STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

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

)

Petitioner, )

)

vs. ) CASE NO. 94-3103

) RICK STARR LINCOLN-MERCURY, INC., ) d/b/a RICK STARR NISSAN, RICK STARR, ) KENNETH J. CARPI, JEFF ROSS and ) NISSAN OF ST. LUCIE, INC., )

)

Respondents. )

)

RECOMMENDED ORDER OF DISMISSAL

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, Joyous D. Parrish, held a evidentiary hearing in the above-styled case on August 9, 1994, in Tallahassee, Florida.

APPEARANCES

For Petitioner: Kevin Russell

Latham & Watkins 5800 Sears Tower

Chicago, Illinois 60606

Dean Bunch

Cabaniss, Burke & Wagner, P.A. 909 East Park Avenue Tallahassee, Florida 32301

For Respondents: Daniel E. Myers

Walter E. Forehand Myers & Forehand

402-B North Office Plaza Drive Tallahassee, Florida 32301

STATEMENT OF THE ISSUES

This order addresses Petitioner's motion for a recommended order of dismissal. The motion argues that the Department of Highway Safety and Motor Vehicles (Department) is without jurisdiction to consider the verified complaint as the proposal submitted by the Respondents does not comply with Section 320.643, Florida Statutes.

PRELIMINARY STATEMENT

This case began on June 6, 1994, when the Department referred a verified complaint to the Division of Administrative Hearings for formal proceedings. The verified complaint filed on behalf of the manufacturer, Nissan Motor

Corporation in U.S.A., sought to challenge the proposed transfer of an automobile franchise from Rick Starr Lincoln-Mercury, Inc. d/b/a Rick Starr Nissan to Nissan of St. Lucie, Inc.

Respondents, the corporations and individual shareholders of Nissan of St.

Lucie, Inc., filed a request for an expedited hearing which was followed by Petitioner's motion for a recommended order of dismissal for lack of jurisdiction on June 21, 1994. More specifically, the motion alleged: that the Department's jurisdiction under Section 320.643(1), Florida Statutes, is limited to proposed transfers that qualify for consideration thereunder; that the proposal does not qualify for consideration under the cited section because the transferor does not have the right to transfer the franchise agreement; that the proposal does not qualify for consideration under the section because it is not a transfer to "another person" within the meaning of the law; and that the proposal does not qualify for consideration because the proposed transferee cannot comply with all requirements of the dealer agreement.

The matter was scheduled for an evidentiary hearing on the motion and, on August 9, 1994, Petitioner presented the testimony of the following witnesses: Rick Starr and Kenneth Carpi. Petitioner's exhibits numbered 1 through 25 were admitted into evidence. Respondents offered the testimony of Rick Starr, Thomas Hushek, and Jeffrey Ross.

The transcript of the proceedings was filed on August 15, 1994. Specific rulings on the proposed findings of fact submitted by the parties are included in the appendix at the conclusion of this order.

This order is entered pursuant to Rule 60Q-2.016(3), Florida Administrative Code, which provides:

Whenever a ruling on a motion recommends action by the agency head which is dispositive of a matter, it shall be incorporated in a recommended order.

FINDINGS OF FACT

1. Respondent, Rick Starr Lincoln-Mercury, Inc. (RSLM), is a Florida corporation conducting business at 5400 South U.S. Highway 1, Fort Pierce, Florida.

   
   

2. Rick Starr is the sole owner of RSLM. Rick Starr is the sole officer and director for RSLM.

   
   

3. Rick Starr is the sole owner of Rick Starr Nissan which, at all times material to this issue, is located at 5400 South U.S. Highway 1, Fort Pierce, Florida.

   
   

4. Petitioner entered into a dealer agreement with RSLM doing business as Rick Starr Nissan on March 28, 1990. That agreement was later superseded by an agreement between the parties on September 24, 1990.

   
   

5. The dealer agreement described above was the subject matter of an administrative hearing conducted by Hearing Officer Rigot. The central issue of that case, DOAH case no. 92-5187, was whether the franchise agreement (used interchangeably herein with "dealer agreement") could be terminated in accordance with Section 320.641, Florida Statutes.

6. Pertinent to this case is the following finding of fact entered by Hearing Officer Rigot:

   
   

   59. Starr's failure to meet the March 30, 1992, deadline extended to May 1, 1992, by which (sic) 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.

   
   

7. Additionally, Hearing Officer Rigot reached the following conclusions of law:

   
   

   1. 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.

   2. 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.

   3. 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.

      
      

8. The final order entered by the Department on August 5, 1993, adopted the recommended order from DOAH case no. 92-5187, and terminated the franchise agreement.

   
   

9. Thereafter, RSLM timely filed a notice of administrative appeal. The final order is currently before the First District Court of Appeal with oral argument scheduled for October 12, 1994. The Department has entered an order staying its final order pending the outcome of the judicial review.

10. Subsequent to filing the appeal, on or about April 5, 1994, RSLM adopted a resolution which provided, in part:

    
    

    WHEREAS, the Board of Directors for RICK

    STARR LINCOLN MERCURY, INC., has determined it to be in the best interest of the corporation to sell the property described in Exhibit "A" attached hereto; it is

    RESOLVED that RICK STARR, the President of

    RICK STARR LINCOLN MERCURY, INC., is authorized

    and directed to execute all documents necessary and proper to carry out the purposes of this resolution.

    
    

11. The property described above as "Exhibit 'A'" was Rick Starr Nissan. The franchise is to be acquired by Nissan of St. Lucie, Inc. (NSL), a Florida corporation. Based upon a resolution of NSL, Rick Starr is empowered to execute all documents necessary and proper to carry out the purchase.

    
    

12. To that end, Rick Starr executed a notice to Petitioner advising of the proposed transfer to NSL, which, at the time, stated NSL's address to be 5400 South U.S. Highway 1, Fort Pierce, Florida.

    
    

13. Additionally, Rick Starr as secretary for NSL, executed a letter to Petitioner's regional general manager dated April 6, 1994, that represented he had read the terms of the franchise agreement and that NSL agrees to comply with all the terms of same.

    
    

14. Finally, Rick Starr, again as secretary for NSL, executed a letter to Petitioner's regional general manager dated April 6, 1994, that represented NSL would relocate the dealership to 4405 U.S. Highway 1, Fort Pierce, Florida (the proposed dealership site).

    
    

15. Rick Starr owns one-third of the shares of NSL. The other one-third owners are Kenneth Carpi and Jeff Ross. According to Mr. Starr, he and Mr. Carpi are "very, very good friends." Mr. Starr described Mr. Ross as his "best friend."

    
    

16. The three men also own JKR Properties, Inc. (JKR), a Florida corporation. JKR owns the property which is the proposed dealership site.

    
    

17. On July 1, 1994, RSLM executed a lease with JKR for the proposed dealership site effective August 1, 1994.

    
    

18. The NSL shareholder agreement provides, in part:

    
    

    Any dispute between the general manager and the shareholders will be decided by a majority vote. However, the shareholders acknowledge and agree and reserve to Rick Starr so long as Carpi, Ross and Starr remain shareholders, the right to veto the decisions of the remaining

    shareholders should Starr determine in his sole discretion that any irreparable injury to the corporation is being suffered or is threatened as a result thereof.

19. One of the reasons Mr. Starr insisted on the foregoing language in the shareholder agreement was to insure he would have the final word if another person offered to purchase the dealership.

    
    

20. Such protection is understandable since the purchase price to be paid by NSL is below the market value.

    
    

21. Mr. Starr executed the purchase and sale agreement for both the buyer and seller.

    
    

22. Mr. Starr did not acquire an interest in the proposed dealership site until almost a year after the final order was entered in DOAH case no. 92-5187.

    
    

23. Mr. Starr was aware of the availability of the proposed dealership site in as early as mid-1991 since the location was recommended to him by Petitioner's representative.

    
    

24. Mr. Starr intends to relocate Rick Starr Nissan to the proposed dealership site regardless of whether or not the transfer to NSL is approved.

    
    

25. The relocation of Rick Starr Nissan at this time does not cure the breach of the dealership agreement which resulted in the cancellation of same.

    
    

    CONCLUSIONS OF LAW

    
    

26. Section 320.60, Florida Statutes, provides, in part:

    
    

    Whenever used in ss. 320.61-320.70, unless the context otherwise requires, the following words and terms have the following meanings:

    * * *

    (12) "Person" means any natural person, partnership, firm, corporation, association, joint venture, trust, or other legal entity.

    
    

27. Section 320.641(7), Florida Statutes, provides:

    
    

    Except as provided in s. 320.643, no replacement motor vehicle dealer shall be named for this point or location to engage in business prior to the final adjudication by the department on the petition or complaint and the exhaustion of all appellate remedies by the canceled or discontinued dealer, if a stay is issued by either the department or an appellate court.

    
    

28. Section 320.643, Florida Statutes, provides, in part:

    
    

    (1) A motor vehicle dealer shall not transfer, assign, or sell a franchise agreement to another person unless the dealer first notifies the licensee of his decision to make such transfer, by written notice setting forth the prospective transferee's name, address,

    financial qualification, and business experience during the previous 5 years. The licensee

    shall, in writing, within 60 days after receipt of such notice, inform the dealer either of his approval of the transfer, assignment, or sale or of the unacceptability of the proposed transferee, setting forth the material reasons for the rejection. If the licensee does not so inform the dealer within the 60-day period, its approval of the proposed transfer is deemed granted. No such transfer, assignment, or sale will be valid unless the transferee agrees in writing to comply with all requirements of the franchise then in effect. . . .

    * * *

    (b) During the pendency of any such hearing, the franchise agreement of the motor vehicle dealer shall continue in effect in accordance with its terms. The department shall expedite any determination requested under this section. (emphasis added)

    
    

29. A dealer may not transfer its franchise agreement except in accordance with the foregoing provision. Setting aside the effect of the final order entered in DOAH case no. 92-5187 which cancelled the franchise agreement, and assuming the stay entered in this case allows the transfer, such transaction must be governed by the cited provision of law. Accordingly, the transfer must be to "another person" and that entity must agree in writing to comply with all requirements of the franchise.

    
    

30. Dealing first with the "another person" issue, it is concluded that the entity represented as the buyer in this case, NSL, is a mere device created by Mr. Starr to attempt to evade the final order and the findings it reached. Mr. Starr controls the buyer and seller in the transaction. He is attempting to do what he should have done several years ago, that is, meet the terms of the franchise agreement.

    
    

31. It is evident that Mr. Starr did not have to create NSL to relocate the dealership to the new site. He did, however, have to propose a transfer of the franchise agreement in order to attempt to breathe life back into it pending the outcome of the appeal.

    
    

32. More important, the new buyer cannot comply with the requirements of the dealership agreement since a separate, stand-alone franchise cannot be established by May, 1992. Petitioner never waived the provision, the final order found such provision material to the agreement, and the offer to now meet the provision, after-the-fact, could not comply with the contract terms.

RECOMMENDATION

Based on the foregoing, it is, hereby, RECOMMENDED:

That the Department of Highway Safety and Motor Vehicles enter a final order concluding that the Department is without jurisdiction to consider the verified complaint as the proposed transfer is not within Section 320.643, Florida Statutes.

DONE AND RECOMMENDED this 29th day of August, 1994, in Tallahassee, Leon County, Florida.

Joyous D. Parrish 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 29th day of August, 1994.

APPENDIX TO RECOMMENDED ORDER, CASE NO. 94-3103

Rulings on the proposed findings of fact submitted by the Petitioner:

1. Paragraphs 1 through 30, 36 through 39, 41 through 44, 46, 48, 49, 50,

   52 through 60, 63 through 68, and 70 are accepted.

2. Paragraph 31 is rejected to the extent it suggests that Mr. Carpi must sell his shares by the use of the word "would." It is accepted Mr. Carpi may sell his shares and that if he does so Mr. Starr and Mr. Ross will become 50 percent shareholders.

3. Paragraph 32 is rejected as to the characterization of the paragraph being other than as stated above. The exhibit speaks for itself.

4. Paragraph 33 is rejected as irrelevant.

5. Paragraph 34 is rejected as irrelevant or argument.

6. Paragraph 35 is rejected as irrelevant or argument.

7. The first sentence of paragraph 40 is accepted. The remainder of the paragraph is rejected as irrelevant.

8. Paragraph 45 is rejected as irrelevant.

9. Paragraph 47 is rejected as argument, or not supported by the weight of the evidence.

10. Paragraph 51 is rejected as irrelevant or argument.

11. Paragraph 61 is rejected as irrelevant or argument.

12. Paragraph 62 is rejected as irrelevant or argument.

13. Paragraph 69 is rejected as irrelevant or argument.

14. Paragraph 71 is rejected as irrelevant or argument.

Rulings on the proposed findings of fact submitted by the Respondent:

1. Respondents presented additional argument not in the form of an proposed recommended order; therefore, no proposed findings of fact were submitted for acceptance or rejection.

COPIES FURNISHED:

Michael J. Alderman Room A432

Neil Kirkman Building Division of Motor Vehicles

Tallahassee, Florida 32399-0635

Dean Bunch

Cabaniss, Burke & Wagner, P.A. 909 East Park Avenue Tallahassee, Florida 32301

Kevin A. Russell Ruth F. Masters Latham & Watkins

233 S. Wacker Drive Suite 5800, Sears Tower

Chicago, Illinois 60606

Walter E. Forehand Myers & Forehand

402-B North Office Plaza Drive Tallahassee, Florida 32301

Nissan of St. Lucie, Inc. 5400 South U.S. 1

Fort Pierce, Florida 34982

Kenneth J. Carpi 5810 N.W. 26th Court

Boca Raton, Florida 33496

Jeff Ross

8159 Pinnacle Peak

Las Vegas, Nevada 89113

Rick Starr

5400 South U.S. 1

Fort Pierce, Florida 34982

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.

================================================================= AGENCY FINAL ORDER

=================================================================

STATE OF FLORIDA

DEPARTMENT OF HIGHWAY SAFETY AND MOTOR VEHICLE

NISSAN MOTOR CORPORATION IN U.S.A.,

Petitioner,

vs. FINAL ORDER NO.:

HSMV-94-0740-FOF-DMV RICK STARR LINCOLN-MERCURY, DOAH CASE NO.: 94-3103 INC. d/b/a RICK STARR NISSAN,

RICK STARR, KENNETH J. CARPI, JEFF ROSS and NISSAN OF ST. LUCIE, INC.

Respondents.

/

FINAL ORDER OF DISMISSAL

This matter came before the Department for entry of a Final Order upon submission of a Recommended Order of Dismissal by Joyous D. Parrish, a Hearing Officer of the Division of Administrative Hearings. The Department hereby adopts the Recommended Order as its Final Order in this matter except to the extent of the exceptions granted in the Appendix. 1/

Accordingly, it is and ADJUDGED that this matter is dismissed.

DONE and ORDERED this 4th day of October, 1994, in Tallahassee, Leon County, Florida.

CHARLES J. BRANTLEY, Director

Division of Motor Vehicles Department of Highway Safety

and Motor Vehicles Neil Kirkman Building

Tallahassee, Florida 32399

Filed with the Clerk of the Division of Motor Vehicles this 4th day of October, 1994.

ENDNOTE

1/ Respondents filed exceptions to the Recommended Order. These exceptions are ruled on in the Appendix to this Order.

NOTICE OF APPEAL RIGHTS

Judicial review of this order may be had pursuant to section 120.68, Florida Statutes, in the District Court of Appeal for the First District, State of Florida, or in any other district court of appeal of this state in an appellate district where a party resides. In order to initiate such review, one copy of the notice of appeal must be filed with the Department and the other copy of the notice of appeal, together with the filing fee, must be filed with the court within thirty days of the filing date of this order as set out above, pursuant to Rule 9.110, Rules of Appellate Procedure.

Copies furnished:

Dean Bunch, Esquire

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

Docket for Case No: 94-003103

Orders for Case No: 94-003103