W. Palm Beach Acquisitions, Inc. v. KIA Motors Am.

WEST PALM BEACH ACQUISITIONS, INC., d/b/a Greenway Kia West Palm Beach, and FLORIDA DEPARTMENT OF HIGHWAY SAFETY & MOTOR VEHICLES, Plaintiffs, v. KIA MOTORS AMERICA, INC., Defendant.

CIVIL No. 20-cv-80780-MATTHEWMAN

United States District Court, S.D. Florida

April 25, 2022

ORDER ON THE PARTIES' MOTIONS FOR SUMMARY JUDGMENT [DEs 85, 92, 100, 131]

WILLIAM MATTHEWMAN, United States Magistrate Judge.

THIS CAUSE is before the Court upon Defendant, Kia Motors America, Inc. c/k/a Kia America, Inc.'s (“Defendant” or “KMA”) Motion for Partial Summary Judgment [DE 85] and Plaintiff, West Palm Beach Acquisitions, Inc. d/b/a Greenway Kia West Palm Beach's (“Plaintiff” or “Greenway”) Motion for Summary Judgment [DEs 92 100, 131].^[1] The parties have filed Statements of Material Fact and evidence to support their motions, have responded and replied to each motion for summary judgment and have filed supplemental authority. See DEs 86 93, 94, 101, 107, 108, 109, 113, 114, 123, 124, 125, 129, 130, 132, 133, 134, 135. The Court held a hearing on the motions via Zoom video teleconference on April 18, 2022, and heard argument from counsel for the parties. The matters are now ripe for review, and the Court has carefully considered the filings and attachments thereto, the arguments of counsel, and the entire docket in this case.

I. THE PENDING COUNTS FROM THE COMPLAINT [DE 1]

Plaintiff's Complaint contains four counts against Defendant: violation of section 320.641, Florida Statutes-Unlawful Termination and Mandatory Stay (Count I); violation of section 320.64(7), Florida Statutes-Unlawful Termination in the Alternative to Count I (Count II); violation of section 320.64(7), Florida Statutes (Injunctive Relief) (Count III); and violation of section 320.64 (42)(a), Florida Statutes (Unlawful Sales Performance Metric) (Count IV). See Compl., DE 1. Plaintiff has agreed to voluntarily dismiss Count II. [DE 104 at 2]. Plaintiff has also agreed to dismiss Count IV, but solely to the extent Count IV seeks money damages. Id.

II. UNDISPUTED FACTS

The following facts are drawn from the uncontested portions of the record together with the parties' respective statements of material facts (“SMF”) [DEs 86, 93, 108, 114, 125, 130, 132, 134]^[2] and supporting affidavits and declarations [DEs 86-1, 108-1, 124, 130-1, 135, 148].

Defendant is the exclusive distributor of Kia motor vehicles in the United States. [Def.'s SMF ¶ 1]. Plaintiff is a licensed Kia dealer doing business as Greenway Kia West Palm Beach. [Def.'s SMF ¶ 2]. Plaintiff and Defendant are parties to a Kia Dealer Sales and Service Agreement dated July 18, 2012, as amended (the “Dealer Agreement”). [Def.'s SMF ¶ 3]. The Dealer Agreement authorizes Plaintiff to sell and service Kia vehicles from its location in West Palm Beach. [Pl.'s SMF ¶ 2]. Plaintiff is one of ten dealerships owned and operated by the Greenway Auto Group in KMA's Southern Region. [Pl.'s SMF ¶ 3].

Under the Dealer Agreement, Plaintiff agreed to “vigorously and aggressively sell and promote Kia productions” wherever sold, and also to “vigorously and aggressively promote, solicit, and make sales of Kia Products within its APR.” [Def.'s Resp. to Pl.'s SMF ¶ 4]. The Dealer Agreement does not specify how KMA determines whether Plaintiff is “vigorously and aggressively” selling and promoting Kia Products, nor does it set forth a minimum level of sales Plaintiff must achieve to comply with Articles II(i) an IX(B)(1). [Pl.'s SMF ¶ 5].

Dealer Sales Efficiency (“DSE”) is not referenced in the Dealer Agreement. [Pl.'s SMF ¶ 7]. Defendant assigns each dealer a geographic territory called an Area of Primary Responsibility (“APR”). [Pl.'s SMF ¶ 8]. APRs are comprised of census tracts defined by the U.S. Census Bureau. Id. Census tracts are typically assigned to the closest dealer, with certain exceptions to account for road networks, natural barriers, and consumer shopping patterns. Id. A “registration” refers to a motor vehicle that a customer registers through a state agency at an address within a referenced geographic area. [Def.'s Resp. to Pl.'s SMF ¶ 9]. DSE is a fraction expressed as a percentage where the numerator is the dealer's nationwide retail sales, and the denominator is the dealer's expected sales. [Pl.'s SMF ¶ 11]. Manufacturers that use a metric similar to DSE include General Motors, Stellantis, and Honda; there are no manufacturers that utilize a sales performance metric fundamentally different from DSE. [Pl.'s SMF ¶ 15].

Defendant normally reports DSE in 12-month blocks. [Pl.'s SMF ¶ 17]. DSE uses historical registration data. [Def.'s Resp. to Pl.'s SMF ¶ 18; Pl.'s SMF ¶ 18]. According to Defendant, any variation between sales and expected sales is attributable to dealer operations and effort rather than factors outside of the dealer's (specifically, Plaintiff's) control. [Pl.'s SMF ¶ 19].

Sharif Farhat, one of KMA's experts in this case, has analogized sales effectiveness metrics to a weathervane. [Pl.'s SMF ¶ 20; Def.'s Resp. to Pl.'s SMF ¶ 20]. Mr. Farhat believes that sales effectiveness as a metric is a “good place to start. It's a good starting point to compare groups of dealers to identify variation between those dealers. That's what I'm using it to mean.” [Pl.'s SMF ¶ 21; Def.'s Resp. to Pl.'s SMF ¶ 21]. He also believes that a “single sales effectiveness score for a snapshot in time” is “not appropriate and that's different than the change over time.” Id. Mr. Farhat thinks that sales effectiveness scores alone are not grounds for terminating a dealer, even when the dealer has scores below expected levels for years. [Pl.'s SMF ¶ 22; Def.'s Resp. to Pl.'s SMF ¶ 22]. Mr. Farhat thinks that a “deeper dive” should occur before issuing a termination notice. [Pl.'s SMF ¶ 24; Def.'s Resp. to Pl.'s SMF ¶ 24]. Mr. Farhat's expert report in this action includes a “likely cause” analysis identifying Plaintiff's gross profit and advertising as likely causes for its sales performance. [Pl.'s SMF ¶ 25; Def.'s Resp. to Pl.'s SMF ¶ 25].

Defendant's other expert in this case, M. Laurentius Marais, testified that a “performance measurement system need not be designed to be a reliable measure of some part of the empirical world.” [Pl.'s SMF ¶ 33; Def.'s Resp. to Pl.'s SMF ¶ 33]. Mr. Marais also testified that a performance metric is effective if it “advances the goal of the principal.” [Pl.'s SMF ¶ 34; Def.'s Resp. to Pl.'s SMF ¶ 34].

By letter dated June 8, 2018 (“DII Letter”), Defendant informed Plaintiff that its sales were unsatisfactory, and that Plaintiff had been put in the Dealer Improvement Initiative (“DII”). [Pl.'s SMF ¶ 36]. According to Defendant, DII is “aimed at improving the performance of dealers that are failing to comply with its [sic] Kia Dealer Sales and Service Agreement.” [Pl.'s SMF ¶ 37]. The DII Letter identified the following purported deficiencies: Plaintiff's DSE score, lease penetration, capitalization, and service retention; however, the DSE Score is not specified to be a stand-alone deficiency. [Pl.'s SMF ¶ 38; Def.'s Resp. to Pl.'s SMF ¶ 38]. While the DII Letter is dated June 8, 2018, the data Defendant cites is from March 2018. [Pl.'s SMF ¶ 40; Def.'s Resp. to Pl.'s SMF ¶ 40].

Defendant established a “Cure Period” that ran from the date Plaintiff received the DII Letter until January 2, 2019, but this Cure Period was later extended to September 30, 2019. [Pl.'s SMF ¶ 42; Def.'s Resp. to Pl.'s SMF ¶ 42]. During the Cure Period, Plaintiff's “DII sales objective [was] to achieve and maintain, or make substantial progress towards achieving and maintaining, a DSE score that [was] no worse than 10% below the Dealership's expected sales.” [Pl.'s SMF ¶ 43]. Defendant calculated a monthly sales target of 129 units. [Pl.'s SMF ¶ 44]. Neither the Dealer Agreement nor the DII Letter defines the term “substantial progress.” [Pl.'s SMF ¶ 45]. While what constitutes “substantial progress” is subjective, Defendant would consider a 20-point improvement in a DSE score to be one indication of “substantial improvement relative to the state metric, ” and, in order to determine whether a dealer “achieved and maintained” substantial progress, it would look more holistically “in the context [of] what the dealer had achieved in the past” and “other a period of time.” [Pl.'s SMF ¶ 46; Def.'s Resp. to Pl.'s ¶ 46].

Throughout the Cure Period, Defendant's personnel Nicholas Verna and Daniel Valdes visited Plaintiff and documented their visits in “Contact Reports.” [Pl.'s SMF ¶ 49]. Defendant's personnel routinely completed the Contact Reports after field visits to dealerships. [Pl.'s SMF ¶ 50]. The Contact Reports included rankings showing Plaintiff's sales in the District and Region and its DSE score. [Pl.'s SMF ¶ 51].

On or about February 12, 2020, Defendant sent Plaintiff a communication entitled “Notice of Termination, ” advising Plaintiff that the Dealer Agreement would terminate on the ninety-first day after Plaintiff's receipt of the Notice of Termination. [Def.'s SMF ¶ 4]. While the Termination Notice is dated February 12, 2020, the DSE data is from November 2019, which Defendant writes, is “the most recent period for which we have registration data.” [Pl.'s SMF ¶ 63]. In support of the conclusions in the Notice of Termination, Defendant relied upon the data and metrics cited in the Notice of Termination. [Def.'s Resp. to Pl.'s SMF ¶ 76].

On May 12, 2020, Plaintiff filed its Complaint and sought, among other things, an immediate stay of the termination, which is automatically provided for under section 320.641(3), Florida Statutes. [Def.'s SMF ¶ 5]. Defendant consented to the stay of termination. [Def.'s SMF ¶ 6]. To date the Dealer Agreement has not been terminated, and Plaintiff...