Liberty Hyundai, Inc. v. Hyundai Motor Am.

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LIBERTY HYUNDAI, INC. d/b/a FELDMAN HYUNDAI OF NEW HUDSON and GENESIS OF NEW HUDSON, Plaintiff, v. HYUNDAI MOTOR AMERICA, INC. and GENESIS MOTOR AMERICA, LLC, Defendants.

No. 23-10214

United States District Court, E.D. Michigan, Southern Division

December 21, 2023

ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS COUNTS V, VI, AND VII OF PLAINTIFF'S FIRST AMENDED COMPLAINT (ECF No. 20)

F. Kay Behm United States District Judge

This case is before the court on Defendant Genesis Motor America LLC's (“GMA”) motion to dismiss pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). (ECF No 20). Plaintiff Liberty Hyundai, Inc. (“Liberty”) filed their initial complaint against GMA and Hyundai Motor America, Inc. (“HMA”) on January 27, 2023. (ECF No. 1).^[1] On April 3, 2023, Defendant GMA filed a motion to dismiss Counts V and VI of Liberty's complaint. (ECF No. 8). In response, the court entered an order giving Liberty the opportunity to file an amended complaint pursuant to Federal Rule of Civil Procedure 15(a)(2). (ECF No. 14). Liberty filed their first amended complaint (“FAC”) on April 24, 2023. (ECF No. 18). As such the court denied GMA's motion to dismiss as moot on April 25, 2023. (ECF No. 19).

Liberty's FAC raises seven claims against GMA and HMA, including for violations of Michigan's Motor Vehicle Franchise Act, Mich. Comp. Laws § 445.1574(1)(e) and (r) (Counts I, II, III), breach of contract (Count IV, VII), promissory estoppel (Count V), and fraud in the inducement (Count VI). Id. GMA filed an updated motion to dismiss on May 8, 2023, seeking to dismiss Counts V, VI and VII of the FAC.^[2] (ECF No. 20). Liberty filed their response on May 30, 2023, and GMA filed their reply on June 13, 2023. (ECF Nos. 24, 26). The court held a hearing on this motion on October 18, 2023, and both parties participated in oral argument. (See ECF No. 28). For the reasons stated below, the court GRANTS IN PART and DENIES IN PART GMA's motion.

I. FACTUAL BACKGROUND

This case stems from the denial of Liberty's plan to relocate their Genesis dealership to a location in Novi, Michigan. Liberty currently operates new motor vehicle dealerships selling both Hyundai and Genesis-brand motor vehicles in New Hudson, Michigan. (ECF No. 18, PageID.121). HMA is the “sole authorized distributor in the United States of Hyundai branded automobiles to a nationwide network of franchised Hyundai dealers.” Id., PageID.122. Similarly, GMA is the “sole authorized distributor in the United States of Genesis branded automobiles to a nationwide network of franchised Genesis dealers.” Id., PageID.123. GMA is a subsidiary of HMA. Id. Liberty began their business relationship with HMA in approximately 2009, when they executed the Hyundai Dealer Sales and Service Agreement (the “Hyundai Agreement”), allowing them to sell and service Hyundai-branded vehicles at their dealership. (ECF No. 18-2, “Hyundai Motor America Dealer Sales and Service Agreement”). In 2018, Liberty executed a second agreement (the “Genesis Agreement”) with GMA, allowing them to also sell and service Genesis-branded vehicles. (ECF No. 18-3, “Genesis Motor America Dealer Sales and Service Agreement”).

Initially, HMA and GMA allowed individual dealers, like Liberty, to operate both Hyundai and Genesis dealerships from the same facility. (ECF No. 24, PageID.235). However, they eventually “announce[d] plans for dealers to begin operating independent, exclusive facilities for each of the Hyundai and Genesis line-makes.” Id. These programs were known as the “Accelerate” and “Keystone” programs. Id. Liberty submitted their Accelerate and Keystone program enrollment forms on March 6, 2020, and “indicat[ed] [their] desire to operate independent, exclusive facilities” for each brand. Id. Because Liberty's existing facilities in New Hudson were too small to accommodate the program requirements for both Hyundai and Genesis, they sought to open a new Genesis showroom in Novi, Michigan. (ECF No. 18, PageID.134). When Liberty told Paul Lamb, a representative for HMA and GMA, about their plan, he allegedly responded that it was an “idea worth discussing.” Id.

On October 31, 2020, Plaintiff signed a Genesis Keystone Retailer Participation Agreement (“Keystone Agreement”). Id. This agreement set out a number of program rules, including that “the dealer must ‘[o]btain approval from GMA for the relocation of the Genesis Facility.'” (ECF No. 24, PageID.236; see also ECF No. 18-6). At that time, Liberty also operated a Kia dealership in Novi, Michigan, and identified that location as a suitable alternative for relocating its Genesis dealership. (ECF No. 18, PageID.135). They also found and acquired a parcel of land in Novi where they planned to relocate their Kia dealership in order to make room for the new Genesis dealership. Id. In September 2021, Liberty sent Paul Lamb the “site plans and current building footprints for the potential Genesis relocation to the current Kia of Novi site.” Id. Liberty later met with both Paul Lamb and HMA and GMA's General Manager for National Dealer Network Development, Chad Filiault, to review the potential relocation of New Hudson Genesis to the proposed Novi location. Id. After this meeting, Liberty claims they followed up with Paul Lamb stating they “needed to know whether HMA and GMA would approve the relocation because [they] had timelines to meet to qualify for monies under Accelerate and Keystone.”^[3] Id., PageID.135-36. Lamb responded, “Novi location is great” and inquired as to “whether [Liberty] would agree to meet both Accelerate and Keystone's facility image requirements at the relocation site as well as at the New Hudson site where both dealerships currently operated.” Id., PageID.136. GMA also inquired as to whether any neighboring Genesis dealers could protest the proposed move under Michigan's Dealer Act.^[4]Id. Liberty paid for a consultant to perform a distance survey, which indicated that no dealer would have the right to protest. (ECF No. 24, PageID.237) (“counsel for Plaintiff sent GMA the required results with a legal analysis that stated the relocation of the Genesis New Hudson franchise to Novi is permissible and will not be protestable.”).

Liberty alleges the parties continued to stay in contact over the following months and, in February 2022, Paul Lamb indicated through a text message: “you[r] package should be moving forward for the Novi proposal.” (ECF No. 18, PageID.137). A few days later, he followed up and stated, “the central region sent the relocation request in for Novi early this week.” Id. As a result, Liberty “expended significant funds on preparing site surveys, engineering and architectural designs, and other required reports for the potential relocation approval.” Id. However, in March 2022, HMA and GMA “indicated, for the first time that they would not be approving [Liberty's] relocation request.” Id., PageID.138. Liberty alleges they never received a written denial of their request. Id. Rather, several weeks later, Liberty received a “Notice of Genesis Dealership Relocation and Hyundai Dealership Establishment Notice” which notified them that Genesis of Dearborn planned to relocate their dealership into Commerce Township, Michigan. (ECF No. 24-1). This Commerce Township location would be within the Novi market area, frustrating Liberty's plans to relocate their dealership. (ECF No. 24, PageID.238). Liberty argues “it is evident that Defendants were in discussions with Genesis of Dearborn, regarding relocation of its dealership to Commerce Township, at the same time they were in communications with Plaintiff about its relocation to Novi.” (ECF No. 18, PageID.139). Likewise, Liberty argues these actions were taken in bad faith and they have suffered, and will continue to suffer, material damages as a result. Id., PageID.142.

II. RELEVANT LEGAL STANDARDS

A. Federal Rule of Civil Procedure 12(b)(6)

In deciding a motion to dismiss under Fed.R.Civ.P. 12(b)(6), the court must “construe the complaint in the light most favorable to the [nonmoving party] ... [and] accept all well-pled factual allegations as true.” League of United Latin Am. Citizens v. Bredesen, 500 F.3d 523, 527 (6th Cir. 2007); see also Yuhasz v. Brush Wellman, Inc., 341 F.3d 559, 562 (6th Cir. 2003). The complaint must provide “‘a short and plain statement of the claim showing that the pleader is entitled to relief,' in order to ‘give the defendant fair notice of what the ... claim is and the grounds upon which it rests.'” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Moreover, the complaint must “contain[] sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 677 (2009). A claim has “facial plausibility” when the nonmoving party pleads facts that “allow[] the court to draw the reasonable inference that the [moving party] is liable for the misconduct alleged.” Id. at 678. The factual allegations “must do more than create speculation or suspicion of a legally cognizable cause of action; they must show entitlement to relief.” League of United Latin Am. Citizens, 500 F.3d at 527.

In evaluating the allegations in the complaint, the court must be mindful of its limited task when presented with a motion to dismiss under Rule 12(b)(6). At the motion to dismiss stage, the court does not consider whether the factual allegations are probably true; instead the court must accept the factual allegations as true, even when skeptical. See Twombly, 550 U.S. at 555 (a court must proceed “on the assumption that all the allegations in the complaint are true (even if doubtful in fact)”); Neitzke v....