STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

RICK STARR NISSAN LINCOLN-MERCURY, ) INC., d/b/a RICK STARR NISSAN, )

)

Petitioner, )

)

vs. ) CASE NO. 92-5187

) NISSAN MOTOR CORPORATION IN U.S.A., )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to Notice, this cause was heard by Linda M. Rigot, the assigned Hearing Officer of the Division of Administrative Hearings, on April 5 and 6, 1993, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Daniel E. Myers, Esquire

Walter E. Forehand, Esquire Myers & Forehand

402 North Office Plaza Drive Suite B Tallahassee, Florida 32301

For Respondent: Kevin Russell, Esquire

Lathem & Watkins

Suite 5800 Sears Tower Chicago, Illinois 60606

Dean Bunch, Esquire

Cabaniss, Burke & Wagner, P.A. 851 East Park Avenue Tallahassee, Florida 32301

STATEMENT OF THE ISSUE

The issue presented is whether Respondent's proposed termination of its franchise agreement with Petitioner is unfair or prohibited within the meaning of Section 320.641, Florida Statutes.

PRELIMINARY STATEMENT

By letter dated June 5, 1992, Respondent notified Petitioner of its intention to terminate its franchise agreement, and Petitioner timely filed a complaint with the Department of Highway Safety and Motor Vehicles, alleging that such termination is unfair or prohibited. This cause was thereafter transferred to the Division of Administrative Hearings for the conduct of a formal proceeding.

Petitioner presented the testimony of Richard N. Starr and Thomas P. Hushek. The Respondent presented the testimony of Mae Johnson, William R. Danner, Peter W. McAvoy, and Mark C. Erwin. Additionally, Petitioner's Exhibits numbered 1-10 and Respondent's Exhibits numbered 1-20 were admitted in evidence.

Both Petitioner and Respondent submitted post-hearing proposed findings of fact in the form of proposed recommended orders. A specific ruling on each proposed finding of fact can be found in the Appendix to this Recommended Order.

FINDINGS OF FACT

1. At all times material hereto, Richard N. Starr has been the sole owner of Rick Starr Lincoln-Mercury, Inc., located at 5400 South U.S. 1, Ft. Pierce, Florida.

   
   

2. The Nissan dealer in Ft. Pierce was Englander Nissan, Inc. Englander was an "exclusive" Nissan dealer; that is, its new vehicle sales, service, and parts facilities were exclusively dedicated to Nissan.

   
   

3. In December 1989, Starr entered into a "buy/sell" agreement with Englander pursuant to which Starr agreed to purchase Englander's assets.

   Starr's contractual obligation was conditioned on Nissan executing a dealer agreement authorizing the "joint" sale and service of Nissan vehicles at Starr's existing Lincoln-Mercury facility.

   
   

4. Prior to discussing this transaction with Nissan, Starr intended to "dual" the Nissan and the Lincoln-Mercury franchises in the Lincoln-Mercury facility. A "dual" dealer has two or more franchises sharing sales, service, or parts facilities. On December 18, 1989, Starr submitted to Nissan a dealer application that reflected his intent to dual the two franchises. Starr submitted his application to what was then known as the Jacksonville Region, which encompassed the states of Florida, Georgia, and South Carolina. On July 6, 1992, the Jacksonville Region was expanded and became known as Nissan's Southeast Region.

   
   

5. In the buy/sell process, Nissan's market representation manager, then William R. Danner, was responsible for gathering information regarding and evaluating the capitalization, management, and facilities of a dealer applicant such as Starr. "Exclusivity" was very important to Nissan in evaluating a dealer applicant's facilities. In Nissan's experience exclusive dealers provide better performance in such areas as customer satisfaction, personnel, and product knowledge, as well as greater sales volume and profits. In a buy/sell where the seller is an exclusive dealer, it is very important to Nissan to maintain that exclusivity.

   
   

6. Danner noted that Starr's buy/sell agreement and Starr's application to become a Nissan dealer envisioned Nissan being dualed with Lincoln-Mercury in Starr's existing Lincoln-Mercury facility. Danner contacted Starr to discuss that issue in early January 1990. Starr specifically asked if it would be acceptable to dual the two franchises indefinitely in the Lincoln-Mercury facility, and Danner specifically told Starr that it would not be. Danner told Starr that the buy/sell would only work if Nissan and Starr entered into a dealer agreement requiring Starr to provide new dealership facilities for Nissan by the end of a specified term, and Starr agreed.

   
   

7. Danner prepared an exhibit to the proposed dealer agreement reflecting that requirement. He prepared an "Exhibit A," the form that Nissan used to

   require dealers to provide new facilities within a specified period of time. Danner discussed Exhibit A with Starr in late January 1990, explaining that Starr could satisfy his facilities obligation in any of the three ways detailed in Exhibit A: by acquisition of property and construction of a new dealership facility, by acquisition of an existing dealership facility that met Nissan's guidelines, or by acquisition of a dealership facility that could be remodeled to meet Nissan's guidelines. Danner also explained that Starr would have a limited time by which to comply with the facility requirement. Starr understood that he would be required to move his Nissan franchise out of his Lincoln- Mercury facility and into its own facility by March 1, 1992.

   
   

8. Danner also conducted the facilities survey of Starr's Lincoln-Mercury dealership. A facility survey is the physical measurement of the dealership facilities and land for the purpose of comparing the actual size of the dealership to Nissan's guidelines. During that meeting, Starr and Danner discussed other facilities in the southern Ft. Pierce area which could be acquired and remodeled in fulfillment of the third option under Exhibit A. In particular, they discussed the Barry Reid Buick facility, which would have required remodeling because it had display areas--that is, cement pads covered by a tin roof--rather than an enclosed showroom. During that conversation, Starr asked Danner if his Lincoln-Mercury facility would satisfy Nissan now that Nissan had seen it, and Danner told him that it would not.

   
   

9. Danner's facility survey showed that Starr's Lincoln-Mercury facility exceeded Nissan's guidelines for a dual Lincoln-Mercury and Nissan dealership in the Ft. Pierce market. Nevertheless, Nissan insisted that Starr agree to provide new dealership facilities because Nissan wanted exclusive facilities as it had had an exclusive facility in the Ft. Pierce market with Englander. Because Englander was experiencing financial difficulties and the buy/sell would both maintain continuity in the market and relocate the franchise to the desired southern part of the Ft. Pierce market, Nissan was willing to permit Starr to dual Nissan with Lincoln-Mercury for two years.

   
   

10. By letter of transmittal dated February 9, 1990, Nissan's Jacksonville region office recommended to Nissan's national headquarters that the buy/sell agreement between Starr and Englander be approved, that Starr be given a "term" agreement, and that the Nissan franchise be "dualed" with Lincoln-Mercury for 24 months by which time Starr was obligated to provide Nissan with new facilities, thereby "de-dualing" Nissan prior to March 1, 1992.

    
    

11. Nissan has two types of dealer agreements--a "perpetual" agreement and a "term" agreement. The perpetual agreement has no specified termination date. The term agreement is for a specific term during which the dealer must remedy a specific deficiency. If the dealer satisfies the deficiency during the term, then Nissan provides the dealer with a perpetual agreement.

    
    

12. Nissan and Starr entered into a Nissan Dealer Term Sales and Service Agreement effective as of March 28, 1990 ("the March Agreement"). Article Sixth of the March Agreement provided as follows:

    
    

    This Agreement shall have a term commencing on the effective date hereof and, subject to

    its earlier termination in accordance with the provisions of this Agreement, expiring on March 1, 1992. Subject to other applicable provisions of this Agreement, this Agreement shall automatically terminate at the end of

    such stipulated term without any action by either Dealer or Seller.

    
    

13. Article Eighth of the March Agreement provided, in part, as follows:

    
    

    If this Agreement is not terminated prior to the expiration date set forth in Article Sixth above, Seller hereby offers to enter into as of such date a Nissan Dealer Sales & Service Agreement in such form as may be in use by Seller at such time. This offer may be accepted by Dealer fulfilling all of the following conditions during the term of this Agreement and at the expiration thereof, each of which Dealer understands and agrees to be reasonable and necessary:

    
    

    1. New Dealership Facilities:

       
       

       SEE EXHIBIT "A" WHICH EXHIBIT IS INCORPORATED BY THIS REFERENCE INTO THIS AGREEMENT FOR ALL PURPOSES.

       
       

    2. Complete the acquisition and installation, at the New Dealership Facilities, of signs, furniture, furnishings, tools and equipment as required by Seller for Dealer's New Dealership Facilities;

    3. Employ that number of qualified persons to operate the dealership required by Seller for Dealer's New Dealership Facilities;

       * * *

       1. Comply with all other of Seller's requirements for Dealer to operate the New Dealership Facilities and qualify in all other respects for a Nissan Dealer Sales & Service Agreement;

       2. Comply with all federal, state and local governmental licensing and other requirements for Dealer to do business as an Authorized Nissan Dealer at the New Dealership Facilities;

       * * *

       Should Dealer fail to fulfill each and all of the above conditions during the term of this Agreement and prior to the expiration thereof, the above offer shall be automatically revoked on such expiration date without further notice.

       
       

14. Exhibit A to the March Agreement provided as follows:

    
    

    Provide new Dealership Facilities of a size, appearance and layout meeting Seller's approval and in accordance with the Guides established by Seller. 'Provide' as used herein shall mean either (a) complete

    construction of new Dealership Facilities on a site and according to plans approved by Seller; or (b) complete acquisition of Dealership Facilities on a site and of a style and layout approved by Seller; or (c) complete remodeling of Dealership Facilities to a size, style and layout approved by Seller, all in accordance with final architectural plans to be submitted and approved by Seller as follows:

    1. Dealer shall complete site search and present site proposal to Seller for approval on or before November 1, 1990; and

    2. Dealer shall submit plans for the construction of the Dealership Facilities for Seller's approval on or before February 1, 1991; and

    3. Dealer shall submit a signed contract for the construction of the Dealership Facilities on or before May 1, 1991; and

    4. Dealer shall commence construction of the Dealership Facilities on or before June 1, 1991; and

    5. Dealer shall complete construction of the Dealership Facilities on or before March 1, 1992; and

       The new Dealership Facilities must be fully operational on or before the expiration of the term of this Agreement. Failure by Dealer to meet any of the deadlines set forth above shall constitute a material breach of this Agreement.

       
       

15. Subsection (c) of the first paragraph of Exhibit A relates to the remodeling of an existing dealership which Starr might acquire that would not meet Nissan guidelines at the time it was acquired. That remodeling could not be satisfied by remodeling Starr's existing Lincoln-Mercury facility since no remodeling of that facility would produce an exclusive facility for Nissan. Similarly, the references to "Dealership Facilities" used throughout Exhibit A were not references to Starr's existing facility (which had already been acquired and/or constructed), but rather were references to the "new Dealership Facilities" to be provided by Starr in fulfillment of his obligation under the Agreement. The condition of exclusivity was expressed in Nissan's requirement of "new Dealership Facilities," and "Seller's approval" would not be given to any facilities that were not exclusive.

    
    

16. Article Tenth of the March Agreement provided as follows:

    
    

    Dealer's failure to carry out fully all terms and provisions of this Agreement, including those terms and provisions incorporated herein by reference, shall be a breach of the entire Agreement, and Seller shall be under no obligation to Dealer to extend this Agreement in whole or in part or to enter into a regular Nissan Dealer Sales & Service Agreement with Dealer or be under any obligation to Dealer.

17. Section 17.B. of the Standard Provisions of the March Agreement provided as follows:

    
    

    The waiver by either party, or the failure by either party to claim a breach, of any provision of this Agreement shall not affect the right to require full performance thereafter, nor shall it constitute a waiver of any subsequent breach, or affect in any way the effectiveness of such provision.

    
    

18. Nissan introduced a new form of dealer sales and service agreement throughout the United States in the latter part of 1988 or in 1989. In March 1990, because the state of Florida had not yet approved that new agreement form, Starr executed the prior form. In August 1990, after receiving approval from the state of Florida, Nissan began having Florida dealers, including Starr, execute the new agreement.

    
    

19. Starr executed the new form of Nissan Dealer Term Sales & Service Agreement effective September 24, 1990 (the September Agreement). Article Sixth provides, in part, as follows: "This Agreement cancels, supersedes and annuls all prior contracts, agreements and understandings except as stated herein, all negotiations, representations and understandings being merged herein."

    
    

20. Article Seventh, entitled "Term," provided as follows:

    
    

    This Agreement shall have a term commencing on the effective date hereof and, subject to its earlier termination in accordance with the provisions of this Agreement, expiring on the expiration date indicated in the Final Article of this Agreement. Subject to other applicable provisions of this Agreement, this

    Agreement shall automatically terminate at the end of such stipulated term without any action by either Dealer or Seller.

    
    

    The Final Article states that the expiration date of the September Agreement was April 1, 1992. The insertion of that date rather than March 1, 1992, was a typographical error. It is uncontroverted that at all times both Starr and Nissan believed the expiration date of Starr's Term Agreement to be March 1, 1992. Whether that typographical error extended Starr's Term Agreement expiration date to April 1, 1992, is not dispositive and, therefore, need not be determined in this proceeding.

    
    

21. Article Twelfth of the September Agreement provided, in part, as follows:

    
    

    If this Agreement is not terminated prior to the expiration date set forth in the Final Article, Seller may offer to enter into as of such date a Nissan Dealer Sales & Service Agreement in such form as may be in use by Seller at such time. Seller will make the offer and Dealer may accept such offer only if Dealer has fulfilled and continues to

    fulfill, during the term of this Agreement and at the expiration thereof, all of the following conditions, each of which Dealer understands and agrees to be reasonable and necessary:

    * * *

    1. If New Dealership Facilities are required under Article Twelfth (d), below:

       1. Complete the acquisition and installation, at the New Dealership Facilities, of signs, furniture, furnishings, tools and equipment as required by Seller for Dealer's New Dealership Facilities;

       2. Employ that number of qualified persons to operate the dealership as required by Seller for Dealer's New Dealership Facilities;

       3. Comply with all other of Seller's requirements for Dealer to operate the New Dealership Facilities and qualify in all other respects for a Nissan Dealer Sales & Service Agreement;

       4. Comply with all federal, state and local governmental licensing and other requirements for Dealer to do business as an Authorized Nissan Dealer at the New Dealership Facilities;

    2. New Dealership Facilities (or upgrade to existing Dealership Facilities, if applicable):

    
    

    SEE EXHIBIT A WHICH IS INCORPORATED BY THIS REFERENCE INTO THIS AGREEMENT FOR ALL PURPOSES

    * * *

    
    

22. Exhibit A of the September Agreement provided as follows:

    
    

    Dealer shall complete the acquisition (by purchase or long term lease) of land located on a site approved by Seller so as to provide separate and distinct Nissan Dealership Facilities of a size, appearance and layout meeting Seller's approval and in accordance with the Guides established by Seller and all in accordance with final architectural plans to be submitted and meeting Seller's approval (such facilities are hereinafter referred to as the "New Dealership Facilities") in accordance with the following schedule:

    1. Dealer shall complete the acquisition (by purchase or long term lease) of land located on a site approved by Seller on or before November 1, 1990; and

    2. Dealer shall submit final architectural plans for Seller's approval on or before February 1, 1991; and

    3. Dealer shall submit a signed contract for construction of the New Dealership Facilities

       on or before May 1, 1991; and

    4. Dealer shall commence construction of the New Dealership Facilities on or before June 1, 1991; and

    5. Dealer shall complete construction of the New Dealership Facilities and have them fully operational on or before March 1, 1992; and

       
       

       Failure by Dealer to meet any of the deadlines set forth above shall constitute a material breach of this Agreement.

       
       

23. The Nissan employee who prepared Exhibit A did so by selecting the exhibit form being utilized at that time by Nissan for a dealer on a term agreement with a commitment for exclusive Nissan facilities and then "plugging in" the interim deadline dates from the March Agreement. Although the verbiage in Exhibit A of the September Agreement is different from that in Exhibit A of the March Agreement, neither party to the Agreement intended to change Starr's facilities obligation by use of the new form. Moreover, as evidenced by their conduct thereafter, both Starr and Nissan understood that Starr had the same three options for complying with his obligation to acquire or construct an exclusive facility for Nissan. Starr signed Exhibit A in addition to signing elsewhere on the September Agreement.

    
    

24. Article Tenth of the September Agreement provided as follows:

    
    

    Dealer's failure to carry out fully all of the terms and provisions of this Agreement, including those terms and provisions incorporated herein by reference, shall be a breach of the entire Agreement, and Seller shall be under no obligation to Dealer to extend this Agreement in whole or in part or to enter into a regular Nissan Dealer Sales

    & Service Agreement with Dealer or be under any other obligation to Dealer.

    
    

    Upon Dealer's failure to meet any interim deadlines set forth in Article Twelfth of this Agreement or the occurrence of any of the other events warranting termination of this agreement as set forth in Section 12 of the Standard Provisions, Seller may terminate

    this Agreement, prior to the expiration date hereof, by giving Dealer written notice thereof, such termination to be effective upon the date specified in such notice, or such latter date as may be required by any applicable statute.

    
    

25. Section 17.B. of the Standard Provisions of the September Agreement provided as follows:

    
    

    The waiver by either party, or the delay or failure by either party to claim a breach, of any provision of this Agreement shall not affect the right to require full performance

    thereafter, nor shall it constitute a waiver of any subsequent breach, or affect in any way the effectiveness of such provision.

    
    

26. In their dealings with Starr from March 28, 1990 to May 1, 1992, Nissan's employees consistently took the position that Nissan wanted a separate facility. No employee of Nissan ever told Starr not to worry about the March 1, 1992, deadline.

    
    

27. Nissan's district sales managers visited Starr's dealership facility approximately every four to six weeks from March 1990 through March 1992. Peter Grimm was the district sales manager responsible for Starr's dealership facility from the spring of 1990 to the spring of 1991, and Mae Johnson was the district sales manager responsible for that facility from the spring of 1991 through February 1992. Both district sales managers received specific instructions from their supervisors to review with Starr the requirements under the Term Agreement, including, specifically, the requirement that Starr provide a separate Nissan facility by March 1, 1992, together with the interim deadlines regarding that obligation.

    
    

28. Grimm discussed with Starr on a number of occasions the necessity for Starr to relocate his Nissan franchise. During those discussions, Starr discussed the possibility of purchasing property and building a new facility, purchasing the existing vacant Hyundai facility, and purchasing the recently- closed Suzuki facility. On at least one occasion Starr suggested that he might simply build a separate showroom for Nissan on the same property next to the Lincoln-Mercury facility. When Starr suggested that, Grimm told him that was not an option because it would be considered a dual dealership to separate only the showroom and would not be approved by Nissan. Starr explained to Grimm that he was in no hurry due to the economy. Grimm consistently reinforced Starr's need to meet the interim deadlines if he were constructing a facility and to meet the March 1, 1992, deadline under any option. During the final hearing, Starr admitted that Grimm had such conversations with him.

    
    

29. Johnson had been instructed to discuss Starr's obligation to furnish exclusive Nissan facilities by March 1, 1992, with him in person on a monthly basis. She was not always able to meet with him in person since Starr was often at one of his other dealerships in Massachusetts. By telephone on June 3, 1991, Starr informed Johnson that he had recently met with Peter McAvoy, Nissan's regional sales manager for the Jacksonville region, had discussed with McAvoy moving Nissan to a new and different facility, and would be in contact with McAvoy regarding those plans. On July 11 Starr advised Johnson that he intended to discuss with McAvoy and with Michael O'Malley, Nissan's regional general manager for the Jacksonville region, the possibility of dualing the Nissan franchise with Acura in the nearby Acura facility. On August 8 Starr told her that the Acura facility was the most promising of his options; however, on September 17 he told her that the Acura facility was no longer a possibility.

    He advised her that he was planning to build a Nissan facility next to his existing Lincoln-Mercury facility instead. Johnson advised Starr that he needed to discuss that idea with regional management, and Starr agreed to do so.

    
    

30. On October 17 Starr advised her that he had discussed with McAvoy plans for a new facility located adjacent to the Lincoln-Mercury facility, that he thought his construction plans would be approved, and that construction could commence prior to the term deadline. On December 11 Starr advised Johnson that he intended to send facility plans to regional management by the end of the week. He advised her, however, that he was concerned about building a new

    facility with the current trade balance situation between the United States and Japan. He asked her to document his concerns regarding the implications of trade meetings to be held between the United States and Japan in January.

    
    

31. Throughout her contacts with Starr, Johnson advised him that he had missed interim construction deadlines, reminded him that he must be operational in a new facility by March 1, 1992, and advised him that she did not support any plans that did not meet the deadline. Starr repeatedly assured her that he understood the importance of the deadlines, that he understood that he had missed interim deadlines for construction, and that he intended to comply with the March 1 final deadline.

    
    

32. Regional and national Nissan management personnel also attempted to gain Starr's compliance with the deadlines contained in the Term Agreement. On November 2, 1990, William Kirrane, Nissan's director of field operations from the national office, O'Malley, and Grimm counseled Starr to secure a new site and proceed with fulfilling his Term Agreement requirements. Those employees had come to Starr's dealership facility in Ft. Pierce and spent several hours with him discussing the facility issue.

    
    

33. McAvoy sent Starr a letter by certified mail on March 28, 1991, informing him that he was in default with respect to the first two interim deadlines, that his failure to meet those deadlines constituted a material breach of the Agreement, and that Nissan wished to meet with him at the Jacksonville region office in April 1991 to discuss his performance pursuant to the Term Agreement. Starr failed to contact McAvoy in response to that letter, and he never went to the Jacksonville region office in April.

    
    

34. Nissan's market representation manager, Mark Erwin, sent Starr a letter dated April 25, 1991, by certified mail asking him to meet with regional management in Jacksonville during the month of May 1991 to review the conditions contained in his Term Agreement. Starr did not come to the Jacksonville region office in response to that letter.

    
    

35. Therefore, in May 1991, McAvoy went to Ft. Pierce to meet with Starr. They discussed the fact that Starr had missed three interim deadlines for construction pursuant to his Term Agreement and discussed his options for fulfilling his requirement prior to the expiration of the Agreement. Starr represented that he would provide exclusive facilities for Nissan by acquiring the vacant Hyundai facility or the vacant Suzuki facility or by constructing new facilities for Nissan. During that meeting Starr asked McAvoy if it were possible to remain indefinitely in the Lincoln-Mercury facility by expanding the showroom and coming to some type of accommodation regarding the parts and service components. McAvoy told Starr that Nissan was not interested in remaining there and was specifically not interested in being dualed with

    Lincoln-Mercury. Starr asked what Nissan's actual facility guidelines were for land and buildings, and McAvoy agreed to send those figures to him. On June 11, 1991, the minimum square footage requirements for an exclusive Nissan facility with a 460-unit planning volume were sent to Starr.

    
    

36. McAvoy arranged another meeting at the dealership in July because another interim deadline for construction had passed with no compliance by Starr. O'Malley also attended that meeting. They discussed the fact that Starr had missed the interim construction deadlines and discussed the three exclusive facility options that had been addressed during the May meeting as well as the possibility of Starr acquiring the Acura dealership facility next door. McAvoy

    and O'Malley told Starr that Nissan would be happy to go into the Acura facility but did not want to be dualed with Acura.

    
    

37. McAvoy followed up that meeting with a telephone call on August 5, 1991, and a letter dated August 9. The letter reiterated that Starr could satisfy the criteria in his agreement by relocating to the vacant Hyundai facility or the vacant Suzuki facility prior to March 1, 1992, resulting in an exclusive Nissan operation. The letter further advised Starr that although Nissan would approve relocation of the Nissan franchise to the Acura facility prior to March 1, 1992, such relocation must be followed by a de-dualing of the Acura franchise by October 1, 1992, resulting in an exclusive Nissan operation at that location, and that such a deadline would not be extended. The letter also advised that Starr could construct an exclusive Nissan facility for all departments adjacent to his Nissan/Lincoln-Mercury facility. The letter advised Starr that failure to meet the deadlines constituted a material breach of the Term Agreement and that Nissan would not entertain an extension of the March 1, 1992, deadline. The letter requested that Starr notify the Jacksonville region in writing as to his plans no later than September 3, 1991.

    
    

38. Starr responded to that letter, by letter dated August 22. He disputed the undisputable fact that he had not met the four construction deadlines. Starr further advised that of the four options referenced in McAvoy's August 9 letter, he had chosen to build a new facility, had met with his contractor, and had begun the preliminary work necessary to build a new facility. He reiterated his understanding that it was Nissan's intent to have exclusive representation in the Ft. Pierce market area.

    
    

39. Starr's August 22 letter also objected to McAvoy's statement in his letter that Starr was in material breach of their contract. Starr also suggested that he had been excused from his obligation to provide exclusive facilities by March 1, 1992 in his November 1990 meeting with Kirrane, O'Malley, and Grimm. That allegation was not true and was inconsistent with every other written and oral contact Starr had had from the inception of his dealings with Nissan through the date of Starr's letter.

    
    

40. McAvoy was encouraged by Starr's August 22 letter because it expressed a decision to build a new facility and represented that Starr was going forward with the project. Nevertheless, McAvoy did not inform Starr, explicitly or implicitly, that Starr need not worry about the March 1, 1992, deadline. McAvoy continued to monitor Starr's progress with respect to the Term Agreement and his submission of facility plans.

    
    

41. In November 1991 Starr submitted to the region office a drawing of his plan for an exclusive sales, service, and parts facility. The drawing did not reveal the square footage of the facility, the land area to be dedicated to Nissan, the location of the facility on the site relative to the adjacent Lincoln-Mercury facility, the location of entrances and exits, or the number of service stalls the facility would have. Within a week of receiving the drawing, McAvoy wrote to Starr identifying these and other concerns. In response, Starr sent a revised drawing that added a little more detail but failed to identify square footage and the location of the facility on the property. Regional personnel contacted Starr by telephone and advised him as to the continuing deficiencies of the drawings.

    
    

42. Starr submitted a third drawing on December 23 which still failed to provide dimensions. On January 7, 1992, McAvoy wrote to Starr advising that the plans still failed to provide all of the information requested in McAvoy's

    November 20 letter. The January 7 letter outlined in a "fill in the blank" format the dimensional information that Nissan had been seeking and requested that Starr fill in the blanks. Starr did so, and that information together with the plans were submitted by the regional office to Nissan's national office.

    McAvoy informed Starr that the national office had approved his plans, by letter dated February 7, 1992.

    
    

43. Although McAvoy and other Nissan personnel had told Starr on many occasions that Nissan would not extend the March 1, 1992, deadline, it was obvious to McAvoy that Starr could not meet that deadline since he had just received approval of his plans. Accordingly, McAvoy included in his February 7 letter an offer by Nissan to give Starr a six-month extension of the March 1 deadline. The new deadline for completion of the project would be September 1, 1992, with interim deadlines of April 1 for providing a signed construction contract and May 1 for commencing construction. The proposed extension also provided that Starr's failure to meet any of those deadlines would constitute a material breach of the Term Agreement. McAvoy believed those proposed deadlines to be reasonable based on his earlier conversations with Starr regarding the length of time it would take Starr to construct the facility. The letter further provided that the extension which was being offered would only become effective if Starr signed, dated, and returned a copy of that letter to the regional office by February 14, 1992.

    
    

44. In response to that letter Starr telephoned and spoke with McAvoy and Erwin. Starr expressed his concern about being able to meet the new deadlines. The Nissan employees asked Starr what time period he needed in order to accomplish the project, and Starr told them that he could do so by the end of the year. McAvoy and Erwin agreed to give Starr the extension he requested, until December 1, and the three of them agreed to revised interim deadlines. When the conversation was concluded, Starr was pleased with the new deadlines. Starr raised no concerns regarding securing financing or approval from his landlord during that discussion.

    
    

45. On March 5, 1992, McAvoy sent Starr a letter memorializing their conversation. The letter further stated that, based upon Starr's request, Nissan was willing to offer to extend: (A) by one month, from April 1 to May 1, the date by which Starr was required to provide Nissan with a signed construction contract for the new dealership facilities; (B) by two months, from May 1 to July 1, the date by which Starr was required to commence construction of the new dealership facilities; and (C) by three months, from September 1 to December 1, 1992, the date by which Starr was required to complete construction of the new dealership facilities and have them fully operational. The letter further advised that failure by Starr to meet any of those deadlines would constitute a material breach of the Term Agreement and that no further extensions would be offered. Finally, the letter advised that if Starr agreed to those terms and conditions, he should sign and date the letter and return a copy to Nissan's regional office by March 13, 1992.

    
    

46. Starr did not sign and return a copy of the March 5 letter. Starr did not even contact Nissan in response to the letter.

    
    

47. Erwin attempted to locate Starr and succeeded in reaching him at one of his dealerships in Massachusetts on March 19. In that telephone conversation, Starr expressed his concerns regarding the December 1 final deadline, Erwin advised Starr that that deadline would not be modified, and Starr requested an opportunity to review the matter upon his return to Ft. Pierce the week of March 23.

48. On March 25 Erwin again contacted Starr by telephone, this time at his dealership in Ft. Pierce. Starr then proposed to build a new vehicle showroom for Nissan prior to December 1 and a fixed operations (parts and service) facility thereafter. McAvoy called Starr the next day and told him his proposal was unacceptable, and Starr told McAvoy that he (Starr) did not have any firm time frame for completing the construction.

    
    

49. As Nissan continued to work with Starr and attempted to secure Starr's agreement to the extensions reflected in the February 7 and then the March 5 letters, Starr's Term Agreement with Nissan expired. Because Nissan did not want any dealer operating without a sales and service agreement, and in order to give Starr an opportunity to respond to Nissan's pending offer to extend the Term Agreement by agreeing to deadlines, Nissan unilaterally extended the Agreement to May 1, 1992 and sent Starr Amendment No. 1 to the Nissan Dealer Term Sales and Service Agreement. Starr executed and returned that document to Nissan. Whether that Amendment constituted a 60-day extension because Starr's Agreement expired March 1, 1992 or whether that Amendment constituted a 30-day extension because Starr's Agreement expired April 1, 1992 is immaterial. Both Nissan and Starr understood that the Amendment extended Starr's Term Agreement to May 1, 1992.

    
    

50. On March 30, 1992, McAvoy sent a letter to Starr by certified mail summarizing Nissan's contacts with Starr during that month. That letter concluded as follows:

    
    

    As you are aware, the current Nissan Dealer Term Agreement currently in effect with Rick Starr Nissan expired on March 1, 1992. The Region has obtained an interim extension that will expire on May 1, 1992. This is to advise you that this interim extension will not be extended without the concurrence of Rick Starr Nissan to comply with the final expiration date of December 1, 1992, as well as the necessary interim date identifying the start of the subject facility construction. If you fail to agree to comply with the final expiration date of December 1, 1992, as well as the interim term dates, Nissan will not extend or renew your Nissan Dealer Term Sales and Service Agreement.

    
    

51. Starr did not respond to Nissan's March 30, 1992, letter or otherwise make contact with Nissan.

    
    

52. On April 28, 1992, as the May 1 expiration date of the extended Term Agreement was approaching without any commitment from Starr to construct an exclusive dealership facility for Nissan, McAvoy sent a letter to Nissan's national headquarters recommending that a notice of termination be sent to Starr. On May 1, 1992, the Term Agreement expired. On June 5, 1992, a letter was sent to Starr by certified mail and hand delivery notifying him that Nissan intended to terminate the Term Agreement effective 90 days from his receipt of that letter.

    
    

53. In July 1992 Starr made a "compromise" proposal to Nissan's district operations manager Jeff Moody. Starr proposed to build a separate sales

    facility for Nissan but he proposed to dual the service and parts departments in the Lincoln-Mercury facility. That proposal was not accepted.

    
    

54. Starr breached the Term Agreement with Nissan. Starr did not provide new dealership facilities as required by the Term Agreement. During the period between Starr's August 22, 1991, decision to build exclusive sales, service, and parts facilities for Nissan on the property occupied by the Lincoln-Mercury facility and the expiration of the Term Agreement on May 1, 1992, Starr (A) did not sign a construction contract with its contractor; (B) did not retain an architect; (C) took no steps to have the necessary impact study performed, to secure any necessary variances or zoning approvals, or to secure the permits which would be necessary to commence construction; and (D) did not pay its contractor any monies for any services rendered in connection with Starr's proposed construction of Nissan facilities.

    
    

55. Starr testified as to several factors which caused a delay in his construction plans and which, according to Starr, excuse his compliance with his contractual obligation. Those factors--landlord approval, the recession, and financing--are without merit, even if the Term Agreement had been contingent on such factors. As to the first factor, landlord approval was only necessary due to Starr's choosing to construct a Nissan facility adjacent to the Lincoln- Mercury facility of all the options available to him. Starr verbally represented repeatedly to Nissan employees that approval of his landlord was not a problem and that he already had verbal approval. Although the landlord may have been on an extended trip between November or December 1991 and April 1992, Starr took no steps to obtain the landlord's written approval, before, during, or after that trip. As to the second factor, Starr's contractual obligation was not subject to the state of the economy, and the auto industry was depressed in March 1990 when he contracted to buy or build an exclusive facility for Nissan to the same extent that it was depressed in March 1991. The third factor related to Starr's inability to secure financing; yet, Starr did not submit an application for a construction loan to any bank or finance company at any time prior to May 1, 1992.

    
    

56. Planning volume is a mathematical figure based on industry registrations in a dealer assigned trade area. Starr's planning volume for its Nissan operations was 460. In late 1988, Nissan adopted a policy generally requiring exclusive facilities of dealers with a planning volume above 400. Although there are some Nissan dealers in Nissan's southeast region with planning volumes in excess of 400 who are located in dual facilities, those dealers were located in dual facilities prior to the issuance of Nissan's exclusivity policy. With respect to those dealers, Nissan has no contractual or statutory right to require them to relocate into exclusive facilities.

    
    

57. During the time material hereto, all other Nissan dealers holding term agreements in the southeast region were meeting their deadlines. As to other dealers in the southeast region whose operations were not meeting all of Nissan's guidelines, some had been terminated for failure to meet facility guidelines, some had entered into buy/sell agreements to avoid termination, and some were engaged in efforts to bring the facilities up to guidelines for that particular planning volume.

    
    

58. Although Starr inquired about the possibility of remaining in the Lincoln-Mercury facility and remodeling that facility to provide a separate showroom for Nissan, he was told on each occasion that Nissan would not approve such a dual dealership. Starr understood when he entered into the March Agreement with Nissan that he could satisfy his requirement to provide new

    dealership facilities in one of three ways identified in that Agreement: he could construct a new dealership facility and dedicate it exclusively to Nissan or he could acquire and dedicate exclusively to Nissan an existing facility which met Nissan's guidelines or he could acquire an existing facility that did not meet Nissan's guidelines and renovate it so that it did. Starr understood that remodeling the existing Lincoln-Mercury facility would only produce a dual dealership and not the required exclusive dealership.

    
    

59. Starr's failure to meet the March 30, 1992, deadline extended to May 1, 1992, by which to have an exclusive Nissan facility operational constitutes a material and substantial breach of Starr's Term Agreement since Starr's promise to construct or acquire an exclusive facility for Nissan was the basis upon which Nissan entered into the Term Agreement with Starr. Similarly, Starr's failure to meet the interim construction deadlines constituted a material and substantial breach. The fact that Nissan did not declare its Term Agreement with Starr breached and, therefore, terminated as each construction interim deadline passed is unimportant. The construction deadlines only applied if Starr intended to construct a facility. Starr's obligation under the Term Agreement could have been met up to the final deadline by Starr's acquisition of an existing facility which met Nissan's guidelines. Nissan did advise Starr periodically during the Term Agreement that Starr was in default and had committed a material and substantial breach of the contract by failing to meet the construction deadlines; however, Nissan would not have been in a position to consider the contract terminated until after the final deadline for having an operational and exclusive Nissan facility.

    
    

    CONCLUSIONS OF LAW

    
    

60. The Division of Administrative Hearings has jurisdiction over the parties hereto and the subject matter hereof. Section 120.57(1), Florida Statutes.

    
    

61. Section 320.641(3), Florida Statutes, provides as follows:

    
    

    (3) Any motor vehicle dealer whose franchise agreement is discontinued, canceled, not renewed, modified, or replaced may, within the 90-day notice period, file a petition or complaint for a determination of whether such action is an unfair or prohibited discontinuation, cancellation, nonrenewal, modification, or replacement. Agreements and certificates of appointment shall continue in effect until final determination of the issues raised in such petition or complaint by the motor vehicle dealer. A discontinuation, cancellation, or nonrenewal of a franchise agreement is unfair if it is not clearly permitted by the franchise agreement; is not undertaken in good faith; is not undertaken for good cause; or is based on an alleged breach of the franchise agreement which is not in fact a material and substantial breach.

    
    

62. The burden of proof to demonstrate the unfairness of Nissan's intended termination rests upon the dealer. Barry Cook Ford, Inc., v. Ford Motor Company, 18 F.L.W. D775 (Fla. 1st Dist. 1993); Dick Winning Chrysler-Plymouth of

    Ft. Myers, Inc., v. Chrysler Motors Corporation, 750 F.2d 895 (11th Cir. 1985); International Harvester v. Calvin, 353 So.2d 144 (Fla. 1st Dist. 1977). If the dealer makes a prima facia showing of bad faith, the burden shifts to the manufacturer to show that it would have reached the same decision even in the absence of bad faith. There has been no showing of bad faith on the part of Nissan in this case. On the other hand, the evidence reveals that Nissan acted in a consistent, honest, and forthright manner in its dealings with Starr.

    Similarly, Starr's breach of the Term Agreement by failing to provide Nissan with an exclusive facility, the very reason for Nissan and Starr entering into a term agreement rather than a perpetual agreement, constitutes good cause for termination and is not only clearly permitted by the franchise agreement, it is required by the terms of the franchise agreement.

    
    

63. Starr's breach of the franchise agreement, which is not seriously disputed in this proceeding, was material and substantial. On strikingly similar facts, the Eleventh Circuit Court of Appeals found that the dealer's failure to construct a facility pursuant to the terms of a two-year term franchise agreement warranted its termination. Dick Winning Chrysler-Plymouth of Ft. Myers, Inc. v. Chrysler Motors Corporation, supra. The very reason Nissan required Starr to execute a Term Agreement was to require Starr to provide new dealership facilities for Nissan. Exhibit A in both the March Agreement and the September Agreement specifically provided that Starr's failure to meet the deadlines for providing new dealership facilities would constitute a material breach of the Agreement. Nissan's written and oral communications with Starr stressed the importance of Starr providing exclusive facilities and emphasized that Starr's failure to comply with Exhibit A constituted a material breach of the Agreement.

    
    

64. Starr's argument that Nissan waived its right to insist on Starr's performance under the Agreement is without merit. For over two years Nissan attempted to obtain Starr's compliance with his contractual obligation. The evidence shows that Starr did not take seriously his contractual obligation and that Starr made no serious attempt to comply with any of the options given to him for fulfilling that obligation. Other than delay and failure to respond to Nissan's repeated requests for Starr to make a decision and proceed forward, the only affirmative act done by Starr was to send Nissan a drawing of where he would place a Nissan facility on the Lincoln-Mercury site.

    
    

65. Nissan did not terminate the Agreement as and when Starr missed each of the interim deadlines. At the same time, however, Nissan insisted on complete performance by final deadline. Starr submitted to Nissan in November 1991 an uninformative drawing of the facility it would provide for Nissan adjacent to the Lincoln-Mercury facility, followed by a second uninformative drawing. On December 23, 1991, Starr submitted a site plan showing the facility and its location on the property and submitted the data reflecting the square footage of the different components in January 1992. Therefore, Starr did not receive approval of its construction plans until early February, shortly before the expiration of the Term Agreement. Nissan in good faith: (A) offered to extend the interim and final deadlines; (B) offered to extend those dates further at Starr's request; and (C) extended the expiration date of the Agreement to May 1, 1992, to enable Starr to execute an amendment memorializing the parties' agreement on a second extension. Nissan's acts do not show a waiver of its right to obtain performance pursuant to its contract with Starr; rather, they demonstrate Nissan's continuing good faith in its dealings with Starr.

66. Starr's argument that Nissan could not declare Starr in default of the final deadline because Nissan had not declared Starr in default on the interim deadlines is rejected. Starr had throughout the entire time period the option of purchasing one of the vacant facilities which Starr had discussed repeatedly with Nissan's employees and which Starr had represented over an extended period of time that he might buy. If Starr had purchased one of the existing vacant facilities which Nissan had approved as being appropriate, none of the interim construction deadlines would have applied. In other words, until Starr made an election as to which option would be exercised, Nissan was not in a position to terminate the Term Agreement based upon construction deadlines. When Starr did make an election to construct a facility, it was too close to the end of the Term Agreement for that construction to have been completed. Accordingly, Nissan attempted to obtain agreement from Starr as to a new set of construction deadlines, and Starr refused to enter into such an agreement.

    
    

67. In any event, both the March Agreement and the September Agreement expressly provide against any implication of waiver by delay or by failure to claim a breach. See Section 17.B. of the Standard Provisions.

    
    

68. Starr took the position at hearing that the facilities obligation under Subsection (c) of Exhibit A to the March Agreement could be fulfilled by remodeling the existing Lincoln-Mercury facility. Even if this were a plausible interpretation, Starr neither remodeled that facility nor took any steps to undertake such remodeling and, thus, committed a material and substantial breach of the Agreement, warranting its termination.

    
    

69. Moreover, the Lincoln-Mercury facility exceeded Nissan's guidelines for a dual dealership. Remodeling the existing facility by expanding it, as Starr suggests, would only result in a larger dual dealership. Starr's desire to dual the Nissan and the Lincoln-Mercury franchises was communicated to Nissan when Starr submitted its dealership application, and Nissan clearly communicated that was not acceptable. Further, before entering into the Term Agreement, Nissan's employee, Danner, explained to Starr that Subsection (c) addressed a situation where Starr might acquire a facility that did not meet Nissan's guidelines and remodel it to meet those guidelines. By way of illustration, Danner specifically discussed with Starr the Barry Reid Buick facility, which lacked a proper showroom.

    
    

70. Starr's argument that its admitted breach of the Term Agreement is not material and substantial because Nissan allows other dealers to operate from a dual facility is irrelevant. Only the contract between Nissan and Starr is involved in this proceeding. Likewise, Nissan's informal agreement to allow Starr to dual the Nissan franchise with the Acura franchise for a maximum of six months if Starr purchased that existing facility does not constitute a waiver of Nissan's rights under the Term Agreement. That simply shows Nissan's continued good faith efforts to work with Starr in achieving an exclusive Nissan facility by a time certain.

    
    

71. Starr has failed to prove that Nissan's proposed termination is prohibited or unfair. The record in this cause reveals that the proposed termination is clearly permitted by the franchise agreement, is undertaken in good faith, is undertaken for good cause, and is based on Starr's material and substantial breach of the franchise agreement.

RECOMMENDATION

Based upon the foregoing Findings of Fact and Conclusions of Law, it is RECOMMENDED that a Final Order be entered dismissing Starr's

Petition/Complaint and approving Nissan's termination of Starr's franchise agreement.

DONE and ENTERED this 10th day of June, 1993, at Tallahassee, Florida.

LINDA M. RIGOT

Hearing Officer

Division of Administrative Hearings The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399-1550

(904) 488-9675

Filed with the Clerk of the Division of Administrative Hearings this 10th day of June, 1993.

APPENDIX TO RECOMMENDED ORDER DOAH CASE NO. 92-5187

1. Petitioner's proposed findings of fact numbered 1-11, 13, 17-21, 23, 25-32, 34-39, and 43 have been adopted either verbatim or in substance in this Recommended Order.

2. Petitioner's proposed finding of fact number 12 has been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony.

3. Petitioner's finding of fact number 14 has been rejected as being unnecessary to the issues involved herein.

4. Petitioner's findings of fact numbered 15, 16, 33, 41, 42 and 44 have been rejected as not being supported by the weight of the competent evidence in this cause.

5. Petitioner's findings of fact numbered 22, 24 and 40 have been rejected as being irrelevant to the issues under consideration in this cause.

   
   

6. Respondent's proposed findings of fact numbered 1, 4-12, 15-37, 39-51, 53-72, 74-83, 85, 87, 89, 91, 93, 94, 102-104, 109, 112, 113 and 117 have been adopted either verbatim or in substance in this Recommended Order.

7. Respondent's proposed findings of fact numbered 2, 3, 13, 14, 38, 52, 73, 84, 86, 88, 90, 92, 95, 98, 99, 101, 105, 107, 108, 110, 111, 115 and 116 have been rejected as not constituting findings of fact but rather as constituting argument of counsel, conclusions of law, or recitation of the testimony.

8. Respondent's proposed findings of fact numbered 96, 97, 100, 106 and

114 have been rejected as being unnecessary to the issues involved herein.

COPIES FURNISHED:

Kevin Russell, Esquire Lathem & Watkins

Suite 5800 Sears Tower Chicago, Illinois 60606

Dean Bunch, Esquire

Cabanis, Burke & Wagner, P.A. 851 East Park Avenue Tallahassee, Florida 32301

Daniel E. Myers, Esquire Walter E. Forehand, Esquire Myers & Forehand

402-B North Office Plaza Drive Tallahassee, Florida 32301

Michael J. Alderman, Esquire Department of Highway Safety

and Motor Vehicles

Neil Kirkman Building, Room A432 Tallahassee, Florida 32399-0500

Charles J. Brantley, Director Division of Motor Vehicles

Room B439, Neil Kirkman Building Tallahassee, Florida 32399-0500

Enoch Jon Whitney, General Counsel Division of Motor Vehicles

Neil Kirkman Building Tallahassee, Florida 32399-0500

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the right to submit written exceptions to this Recommended Order. All agencies allow each party at least 10 days in which to submit written exceptions. Some agencies allow a larger period within which to submit written exceptions. You should contact the agency that will issue the final order in this case concerning agency rules on the deadline for filing exceptions to this Recommended Order. Any exceptions to this Recommended Order should be filed with the agency that will issue the final order in this case.

Docket for Case No: 92-005187

Orders for Case No: 92-005187