrmt.) Asbury sent a copy of the Acknowledgement Agreement to Plaintiffs on August 31, 2009, in the midst of Fresno Motors' renegotiations with MBUSA and Asbury to purchase the Fresno Dealership as MBUSA's assignee. (FAC ¶ 59; Nelson Decl. ¶ 33; Burkhalter Decl. ¶ 8; UF No. 31.)
Asbury terminated the APA with Plaintiffs on June 19, 2009. (FAC ¶ 46; Nelson Decl. ¶ 16, Exh. H [Term. Letter]; UF No. 14.) Fresno Motors subsequently objected to MBUSA's exercise of its right of first refusal as untimely and unlawful. (FAC ¶ 49; Nelson Decl. ¶ 17.) In an effort to resolve the dispute, MBUSA voluntarily
(July 30, 2009 Email.) MBUSA and Fresno Motors negotiated and finalized an Assignment and Assumption Agreement ("Assignment") for Mr. Nelson's signature, which was transmitted to Fresno Motor's counsel on August 28, 2009. (FAC ¶ 56; Burkhalter Decl. ¶ 9 & Exh. F [Aug. 25, 2009 Email]; Young Decl. ¶¶ 3, 9, Exhs. 1 [Aug. 30, 2009 Email & Assign. Agrmt.], 2 [Aug. 28, 2009 Email], 10 [Sept. 17, 2009 Email].) However, Fresno Motors did not sign the Assignment. (FAC ¶ 61 & Exh. H [Findings & Rec. re Arbit.], at 3.)
Negotiations reached an impasse when MBUSA would not provide the Landlord with a guarantee of Fresno Motors' obligations under the sublease. (FAC ¶¶ 53-55, 102-105; Nelson Decl. ¶ 31; UF No. 29.)
On December 9, 2009, Fresno Motors initiated arbitration proceedings against Asbury and MBUSA. (Findings and Rec. re Arbit., at 3.) Asbury agreed to submit to arbitration while MBUSA declined to do so. (Id.) On December 31, 2009, Fresno Motors filed a petition to compel arbitration against MBUSA in the Eastern District of California (Case No. 1:10-cv-00012), based on the arbitration provision under the APA. (Id.; Pls.' Req. Jud. Not., Exh. 1 [Arbit. Pet.].)
On September 8, 2011, Plaintiffs brought the instant action against MBUSA in the Northern District of California. (Dkt. No. 1.) Plaintiffs filed the FAC on November 4, 2011. (Dkt. No. 23.) On November 18, 2011, MBUSA filed a renewed motion to dismiss the FAC pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (Dkt. No. 29). On November 30, 2011, the case was transferred to the Eastern District of California, Fresno Division, by the parties' stipulation and court order. (Ct.Order, Dkt. No. 32, Nov. 30, 2011.)
On January 12, 2012, the Court converted MBUSA's renewed motion to dismiss to a motion for summary judgment. (Ct.Order, Dkt. No. 52, Jan. 12, 2012.) The Court gave notice of the converted motion to the parties and afforded the parties the opportunity to submit additional evidence in support of their claims. (Id.) The Court ordered MBUSA to file a supplemental response by February 3, 2012, and ordered Plaintiffs to submit a supplemental opposition by February 10, 2012. (Id.) The Court also permitted MBUSA to submit a supplemental reply no later than February 17, 2012. (Id.) Hearing on the converted summary judgment motion was set for February 24, 2012 at 9:00 a.m. (Id.) In their responses, the Court specifically requested that the parties include briefing and additional evidence related to whether Plaintiffs can prove fraudulent concealment, particularly with regarded to the following issues: (1) whether MBUSA had a duty to disclose the contents of the Acknowledgement Agreement and (2) whether "but for" MBUSA's failure to disclose the Acknowledgment Agreement to Plaintiffs, Plaintiffs would not have engaged in negotiations with the Landlord of the Fresno Dealership premises. (Id.)
On February 3, 2012, MBUSA timely filed its converted summary judgment motion. (Dkt. No. 56.) The parties then stipulated to a two-week extension for Plaintiffs to file their opposition to the converted summary judgment motion and to continue the hearing, (Dkt. No. 57), which the Court granted. (Ct.Order, Dkt. No. 60, Feb. 9, 2012.) Plaintiffs concurrently filed an ex parte application to extend the time for discovery and present facts under Federal Rule of Civil Procedure 56(d). (Dkt. No. 58.)
The Court may grant summary judgment on "each claim or defense — or the part of each claim or defense — on which summary judgment is sought." Fed. R.Civ.P. 56(a). The Court may award summary judgment where the pleadings, the discovery and disclosure materials on file, and any affidavits show that "there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Id.; see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A fact is "material" when its resolution might affect the outcome of the suit under the governing law, and is determined by looking to the substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). "Factual disputes that are irrelevant or unnecessary will not be counted." Id. A factual issue is "genuine" when there is sufficient evidence such that a reasonable trier of fact could resolve the issue in the nonmovant's favor. Id.
The party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp., 477 U.S. at 325, 106 S.Ct. 2548; In re Oracle Corp. Sec. Litig., 627 F.3d 376, 387 (9th Cir.2010). Where the movant bears the burden of proof on an issue at trial, the movant "must affirmatively demonstrate that no reasonable trier of fact could find other than for the moving party." Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir.2007). In contrast, where the nonmovant will have the burden of proof on an issue at trial, the moving party may discharge its burden of production by either (1) negating an essential element of the opposing party's claim or defense, Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-60, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970), or (2) showing that there is an absence of evidence to support the nonmoving party's case, Celotex Corp.,
In considering a motion for summary judgment, the Court's function is not to weigh the evidence and determine the truth of the matter or make credibility determinations, as those are jury functions. Anderson, 477 U.S. at 255, 106 S.Ct. 2505. "The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Id.; see also T.W. Elec. Serv., Inc. v. Pac. Elec. Contractors Ass'n, 809 F.2d 626, 630-31 (9th Cir.1987). But conclusory and speculative testimony in affidavits and moving papers is insufficient to raise triable issues of fact and defeat summary judgment. Thornhill Pub. Co. v. Gen. Tel. & Elec. Corp., 594 F.2d 730, 738 (9th Cir.1979). "If the court does not grant all the relief requested by the motion, it may enter an order stating any material fact — including an item of damages or other relief — that is not genuinely in dispute and treating the fact as established in the case." Fed. R.Civ.P. 56(g).
Plaintiffs assert that MBUSA tortiously interfered with Plaintiffs' contractual relationship with Asbury and their prospective economic advantage in the Fresno Dealership. (FAC ¶¶ 68-84.)
The Court finds that under California law, as recognized by the Ninth Circuit, a claim for tortious interference of contract and prospective economic advantage may only lie against "strangers" or interlopers who do not have a direct and significant interest in the plaintiff's contractual relationship with another individual or entity. The Court disagrees with Plaintiffs that a nonparty to a contract is automatically subject to a tortious interference claim. Rather, the Court finds that a tortious interference claim cannot also lie against a nonparty who has a direct economic interest and involvement in the contractual relationship. The not-a-stranger principle, as applied to MBUSA under the undisputed facts, show that MBUSA had a substantial, continuing economic interest and necessary involvement in the APA that was contractually recognized and statutorily protected.
In Applied Equipment, the California Supreme Court addressed the issue of whether a party to a contract could be
The California Supreme Court based its decision, in part, on precedent and longstanding policy, including the "underlying policy of protecting the expectations of contracting parties against frustration by outsiders who have no legitimate social or economic interest in the contractual relationship" and the principle that "[t]he tort duty not to interfere with the contract falls only on strangers — interlopers who have no legitimate interest in the scope or course of the contract's performance." Id. at 514, 28 Cal.Rptr.2d 475, 869 P.2d 454.
Although Applied Equipment was not specifically cited in Marin Tug, the Ninth Circuit in Marin Tug also invoked and applied the not-a-stranger principle in deciding whether the wrongfulness element of the claim for tortious interference with prospective economic advantage was satisfied. In that case, Marin Tug and Barge Inc., a barge company that transported oil, entered into a contract with a petroleum company that brokered fuel, under which one of Marin Tug's barges (the "Tenor") was loaded with oil at Shell Oil's refinery. Marin Tug, 271 F.3d at 827. After the Tenor was contaminated by Shell Oil, Marin Tug brought suit against Shell and the petroleum company, asserting various contract and tort causes of action. Id. at 827-28. After Marin Tug filed suit, Shell refused to have any further business dealings with Marin Tug and prohibited it from loading fuel at Shell's refinery, which resulted in not only Shell's refusal to contract with Marin Tug, but also Marin Tug's inability to conduct business with third-party fuel brokers and consumers who would have otherwise hired it to transport Shell's oil. Id. at 828. In response to Shell's refusal to do business with Marin Tug, Marin Tug amended its complaint to allege intentional interference with prospective economic advantage against Shell. Id. The district court granted summary judgment in favor of Shell on the tortious interference claim, and the Ninth Circuit affirmed, holding that Marin Tug and its owners could not show some unlawful element to satisfy the requisite wrongfulness element for their tortious interference claim. Id. at 834-35.
Closely intertwined with the not-a-stranger principle is the fundamental precept that a nonparty to a contractual relationship who nevertheless has a sufficiently direct economic stake in that relationship has a right to protect its own economic interest. See Marin Tug, 271 F.3d at 832 (applying the principle under California law that "the tort of interference with prospective economic advantage was not intended broadly to limit individuals or commercial entities in choosing their commercial relationships, whether their motives in doing so might be — unless those motives are independently unlawful"); see also A-Mark Coin v. Gen'l Mills, Inc., 148 Cal.App.3d 312, 324, 195 Cal.Rptr. 859 (1983) (stating that "in the absence of prohibition by statute, illegitimate means, or some other unlawful element, a defendant seeking to increase his own business may ... enter into secret negotiations behind the plaintiff's back, refuse to deal with him ... or even refuse to deal with third parties unless they cease dealing with the plaintiff, all without incurring liability").
Plaintiffs do not contest that MBUSA had a direct economic interest or involvement in the APA or in the business relationship between Plaintiffs and Asbury. Rather, Plaintiffs argue that MBUSA has misinterpreted the not-a-stranger principle under Applied Equipment in light of the purported clarifications of the case by the California appellate court in Woods. Plaintiffs argue that Applied Equipment and Woods support the proposition that because MBUSA was admittedly a nonparty to the APA between Plaintiffs and Asbury, it is necessarily a stranger, such that
The California appellate court in Woods revisited Applied Equipment and criticized the application of the not-a-stranger principle in Marin Tug. In Woods, the plaintiffs, officers and employees of Fox Family Worldwide, Inc. ("Fox Family"), brought suit against the company's major shareholder in connection with the sale of the company. Woods, 129 Cal.App.4th at 348, 28 Cal.Rptr.3d 463. The plaintiffs' contract with Fox Family bound the company to certain stock options they held, and in turn, the contract required the plaintiffs to sell their stock options in the event that one of the major shareholders sold his interest in the company and in such a manner that guaranteed them 1% of the sale price of that interest. Id. at 347-48, 28 Cal.Rptr.3d 463. Fox Family was eventually sold to Walt Disney Co. ("Disney"). Id. at 348, 28 Cal.Rptr.3d 463. Certain obligations assumed by Disney decreased the sale price, and as a result, the plaintiffs' stock option buyout rights were substantially reduced. Id. at 348, 28 Cal.Rptr.3d 463. The plaintiffs claimed that the major shareholder engineered the Fox Family-Disney deal in such a way as to cut its losses and unload undesirable obligations, with knowledge of the plaintiffs' stock option rights and with the intent to interfere with those rights. Id. Based on these allegations, the plaintiffs brought tortious interference claims against the major shareholder. Id. The shareholder later demurred to these claims on the basis that, as a holder of just under half of Fox Family stock, it was not a stranger to the plaintiffs' contracts with the company and therefore could not, as a matter of law, be liable for interfering with those contracts. Id. at 349, 28 Cal.Rptr.3d 463. The trial court sustained the demurrer and found that the major shareholder was not a stranger under Applied Equipment. Id. at 349, 28 Cal.Rptr.3d 463.
The appellate court reversed the trial court's decision, finding "it highly unlikely that Applied Equipment intended to hold, or should be construed as holding, that persons or entities with an ownership interest in a corporation are automatically immune from liability for interfering with their corporation's contractual obligations." Id. at 353, 28 Cal.Rptr.3d 463. In reaching its decision, the appellate court focused on Applied Equipment's use of the phrase "outsiders who have no legitimate social or economic interest in the contractual relationship," as being only dicta and a "mystery," with no apparent connection to the issue before the appellate court. Id. at 352, 353, 28 Cal.Rptr.3d 463. The Woods court concluded that when the Applied Equipment court used the term "stranger to a contract," it did so interchangeably with the terms "noncontracting parties." Id. at 353, 28 Cal.Rptr.3d 463. The appellate court also rejected the interpretation that the quoted language meant that "not only were contracting parties immune from interference claims, so too were another class of defendants who, although not parties to a contract, were not true `strangers' to the contract because they had some general interest in the contractual relationship." Id. at 352, 28 Cal.Rptr.3d 463.
While this Court agrees with the Woods court that the issue before the Applied Equipment court concerned liability of a party for interfering with its own contract, the Court does not believe that the phrase "outsiders who have no legitimate social or economic interest in the contractual relationship" was only dicta or an arbitrary turn of the phrase used by the California Supreme Court. The Applied Equipment court based its holding on a longstanding underlying policy, as noted by the Ninth
Likewise, the Woods court minimized the Ninth Circuit's observations of the not-a-stranger principle in Marin Tug and read that case as being limited to an evaluation of the wrongfulness element of the claim for tortious interference with prospective economic advantage. Woods, 129 Cal.App.4th at 355, 28 Cal.Rptr.3d 463 ("[W]e conclude that Marin Tug did no more than evaluate the wrongfulness of Shell's conduct in the context of its relationships with Marin Tug and the tug company's customers and was not extending immunity from contract interference claims to an even broader, more attenuated class of persons.") However, the California appellate court also does not account for the Ninth Circuit's clear exposition of the core principles of California law relevant to tortious interference claims that undergirded the Ninth Circuit's analysis, including the not-a-stranger principle, which the Court finds applicable here. See Marin Tug, 271 F.3d at 832. Nor is the not-a-stranger principle being applied in this case to an attenuated class of persons, but, as explained below, to a manufacturer/distributer that had a substantial, continuing economic interest and necessary involvement in the contractual relationship between a prospective dealer and an existing one.
The Woods court and Plaintiffs further point to a caveat raised by the California Supreme Court in Applied Equipment. In holding that a party to a contract could not be liable for tortious interference, the California Supreme Court noted the following: "Nothing we have said suggests that Litton may not be held liable for direct interference with the Applied/Varian purchase order (to which it was not a party) or that Varian may not be held liable for direct interference with the Applied/Litton subcontract (to which it was not a party), provided that each of the elements of the tort of interference with contract is satisfied." Applied Equipment, 7 Cal.4th at 521, 28 Cal.Rptr.2d 475, 869 P.2d 454. The California Supreme Court indicated that its holding did not foreclose the possibility that Litton or Varian, as nonparties, could be held liable for tortious interference of the other's contracts, i.e., the purchase order and subcontract, respectively, provided that it satisfy each of the elements of tortious interference. However, the California Supreme Court did not affirmatively rule — as Plaintiffs erroneously insist in focusing on this language — that Litton and Varian could, in fact, be held liable for tortious interference of the other's contract
Based on its reading of Applied Equipment, the Woods court determined that Applied Equipment did not overrule the line of cases that owners or officers of a business entity could be held liable for interference with that entity's contracts, subject to the defense of privilege. Id. at 353, 28 Cal.Rptr.3d 463. Thus, the Woods court concluded that Applied Equipment left intact the long-held "rule that owners and managers may be held liable in tort for contractual interference when they were not acting to protect the interest of the contracting party." Id. at 353, 28 Cal.Rptr.3d 463 (citation omitted). This rule is simply inapposite here. The instant case concerns whether a nonparty to a contract (a car manufacturer/distributor) may be nevertheless immune to tortious interference claims because of substantial economic interests in the underlying contract and business relationship involving the plaintiff (prospective transferee) and a third party (existing dealer). Even if the Court accepts Plaintiffs' reading of Applied Equipment as holding that mere economic interest is insufficient to shield a nonparty from a tortious interference claim, it does not govern situations where, as here, MBUSA alleges not some generalized economic interest, but a substantial, continuing interest that was contractually and statutorily protected.
MBUSA argues that it was not a stranger to the contractual relationship between Plaintiffs and Asbury for three reasons: (1) the entire purpose of the APA was to transfer Asbury's Fresno Dealership assets to Plaintiffs, who would then sell and service vehicles purchased from MBUSA and operate under dealer agreements with MBUSA, provided that MBUSA approved Fresno Motors as its authorized dealer; (2) a "symbiotic economic relationship" necessarily existed between MBUSA (distributor) and Asbury/transferee (dealer); and (3) MBUSA had a preexisting contractual right to interfere with the APA, based on the right of first refusal provision in the Dealer Agreements with Asbury and MBUSA's right to review and approve any transfer of the Fresno Dealership. (Id. at 11-12.) Plaintiffs do not offer any argument or evidence controverting MBUSA's significant, economic interest in the relationship between Asbury (MBUSA's existing dealer) and Plaintiffs (a prospective new one). Plaintiffs only contend that the three grounds proffered by MBUSA for why it was not a stranger to the APA still does not change the fact that it was a nonparty to the APA. (Pls.' Opp'n, at 14-15.) As explained above, however, MBUSA's status as a nonparty does not necessarily mean that it is subject to a claim for tortious interference. While "[i]t is axiomatic... that there can be no action for inducement of breach of contract against the other party to the contract," Shoemaker v. Myers, 52 Cal.3d 1, 24, 276 Cal.Rptr. 303, 801 P.2d 1054 (1990), it is not true that a nonparty to the contract — by mere virtue of its status as a nonparty — is categorically subject to a claim for tortious interference. A claim for tortious interference may still not lie against a nonparty who has a sufficiently "direct interest and
Based on the undisputed facts, the Court finds that MBUSA had a substantial, continuing economic interest and necessary involvement in the APA between Asbury and Plaintiffs, such that it was not a stranger to their contractual relationship. It is uncontested that Fresno Motors could not purchase Asbury's assets of the Fresno Dealership under the APA without MBUSA's written approval, consent, and release. The APA expressly required, on or before the closing date, that Selma Motors (and later Fresno Motors as the assignee) obtain MBUSA's approval to be the authorized dealer of Mercedes-Benz vehicles. (APA, at 7, sec. 7.03.) In fact, the extent of MBUSA's role, as the manufacturer/distributor in approving or disapproving a prospective dealer, is codified and regulated under Vehicle Code sections 11713.3(d)(2)(A), (B). As Plaintiffs allege, Plaintiffs had to communicate with and submit application materials to MBUSA in the process of obtaining approval as an authorized Mercedes-Benz dealer. (FAC ¶¶ 8, 13-15.) The APA also included, as a condition precedent, that Asbury obtain MBUSA's consent and release of its existing Dealer Agreements with MBUSA. (APA, at 7, sec. 8.03.) Thus, MBUSA's involvement was both necessary and integral to the consummation of the transaction contemplated by Plaintiffs and Asbury under the APA.
It is also uncontested that Plaintiffs' entire purpose of entering into the APA was to purchase Asbury's assets of the Fresno Dealership and thereby sell and service Mercedes-Benz vehicles as an authorized dealer of MBUSA. The closing of the APA would then, in effect, create a continuing manufacturer-dealer relationship between MBUSA and Fresno Motors with certain duties and rights flowing to each under their dealership agreements and the California Vehicle Code. For example, pursuant to the standard provisions incorporated in MBUSA's dealer agreements, the parties would have to adhere to detailed guidelines regarding the acquisition, delivery, and inventory of Mercedes-Benz vehicle products; the dealer's marketing and sales of Mercedes-Benz vehicles; the dealer's service obligations, along with MBUSA's obligations to provide service manuals and materials and field personal assistance; the dealer's service and parts organization requirements; the dealer's customer satisfaction obligations; the dealer's location and facilities requirements; MBUSA's warranty obligations; the dealer's financing, capital, and accounting requirements; and the dealer's sales reporting requirements. (PCDA, at 1-20; LTDA, at 1-20.) The dealer agreements would also enable MBUSA to monitor the dealer's performance by periodically evaluating the dealer's service and parts performance, the dealer's customer satisfaction performance, and the dealer's facilities as well as by inspecting the dealer's accounts and records on a reasonable basis. (PCDA, at 12-15, 19-20; LTDA, at 12-15, 19-20.) As true of the manufacturer-distributor relationship, a "symbiotic economic relationship" would necessarily exist between MBUSA and Fresno Motors. (See Def.'s Mem. in Supp. Mot. to Dismiss, at 11-12; see also PCDA at 36 & LTDA at 37 ("This Agreement is entered into by and between MBUSA and Dealer for their sole and mutual benefit."); PCDA at 6-7 & LTDA at 7 ("Dealer and MBUSA agree that customer satisfaction and the future growth of their respective businesses is substantially dependent upon the ability of owners of Mercedes-Benz [passenger cars/light trucks] to obtain high-quality servicing from Dealer.").) As true of MBUSA's and Asbury's business relationship, MBUSA would need to depend on Fresno Motors' performance in
The factual circumstances of Marin Tug are also instructive here. In holding that Marin Tug and its owners could not show some unlawful element to satisfy the requisite wrongfulness element for their tortious interference claim, the Ninth Circuit noted the following: "Shell's actions were, at bottom, simply a refusal to deal with Marin Tug, and therefore presumptively valid ... absent some unlawful element," and that it was "not dissuaded from this conclusion by the fact that in some instances the actual contracts were between Marin Tug and the buyer, not with Shell. Such contracts, no less than those in which Marin Tug contracted directly with Shell, required direct, active involvement by Shell-the loading of Shell oil onto Marin Tug's barges." Id. at 834 (emphasis added). "Because the economic relationship between Marin Tug and the buyer of any Shell oil shipped on Marin Tug's barges depend[ed] on Shell's cooperation," the Ninth Circuit found that "Shell is not easily characterized as a stranger to that relationship." Id. Furthermore, the Ninth Circuit observed, as demonstrated by the underlying dispute giving rise to the lawsuit, Marin Tug and Shell had a "mutual economic interest in delivering the oil safely and cleanly, and were dependent upon each other to do so." Id. "In this situation, there is nothing wrongful under California law about the means Shell chose to advance its interests, a simple refusal to deal with Marin Tug or to load its oil on Marin Tug's barges." Id.
Likewise, here, MBUSA had a direct, active role in the contractual relationship between Plaintiffs and Asbury — the distribution of Mercedes-Benz vehicles to the Fresno Dealership for sale, lease, and maintenance. The contractual relationship between Plaintiffs and Asbury further depended on MBUSA's cooperation, i.e., its explicit approval of Fresno Motors as an authorized Mercedes-Benz dealership and consent and release of Asbury's Dealer Agreements under the APA. Moreover, as in Marin Tug, Asbury and MBUSA had a mutual economic interest in distributing and selling Mercedes-Benz vehicles to consumers and, as a distributor and dealer, were dependent on the other in furthering their economic interest.
There is yet another compelling reason for not viewing MBUSA as a stranger to the APA: MBUSA had a preexisting contractual and statutory right to interfere with that contract. Under MBUSA's
Simply stated, MBUSA was not a stranger to the contractual relationship between Plaintiffs and Asbury. MBUSA is thus entitled to judgment as a matter of law with respect to the tortious interference
Plaintiffs request damages in connection with MBUSA's alleged violation of section 11713.3(t) of the California Vehicle Code by its purported untimely and unlawful exercise of first refusal and its failure to reimburse them for certain expenses. (FAC ¶¶ 95-97.) At issue is whether Plaintiffs have standing to assert a claim under section 11713.3(t). MBUSA argues that Plaintiffs lack standing to bring a section 11713.3(t) claim because that section only applies to manufacturers and franchisees, and there is no private cause of action for nonlicensees, as evidenced by the express language of section 11726 of the Vehicle Code, other subdivisions of the Vehicle Code, and related legislative history materials. (Def.'s Mem. in Supp. Mot. to Dismiss, at 19-22.) Plaintiffs contend that they have a right of action as a prospective franchisee based on subdivision (t)(6) of section 11713.3, which requires reimbursement for certain expenses to "proposed transferee" of certain expenses, and attendant legislative history materials on section 11713.3(t). (Pls.' Opp'n, at 17-21.)
Section 11713.3 renders certain conduct by licensed manufacturers and distributors unlawful. The statute provides in relevant part:
Cal. Veh.Code § 11713.3(t)(2), (6).
Here, Plaintiffs assert that MBUSA violated both paragraphs 2 and 6 of section 11713.3(t). A statutory violation, however, does not necessarily give rise to a private cause of action; rather, "whether a party has a right to sue depends on whether the Legislature has manifested an intent to create such a private cause of action under the statute." Lu v. Hawaiian Gardens Casino, Inc., 50 Cal.4th 592, 596, 113 Cal.Rptr.3d 498, 236 P.3d 346 (2010) (citations and quotes omitted). Legislative intent is evidenced by, first, the statute's plain language and, second, if the language is ambiguous, its legislative history. Id. at 596, 598, 113 Cal.Rptr.3d 498, 236 P.3d 346. A statute may contain "clear, understandable, unmistakable terms," which strongly and directly indicate that the Legislature intended to create a private cause of action, such as by expressly stating that a person has or is
It is undisputed that Plaintiffs were not existing licensees, dealers, or franchisees of Mercedes-Benz vehicles or that they had any valid agreement with MBUSA. Instead, Plaintiffs were prospective transferees who entered into the APA with Asbury, an existing Mercedes-Benz dealer, to purchase Asbury's assets in the Fresno Dealership. Nevertheless, Plaintiffs heavily rely on subdivision (t)(6) as evidence of the Legislature's intent to create a private cause of action for prospective franchise dealers because subdivision t(6) expressly requires distributors to reimburse a "proposed transferee" for certain expenses. Plaintiffs' reliance is misplaced.
A violation of subdivision t(6) by MBUSA does not per se confer a cause of action on Plaintiffs. The language of subdivision t(6) neither explicitly states a private cause of action for a prospective transferee nor permits a prospective transferee to recover damages for a distributor's failure to reimburse it for certain expenses. Moreover, while "proposed transferee" plainly means prospective assignees of a franchise or prospective franchisees, Plaintiffs' reading is too narrowly focused and entirely disregards the context of the statutory provision. In interpreting a statute, the Court is guided by the Legislature's intent, as evinced by the plain meaning of the statute's words of the law. Cal. Teachers Ass'n v. Governing Bd. of Rialto Unified School Dist., 14 Cal.4th 627, 632, 59 Cal.Rptr.2d 671, 927 P.2d 1175 (1997); see also Larry Menke, Inc. v. DaimlerChrysler Motors Co., 171 Cal.App.4th 1088, 1093, 90 Cal.Rptr.3d 389 (2009). "When the language of a statute is clear and unambiguous, there is no need for interpretation and we must apply the statute as written." Chambers v. Miller, 140 Cal.App.4th 821, 825, 44 Cal.Rptr.3d 777 (2006). However, because words naturally derive their meaning from how they are used, the meaning of a statutory provision cannot be ascertained from simply reading a single word or sentence in isolation; rather, words must be construed in their context. See State of Cal. ex rel. Dockstader v. Hamby, 162 Cal.App.4th 480, 487, 75 Cal.Rptr.3d 567 (2008); Larry Menke, 171 Cal. App.4th at 1094, 90 Cal.Rptr.3d 389.
Plaintiffs only myopically focus on subdivision (t)(6) — specifically the term "proposed transferee" — without regard to section 11713.3(t) under which subdivision t(6) is subsumed or the section's other provisions. Subdivision (t)(6) must be interpreted in the larger context of section 11713.3(t), which expressly prohibits a manufacturer or distributor from exercising a right of first refusal requiring "a franchisee or an owner of the franchise" to transfer "to the franchisor, or to a nominee of the franchisor" the assets of the franchised business without satisfying certain statutory conditions. Cal. Veh.Code § 11713.3(t) (emphasis added). The Vehicle Code defines a "franchise" as "a written agreement between two or more persons having all of the [five enumerated] conditions," which confers on the franchisee the right to sell or lease new motor vehicles manufactured or distributed by the franchisor. Cal. Veh.Code § 331(a). A "franchisee" is defined as "any person
More importantly, Plaintiffs simply fail to account for section 11726, which must be read in conjunction with section 11713.3. See Gately v. Cloverdale Unified School Dist., 156 Cal.App.4th 487, 494, 67 Cal.Rptr.3d 377 (2007) ("Statutory provisions that are in pari materia, i.e., related to the same subject, should be construed together as one statute and harmonized if possible"). Section 11726 provides as follows:
Cal. Veh.Code § 11726 (emphases added). Section 11726 creates a private right of action for licensed dealers and distributors to sue each other by expressly enabling a licensee to recover damages in a court of law. Here, the term "licensee" refers to already licensed dealers and manufacturers, not prospective licensees. See Cal. Veh.Code § 11700 (providing that no person shall act as a dealer, manufacturer, or distributor without having first been issued a license). The plain wording of sections 11713.3(t) and 11726 make it clear that a cause of action for damages extends only to franchisees or dealers with an existing agreement with a manufacturer or distributor, not to a prospective transferee. See Larry Menke, 171 Cal.App.4th at 1093, 90 Cal.Rptr.3d 389 (determining from the plain terms of a section of the Vehicle Code and section 11726 that a prospective licensee had no standing to sue manufacturer for damages under that Vehicle Code section). There is no statutory recognition of a private right of action for damages to a prospective licensee in either section 11726 or section 11713(t), or for that matter, any other section of the Vehicle Code of which the Court is aware.
The legislative history materials submitted by Plaintiffs do not support a different reading of subdivision (t). In fact, the materials only show that subdivision (t) was enacted to ensure further protection to existing and newly licensed dealers against manufacturers and distributors, not to prospective dealers or franchisees. In 1973, the Legislature enacted the "Automotive Franchise Act" to, among other things, "avoid undue control of the independent new motor vehicle dealer by the vehicle manufacturer or distributor and to insure that dealers fulfill their obligations under their franchises and provide adequate and sufficient service to consumers." (Stats. 1973, c. 996, p. 1964, § 1; Pls.' Req. for Jud. Notice, Exh. 7 [AB 2707 re Auto. Franchise Law].)
These legislative materials indicate that new measures were added to protect newly licensed dealers and consumers by, for example, requiring reasonable measures that manufacturers and distributors must satisfy to exercise their right of first refusal. There is no mention of prospective dealers, franchisees, or licensees, other than perhaps as an implied part of the larger consumer public, who may bring protests before the New Motor Vehicle Board under section 3050. Plaintiffs, however, do not purport to bring a claim for a Vehicle Code violation as part of the consuming public before the Board; rather, they seek to bring a private cause of action for damages.
If the Legislature meant to include prospective licensees as those protected under section 11726 or section 11713.3, it would have done so. It is not the Court's role to second guess the intent of the Legislature when the express statutory language is clear on its face. See Calif. Teachers Ass'n, 14 Cal.4th at 632-33, 59 Cal.Rptr.2d 671, 927 P.2d 1175. And the Court is not aware of any statute, decisional law, or any other authority — and Plaintiffs have furnished none — that would counsel an extension of a private right of action or create an implied right of action for prospective franchisees or licensees. Because neither the language of subdivision (t) nor its legislative history suggests that there is a private right of action for a prospective dealer or franchisee, the Court finds that Plaintiffs do not have standing to sue for violation of section 11713.3(t). MBUSA is thus entitled to judgment as a matter of law as to Plaintiffs' Vehicle Code claim under the fourth cause of action.
Plaintiffs allege that MBUSA, in concert with Asbury, committed fraudulent concealment by intentionally withholding and suppressing from Plaintiffs the Acknowledgment Agreement under which MBUSA promised to be "primarily responsible" for the performance of any assignee with respect to a sublease. (FAC ¶¶ 54, 103.) Plaintiffs allege that MBUSA knowingly concealed this information from Plaintiffs between July 31 and August 31, 2009, forcing Plaintiffs to incur additional, unnecessary
Under California law, the elements of fraudulent concealment are: (1) the defendant concealed or suppressed a material fact; (2) the defendant was under a duty to disclose the fact to the plaintiff; (3) the defendant intentionally concealed or suppressed the fact with intent to defraud the plaintiff; (4) the plaintiff was unaware of the fact and would not have acted as he did if he had known of the concealed or suppressed fact; and (5) plaintiff was damaged by the concealment. Jones v. ConocoPhillips, 198 Cal.App.4th 1187, 1198, 130 Cal.Rptr.3d 571 (2011) (citing Kaldenbach v. Mutual of Omaha Life Ins. Co., 178 Cal.App.4th 830, 850, 100 Cal.Rptr.3d 637 (2009)); see also Johnson v. Lucent Techs., Inc., 653 F.3d 1000, 1011-12 (9th Cir.2011).
The Acknowledgment Agreement states that "MB expressly agrees that it shall be primarily responsible for the performance under the Fresno Motors APA and the Sublease." (Ack. Agrmt. (emphasis added).) Plaintiffs' fraudulent concealment claim is predicated on the assertion that MBUSA somehow agreed in the Acknowledgment Agreement to provide a guarantee to the Landlord.
The dispute between the parties turns on the meaning of the term "primarily responsible" under the Acknowledgment Agreement. MBUSA argues that the promise to be "primarily responsible" for an assignee's sublease means that MBUSA would indemnify Asbury in the event the assignee failed to meet its sublease obligations to Asbury, not that it would provide a guarantee to the Landlord of the assignee's obligation under the sublease. (Def.'s Mem. in Supp. Mot. to Dismiss, at 23-24.) Plaintiffs insist that "[o]n its face, MBUSA's promise is a guarantee," (Pls.' Opp'n to Mot. to Dismiss, at 22:15), and that "[t]here is no practical or legal difference between promising to be `primarily responsible for another person's obligation to perform' and guaranteeing that obligation," (Pls.' Supp. Opp'n, at 16:21-22). To resolve this issue, the Court must apply rules of contract interpretation under California law.
"The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties." Bank of the W. v. Superior Court, 2 Cal.4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992); see also Cal. Civ.Code § 1636 ("A contract
If the contract language is capable of two different reasonable interpretations, then the contract is ambiguous. Oceanside 84, Ltd. v. Fid. Fed. Bank, 56 Cal.App.4th 1441, 1448, 66 Cal.Rptr.2d 487 (1997). "Under California law, the determination of whether a written contract is ambiguous is a question of law that must be decided by the court." Brobeck, Phleger & Harrison v. Telex Corp., 602 F.2d 866, 871 (9th Cir.1979); accord Han v. Mobil Oil Corp., 73 F.3d 872, 877 (9th Cir.1995); Wolf v. Superior Court, 114 Cal.App.4th 1343, 1351, 8 Cal.Rptr.3d 649 (2004). Even if the contract is unambiguous on its face, the trial court must consider relevant extrinsic evidence that can prove a meaning to which the language of the contract is reasonably susceptible. United States v. King Features Entm't, Inc., 843 F.2d 394, 398 (9th Cir.1988); Abers v. Rounsavell, 189 Cal.App.4th 348, 356, 116 Cal.Rptr.3d 860 (2010) ("[T]rial judges, acting as a gatekeeper, may take a `preliminary look' at proffered extrinsic evidence to determine ambiguity...."). The interpretation of a contract therefore involves a two-step process: "First the court provisionally receives (without actually admitting) all credible evidence concerning the parties' intentions to determine `ambiguity,' i.e., whether the language is `reasonably susceptible' to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is `reasonably susceptible' to the interpretation urged, the extrinsic evidence is then admitted to aid in the second step — interpreting the contract." Wolf, 114 Cal. App.4th at 1351, 8 Cal.Rptr.3d 649 (2004) (quoting Winet v. Price, 4 Cal.App.4th 1159, 1165, 6 Cal.Rptr.2d 554 (1992)). The resolution of the ambiguity is also a question of law if (i) no parol evidence is admitted or (ii) the parol evidence is not in conflict. Id.
The first step in the analysis is to determine whether the term "primarily responsible" is ambiguous, i.e., reasonably susceptible to the interpretation that Plaintiffs urge — namely that MBUSA promised to provide a guarantee to the Landlord of all of Plaintiffs' obligations under a sublease. Oceanside 84, 56 Cal. App.4th at 1448, 66 Cal.Rptr.2d 487 ("When a dispute arises over the meaning of contract language, the first question to
In determining whether a contract is reasonably susceptible to the interpretation that a party urges, the Court must look to the language of the contract as well as to extrinsic evidence of the parties' intent. Oceanside 84, 56 Cal.App.4th at 1448, 66 Cal.Rptr.2d 487. The Court first examines the express language of the Acknowledgment Agreement. The term "primarily responsible" appears twice in the Acknowledgment Agreement under subsection "Terms of Exercise." This term is not defined separately in the Acknowledgment Agreement or capitalized to indicate that it is conferred with a special or technical meaning given in the APA. Contrary to Plaintiffs' insistence, the Acknowledgement Agreement does not state on its face that MBUSA agreed to provide any "guarantee" to the Landlord, as neither the term "guarantee" nor the promise to provide one to the Landlord appear in the Acknowledgment Agreement. As a result, the term "primarily responsible" must be considered in the light of all the circumstances and overall context of the agreement. See Wolf, 114 Cal.App.4th at 1352, 8 Cal.Rptr.3d 649.
It is undisputed that Asbury and MBUSA executed the Acknowledgment Agreement on June 19, 2009, and that they were the only parties to the agreement. (Ack.Agrmt.) The Acknowledgment Agreement consists of two pages, with six full paragraphs on the first page and the parties' signatures on the second. (Id.) The agreement is entitled "Acknowledgment of and Agreement with respect to Exercise of Right of First Refusal." (Id.) The first paragraph indicates the date and the names of the contracting parties, Asbury and MBUSA. (Id.) The second paragraph provides background material on the APA, which was executed by Asbury and Fresno Motors (as assignee of Selma Motors) on March 27, 2009, and subsequently amended. (Id.) The third paragraph provides that "[o]n June 15, 2009, MB provided timely written notice to Asbury of its exercise of its right of first refusal with respect to the transactions contemplated in the Fresno Motors APA, and its intent to purchase substantially all of the assets of Asbury upon the same terms and conditions as set forth in the Fresno Motors APA." (Id.) The paragraph continues and states that "[t]he parties now desire to acknowledge their respective rights and obligations with respect to such exercise of MB's right of first refusal as follows," and lists three such rights and obligations. (Id.) Under the fourth paragraph, subtitled "Terms of Exercise," the agreement states the core provision that includes the term "primarily responsible":
(Ack. Agrmt. (emphases added).)
The first sentence of the cited paragraph repeats the previous statement that by exercising its right of first refusal, MBUSA "will be subject to the same terms and conditions under the Fresno Motors APA as such terms and conditions apply to Fresno Motors." (Id. (emphasis added).) By exercising its right of first refusal, MBUSA stepped into the shoes of the buyer (Fresno Motors) and assumed all of its rights and obligations under the APA, including those under a sublease. This language repeats the language used in section 2.05 of the APA: "The Lease Assignment or the Sublease, as the case may be, will be on a pass through basis such that the Buyer will be subject to the same terms and conditions in the Lease as in effect as of the date of this Agreement...." (Id. (emphasis added).)
The cited paragraph from the Acknowledgment Agreement goes on to provide that in the event MBUSA assigns its rights, such assignment "shall not operate as a release of MB of its obligations" under the APA, including the sublease. (Id. (emphasis added).) Interpreted together with the previous sentence, this provision indicates that if MBUSA assigns its right and obligations, it would still remain obligated to Asbury on par with the assignee as the buyer under the APA, including the assumption of Asbury's leasehold interest. The next sentence then clarifies this provision: "For avoidance of doubt, MB expressly agrees that it shall be primarily responsible for the performance under the Fresno Motors APA and the Sublease. Asbury acknowledges that MB may assign its rights and obligations under the Fresno Motors APA and the Sublease to a third party provided that MB remain primarily responsible for the performance of any such assignee with respect to the Fresno Motors APA and the Sublease." (Id. (emphases added).) When read in its entirety, this provision indicates that if MBUSA assigns its right under the APA, it would still remain "primarily responsible" under the APA and sublease as if it were the original buyer, such that the assignment "shall not operate as a release of MB of its obligations." To remain obligated under the sublease would require MBUSA to remain obligated to Asbury, not to the Landlord.
Additionally, the fifth paragraph under the Acknowledgement Agreement, subtitled "Termination with Fresno Motors,"
In short, the Acknowledgment Agreement simply reiterates MBUSA's existing obligations in exercising its right of first refusal under the APA: by exercising its right of first refusal, MBUSA stepped into the shoes of the buyer, Fresno Motors, and assumed the buyer's obligations to Asbury, which included the obligation to assume the leasehold interest as either an assignment or sublease under the terms and conditions of the APA. Thus, from the examination of the Acknowledgment Agreement's language in its proper context and circumstances, the Court does not find that the term "primarily responsible" is reasonably susceptible to mean a guarantee to the Landlord of Plaintiffs' obligations under a sublease. Plaintiffs seize on the phrase that MBUSA shall remain "primarily responsible" in isolation, without proper regard to its context in the agreement, and more importantly, without properly considering to whom the guarantee is owed.
The Court next takes a preliminary look at the additional extrinsic evidence offered by the parties. Both parties rely on section 2787 of the California Civil Code, which states that a guarantor, which is used synonymous with a surety, is "one who promises to answer for the debt, default, or miscarriages of another." Cal. Civ. Code § 2787. MBUSA also additionally relies on the definition that a guarantee contract "involves a direct promise to perform the obligation of the principal in the event that the principal fails to perform as required by his contract." Pasternak v. Boutris, 99 Cal.App.4th 907, 931, 121 Cal.Rptr.2d 493 (2002). Neither is helpful because the definitions do not use the term "primarily responsible," and although it appears that the terms "primarily responsible" and "guarantee" may be interchangeably used to signify some sort of obligation, the definitions do not capture the transfer and assumption of obligations between the parties in the context of the Acknowledgment Agreement — which was essentially between the buyer to Asbury, not from the buyer to the Landlord.
Plaintiffs have not pointed to any further legal authority or extrinsic evidence that suggests that the term "primarily responsible" is reasonably susceptible to mean a guarantee to the Landlord. The only extrinsic evidence that Plaintiffs cite in support of its interpretation of the term "primarily responsible" is an email from Asbury's counsel to MBUSA's and Plaintiffs' counsel on August 31, 2009, stating that it was Asbury's belief that MBUSA promised to guarantee the sublease. (Pls.' Supp. Opp'n, at 17, citing Nelson Decl., Exh. S.) Specifically, the email states:
(Nelson Decl., Exh. S.) This communication is not relevant evidence of mutual intent. Rather, it is only evidence of Asbury's de facto interpretation and understanding of the terms of the Acknowledgment Agreement well after the agreement was executed. Even if it is probative of Asbury's subjective intent, as Plaintiffs suggest, (Pls.' Supp. Opp'n, at 17), there is no evidence that Asbury expressed this intention to MBUSA at or near the time it executed the Acknowledgment. See Cal. Civ.Code § 1636 ("A contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting...."); Shaw v. Regents of Univ. of Cal., 58 Cal.App.4th 44, 55, 67 Cal.Rptr.2d 850 (1997) ("The true intent of a contracting party is irrelevant if it remains unexpressed."). The email is also irrelevant and not competent extrinsic evidence because, although intent determines the meaning of a contract, Cal. Civ. Code §§ 1636, 1638, California recognizes the objective theory of contracts, under which "[i]t is the objective intent, as evidenced by the words of the contract, rather than the subjective intent of one of the parties, that controls interpretation." Berman v. Bromberg, 56 Cal.App.4th 936, 948, 65 Cal.Rptr.2d 777 (1997) (citations and quotes omitted); Winet, 4 Cal.App.4th at 1166 n. 3, 6 Cal.Rptr.2d 554 (observing that evidence of subjective intent is not "competent extrinsic evidence, because evidence of undisclosed subjective intent of the parties is irrelevant to determining the meaning of contractual language"); see also id. at 1166, 6 Cal.Rptr.2d 554 ("It is the outward expression of the agreement, rather than a party's unexpressed intention, which the court will enforce."); Founding Members, 109 Cal.App.4th at 956, 135 Cal.Rptr.2d 505 ("The parties' undisclosed intent or understanding is irrelevant to contract interpretation.")
Having examined the terms of the Acknowledgment Agreement and Plaintiffs' extrinsic evidence for the purposes of deciding ambiguity, the Court determines that the term "primarily responsible" used in the context of the agreement is not reasonably susceptible to Plaintiffs' interpretation. The Acknowledgment Agreement did not express a promise by MBUSA to provide the Landlord with a guarantee of the assignee's performance under a sublease. Rather, as eponymously expressed in the title of the agreement, MBUSA and Asbury acknowledged their existing rights and obligations with respect to MBUSA's exercise of its right of first refusal, including the obligation to assume Asbury's leasehold interest. In the event of an assignment, MBUSA agreed to the status quo — i.e., to "remain primarily responsible," (Ack. Agrmt. (emphasis added)), under the APA and the sublease. Such an obligation did not include a guarantee obligation to the Landlord. Plaintiffs latch onto the phrase "primarily responsible" in the abstract and impute a meaning onto the Acknowledgment Agreement that is unsupported by the language of the agreement, its context, or any extrinsic evidence. Plaintiffs cannot simply manufacture an ambiguity through obfuscation and isolated reading of contractual language and present that as a genuine issue of material fact. Because MBUSA did not conceal an agreement to provide a guarantee to the Landlord, Plaintiffs cannot prove the first
Plaintiffs' fraudulent concealment claim also falters under the second element of the claim. A duty to disclose a material fact arises under four circumstances: (i) where a fiduciary relationship exists between the parties; (ii) "when the defendant had exclusive knowledge of material facts not known to the plaintiff"; (iii) when the defendant "actively conceals" a material fact from the plaintiff; and (iv) when the defendant "makes partial representations but also suppresses some material facts." LiMandri v. Judkins, 52 Cal.App.4th 326, 336, 60 Cal.Rptr.2d 539 (1997) (citation and quotes omitted); accord Deteresa v. Am. Broad. Cos., Inc., 121 F.3d 460, 467 (9th Cir.1997). Where there is no fiduciary relationship, "[e]ach of the other three circumstances ... presupposes the existence of some other relationship between the plaintiff and defendant in which a duty to disclose can arise." LiMandri, 52 Cal.App.4th at 336-37, 60 Cal.Rptr.2d 539. "[S]uch a relationship can only come into being as the result of some sort of transaction between parties," such as the relationship between a seller and buyer, employer and prospective employee, doctor and patient, or parties entering into a contractual agreement. Id.
Plaintiffs do not contest MBUSA's assertion that it was not in a fiduciary relationship with Plaintiffs. (Def.'s Mem. in Supp. Summ. J., at 9-10.) A fiduciary relationship exists where "confidence is reposed by one person in the integrity of another," and arises in such contexts as trustee/beneficiary, directors and majority shareholders of a corporation, business partners, joint adventurers, and agent/principal. Wolf v. Superior Court, 107 Cal.App.4th 25, 29-30, 130 Cal.Rptr.2d 860 (2003). The Court agrees with MBUSA that MBUSA and Plaintiffs were not in a fiduciary relationship, as it is undisputed that they were engaged in arms-length commercial negotiations. Thus, the first circumstance under LiMandri does not apply.
Nevertheless, it is also undisputed that Plaintiffs and MBUSA were engaged in a transaction, as they were in the midst of negotiating the assignment of MBUSA's rights and obligations under the APA, although Fresno Motors never executed the proposed Assignment and Assumption Agreement. A duty may therefore arise if MBUSA had "exclusive knowledge of material facts not known" to Plaintiffs; MBUSA "actively conceal[ed]" a material fact from Plaintiffs; or MBUSA made "partial representations" but also suppressed some material facts. LiMandri, 52 Cal.App.4th at 336, 60 Cal.Rptr.2d 539. The Court finds that none of the three circumstances are satisfied here because the purported concealed facts of the Acknowledgment Agreement were already disclosed to Plaintiffs and readily discoverable. Goodman v. Kennedy, 18 Cal.3d 335, 347, 134 Cal.Rptr. 375, 556 P.2d 737 (1976) ("A duty of disclosure ... may exist when one party to a transaction has sole knowledge or access to material facts and knows that such facts are not known to or reasonably discoverable by the other party.") As discussed above, the alleged secret contract that MBUSA supposedly failed to disclose to Plaintiffs merely acknowledged
MBUSA could not have fraudulently concealed a fact from Plaintiffs that they already knew or was disclosed to them. Because the fact that was purportedly concealed — MBUSA's promise to Asbury to be "primarily responsible" for the sublease — was already disclosed to Plaintiffs under the APA, it was not within MBUSA's "exclusive" knowledge to implicate a duty to disclose this fact. Likewise, a party cannot actively or partially conceal a fact already disclosed, readily discoverable, and notorious. Accordingly, MBUSA did not have a duty to disclose the Acknowledgment Agreement under the remaining circumstances articulated in LiMandri. Plaintiffs therefore also cannot satisfy the duty element of fraudulent concealment, and MBUSA is entitled to judgment as a matter of law on Plaintiffs' fifth cause of action for fraudulent concealment.
Plaintiffs allege that MBUSA engaged in unlawful competition by: (i) aiding, abetting, and conspiring with Asbury in the breach of Asbury's contractual obligations to Plaintiffs; (ii) providing unlawful notice, in violation of Vehicle Code section 11713.3(t); (iii) inducing Asbury to terminate its deal with Plaintiffs on June 19, 2009; and (iv) fraudulently concealing the Acknowledgment Agreement from Plaintiffs. (FAC ¶ 86.) Plaintiffs allege that such acts are "unlawful" and "unfair" within the meaning of the UCL, Cal. Bus. & Prof.Code §§ 17200, et seq. (Id. ¶¶ 87-88.)
The UCL prohibits an entity or an individual from engaging in "unfair competition," defined as "any unlawful, unfair or fraudulent business act or practice." Cal. Bus. & Prof.Code § 17200. The UCL provides a separate theory of liability under the "unlawful," "unfair," or "fraudulent" prong. Lozano v. AT & T Wireless Servs., Inc., 504 F.3d 718, 731 (9th Cir.2007). Section 17200 borrows violations of other laws and treats them as unlawful practices that are independently actionable under the UCL. Farmers Ins. Exch. v. Superior Court, 2 Cal.4th 377, 383, 6 Cal.Rptr.2d 487, 826 P.2d 730 (1992). Here, Plaintiffs' UCL claim is predicated on its claims for
Additionally, the Court agrees with MBUSA that Plaintiffs lack standing to bring a UCL claim because they have not properly alleged a basis for relief. (See Def.'s Mem. in Supp. Mot. to Dismiss, at 16-19.) Under the Constitution's requirement for standing, the plaintiff must show an "injury in fact" that is fairly traceable to the challenged action of the defendant and likely to be redressed by a favorable decision. Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). Relief for claims under the UCL is "generally limited to injunctive relief and restitution." Cel-Tech Commc'ns, Inc. v. L.A. Cellular Tel. Co., 20 Cal.4th 163, 179, 83 Cal.Rptr.2d 548, 973 P.2d 527 (1999); see also Cal. Bus. & Prof.Code § 17203 ("The court may make such orders or judgments ... as may be necessary to prevent the use or employment by any person of any practice which constitutes unfair competition ... or as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition.") After the passage of Proposition 64 in 2004, "[t]o have standing to assert a claim under the UCL, a plaintiff must have `suffered injury in fact and [have] lost money or property as a result of such unfair competition.'" Aron v. U-Haul Co. of Cal., 143 Cal.App.4th 796, 802, 49 Cal.Rptr.3d 555 (2006) (quoting Cal. Bus. & Prof.Code § 17204); see also Californians for Disability Rights v. Mervyn's, LLC, 39 Cal.4th 223, 227, 46 Cal.Rptr.3d 57, 138 P.3d 207 (2006).
Here, Plaintiffs did not request injunctive relief in the FAC. Rather, Plaintiffs seek to recover, as restitution, "all sums actually paid to MBUSA, or by which MBUSA has benefitted, resulting from MBUSA's unlawful, unfair and deceptive conduct" alleged in the FAC. (FAC ¶ 90; see also id., Prayer.) Plaintiffs allege that "these sums include, but are not limited to, benefits MBUSA derived from Plaintiffs' evaluation, investigation and negotiation of the APA with Asbury, as well as benefits MBUSA derived from Asbury's eventual sale of the Mercedes-Benz Fresno Dealership to another party after Asbury terminated the deal for a second time in October 2009." (Id. ¶ 90 (emphases added).) A restitution order against the defendant, however, "requires both that money or property have been lost by a plaintiff, on
In the FAC, Plaintiffs do not allege any sums Plaintiffs or any other party paid to MBUSA. Nor do Plaintiffs identify any property or money lost that MBUSA has acquired or a benefit obtained by MBUSA in which Plaintiffs have an ownership interest. Rather, Plaintiffs only allege benefits that MBUSA derived (i) from Plaintiffs' evaluation, investigation, and negotiation of the APA with Asbury and (ii) benefits from Asbury's sale of its dealership to another party. (FAC ¶ 90.) Such unspecified, intangible benefits are not recoverable in restitution — i.e., money, property, or benefits in which Plaintiffs had an ownership interest, as indicated by Plaintiffs' own cited authority. See Korea Supply Co., 29 Cal.4th at 1148-49, 131 Cal.Rptr.2d 29, 63 P.3d 937; Cal. Bus. & Prof.Code § 17203 ("The court may make such orders or judgments ... as may be necessary to restore to any person in interest any money or property, real or personal, which may have been acquired by means of such unfair competition." (emphasis added)); Cal. Bus. & Prof.Code § 17204 ("Actions for relief pursuant to this chapter shall be prosecuted... by a person who has suffered injury in fact and has lost money or property as a result of the unfair competition." (emphasis added)).
In their opposition, Plaintiffs argue that "[t]he term `benefit' denotes any form of advantage," (Pls.' Opp'n, at 16:26), but cite no legal authority for this rule. Plaintiffs rely on Troyk v. Farmers Grp., Inc., 171 Cal.App.4th 1305, 1339, 90 Cal.Rptr.3d 589 (2009), for the proposition that "[f]or a benefit to be conferred, it is not essential that money be paid directly to the recipient by the party seeking restitution." (Id. at 16-17 (citing Troyk, 171 Cal.App.4th at 1340, 90 Cal.Rptr.3d 589)). However, that language from Troyk quotes from another case and must be interpreted within the factual context of the Troyk court's holding. The Troyk court held that the insurer defendant could be liable for restitution for indirect receipt of service payments made by insured plaintiffs because the money was paid to the insurer's wholly owned subsidiary and the insurer and subsidiary were treated as a single enterprise, such that the payments to the subsidiary "should be treated as if paid to" the insurer. Id. at 1340, 90 Cal.Rptr.3d 589. While the Court agrees with Plaintiffs that money need not be paid directly to MBUSA for restitution, Plaintiffs do not assert any indirect monetary sum obtained by MBUSA from Plaintiffs, via a closely affiliated third party, as a result of MBUSA's alleged unlawful and unfair acts.
Moreover, as both parties agree, the disgorgement of what MBUSA has "benefited" as a result of its alleged unlawful and unfair acts, in itself, is not restitution. See Korea Supply, 29 Cal.4th at 1148, 131 Cal.Rptr.2d 29, 63 P.3d 937 ("[A]n order for restitution is one compelling a UCL defendant to return money obtained through an unfair business practice to those persons in interest from whom the property was taken, that is, to persons who had an ownership interest in the property or those claiming through that person."
For the foregoing reasons, MBUSA's converted motion for summary judgment is GRANTED.
