                                                                                                                           Opinions of the United
2001 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


8-27-2001

GM Corp Chevrolet v. New A.C. Chevrolet
Precedential or Non-Precedential:

Docket 00-5251




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Recommended Citation
"GM Corp Chevrolet v. New A.C. Chevrolet" (2001). 2001 Decisions. Paper 195.
http://digitalcommons.law.villanova.edu/thirdcircuit_2001/195


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Volume 1 of 2

Filed August 27, 2001

UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT

No. 00-5251

GENERAL MOTORS CORPORATION
CHEVROLET MOTOR DIVISION

v.

THE NEW A.C. CHEVROLET, INC.
dba THE NEW A.C. CHEVROLET,
       Appellant

On Appeal from the United States District Court
For the District of New Jersey
(D.C. Civil No. 98-cv-00112)
District Judge: Honorable Faith S. Hochberg

Argued: November 30, 2000

Before: BECKER, Chief Judge, RENDELL and
MAGILL,* Circuit Judges.

(Filed: August 27, 2001)

       WILLIAM F. LANG, III (ARGUED)
       MARTIN G. MARGOLIS, Esq.
       THOMAS G. RUSSOMANO, Esq.
       The Margolis Law Firm, P.A.
       60 Pompton Avenue (Route #23)
       Verona, New Jersey 07044

        Counsel for Appellant
_________________________________________________________________

* Honorable Frank S. Magill, Senior Judge of the United States Court of
Appeals for the Eighth Circuit, sitting by designation.
       LAWRENCE S. BUONOMO, ESQ.
       GM Legal Staff
       General Motors Corporation
       3031 West Grand Boulevard
       Detroit, MI 48232

       DANIEL L. GOLDBERG, ESQ.
        (ARGUED)
       ALICIA L. DOWNEY
       Bingham Dana LLP
       150 Federal Street
       Boston, MA 02110

       LOIS H. GOODMAN, ESQ.
       Carpenter, Bennett & Morrissey
       100 Mulberry Street
       Three Gateway Center
       Newark, NJ 07102

        Counsel for Appellee

OPINION OF THE COURT

BECKER, Chief Judge.

This is an extremely complicated motor vehicle dealer
franchise termination case marked by disputes over what is
known in the industry as "dualing," i.e., the acquisition by
an automobile franchisee of a franchise of a different
manufacturer. This case comes before us on appeal from a
series of orders entered by the District Court for the District
of New Jersey in a declaratory judgment action arising out
of a franchise termination. The plaintiff is General Motors
Corporation, Chevrolet Motor Division (GM), the franchisor.
In 1998, GM notified the defendant, New AC Chevrolet, Inc.
(New AC), a dealer in Jersey City, New Jersey, that its
franchise agreement would be terminated. As the basis for
its termination decision, GM pointed to New AC's insistence
on adding a "dualed" Volkswagen franchise to its dealership
business despite GM's repeated objections to such an
addition.

In its suit, GM sought a declaration that the proposed
termination was in compliance with the parties' dealer

                                  2
agreement, which forbade the addition of other vehicle lines
without GM's prior written authorization; the federal
Automobile Dealers Day in Court Act (ADDCA), 15 U.S.C.
SS 1221-25; and New Jersey's Franchise Practices Act
(NJFPA), N.J. Stat. Ann. SS 56:10-1 to 56:10-15. In its
response, New AC asserted that the planned termination
was actually part of GM's predetermined design to remove
New AC as a Chevrolet franchisee, and to have another
dealer serve as its exclusive Chevrolet distributor in Jersey
City. Consequently, New AC filed a counterclaim, alleging
essentially that GM's decision to terminate New AC's
franchise, as well certain other of its actions toward New
AC, ran afoul of the expressed and implied terms of the
franchise agreement, the ADDCA, and the NJFPA.

Although New AC's appeal takes issue with the entire
series of orders entered by the District Court during the
two-year course of this litigation, New AC's most significant
challenges are made in connection with two orders--the
January 13, 1999 order dismissing inter alia Counts One
and Four of New AC's counterclaim on Fed. R. Civ. Pro.
12(b)(6) grounds, and the March 8, 2000 order granting
summary judgment in GM's favor on the ADDCA, NJFPA,
and state contract law claims, see General Motors Corp. v.
New A.C. Chevrolet, Inc., 91 F. Supp. 2d 733 (D.N.J. 2000).
We first take up New AC's challenge to the March 8, 2000
summary judgment order, for the issues raised in
connection with this challenge bear directly on the core of
the dispute between GM and New AC, and require us to
examine the nature of the relationship between an
automobile franchisor and franchisee. In pertinent part, the
March 8, 2000 order determined: (1) that there was no
genuine issue that New AC committed a material breach of
the franchise agreement by insisting on the operation of a
Volkswagen vehicle line on its dealership premises; and (2)
that GM possessed the "good cause" necessary for a lawful
franchise termination under S 56:10-5 of the NJFPA. See id.
at 738-39, 740-41.

With respect to New AC's challenges to the March 8,
2000 order, we first reject New AC's contention, stressed at
oral argument, that its addition of a Volkswagen line did
not constitute a breach of its franchise agreement with GM

                               3
because Volkswagen sales and service were offered at a
separate dealership location and facility. We do not think
the facts of this case support such a contention. We further
conclude that there is no genuine issue as to the
materiality of this breach. A breach is material if it will
deprive the injured party of the benefit that is justifiably
expected under the contract, and, in this case, GM's
justifiable expectation is best evidenced by the mutually
agreed upon provisions of the dealer agreement that
proscribe New AC from offering a "dualed" vehicle line
without GM's prior written authorization.

The most significant challenge that New AC raises in
connection with its appeal of the March 8, 2000 summary
judgment order, a contention also heavily emphasized at
oral argument, concerns S 56:10-5 of the NJFPA. As noted
above, this statutory provision supplements all private
franchise agreements in New Jersey by directing that
termination occur only if the franchisor possesses"good
cause." N.J. Stat. Ann. S 56:10-5. It defines "good cause" as
"failure by the franchisee to substantially comply with those
requirements imposed upon him by the franchise." Id.
Although S 56:10-5, by its terms, appears to define "good
cause" only by reference to the actions of the franchisee,
New AC argues that the franchisor must also act in good
faith in order to possess the "good cause" necessary for
termination under S 56:10-5. Because the District Court, in
its March 8, 2000 opinion, took the (contrary) position that
a franchisor's good faith was irrelevant to the"good cause"
inquiry, see General Motors Corp., 91 F. Supp. 2d at 740
n.10, New AC submits that the Court's decision should be
reversed.

We assume arguendo, as New AC would like us to do,
that under New Jersey franchise law, a franchisor's
motivation in effecting a franchisee's termination is relevant
to the "good cause" inquiry. Put another way, we assume
that a franchisor will not possess the "good cause" required
for termination by S 56:10-5 unless it also makes that
decision in good faith. Nonetheless, we conclude that New
AC has failed to furnish the record evidence necessary to
create a genuine issue that GM acted in bad faith (or with
an improper motive) in terminating New AC's Chevrolet
franchise.

                               4
New AC's argument for GM's bad faith centers primarily
on what we will call the "Project 2000" or"Plan 2000"
theory; the central aspect of this theory is the contention
that GM's decision to terminate New AC, ostensibly for its
"dualing" of a Volkswagen line, was part of its
predetermined decision to strip New AC of its Chevrolet
franchise, and to have another dealer serve as GM's
exclusive Chevrolet franchisee in Jersey City. Examining
the record evidence put forth by New AC in support of the
"Project 2000" theory, we do not think it suffices to create
a genuine issue as to GM's bad-faith motivation. Because
we conclude that New AC's "dualing" of a Volkswagen
franchise constituted a material breach of its dealer
agreement (and represented substantial noncompliance
with its franchise obligations), and because we find that
New AC failed to create a genuine issue as to GM's bad
faith, we will affirm the District Court's March 8, 2000
order in all respects.

We then turn to New AC's challenges to the January 13,
1999 dismissal order, which primarily require us to
construe the allegations that New AC set forth in its
counterclaim. Here, New AC's first objection is to the
District Court's dismissal of Count One of its counterclaim,
which alleges that GM violated the provisions of the
ADDCA. The ADDCA is a federal remedial statute, enacted
to redress the bargaining disparity between large
automobile manufacturers and local dealerships. The
ADDCA generally requires a manufacturer to act in"good
faith" in its relations with its dealers, see 15 U.S.C. S 1222,
and defines "good faith" narrowly as precluding "coercion,
intimidation, or threats of coercion or intimidation," id. at
S 1221(e).

In reviewing the District Court's Fed. R. Civ. Pro. 12(b)(6)
dismissal of New AC's ADDCA counterclaim, we begin by
clarifying the type of automobile manufacturer conduct that
constitutes coercion or intimidation. We have previously
stated that the type of coercion or intimidation rendered
actionable by the ADDCA occurs only when the
manufacturer makes a "wrongful demand which will result
in sanction if not complied with." Buono Sales, Inc. v.
Chrysler Motors Corp., 449 F.2d 715, 724 (3d Cir. 1971)

                               5
(internal quotations and citations omitted). We now explain
that while a manufacturer does not make a wrongful
demand if it merely insists that the dealer comply with a
reasonable obligation imposed by the franchise agreement,
a dealer can state a claim for relief under the ADDCA by
alleging that the manufacturer's reliance on those
objectively reasonable provisions is, in fact, motivated by a
pretextual, bad-faith reason.

Applying this standard to the facts as alleged in New AC's
counterclaim, we conclude that New AC adequately stated
a claim for relief under the ADDCA based on GM's approval
of the relocation of a competing Chevrolet franchisee, and
its decision to terminate New AC due to the latter's
"dualing" of a Volkswagen line. However, we do not think
that our conclusion necessitates setting aside the District
Court's dismissal of Count One of New AC's counterclaim,
as New AC was not prejudiced by the District Court's
erroneous dismissal of these claims. New AC had a full and
fair opportunity to discover and present evidence
supporting these claims to the District Court, either
because GM's declaratory judgment action presented a
mirror image of the claim which remained alive in the
litigation and was ultimately adjudicated by the District
Court, or because the claim was inextricably linked to New
AC's "Project 2000" theory of bad faith, with respect to
which New AC's record evidence failed to create a genuine
issue of material fact.

New AC also contests the District Court's dismissal of
Count Four of its counterclaim, which alleges inter alia that
GM's actions violated the implied duty of good faith and fair
dealing by predetermining the outcome of its management
review process, and by approving the relocation of a
competing Chevrolet franchisee. Examining the pertinent
allegations made in New AC's counterclaim, we first
conclude that New AC failed to make the factual allegations
necessary to support a claim that such an implied duty was
breached when GM predetermined the outcome of its
management review process. We then turn to the more
significant question of whether such a duty of good faith
even arises under Michigan law--the state law that the
parties agree is applicable to the resolution of this issue--in

                               6
connection with GM's decision to authorize the relocation of
a competing Chevrolet franchisee.

Under Michigan state contract law, "[w]here a party to a
contract makes the manner of its performance a matter of
its own discretion, the law does not hesitate to imply the
proviso that such discretion be exercised honestly and in
good faith." Burkhardt v. City Nat'l Bank of Detroit, 226
N.W.2d 678, 680 (Mich. Ct. App. 1975). We conclude that
the pertinent franchise agreement provision, which commits
such a relocation decision to the sole discretion of GM,
gives rise to an implied duty of good faith. Nonetheless, we
believe that the District Court's decision to the contrary
does not mandate reversal of the District Court's 12(b)(6)
dismissal, as New AC had a full and fair opportunity to
obtain and present evidence establishing GM's bad faith
but failed to do so adequately.

Aside from these principal issues, New AC brings a series
of less significant challenges to the other orders entered by
the District Court during the life span of this litigation. We
resolve these issues summarily, with brief commentary,
infra at note 25, and hold that none warrant reversal of any
of the District Court's orders. We thus affirm the decision
of the District Court in all respects.

I.

A. Factual Background

New AC is a New Jersey corporation operating as an
automobile dealer in Jersey City. GM is a Delaware
corporation engaged in the manufacture and distribution of
automobiles and automobile parts and accessories.
Chevrolet is a division of GM. New AC commenced business
as a Chevrolet franchisee in 1983. New AC's dealership was
then, and continues to be today, located at 3085 Kennedy
Boulevard in Jersey City. The present litigation is not the
first between GM and New AC; the two companies earlier
sparred over the relocation of a competing Chevrolet
franchise, the DiFeo Chevrolet dealership (DiFeo). Because
the events surrounding DiFeo's relocation are relevant to
certain issues on this appeal, we set forth the key facts.

                               7
In 1992, New AC and Bell Chevrolet were the only two
Chevrolet franchises located in Jersey City, and both had
dealerships situated along Kennedy Boulevard. In
November of 1992, DiFeo acquired Bell Chevrolet (one
month later, DiFeo itself was acquired by United Auto
Group, although it continued to operate under the DiFeo
name), and moved the dealership to Clendenny Avenue. In
1995, DiFeo sought to relocate its Chevrolet franchise yet
again, this time to a location on Route 440 in Jersey City,
and sought GM's permission for the move. Because Route
440 was apparently a more commercially attractive site, GM
approved the relocation, and informed New AC that the
DiFeo franchise would be moving to a location on Route
440. Concerned that DiFeo's relocation would damage its
dealership business, New AC challenged the move both at
the administrative level and before the Superior Court of
New Jersey.1 New AC did not prevail, either in the
administrative proceedings or in the Superior Court, see
New A.C. Chevrolet, Inc. v. Chevrolet Div. of Gen. Motors
Corp., 688 A.2d 116 (N.J. Super. Ct. App. Div. 1997), and
DiFeo's 1995 relocation to the Route 440 site was allowed
to proceed.

We turn now to the facts of the present litigation. At all
relevant times, the franchise relationship between GM and
New AC was governed by a series of standardized Chevrolet
"Dealer Sales and Service Agreements," which fix the rights
and obligations of franchisor GM and franchisee New AC,
and are renewable every five years. At the time of GM's
termination decision, the operative "Dealer Sales and
Service Agreement" was one that had become effective on
November 1, 1995 (Dealer Agreement). The specific
_________________________________________________________________

1. New AC's challenge was brought pursuant to the New Jersey Motor
Vehicle Franchise Act (NJMVFA), N.J. Stat. Ann.SS 56:10-16 to 56:10-
25, which provides a protest procedure by which an existing automobile
dealer can contest (and eventually enjoin) its franchisor's decision to
relocate a new dealer into the same market area, by demonstrating that
such a move would be "injurious" to the existing dealer and to the public
interest. See id. SS 56:10-18, 56:10-19. Such a protest is heard, in the
first instance, by the Motor Vehicle Franchise Committee, but the
Committee's final determination can be appealed to the Superior Court
of New Jersey.

                               8
provisions of the Dealer Agreement will be canvassed in
more extensive fashion below, as they become pertinent to
the analysis of this appeal. For present purposes, however,
the most important provision is Article 4.4.2 of the Dealer
Agreement, which requires the franchisee to obtain prior
written permission from GM before altering the location or
the use of its dealership premises, and identifies the
addition of a different vehicle line as an alteration covered
by this approval requirement: "No change in location or in
the use of Premises, including addition of any other vehicle
lines, will be made without Division's [i.e., GM's] prior
written authorization."

The events directly leading up to the present litigation
commenced when New AC decided to supplement its then-
existing dealership business by adding a Volkswagen line of
vehicles. In late December 1995, New AC submitted
applications for a franchise to Volkwagen of America, Inc.
(Volkswagen). Volkswagen approved New AC's request, and
on February 23, 1996, New AC signed a letter of intent with
Volkswagen agreeing to serve as an authorized Volkswagen
dealer in Jersey City.

About five weeks after executing the letter of intent, New
AC first informed GM, by letter, of its plans to operate a
Volkswagen franchise as part of its dealership business. In
response, GM requested that New AC supply further
information concerning the planned Volkswagen franchise,
and submit a proposed Location and Premises Addendum
which would identify the space at New AC's Kennedy
Boulevard dealership that would be allocated to GM uses
and the space that would allocated to Volkswagen uses.
Furthermore, GM specifically reminded New AC that Article
4.4.2 of the Dealer Agreement governs New AC's ability to
add new vehicle lines to its dealership business.

New AC replied about two weeks later, maintaining that
it planned to keep the physical space and personnel
devoted to Volkswagen sales and servicing separate and
distinct from the space and personnel responsible for GM
sales and service. In addition, New AC provided the
proposed Location and Premises Addendum. The proposed
Addendum represented that the total space at the Kennedy
Boulevard dealership then-assigned to GM use would be

                               9
decreased by 1,000 square feet, which would be re-
allocated to Volkswagen use. After reviewing the materials
furnished by New AC, GM denied New AC's request for the
addition of a Volkswagen line of vehicles. By way of
explanation, GM noted that its dealer strategy "generally
disfavors dualing of GM lines with the vehicle lines of
another manufacturer;" it also identified New AC's
deficiencies as a dealer in four areas: capitalization, sales
performance, customer satisfaction, and training, and
stated GM's concern that the addition of a Volkswagen line
would exacerbate these deficiencies.

New AC reacted to this denial by asking for non-binding
management review of the decision, in accordance with
GM's internal grievance procedure, as detailed in the GM
handbook entitled "Dispute Resolution Process for
Chevrolet, Pontiac, Oldsmobile or GMC Truck Dealers." GM
conducted the requested management review, but informed
New AC that its denial of the Volkswagen line addition
would stand. New AC then asked GM to reconsider and
represented that it had improved the deficiencies in its
capitalization, sales performance, customer satisfaction,
and training that GM had earlier observed. Again, GM stood
by its denial, stressing its general policy against"dualing of
GM lines with those of another manufacturer." Again, GM
pointed New AC to its obligations under Article 4.4.2 of the
Dealer Agreement, stating: "[P]lease be reminded that any
change to, or in the use of, a dealer's facility requires the
prior written approval of the division."

Despite GM's denials, New AC proceeded with its plans to
add a Volkswagen line of vehicles at the Kennedy Boulevard
dealership. GM officials learned that New AC had begun
operating a Volkswagen franchise around January 1997.
On January 15, 1997, Daniel Durkin, GM's Zone Manager
for the area including Jersey City, wrote to New AC
informing the franchisee that it was in material breach of
the Dealer Agreement due to its "addition of the
Volkswagen franchise without obtaining General Motors
written approval," as required under Article 4.4.2 of the
Dealer Agreement. Durkin warned New AC that "if this
serious situation is not satisfactorily resolved or corrected
within 30 days from your receipt of this letter, then

                               10
Chevrolet Motor Division may elect to terminate the Dealer
Agreement and cease all business relationships with your
dealer company." Durkin sent a second letter of warning to
New AC about one month later, on February 11, 1997,
stressing that "[t]he only rectification acceptable to
Chevrolet is for The New A.C. Chevrolet to remove
Volkswagen from the Chevrolet premises, which can be
accomplished by providing completely separate sales and
service facilities for Volkswagen."

GM's interactions with New AC during this period were
not, however, limited to the sending of warning letters.
Around June of 1997, in an apparent attempt to arrive at
a mutually satisfactory compromise avoiding the
termination of New AC's Chevrolet dealership, Durkin
suggested that New AC consider offering Oldsmobiles,
manufactured by another GM division, as a second line of
vehicles at the Kennedy Boulevard location. According to
Durkin, the DiFeo dealership, the other Chevrolet
franchisee operating in Jersey City, was in the process of
relinquishing both its Chevrolet and Oldsmobile franchises.
Durkin recommended that New AC explore the possibility of
acquiring the soon-to-be relinquished Oldsmobile franchise,
and indicated that GM would support the addition of
Oldsmobile to New AC's dealership under the appropriate
circumstances. Durkin mentioned that GM hoped for a
dealership presence around Route 440, a more centralized
commercial location in Jersey City, and that, to that end,
GM was pursuing a lease option on property in the Route
440 vicinity. Durkin suggested that GM would be willing to
offer financial support to New AC to develop the Route 440
property as a satellite location for a "dualed"
Chevrolet/Oldsmobile dealership, or to convert New AC's
existing Kennedy Boulevard facility into one better suited
for the sale and service of "dualed" Chevrolet and
Oldsmobile lines.

Although GM offered this compromise, it remained
steadfast in its insistence that New AC abandon its
Volkswagen franchise. At the same time that Durkin
suggested that GM would support the addition of an
Oldsmobile line, he made clear to New AC that the
continuation of the Volkswagen franchise was not a

                                11
workable option: "Under any circumstances, whether or not
you choose to pursue the opportunities outlined above, the
continued unauthorized presence of Volkswagen at your
current location remains an unacceptable violation of your
Dealer Sales and Service Agreement." In addition,
throughout the summer and fall of 1997, GM repeatedly
sent letters to New AC reiterating that New AC's continued
operation of the Volkswagen franchise was in violation of
the Dealer Agreement.

Throughout the summer and fall of 1997, New AC and
GM explored the viability of the proposed Oldsmobile
compromise. GM investigated the possibility of leasing
various sites along the Route 440 corridor, and repeatedly
extended the deadline for New AC to accept or reject the
Oldsmobile compromise. Ultimately, this proposed plan fell
through when GM informed New AC that it was unable to
complete leasing arrangements for the Route 440 sites it
had contemplated, and when New AC responded by
insisting that it would not discontinue its Volkswagen
franchise. New AC contended that it had adequately
addressed GM's concerns about the "dualing" of Chevrolet
and Volkswagen lines at the Kennedy Boulevard dealership
by constructing a separate showroom and using a separate
staff for the Volkswagen vehicles, and by working toward
creating a separate Volkswagen parts and service facility.

Finally, in January of 1998, about eighteen months after
New AC first informed GM of its intention to obtain and
operate a Volkswagen franchise at the Kennedy Boulevard
dealership, GM terminated New AC's Chevrolet franchise. In
a letter dated January 5, 1998, Daniel Durkin observed
that New AC, by maintaining a Volkswagen line, "has been
in continual violation" of provisions of the Dealer
Agreement. Specifically, Durkin asserted that New AC was
in violation of Article 4.4.2 of the agreement, which, as
noted above, provides that "[n]o change in location or in the
use of Premises, including addition of any other vehicle
lines, will be made without [GM's] prior written
authorization." Durkin also relied on Article 13.1.5 of the
Dealer Agreement, which identifies the following franchisee
conduct as a material breach of the agreement: "Any sale,
transfer, relinquishment, or discontinuance of use by [New

                                12
AC] of any of the Dealership Premises or other principal
assets required in the conduct of the Dealership
Operations, without [GM's] prior written approval." Durkin
informed New AC that, because of these material breaches,
GM was electing "to terminate the Dealer Sales and Service
Agreement and cease all business relationships with The
New A.C. Chevrolet Company effective sixty days from. . .
receipt of this letter."

B. Procedural History

1. The Pleadings

The present litigation commenced when, on January 5,
1998--the same day on which Durkin informed New AC of
its termination as a Chevrolet franchisee--GM filed a
complaint in the District Court seeking a declaration that
its termination of the New AC franchise was lawful. Count
I of GM's complaint requested a declaration that the
termination did not constitute a breach of any provision of
the Dealer Agreement. Count II requested a declaration that
the termination did not violate the federal Automobile
Dealers Day in Court Act (ADDCA), 15 U.S.C. SS 1221-25.
Count III asked for a declaration that the termination was
not in violation of New Jersey's Franchise Practices Act
(NJFPA), N.J. Stat. Ann. SS 56:10-1 to 56:10-15.2
_________________________________________________________________

2. In its August 26, 1998 order, the District Court granted GM leave to
amend this original complaint, to include claims based on New AC's
post-termination conduct, particularly New AC's continued display of
Chevrolet and GM signage after the revocation of its Chevrolet franchise.
In its amended complaint, GM asserted that New AC's use of such
signage violated the Lanham Act, 15 U.S.C. S 1051 et seq. (Counts VI
and VII); the common law of trademark infringement and unfair
competition (Count VIII); and Article 17.5 of the Dealer Agreement
(Count IX). Counts I, II, and III of the Amended Complaint rescribed the
three counts contained in GM's original complaint, requesting a
declaration that New AC's termination did not breach the Dealer
Agreement and did not contravene the ADDCA or the NJFPA. GM's
amended complaint also contained five counts based on two other post-
termination actions allegedly taken by New AC. Because GM eventually
consented to the dismissal of all five of these counts, in connection with
the District Court's March 8, 2000 order granting GM summary
judgment, these claims are not at issue on this appeal.

                                13
On April 2, 1998, New AC responded by filing a nine-
count counterclaim, basically alleging that GM's course of
conduct in dealing with New AC violated the express and
implied terms of the Dealer Agreement, as well as the
ADDCA, and the NJFPA. (The specific allegations made in
particular counts will be set forth below, as they become
relevant to our analysis.) In terms of relief, New AC
requested $25 million in compensatory damages plus
additional punitive damages on each of the first eight
counts, and an injunction preventing GM from terminating
New AC's Chevrolet franchise and ordering GM to allow
New AC to operate a Volkswagen franchise.

2. The Principal Orders

Although New AC's appeal challenges a series of orders
entered by the District Court during the two-year course of
this litigation, New AC's most significant contentions arise
in connection with only two, the January 13, 1999 order
partially granting GM's motion to dismiss seven of the nine
counts of New AC's counterclaim, and the March 8, 2000
order granting GM summary judgment, see General Motors
Corp. v. New A.C. Chevrolet, Inc., 91 F. Supp. 2d 733
(D.N.J. 2000). We summarize these two orders here; we will
discuss the details of the remaining challenged orders
below (particularly infra in note 25), as they become
pertinent to our analysis.

GM filed a motion to dismiss seven of the nine counts in
New AC's counterclaim, which the District Court granted in
an order and accompanying opinion entered on January
13, 1999. On this appeal, New AC only challenges the
District Court's dismissal of Counts One and Four. In
Count One, New AC alleged that GM violated the ADDCA by
engaging in a course of wrongful conduct that rose to the
level of coercion and intimidation. The District Court
disagreed, concluding that the coercion and intimidation
alleged by New AC did not constitute the type of coercion
and intimidation required for an ADDCA violation.

In Count Four, New AC alleged that GM breached the
express and implied terms of the Dealer Agreement by
allowing the DiFeo Chevrolet franchise to relocate, and by

                                14
"refusing to comply with its self-imposed mediation
process." The District Court decided that the contentions
contained in Count Four failed to state a claim, on the
grounds that the counterclaim failed to allege any facts
indicating that New AC was denied an opportunity to
participate in private mediation, or that GM acted in bad
faith in permitting the DiFeo relocation.

Following the Court's January 13, 1999 order dismissing
seven of the nine counts contained in the counterclaim,
only Counts Two and Three, both asserting that GM
violated the NJFPA, remained alive. Count Two alleged that
GM had violated S 56:10-5 of the NJFPA, prohibiting the
termination of motor vehicle dealers without "good cause."
Count Three alleged that GM had violated S 56:10-7(e) of
the NJFPA, barring the imposition of unreasonable
standards of performance on automobile dealers, by
imposing unreasonable restrictions on New AC. New AC
and GM proceeded to discovery on Counts Two and Three
of New AC's counterclaim, as well as on all of the claims set
forth in GM's amended complaint.

After the conclusion of discovery, GM moved for summary
judgment, see Fed. R. Civ. Pro. 56, on the portions of its
amended complaint alleging that New AC's franchise
termination was lawful (Counts I, II, and III) and that New
AC's post-termination use of GM signage was unlawful
(Counts VI, VII, VIII, and IX). GM also sought summary
judgment against New AC on Counts Two and Three of the
counterclaim just described. New AC cross-moved for
summary judgment with respect to GM's entire amended
complaint.

In its March 8, 2000 order and accompanying opinion,
the District Court resolved the summary judgment motions
in GM's favor. See General Motors Corp., 91 F. Supp. 2d at
734. With respect to Count I of the amended complaint,
which seeks a declaration that New AC's termination was in
accord with the provisions of the Dealer Agreement, the
Court concluded that the plain language of the agreement
clearly gave GM the authority to end New AC's franchise
based on New AC's addition of a Volkswagen line over GM's
express objection. See id. at 738-39. With respect to Count
II of the amended complaint, which seeks a declaration that

                               15
the termination was proper under the ADDCA, the Court
observed that New AC had failed to furnish any factual
support for the claim that GM's conduct amounted to
coercion or intimidation. See id. at 739-40. Finally, with
respect to Count III of the amended complaint and Counts
Two and Three of New AC's counterclaim, which focus on
the NJFPA, the Court found that New AC's unauthorized
addition of a Volkswagen line constituted "good cause" for
termination as that term is defined in the NJFPA, and
further concluded that New AC had failed to present any
evidence that the performance standards imposed by GM
on New AC were unreasonable. See id. at 740-41.

The District Court's March 8, 2000 order also granted
summary judgment for GM on Counts VI, VII, VIII, and IX,
the sections of GM's amended complaint contending that
New AC's continued post-termination display of GM signage
violated federal and state trademark and unfair competition
law, and breached the terms of the Dealer Agreement. See
id. at 741-43. Although adjudicating New AC liable for
trademark infringement, the March 8, 2000 order did not
set the amount of GM's damages. Rather, the District Court
directed the parties to submit additional briefs regarding
the proper measure of damages, the amount of time New
AC was to be granted for removal of the GM signage, and
whether New AC was entitled to compensation for the
signage under the NJFPA. See id. at 743.

New AC timely appealed the March 8, 2000 order (and a
subsequent April 5, 2000 order awarding GM relief) to this
Court. The District Court had federal question jurisdiction
over the ADDCA and Lanham Act claims under 28 U.S.C.
S 1331, and diversity jurisdiction over the state common
law and statutory claims under 28 U.S.C. S 1332. For the
reasons set forth in the margin, notwithstanding GM's
objections, we have appellate jurisdiction under 28 U.S.C.
S 1291 over all of the orders challenged by New AC.3
_________________________________________________________________

3. In its notice of appeal, New AC relates that it is appealing from the
District Court's March 8, 2000 order granting GM summary judgment
and its April 5, 2000 order awarding GM relief. In the March 8, 2000
order, the District Court adjudicated all of the open liability issues in
the
litigation, determining that GM was not to be held liable for its

                                16
II. The March 8, 2000 Order

We first take up New AC's challenges to the District
Court's March 8, 2000 order, which finally adjudicated
_________________________________________________________________

termination of New AC's Chevrolet franchise, and that New AC was
responsible for its post-termination use of GM's trademarks. The April 5,
2000 order further specified the relief that GM was to receive: the
District Court entered a permanent injunction against New AC,
prohibiting its continued use of GM's marks; granted GM attorneys fees
in the amount of $15,940.32; and awarded GM damages in the amount
of "10% of defendant's [i.e., New AC's] profits, trebled; profits to be
measured from May 20, 1998, through the date of this Order [i.e., April
5, 2000]." The April 5, 2000 order, however, did not reduce the amount
of these damages to a sum certain.

Prior to the filing of the appellate briefs, GM moved to dismiss the
appeal, contending that the District Court's order was not final for
purposes of 28 U.S.C. S 1291, and this motion has been pending before
us. Were our finality determination to be based solely on the face of the
March 8, 2000 and April 5, 2000 orders, we would be constrained to
conclude that the orders were not final under S 1291. Section 1291 of
Title 28 authorizes appellate jurisdiction over inter alia "all final
decisions of the district courts of the United States." 28 U.S.C. S 1291.
A final order is one that "ends the litigation on the merits and leaves
nothing for the court to do but execute the judgment." Catlin v. United
States, 324 U.S. 229, 233 (1945).

In general terms, a decision that fixes the parties' liability but leaves
damages unspecified is not final, and the adjudication of liability is not
immediately appealable. See United States v. Schaefer Brewing Co., 356
U.S. 227, 233-34 (1958); Sun Shipbuilding & Dry Dock Co. v. Benefits
Review Bd., 535 F.2d 758, 760 (3d Cir. 1986) (per curiam). Although the
District Court's April 5, 2000 order set forth a reasonably precise
formula for the determination of damages (i.e., 10% of net profits during
a specified period of time), so that one could characterize the
unperformed damage calculation as a merely mechanical or ministerial
act that would not preclude our exercise of appellate jurisdiction, see
Parks v. Pavkovic, 753 F.2d 1397, 1402 (7th Cir. 1985) (determining that
S 1291 finality exists when "computing the money owed . . . is unlikely
to engender dispute or controversy, and will require no analytic or
judgmental determinations that might . . . give rise to other appealable
questions"), our precedent squarely forecloses us from doing so. See
Marshak v. Treadwell, 240 F.3d 184, 191 (3d Cir. 2001) (holding that an
order awarding the defendants damages for trademark infringement in
the amount of "the profits [plaintiff] earned in each year, beginning with

                               17
GM's liability for the termination of New AC's Chevrolet
franchise, granting summary judgment in GM's favor. See
_________________________________________________________________

the first act of infringement in 1970 and ending with the first day of
trial
testimony in this case" was not final because the damage calculation
"cannot reasonably be characterized as merely ministerial. . . . [T]he
parties here have a long history of contentious litigation, and there is a
substantial likelihood that `one or both parties will dispute the ultimate
amount of damages awarded . . . .' "); Apex Fountain Sales, Inc. v.
Kleinfeld, 27 F.3d 931, 934, 936 (3d Cir. 1994) (holding that a civil
contempt order directing that an accounting be performed to determine
the net profit the plaintiff would have realized absent the defendant's
contemptuous conduct was not final, because "no judgment containing
a final dollar amount ha[d] been entered" and because the factual
determination of net profit "will not be easily reached").

In the instant matter, however, the analysis of our appellate
jurisdiction is not limited by the face of the March 8, 2000 and April 5,
2000 orders, as subsequent, post-appeal proceedings bear directly on
our S 1291 finality calculus. See Aluminum Co. of America v. Beazer East,
Inc., 124 F.3d 551, 557 (3d Cir. 1997) ("Even if the appeals court would
have lacked jurisdiction at the time an appeal was filed, the court has
jurisdiction if, as a result of subsequent events, there are no longer any
claims left to be resolved by the district court."). Following the
District
Court's April 5, 2000 order, the only claims left to be resolved were the
application of the damage formula and the reduction of damages to a
sum certain. During the pendency of this appeal before this Court, the
District Court actively managed the matter in order to arrive at a precise
damage figure. On November 8, 2000, the Magistrate Judge submitted a
report and recommendation fixing the damages New AC owed to GM not
only under the April 5, 2000 order, but also under a subsequent May 11,
2000 order holding New AC in civil contempt for failing to comply with
the April 5, 2000 directive to cease use of GM's trademarks. The final
figure, covering all of the damages and attorneys fees awarded to GM,
was set at $324,644.52. The parties filed no objections to the report and
recommendation, and the District Court approved the Magistrate Judge's
report on December 12, 2000. In that December 12, 2000 order, the
District Court also entered a final judgment against New AC for the
$324,644.52 damage amount, and neither New AC nor GM noticed an
appeal. It is clear that this order adjudicated all of the unresolved
issues
then-pending before the court, and we thus conclude that these post-
appeal adjudications suffice to render New AC's appeal from the March
8, 2000 and April 5, 2000 orders final for S 1291 purposes. GM's motion
to dismiss the appeal is therefore denied.

There is one final issue presented regarding the scope of our appellate
jurisdiction. New AC's appeal presents challenges not only to the March
18
General Motors Corp. v. New A.C. Chevrolet, Inc., 91 F.
Supp. 2d 733, 734 (D.N.J. 2000). Our review of a grant or
denial of summary judgment is plenary. See Mathews v.
Lancaster Gen. Hosp., 87 F.3d 624, 632 (3d Cir. 1996). We
may uphold the grant of summary judgment only if, like the
District Court, we determine that there are no genuine
issues of material fact and the movant is entitled to
summary judgment as a matter of law. See Tice v. Centre
Area Transp. Auth., 247 F.3d 506, 511 n.2 (3d Cir. 2001).
In making this determination, we view the facts in the light
most favorable to the non-moving party. See id.

Although New AC's briefing falls far short of analytical
clarity, it appears that New AC raises three basic,
alternative grounds for reversal of the District Court's
March 8, 2000 disposition. First, New AC appears to
contend that there is a genuine issue as to whether a
breach of the Dealer Agreement occurred at all (and hence
whether GM had "good cause" for termination), since, in
New AC's submission, the terms of the franchise agreement
did not prohibit its specific "dualing" of a separate
Volkswagen line. Second, New AC offers the alternative
_________________________________________________________________

8, 2000 and April 5, 2000 orders identified in New AC's notice of appeal,
but also to a series of non-final orders entered earlier in the
litigation.
Specifically, New AC contests (1) a May 15, 1998 order denying New AC
a preliminary injunction; (2) an August 26, 1998 order denying New AC's
motion to dismiss; (3) a January 13, 1999 order partially granting GM's
motion to dismiss; (4) orders entered on March 8, 1999 and April 28,
1999 by the Magistrate Judge that limited the scope of New AC's
discovery; and (5) an order entered on August 4, 1999 denying New AC's
motion for disqualification of the District Judge originally assigned to
the
case and vacatur of all orders entered by that Judge. Generally, we
construe notices of appeal liberally and, therefore, we review earlier
non-
final orders not specified in the notice of appeal where (1) there is a
connection between the specified and unspecified order; (2) the intention
to appeal the unspecified order is apparent; and (3) the opposing party
is not prejudiced and has a full opportunity to brief the issues. See
Pacitti v. Macy's, 193 F.3d 766, 777 (3d Cir. 1999). Because we find that
all of these elements are clearly satisfied in this case, we conclude that
the scope of our appellate jurisdiction encompasses all of the prior non-
final orders, unspecified in the notice of appeal, to which New AC
currently raises challenges.

                               19
argument that, even if its addition of a Volkswagen
franchise did represent a breach of the terms of the Dealer
Agreement, the "dualing" was not sufficiently egregious to
justify New AC's franchise termination, i.e., the breach was
not material. Finally, New AC contends, in essence, that
even if the District Court was correct in determining that
New AC did not substantially comply with the Dealer
Agreement by insisting on the addition of a Volkswagen
line, reversal of the summary judgment grant on the NJFPA
claims is warranted because the Court erred in concluding
that GM's motivation for terminating the franchise--i.e.,
GM's good faith or lack thereof--was irrelevant to the
question whether GM had "good cause" for New AC's
termination as a Chevrolet dealer.

A. Breach

New AC's first major contention with respect to the
District Court's summary judgment grant in the March 8,
2000 order is with the conclusion that a breach of the
Dealer Agreement occurred at all. In New AC's submission,
the terms of the Dealer Agreement never prohibited the
addition of a Volkswagen franchise at a separate dealership
site, and thus, GM's permission was never required for the
Volkswagen addition. In New AC's view, GM was powerless
to object to the addition because New AC did not employ
any of the space it had previously dedicated to GM use to
later sell and service Volkswagen automobiles. This is what
the District Court, in its prior May 15, 1998 opinion,
referred to as the "different premises" /"different
businesses" theory. In essence, New AC contends that there
is a genuine issue as to whether it breached the terms of
the franchise agreement at all, and that the District Court
erred in deciding otherwise. We disagree.

The "different premises" / "different business" line of
argument rests heavily on an interpretation of New AC's
obligations under the Dealer Agreement with respect to its
dealership facilities. The key word on which New AC
focuses is the term "premises," which appears in both
Articles 4.4.2 and 13.1.5 of the Dealer Agreement, the
provisions that GM claims New AC materially breached by
insisting on the addition of a Volkswagen line of vehicles.

                               20
Specifically, Article 4.4.2 states in relevant part that "[n]o
change in location or in the use of Premises, including
addition of any other vehicle lines, will be made without
[GM's] prior written authorization." (emphasis added).
Article 13.1.5 includes in the list of dealer actions that
constitute material breaches of the Agreement, "[a]ny sale,
transfer, relinquishment, or discontinuance of use by
Dealer of any of the Dealership Premises or other principal
assets required in the conduct of the Dealership
Operations, without [GM's] prior written approval."
(emphasis added).

New AC asserts that the term "premises" should be read
narrowly to cover only the physical facilities accompanying
the 3085 Kennedy Boulevard address. According to New
AC, the Volkswagen showroom is located at a site adjacent
to and physically distinct from the facilities at 3085
Kennedy Boulevard, a site assigned the address of 3081
Kennedy Boulevard. Moreover, New AC submits that, at
least as of 1998, it was close to setting up a separate parts
and service area for the Volkswagen vehicles, and informed
GM that it would use different staffs to sell and service its
Chevrolet and Volkswagen automobiles. Thus, New AC's
argument goes, the Volkswagen site is separate and distinct
from the New AC dealership's "premises," and the site's use
by New AC for Volkswagen purposes does not represent a
change in the location or use of New AC's "premises" within
the meaning of Article 4.4.2, or a transfer or
discontinuance of "premises" use within the meaning of
Article 13.1.5.

In granting summary judgment to GM on Count I of its
amended complaint, the District Court dismissed New AC's
"different premises" / "different business" theory in a
footnote:

        This Court rejects New A.C.'s effort to redefine the
       term "Premises" to avoid the clear meaning of this
       contractual provision. The "Premises" is clearly the
       dealership property being operated as an exclusive
       Chevrolet franchise as defined in the Location and
       Premises Addendum to General Motors Corporation
       Dealer Sales and Service Agreement . . . . GM's
       decision to denominate minimum requirements

                               21
       governing the display of Chevrolet vehicles, et cetera,
       does not alter the fact that the "Premises" included all
       dealership property located at 3085 Kennedy
       Boulevard, Jersey City, New Jersey.

General Motors Corp., 91 F. Supp. 2d at 739 n.9. On
appeal, New AC takes issue with the District Court's
conclusion, claiming that the District Court's interpretation
of the term "premises" as used in the Dealer Agreement is
incorrect.

According to New AC, a correct interpretation of the term
must start with Article 4.4.1, which states: "Dealer agrees
to conduct Dealership Operations only from the approved
location(s) within its Area of Primary Responsibility. The
Location and Premises Addendum identifies Dealer's
approved location(s) and facilities ("Premises")." New AC
asserts that the terms "location" and "facilities" are
conceptually separate; i.e. that "location" refers to the street
address of the dealership (3085 Kennedy Boulevard) while
the term "facilities" refers to the square footage
designations made in the Location and Premises
Addendum. (Under the terms of the franchise relationship,
New AC is obligated to submit such an Addendum, which
lists the various dealer locations, and contains a"premises
space analysis" showing the manner in which the dealer's
different departments allocate stalls and square footage
between GM and non-GM uses.) Furthermore, New AC
asserts, the term "premises" covers only the dealer's
"facilities" and not its "location." Thus, New AC's argument
goes, the District Court erred by concluding that the term
"premises" covered all dealership property at 3085 Kennedy
Boulevard, rather than just the stall and square footage
designations listed in the Location and Premises
Addendum.

Like the District Court, we are dubious of New AC's
Addendum-only construction of the term "premises."
However, we need not decide whether this construction is
the appropriate one. We believe that New AC's argument
loses on its own terms because, even accepting arguendo
New AC's assertion that "premises" covers only the stall and
square footage designations listed in the Location and
Premises Addendum, the Addenda in the record before us

                               22
indisputably demonstrate that at least a portion of the
"facilities" (and hence "premises") originally allocated to GM
use at 3085 Kennedy Boulevard would be (and presumably
were) converted to Volkswagen use with the addition of the
Volkswagen line.

In the 1990 Location and Premises Addendum for 3085
Kennedy Boulevard, furnished to GM prior to New AC's
request for the Volkswagen addition, all of the space was
allocated to GM use. Conversely, the proposed 1996
Addendum, which New AC supplied at GM's request once
New AC asked for permission to add a Volkswagen line to
its dealership, clearly indicates that some of the space
originally dedicated to GM use would be shifted to the
Volkswagen line. For instance, 100 square feet of general
office space and 900 square feet of part storage space
would be converted to Volkswagen use, as would four
mechanical service bays.4 Accordingly, even were we
inclined to follow New AC's suggestion to construe
"premises" narrowly to include only the space allocations
contained in the Location and Premises Addenda, those
Addenda demonstrate that at least some portion of the
"premises" at 3085 Kennedy Boulevard were transferred
from GM to Volkswagen use. Thus, the space-designation-
only argument offers New AC no assistance, and we
conclude that New AC breached Articles 4.4.2 and 13.1.5 of
the Dealer Agreement.
_________________________________________________________________

4. At various times, New AC indicated to GM that it would eventually
move the Volkswagen service and parts storage facilities to a separate,
physically distinct space. The record does not indicate whether this was
eventually accomplished. The record does show that, at least as of May
14, 1998, over four months after GM informed New AC that its Chevrolet
franchise was terminated and six days before the termination was
formally implemented, New AC was continuing to devote four service
bays and part of the small parts department at the 3085 Kennedy
Boulevard location to Volkswagen use. At all events, the dispositive
question here is whether New AC was in material breach of the Dealer
Agreement as of the time GM decided to terminate the Dealer Agreement,
thereby furnishing GM with a justifiable ground for termination, rather
than whether such a breach continued to exist at some point thereafter.

                               23
B. Materiality

As an alternative challenge to the District Court's March
8, 2000 grant of summary judgment, New AC submits that
its addition of a Volkswagen franchise over GM's express
and repeated objections, even if considered a breach of the
Dealer Agreement, was not egregious enough to warrant
severance of the franchise relationship. New AC's argument
here is that any breach that it committed was not a
material one, and thus did not justify termination of the
franchise contract.5 We disagree, concluding that, on the
record before us, there is no genuine issue that New AC's
Volkswagen addition constituted a material breach.

Materiality goes to the essence of the contract; a breach
is material if it "will deprive the injured party of the benefit
that is justifiably expected" under the contract. 2 E. Allan
Farnsworth, Farnsworth on Contracts S 8.16, at 497 (2d ed.
1998). We think there can be no dispute that New AC's
insistence on adding a Volkswagen franchise to its
dealership, contrary to GM's repeated objections to this
decision, rose to the level of material breach. GM's
justifiable expectations regarding New AC's performance
under the franchise agreement are best evidenced by the
provisions of the Dealer Agreement. In Article 13.1, the
parties to the Dealer Agreement explicitly defined certain
acts or events as constituting material breaches of the
contract. Article 13.1.5 specifically includes as a material
breach, "[a]ny sale, transfer, relinquishment, or
discontinuance of use by Dealer of any of the Dealership
Premises or other principal assets required in the conduct
of the Dealership Operations, without [GM's] prior written
approval."

To similar effect is Article 4.4.2, which directly governs
situations in which a dealer seeks to add another vehicle
franchise: "No change in location or in the use of Premises,
_________________________________________________________________

5. It is hornbook law that when one party to a contract commits a
material breach, the non-breacher has the option of either continuing
the contract and suing for partial breach, or terminating the agreement
in its entirety. See 2 E. Allan Farnsworth, Farnsworth on Contracts
S 8.16, at 495 (2d ed. 1998). In the case of a non-material breach, the
termination option is not open to the non-breacher. See id. at 495-96.

                               24
including addition of any other vehicle lines, will be made
without [GM]'s prior written authorization."6 In light of our
discussion supra in Part II.A regarding New AC's "different
premises" / "different business" theory, it is clear that New
AC's operation of a Volkswagen franchise and its blatant
disregard of GM's objection to that addition violated Articles
13.1.5 and 4.4.2 of the Dealer Agreement, and
consequently represented a material breach of the franchise
agreement.

To be sure, absent Articles 13.1.5 and 4.4.2, New AC
would have the generally unfettered right to put its
dealership property to the uses it sees fit, including the
operation of an independent and competing vehicle line.
See 1 Gladys Glickman, Franchising, S 10.07[7], at 10-72
(2001) ("If the franchisee is the owner or lessee of the
premises from which the franchised business is conducted
he or she has the right to use the premises for any purpose
permitted by the zoning laws and the landlord unless the
franchisor, by contract, further restricts the businesses
which may be operated on the premises."). In New AC's
case, however, the parties mutually agreed to constrain the
exercise of that right by conferring on GM the power to
disapprove of a proposal to "dual" another vehicle line, a
power which GM clearly and consistently employed to deny
New AC's request to add a Volkswagen line to its
dealership.

Mindful of the disparity in bargaining leverage that can
arise between a franchisor and franchisee, we do not
suggest that Articles 4.4.2 or 13.1.5, or GM's reliance on
those contractual provisions to disapprove of New AC's
decision to "dual" a Volkswagen franchise, are unassailable.
We think, for instance, that New AC could raise viable
_________________________________________________________________

6. Although Article 4.4.2 is not included within Article 13.1's enumerated
list of material breaches, Article 13.1.13 makes clear that the list is
non-
exhaustive, stating (perhaps tautologically) that"[a]ny other material
breach of Dealer's obligations under this Agreement not otherwise
identified in this Article 13 or in Article 14" can constitute a material
breach. Given the substantial similarity of the obligations imposed by
Articles 4.4.2 and 13.1.5 on a franchisee seeking to alter the use of its
dealership facilities, we believe that a violation of Article 4.4.2 will
typically amount to a material breach of the Dealer Agreement.

                               25
challenges to those provisions on the ground that such
anti-"dualing" provisions in general impose unreasonable
obligations on franchisees like New AC, or that GM's
reliance on such provisions in New AC's particular case
constitutes an unreasonable application of the anti-
"dualing" prohibition. In regard to the former contention,
New AC has never challenged Articles 4.4.2 or 13.1.5--
either in the District Court, see General Motors Corp., 91 F.
Supp. 2d at 739 n.8, or on this appeal--on the ground that
such anti-"dualing" proscriptions constitute, as a general
matter, unreasonable restrictions on a franchisee's rights.7

We assume, therefore, that Articles 4.4.2 and 13.1.5
impose reasonable obligations on franchisees, and conclude
that a franchisee's breach of a reasonable franchise
obligation--committed over the express and persistent
objections of the franchisor--is a material one. Cf. Amerada
Hess Corp. v. Quinn, 362 A.2d 1258, 1268-69 (N.J. Super.
Ct. Law Div. 1976) ("Plainly, noncompliance by a franchisee
with his reasonable franchise obligations, resulting in an
actual or potential adverse effect upon the sales of the
franchisor's products, would constitute substantial
noncompliance thereof for purposes of termination,
impairing as it does the franchisor's fundamental reason for
initially entering into the relationship."); accord Brattleboro
Auto Sales, Inc. v. Subaru of New England, Inc., 633 F.2d
649, 652 (2d Cir. 1980) (upholding a manufacturer's
termination of a Subaru dealer under the Vermont
franchise practices statute, on the ground that the
manufacturer "reasonably could have concluded that [the
dealer's] sales and service of Subaru cars would suffer as a
result of [the dealer's] simultaneous promotion of several
lines of directly competing cars").

New AC, however, does appear to contest the
reasonableness of GM's reliance on the anti-"dualing"
provisions of the Dealer Agreement in this particular case,
attempting to minimize the seriousness of its breach by
_________________________________________________________________

7. Instead, New AC focused on arguing that its addition of a Volkswagen
line never violated the anti-"dualing" provisions of Articles 13.1.5 or
4.2.2, because Volkswagen-related activities would occur at a separate
vehicle site. We rejected this argument supra in Part II.A.

                               26
summarily asserting that, because GM permits numerous
other dealers to operate additional vehicle lines, New AC's
addition of a Volkswagen line over GM's objections could
not affect the core of the franchise relationship between GM
and New AC, and thus does not rise to the level of a
material breach. If the evidence proffered by New AC
demonstrated that GM routinely permitted dealers similarly
situated to New AC--e.g., in similar geographical areas,
with similar competitors and consumer bases--to operate
competing vehicle franchises, then such evidence would
tend to show that GM arbitrarily withheld its approval of
New AC's proposed Volkswagen addition, and could
significantly undermine the idea that GM justifiably and
reasonably expected its franchisees to offer only single, GM
vehicle lines. However, New AC makes no such showing.

While we may judicially notice the existence of multi-line
vehicle dealers, New AC points to no record evidence
identifying any of the other GM dealers operating multi-line
dealerships, or indicating which vehicle lines are offered at
those dealerships. More importantly, New AC offers no
evidence tending to show that these multi-line dealers are
similarly situated to New AC. In sum, based on the record
evidence before us, there is no genuine issue as to the fact
that New AC's decision to add a Volkswagen franchise
despite GM's objection constituted a material breach of the
Dealer Agreement.8
_________________________________________________________________

8. New AC raises this same basic argument in the context of challenging
the District Court's grant of summary judgment on the NJFPA claims,
i.e., Count III of GM's amended complaint and Count Two of New AC's
counterclaim, framing the contention in slightly different doctrinal
terms.
New AC argues that GM did not have the "good cause" necessary to
lawfully terminate New AC's Chevrolet franchise in accordance with
S 56:10-5 of the NJFPA because New AC never failed to "substantially
comply" with its obligations under the franchise agreement. We find New
AC's argument here similarly unpersuasive.

First, we believe that our determination as to whether New AC's breach
was material under the terms of the franchise agreement resolves the
question whether New AC "substantially compl[ied]" with the agreement
for purposes of S 56:10-5's "good cause" requirement. N.J. Stat. Ann.
S 56:10-5. Put simply, we see no real or practical difference between a
conclusion that a party materially breached a contract, and a conclusion

                               27
C. "Good Cause"

New AC's best argument for reversal of the District
Court's grant of summary judgment for GM concerns the
NJFPA claims. Before the District Court and again on
appeal, New AC argues that, although the NJFPA defines
"good cause" solely as "failure by the franchisee to
substantially comply with those requirements imposed
upon him by the franchise," N.J. Stat. Ann. S 56:10-5, a
_________________________________________________________________

that the party failed to substantially comply with its obligations under a
contract. To decide otherwise would be simply to engage in linguistic
games. Cf. Farnsworth, S 8.16, at 496 ("The doctrine of material breach
is simply the converse of the doctrine of substantial performance.
Substantial performance is performance without a material breach, and
a material breach results in performance that is not substantial."); cf.
also Amerada Hess, 362 A.2d at 1266-67 (observing that the well-
established "concept of substantial performance .. . generally utilized in
the realm of building contracts but applied, where appropriate, to other
contractual agreements as well" "has been carried into the franchise
milieu by the `good cause' requirement for termination"--specifically, by
S 56:10-5's substantial non-compliance standard).

At all events, we find New AC's contention unavailing, even leaving
aside our analysis of the materiality of New AC's breach. In asserting
that New AC's conduct in connection with the Volkswagen franchise did
not rise to the level of substantial noncompliance necessary for "good
cause" under the NJFPA, New AC cites for comparison two decisions in
which a franchisee's breach was held to constitute substantial
noncompliance for purposes of S 56:10-5. See Jiffy Lube Int'l, Inc. v.
Weiss Bros., Inc., 834 F. Supp. 683 (D.N.J. 1993); Amerada Hess Corp.
v. Quinn, 362 A.2d 1258 (N.J. Super. Ct. Law Div. 1976). We believe,
however, that New AC's conduct in this case is at least as egregious and
serious as the franchisees' actions in Amerada Hess and Jiffy Lube. Like
the franchisee in Jiffy Lube, New AC deliberately disregarded its
obligations to its franchisor GM, insisting on maintaining a competing
manufacturer's vehicle line even in the face of GM's numerous and
repeated objections. Moreover, like the franchise arrangement in Jiffy
Lube, the Dealer Agreement between GM and New AC made the pertinent
obligations explicit, and authorized GM to terminate the relationship if
those requirements were violated, thereby indicating the integral nature
of those obligations to the franchise relationship. In sum, we conclude
that there is no genuine issue either that New AC's conduct materially
breached the Dealer Agreement, or that such breach constituted
substantial noncompliance within the meaning ofS 56:10-5.

                               28
franchisor cannot possess the requisite "good cause" unless
it also acts in good faith (and without an improper,
pretextual motive). New AC then challenges the District
Court's explicit conclusion that, once the Court determined
that New AC's addition of a Volkswagen line constituted
"good cause" for terminating the Chevrolet franchise under
NJFPA S 56:10-5, GM's motive behind that termination was
entirely irrelevant. See General Motors Corp. , 91 F. Supp.
2d at 740 n.10.9

The District Court rejected this contention, concluding
that a franchisor's motivation was irrelevant to the NJFPA
"good cause" inquiry, in the course of granting summary
judgment in GM's favor on Count III of GM's amended
complaint, and on Count Two of New AC's counterclaim,
both of which raised the question whether GM's
termination of New AC's Chevrolet franchise constituted a
violation of S 56:10-5.10 The District Court supported its
conclusion by citing to Karl's Sales & Service, Inc. v. Gimbel
Bros., Inc., 592 A.2d 647 (N.J. Super. Ct. App. Div. 1991),
and Major Oldsmobile, Inc. v. General Motors Corp., No. 95-
7595, 1996 U.S. App. LEXIS 11443 (2d Cir. May 17,1996),
both of which stated that a party's motivation in
terminating an agreement is irrelevant when the terms of
the agreement confer upon that party the legal right to
terminate its obligations. See Karl's Sales, 592 A.2d at 651
_________________________________________________________________

9. With respect to this ground for reversal, New AC is not disputing the
District Court's conclusion that New AC "fail[ed] . . . to substantially
comply with those requirements imposed upon him by the franchise,"
N.J. Stat. Ann. S 56:10-5, when it chose to"dual" a Volkswagen line at
its dealership over GM's consistent objections. See General Motors Corp.,
91 F. Supp. 2d at 739. In fact, we have already rejected the argument
that New AC's "dualing" of Volkswagen did not constitute substantial
noncompliance within the meaning of S 56:10-5's "good cause" definition.
See supra note 8. Rather, New AC is arguing here that, even conceding
that its "dualing" amounts to substantial noncompliance, New Jersey law
would impose an additional, implicit requirement of good faith before
"good cause" under the NJFPA could be said to exist.

10. These two claims are mirror images: In Count Two of its
counterclaim, New AC alleges that GM violated S 56:10-5 by terminating
its Chevrolet franchise without good cause. In Count III of its amended
complaint, GM seeks a declaration that the termination was effected with
good cause, and thus satisfied the requirements ofS 56:10-5.

                               29
("The law is clear that where the right to terminate a
contract is absolute under the wording in an agreement,
the motive of a party in terminating such an agreement is
irrelevant to the question of whether the termination is
effective."); Major Oldsmobile, 1996 U.S. App. LEXIS 11443,
at *7-8 ("As long as a party has the legal right to terminate
its obligation under the contract, it is legally irrelevant
whether the party was also motivated by reasons which
would not themselves constitute valid grounds for
termination of the contract.") (internal quotation marks,
brackets, and citations omitted).

New AC contends that the District Court's reasoning is
erroneous in that it fails to take account of the obligations
imposed by S 56:10-5 of the NJFPA on a franchisor
contemplating a franchise termination, and the manner in
which that provision modifies, in the franchise context, the
common law rule regarding severance of a private
contractual relationship pursuant to a termination at will
provision. New AC is surely correct in asserting that
S 56:10-5 modifies the termination provisions of all
franchise agreements governed by the laws of New Jersey:
Even if the terms of a private franchise agreement permit
termination at will, S 56:10-5's good cause requirement will
supersede that arrangement and impose a good cause
requirement on the franchisor's decision. This is because
the NJFPA was enacted in large part to counteract the
unequal bargaining power between franchisor and
franchisee, which would allow a franchisor to leverage its
bargaining strength so as to insert provisions in its private
agreements with franchisees that would allow it to sever the
franchise relationship at will. See, e.g., Westfield Ctr. Serv.,
Inc. v. Cities Serv. Oil Co., 432 A.2d 48, 53 (N.J. 1981)
(noting that "[f]ranchisors have drafted contracts permitting
them to terminate or to refuse renewal of franchises at will"
and observing that "[t]he New Jersey Legislature was
sensitive to the overall problem" when it enacted the NJFPA
in 1971).

Karl's Sales and Major Oldsmobile certainly state the
proper rule as regards private contractual relationships.
They apparently were not, however, called upon to consider
the NJFPA's statutory modification of that relationship;

                                30
Karl's Sales and Major Oldsmobile neither cite to nor
discuss the NJFPA in general or S 56:10-5 in particular,
presumably because NJFPA claims were never raised in
either case. Insofar as the District Court concluded, solely
on the authority of Karl's Sales and Major Oldsmobile, that
a franchisor's motivation is irrelevant to a claim that a
franchisor's termination violated S 56:10-5, its decision was
reached in error.

In its appellate briefing and at oral argument, New AC
goes further and contends that, under New Jersey law, an
examination of whether a franchisor's termination of a
franchise was supported by "good cause," within the
meaning of S 56:10-5, would necessarily include an inquiry
into whether the franchisor acted in good faith (and without
some impermissible, pretextual motive). Although this
argument is an interesting one, and, as we explain briefly
in the margin, New Jersey law offers no clear answer on
this point, resolution of this issue is not necessary to our
disposition.11 This is because, even were we to assume
_________________________________________________________________

11. The plain language of S 56:10-5 strongly suggests that good faith (or
the absence of some pretextual motive) on the part of the franchisor is
not a requisite element of the "good cause" necessary to terminate a
franchisee in accordance with the NJFPA. Importantly, S 56:10-5 does
not leave the term "good cause" open, but rather adopts a specialized
definition of the phrase: "For the purposes of this act, good cause for
terminating, canceling, or failing to renew a franchise shall be limited
to
failure by the franchisee to substantially comply with those requirements
imposed upon him by the franchise." N.J. Stat. Ann. S 56:10-5. This
statutory definition of "good cause" focuses solely on the objective
actions of the franchisee--i.e., whether the franchisee substantially
complied with franchise requirements--and not on the subjective
motivations of the franchisor--i.e., whether the franchisor's decision was
undertaken in bad faith.

Other pertinent provisions within the NJFPA, particularly S 56:10-9,
support the idea that a franchisor's motivation is irrelevant to the "good
cause" inquiry. Section 56:10-9 allows a franchisee's substantial
noncompliance to serve as a complete defense in"any action" instituted
under the NJFPA by a franchisee. See N.J. Stat. Ann. S 56:10-9.
Although we could find no New Jersey cases on point, a fair reading of
that provision suggests that if a terminated franchisee were to bring an
action against its franchisor claiming a violation of S 56:10-5 because
the

                               31
arguendo that a franchisor's motivation bears on the
S 56:10-5 "good cause" inquiry, New AC has failed to
furnish record evidence sufficient to create a genuine issue
_________________________________________________________________

franchisor lacked the requisite "good cause" for the decision, the
franchisor could avoid liability simply by demonstrating that the
franchisee failed to substantially comply with its franchise obligations.
We also note that when other jurisdictions have desired to include a
good faith component in the termination provisions of analogous
franchise protection statutes, they have explicitly done so in the
language of the statute. See, e.g., Conn. Gen. Stat. S 42-133v(a) (barring
the termination of a franchise unless the franchisor"has good cause for
. . . termination . . . and has acted in good faith"); Ky. Rev. Stat. Ann.
S 190.045(1) (Michie) (similar); N.D. Cent. Code S 51-07-01.1 (defining
"good cause" as "failure . . . to comply with those requirements imposed
by the written contract" but providing that the franchisor's determination
of whether "good cause" exists "must be made in good faith").

Notwithstanding the foregoing, New Jersey courts, in construing
separate provisions in franchise-related statutes, have imposed good
faith requirements in particular circumstances, despite the statute's
omission of an explicit good faith requirement. For instance, in
Monmouth Chrysler-Plymouth, Inc. v. Chrysler Corp. , 509 A.2d 161 (N.J.
1986), the New Jersey Supreme Court construed a provision of the New
Jersey Motor Vehicle Franchise Act, N.J. Stat. Ann.SS 56:10-16 to
56:10-25, a statutory scheme animated by the same franchise-oriented
concerns as the NJFPA. As noted supra note 1, the NJMVFA allows an
existing automobile dealer to challenge (and eventually enjoin) its
franchisor's decision to relocate a new dealer into the same market area,
by demonstrating that such a move would be "injurious" to the existing
dealer and to the public interest. See N.J. Stat. Ann. SS 56:10-18, 56:10-
19. Section 56:10-23 enumerates several factors that bear on the
question whether a relocation is "injurious," but the provision omits
mention of the franchisor's motivation or good faith as one of the
relevant factors. Nonetheless, despite this statutory silence, Monmouth
Chrysler-Plymouth explicitly held that "an additional criterion to be
considered in determining injury under the Motor Vehicle Franchise Act
is the motivation of the franchisor in designating the new dealer." 509
A.2d at 170 (emphasis added). But even were we to predict, based on
Monmouth Chrylser-Plymouth, that New Jersey would imply a good faith
element into the NJFPA's "good cause" requirement, such a prediction
would not affect our disposition. As we explain in the text above, New AC
has failed to present evidence sufficient to create a genuine issue as to
GM's bad faith, and thus the District Court's summary judgment grant
will be affirmed.

                               32
as to whether GM acted in good faith (or without a
pretextual motive) in terminating New AC's Chevrolet
franchise.

New AC's contention that GM acted in bad faith or on
pretext in ending its franchise relationship with New AC
centers primarily on what we will call the "Project 2000"or
"Plan 2000" theory. "Project 2000" is a general business
plan developed by GM sometime around 1995, and
continuously implemented thereafter. In developing"Project
2000," GM officials examined various individual automobile
marketing areas, and sought to create the optimal plan for
the sale of GM vehicle lines in those areas. GM officials
generally believed that the optimal business strategy would
be to have a single dealer, selling and servicing only a
single GM line, in each marketing area.

According to New AC's allegations, set forth in its
counterclaim and repeated in its appellate briefing and at
oral argument, under the "Project 2000" business plan,
GM's principal goal for the Hudson County marketing area,
in which the New AC dealership was located, was to
establish a single dealer as the exclusive Chevrolet
franchisee. Furthermore, New AC argues, GM considered
the Route 440 area to be the most viable commercial strip
in Jersey City, and wanted its designated Jersey City
Chevrolet franchise to be located along Route 440. New AC
contends that, under the "Project 2000" strategy, GM
preferred that the DiFeo dealership, which moved to a
Route 440 site in 1995, serve as this exclusive franchisee,
and therefore favored closing New AC's Chevrolet
dealership. Thus, according to New AC, when GM decided
to terminate New AC's franchise, it used New AC's addition
of a Volkswagen line as a pretext for finally implementing
its single-dealer, single-line "Project 2000" strategy.

At this stage, however, we are reviewing the District
Court's grant of summary judgment, and New AC cannot
simply rest on its mere allegations concerning a"Project
2000" plan to eliminate its dealership. Rather, New AC
must point to "pleadings, depositions, answers to
interrogatories, and admissions on file, together with the
affidavits, if any," Fed. R. Civ. Pro. 56(c), that create a
genuine issue of material fact that GM adopted a strategy

                               33
designed to eliminate New AC's Chevrolet franchise in
Jersey City and that GM employed New AC's addition of a
Volkswagen franchise as a pretextual reason for effecting
that strategy. Based on the record evidence before us, we
believe that New AC has failed to create any such genuine
issue.

Before examining the specific evidence on which New AC
relies, we note that, other than the general contention that
the addition of a Volkswagen line was a pretextual reason
employed by GM to mask the true motive for its termination
of New AC's Chevrolet franchise, the details of New AC's
"Project 2000" argument are less than pellucid. We must
cobble together the specifics of New AC's argument from
incomplete pieces. Therefore, it is important, at the outset,
to clarify New AC's contentions so as to get to the heart of
New AC's argument concerning GM's bad faith and
pretextual motivation.

New AC does not appear to contend, as a general matter,
that GM's stated preference for a single-line dealer
distribution network is either unreasonable or lacking a
legitimate business justification. That is, New AC does not
contend that, as a general rule, it is improper for
automobile manufacturers to preclude their dealers from
"dualing" another vehicle line. See supra Part II.B. Rather,
New AC appears to be arguing that, under the particular
facts of its case, GM's objection to New AC's "dualing" of a
Volkswagen line was not a good-faith application of a
single-line preference, but rather a bad-faith, pretextual
reason, masking another, true motivation behind GM's
action. According to New AC's opening appellate brief, this
true motivation is GM's predetermined decision, made as
early as the mid-1990s as part of "Project 2000," to sever
its franchise relationship with New AC.

In order to survive summary judgment on this NJFPA
claim, New AC must point to evidence creating a genuine
issue of material fact that, prior to New AC's 1996 decision
to add a Volkswagen franchise, GM decided to end its
Chevrolet franchise arrangement with New AC, and that
GM used New AC's operation of a Volkswagen franchise to
obscure the fact that this decision constituted the true
motivation behind New AC's termination. As factual support

                               34
for this theory, New AC focuses primarily on three GM
corporate documents. The first is an October 5, 1995
memorandum titled "Dealer Network Planning" and
addressed to all GM dealers, which announced GM's future
business strategy, an expansion of the "2000 Plan"
originally commenced in 1990 (a precursor to "Project
2000"), designed to increase GM's and its dealers'
profitability "by assuring that each brand is properly
presented to the public, and by renewed emphasis on
having the right number of dealers, at the right locations
and of the right size." In addition to this general goal, the
"Dealer Network Planning" memorandum also expressed a
preference for single dealers in a market area selling only
single lines of GM vehicles:

       The New General Motors Network Strategy is simple:

        Wherever the local market sales potential for the
       refocused brand provides an opportunity for a
       profitable dealership selling and servicing that brand
       alone, General Motors should have a single line,
       exclusive dealer conforming in image and customer
       practices to the norm established for that brand.

       Further, General Motors brands are not commodities
       and should never be offered to the public from facilities
       that also offer competing brands.

In New AC's submission, this "Dealer Network Planning"
memorandum sets forth the core of "Project 2000"--i.e., the
single-line, single-dealer strategy.

According to New AC, two other corporate documents
demonstrate the implementation of this "Project 2000"
single-line, single-dealer strategy in the Jersey City region.
A report titled "Year 2000 Plan: Essex and Hudson
Counties, NJ MDAs: Marketing Area Highlights" includes a
section on State Route 440 in Jersey City, the approximate
location of both the DiFeo and New AC Chevrolet dealership.12
_________________________________________________________________

12. The report itself is not dated. In its opening brief, New AC fixes the
date of the document as 1992 or 1993. This is consistent with the
statement made in GM's 1995 "Dealer Network Planning" memorandum,
which noted that GM had first commenced a "Year 2000" strategy of
developing the optimal business plan for dealers in specific market
regions in 1990.

                               35
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                               36
Volume 2 of 2
                37
In that section, GM identifies the automobile dealerships
located at the intersection of State Route 440 and
Communipaw Avenue as "the only primary shopping area
for Hudson County." The report also contains evaluations of
both the New AC Chevrolet dealership and the Bell
Chevrolet dealership (which was subsequently acquired by
DiFeo). GM observed that both dealerships were in isolated
neighborhood areas, away from Route 440's "primary
shopping area," and had out-of-date facilities. However, GM
appeared much more optimistic about Bell Chevrolet's
chances for future economic success.

For Bell, the report's evaluation noted that "[t]he plan is
to relocate to the State Route 440 autorow area in Jersey
City," while for New AC, the report stated that"viability of
the dealer point is questionable" and observed that "[t]he
plan is to maintain representation and monitor viability of
the point." Finally, a third document, a report dated
February 7, 1996 and titled "Dealer Year 2000 Plan," set
forth the updated plan for the New AC dealership:"Monitor
market conditions -- future viability is questionable."

We are unpersuaded that these documents establish a
genuine issue that GM, prior to New AC's 1996 request to
add a Volkswagen dealership, made a decision to terminate
New AC's Chevrolet franchise. Significantly, none of these
documents refers to a decision by or an intent on the part
of GM to end its franchise relationship with New AC. In
these documents, GM does call New AC's future financial
viability into question, but there is no indication that, at
the time these documents were drafted, GM had concluded
that these economic worries warranted the termination of
New AC's Chevrolet dealership.

To be sure, New AC could be asking us to infer from the
concerns expressed by GM in these documents over the
continued viability of the New AC franchise that, at some
point subsequent to February 1996 (the date of the most
recent of the three documents, the "Dealer Year 2000
Plan"), GM arrived at the conclusion that termination was
necessary, and opportunistically employed New AC's 1996
Volkswagen line addition to mask its true motivation.13 In
_________________________________________________________________

13. Of course, concerns over the continued financial viability of a
franchise are likely to constitute legitimate, reasonable business reasons

                               38
light of the record evidence, however, we believe that "this
is not a reasonable inference from the evidence but instead
is a leap of faith." Northview Motors, Inc. v. Chrysler Motors
Corp., 227 F.3d 78, 95 (3d Cir. 2000). Contrary to New AC's
contentions concerning GM's bad faith, the record evidence
indicates that in the period between the time that New AC
informed GM that it had decided to operate a Volkswagen
franchise and the time that GM informed New AC of its
final decision to terminate New AC's Chevrolet franchise--
importantly, a period that spanned over one-and-a-half
years--GM actually sought to preserve its franchise
relationship with New AC.

New AC first informed GM of its decision to seek a
Volkswagen franchise on April 2, 1996. Were GM simply
using the addition of this vehicle line as a pretext to
implement its predetermined decision to eliminate the New
AC franchise, one would expect New AC's termination to
occur shortly after this notification. Yet, even after again
informing New AC on June 24, 1996 that it was opposed to
the Volkswagen addition, GM delayed for over eighteen
months before finally advising New AC on January 5, 1998
that its Chevrolet franchise was terminated. In the
intervening period, GM sent New AC repeated warning
letters, furnishing New AC with numerous opportunities to
relinquish its Volkswagen franchise and thereby preserve
its franchise relationship with GM. In fact, as late as May
13, 1998, the date on which the District Court heard oral
argument on New AC's motion for a preliminary injunction
barring its franchise termination, GM's counsel represented
to the Court that GM was willing to continue New AC's
Chevrolet franchise provided that New AC ceased offering
the Volkswagen line.

Moreover, GM did not simply issue warnings to New AC;
rather, GM sought to forge a compromise position,
addressing New AC's desire to add another vehicle line by
offering to help establish an Oldsmobile line at New AC's
_________________________________________________________________

for the franchise's termination. Therefore, we assume arguendo, as we
believe New AC would like us to, that GM's pessimistic assessment of
New AC's potential future performance was unwarranted and unjustified.

                               39
dealership and indicating that GM was willing to supply
financial support to New AC. Of course, GM insisted that
any compromise include New AC's abandonment of the
Volkswagen franchise, but New AC steadfastly refused to
take such an action.14 In light of this evidence, we cannot
help but conclude that New AC has failed to establish a
genuine issue that GM acted in bad faith or out of an
improper, pretextual motive in terminating New AC's
Chevrolet franchise. Accordingly, we affirm the District
Court's grant of summary judgment in GM's favor on Count
III of the amended complaint and Count Two of the
counterclaim.15
_________________________________________________________________

14. At oral argument, New AC offered a new theory to explain the one-
and-a-half-year delay between New AC's addition of Volkswagen and
GM's notice of franchise termination. According to New AC, at around
the time in 1996 that New AC announced its intention to operate a
Volkswagen line, DiFeo Chevrolet, the only other Chevrolet franchisee in
Jersey City, was in the process of ending its operations and
relinquishing its Chevrolet franchise. Were GM at that time to implement
its predetermined decision to terminate New AC, it would be left with no
Chevrolet franchise representation in the Jersey City market area. Thus,
according to New AC, GM was forced to deal, and attempt to
compromise, with New AC.

We believe that New AC's proffered theory amounts to pure
speculation. Importantly, New AC points to no evidence in the record
providing factual support for this theory. For instance, for New AC's
account to remain logically consistent, it would need to be shown that
DiFeo, or some other Chevrolet franchisee, re-commenced operations in
Jersey City some time prior to GM's January 5, 1998 notice of
termination to New AC (so that GM could terminate New AC and still
retain a single Chevrolet franchisee in Jersey City). We could find no
such evidence in the record before us, however.

15. New AC also contests the District Court's grant of summary
judgment in GM's favor on Count Three of New AC's counterclaim, which
alleges that GM violated S 56:10-7 of the NJFPA when it "impose[d]
unreasonable restrictions upon NEW AC, as a franchised motor vehicle
dealer, relative to the assertion of its legal or equitable rights
respective
to its Chevrolet/Geo franchise." New AC asserts that the Court
erroneously granted summary judgment here because it mistakenly
believed that New AC waived its right to oppose GM's summary judgment
motion by failing to respond to the motion, and/or because the Court
mistakenly assumed that its disposition of Count Two of the

                               40
D.

In short, we believe that none of New AC's challenges
with respect to the District Court's March 8, 2000 order
necessitate reversal of that order. Accordingly, the District
Court's March 8, 2000 order will be affirmed in its entirety.

III. The January 13, 1999 Order

New AC's other principal arguments in this appeal
challenge the District Court's January 13, 1999 order
which dismissed inter alia Count One of New AC's
counterclaim, alleging that GM's course of conduct violated
the ADDCA, and Count Four, alleging that GM's actions
violated the express and implied terms of the Dealer
Agreement. Our review of a district court's decision
granting a motion to dismiss a claim under Fed. R. Civ. Pro
12(b)(6) is plenary. See Weston v. Pennsylvania , 251 F.3d
420, 425 (3d Cir. 2001); Lorenz v. CSX Corp., 1 F.3d 1406,
1411 (3d Cir. 1993). We accept all factual allegations in the
complaint as true, and we draw all reasonable inferences in
the light most favorable to the non-movant. See Weston,
251 F.3d at 425. We may affirm a 12(b)(6) dismissal only if
it is certain that no relief could be granted to the non-
movant under any set of facts which could be proven. See
id.

A. Count One (ADDCA)

1.

In Count One of its counterclaim, New AC alleges that
GM's actions toward it amounted to a violation of the
_________________________________________________________________

counterclaim controlled its disposition of Count Three. Examining the
District Court's March 8, 2000 decision, it is clear that the Court
neither
relied on a waiver theory nor confused its Count Two analysis with its
Count Three analysis. Rather, the Court granted summary judgment for
GM on Count Three for the independent reason that New AC failed to
create a genuine issue as to the unreasonableness of the franchise
requirements imposed on New AC. New AC does not challenge this
conclusion on appeal and, accordingly, we will affirm the Court's grant
of summary judgment on Count Three.

                                  41
ADDCA. "The ADDCA is a remedial statute enacted to
redress the economic imbalance and unequal bargaining
power between large automobile manufacturers and local
dealerships, protecting dealers from unfair termination and
other retaliatory and coercive practices." Northview Motors,
Inc. v. Chrysler Motors Corp., 227 F.3d 78, 92 (3d Cir.
2000). The substance of the ADDCA cause of action is set
forth principally in 15 U.S.C. S 1222, which authorizes an
"automobile dealer" to "bring suit against any automobile
manufacturer engaged in commerce . . . by reason of the
failure of said automobile manufacturer . . . to act in good
faith in performing or complying with any of the terms or
provisions of the franchise, or in terminating, canceling, or
not renewing the franchise with said dealer." 15 U.S.C.
S 1222. Thus, to make out an ADDCA violation, four
elements must be established: (1) that the plaintiff is an
automobile dealer; (2) that the defendant is an automobile
manufacturer engaged in commerce; (3) that there is a
manufacturer-dealer relationship embodied in a written
franchise agreement; and (4) that the defendant
manufacturer failed to act in good faith, thereby injuring
the plaintiff dealer. See Northview, 227 F.3d at 93.

The first three elements of an ADDCA claim are clearly
established, and thus the dispositive issue is whether, in
Count One, New AC sufficiently pleaded GM's failure to act
in good faith, as that term is understood in the ADDCA
context. Crucial at this point is the understanding that the
definition of "good faith" contained in the ADDCA is
specialized and narrow. An automobile dealer cannot
establish lack of good faith merely by demonstrating that
the manufacturer acted arbitrarily, unreasonably, or in a
generally unfair manner; rather, the dealer must establish
that the manufacturer's conduct constituted "coercion,
intimidation, or threats of coercion or intimidation" directed
at the dealer. 15 U.S.C. S 1221(e).16
_________________________________________________________________

16. The full text of 28 U.S.C. S 1221(e)'s"good faith" definition is as
follows:

        The term "good faith" shall mean the duty of each party to any
       franchise, and all officers, employees, or agents thereof to act in
a
       fair and equitable manner toward each other so as to guarantee the
       one party freedom from coercion, intimidation, or threats of
coercion
       or intimidation from the other party: Provided , That
       recommendation, endorsement, exposition, persuasion, urging or
       argument shall not be deemed to constitute a lack of good faith.

                               42
The narrowness of this definition is evident not only from
the statute's plain language, but also from the case law
construing S 1221(e). See, e.g., Northview, 227 F.3d at 93
("[I]t is well established that the duty of`good faith' dealing
imposed by the Act must be given a narrow, rather than
expansive, construction."). We have expressly stated that
coercion or intimidation is a necessary element of a cause
of action under the ADDCA, see id., and also have
elaborated on the type of conduct that will qualify as
coercion or intimidation.

We have explained that mere termination of a franchisee
does not, on its own, constitute an ADDCA violation, nor
does it afford a presumption that an ADDCA violation has
occurred. For instance, our decision in Buono Sales, Inc. v.
Chrysler Motor Corp., 449 F.2d 715 (3d Cir. 1971), made
clear that "termination [of the franchise] alone will not
violate the statute." Id. at 724; see also Milos v. Ford Motor
Co., 317 F.2d 712, 716 (3d Cir. 1963) ("The argument that
termination before expiration [of the franchise agreement] is
prima facie evidence of a violation is untenable. The Act
expressly conditions recovery of damages on a failure of the
manufacturer to act in good faith. Termination in itself does
not suffice."). Rather, to state an ADDCA claim, the danger
of termination "must have previously been used as a threat
in an attempt to force the dealer to do certain things.
Examples . . . include a manufacturer's pressure on a
dealer to accept cars, parts, etc. which the dealer does not
want or to handle exclusively or sell a quota of parts,
accessories, etc." Buono Sales, 449 F.2d at 724.

The type of coercion or intimidation rendered actionable
by the ADDCA occurs only when the automobile
manufacturer makes a "wrongful demand which will result
in sanctions if not complied with." Id. at 724 (internal
quotations and citations omitted); see also Rea v. Ford
Motor Co., 497 F.2d 577, 585 (3d Cir. 1974) ("[A] violation
of this Act results if there is a wrongful demand[made]
which will result in sanctions if not complied with.")
(internal quotation marks omitted). A demand is wrongful if
it pressures the dealer into taking an action it would not
take otherwise, see, e.g., id. at 583, 585 (upholding a jury
verdict finding Ford in violation of the ADDCA based on

                               43
Ford's threat to cease shipping Ford vehicles unless the
dealer resigned its Oldsmobile franchise in a neighboring
town), or impels the dealer into forfeiting its rights under
the dealer agreement, see, e.g., Northview, 227 F.3d at 93
(noting that "a manufacturer's coercion of a dealer into
relinquishing the right to sell competing car lines may be
actionable [under the ADDCA], at least if the dealer's
franchise agreement gives it the right to make such sales").

A manufacturer does not make a wrongful demand if it
merely insists that the dealer comply with a reasonable
obligation imposed by the franchise agreement. For
instance, in Globe Motors, Inc. v. Studebaker-Packard Corp.,
328 F.2d 645 (3d Cir. 1964), we set aside a jury verdict
finding that an automobile manufacturer acted in bad faith,
within the meaning of the ADDCA, by requiring its dealer to
meet net working capital financial requirements. See id. at
648. In so doing, we observed that the financial
requirements, which were expressly set forth in the
franchise agreement, made clear "that under the contract
the [manufacturer] had [the] right to insist on the [dealer's]
compliance with his contractual commitment as to net
working capital." Id.; see also Milos , 317 F.2d at 717-18
("An attempt to enforce an unambiguous contractual
obligation . . . can hardly be said to constitute coercion or
intimidation.").

This is not to say, however, that a manufacturer who
chooses to terminate a dealer can immunize itself from
ADDCA liability by simply pointing to a franchise
agreement provision with which the dealer ostensibly failed
to comply and assert that such provision was the basis for
its severance of the franchise relationship. Even if a
manufacturer contends that its termination decision was
motivated by a desire to enforce a reasonable contractual
provision and that it possessed "objectively valid reasons
for terminating its relations with a dealer," a franchisee can
state a claim for relief under the ADDCA by alleging that
the manufacturer possessed "an ulterior motive for its
action." Northview, 227 F.3d at 94; cf. Rea, 497 F.2d at 585
(stating that "[a] manufacturer does not breach its duty to
act in good faith by terminating a franchise when a dealer
has failed to fulfill a reasonable obligation or agreement

                               44
made in connection with the operation of the dealership,"
but stressing that "whether a manufacturer has acted with
sufficient justification to constitute good faith in bringing
pressure to bear on a dealer is a factual question the
determination of which will depend on the circumstances
arising in each particular case"). That is, a manufacturer's
insistence that a dealer adhere to its franchise obligations
can constitute a wrongful, sanction-backed demand (and
thus the type of coercion or intimidation necessary to state
an ADDCA violation), if the manufacturer's reliance on
those obligations is motivated by a pretextual, bad-faith
reason.

2.

With this understanding of legal framework governing
New AC's ADDCA claim in mind, we now turn to New AC's
specific allegations. Specifically, Count One avers that GM's
"course of wrongful conduct as set forth in this complaint
constitutes coercion, intimidation and/or threats of
coercion or intimidation within the meaning of 15 U.S.C.
S 1221 et seq., and is in violation ofS 1221 et seq., entitling
NEW AC to damages." As the language quoted above
demonstrates, Count One does not identify the precise
actions on the part of GM that New AC believes violate the
ADDCA, but it does refer us to the factual allegations
contained in the previous portions of the counterclaim (and
expressly incorporates the counterclaim's preceding
paragraphs by reference).

Examining all of the factual allegations, the District
Court determined that New AC's ADDCA claim was focused
on two sets of actions allegedly taken by GM: (1) GM's 1995
approval of the relocation of the DiFeo Chevrolet dealership
to a site closer to Route 440, a move that, according to New
AC, was intended to channel business away from New AC
and toward DiFeo; and (2) GM's decision to terminate New
AC based on the latter's decision to add a Volkswagen line
to its dealership.17 The Court concluded that neither of
_________________________________________________________________

17. On appeal, New AC does not dispute the District Court's decision
that these two sets of action are the "course of wrongful conduct" alleged
in Count One of its counterclaim.

                               45
these alleged actions stated a legal claim for relief under the
ADDCA. Given our obligation, at the 12(b)(6) stage, to
construe all allegations and to draw all reasonable factual
inferences in favor of the non-movant, see Weston, 251
F.3d at 425, we are constrained to disagree.

With respect to New AC's allegations concerning the 1995
DiFeo relocation, New AC's core claim appears to be set
forth in paragraph 93 of its counterclaim, which states:

       [GM] . . . may well have a hidden agenda as[GM's]
       Project 2000 is implemented which may include the
       unlawful attempt to force NEW AC out of business by
       establishing the DiFEO dealership at a site that
       invades NEW AC's recognized area of focus of sales
       penetration. Said action directs Chevrolet/Geo
       business away from NEW AC to DiFEO; injures NEW
       AC's heretofore existent Chevrolet business so
       profoundly as to render NEW AC relatively
       unprofitable.

Paragraph 93 can be fairly read as alleging that GM,
through the approval of DiFeo's relocation, brought
pressure to bear on New AC in order to impel New AC to
forfeit one of the rights to which it is entitled under the
franchise agreement, i.e., the right to continue as a
Chevrolet franchisee through the full life of the Dealer
Agreement, without having its franchise prematurely
terminated.

Although provisions of the Dealer Agreement do appear to
confer GM with the authority to make such a dealer
relocation--for instance, Article 4.3 provides that "the
relocation of an existing dealer," such as DiFeo, is "within
the sole discretion" of GM, "pursuant to its business
judgment"--we have noted above that a manufacturer
cannot shield itself from ADDCA liability by merely relying
on an objective provision of a franchise agreement when the
dealer claims that the manufacturer's reliance on such a
provision is pretextual. See Northview, 227 F.3d at 94
(stating that a manufacturer's "objectively valid reasons" for
a decision will not preclude an ADDCA claim, if the dealer
can demonstrate that the manufacturer possessed"an
ulterior motive for its action"). New AC makes just an

                               46
allegation of pretext in paragraph 93, claiming that GM's
reason for approving the DiFeo relocation was not
motivated by a legitimate business goal, but rather was
part of "Project 2000' "s "hidden agenda."

We reach a similar conclusion with respect to the second
set of actions alleged to violate the ADDCA, i.e., GM's
termination of New AC's Chevrolet franchise based on New
AC's "dualing" of a Volkswagen line. Here, New AC could
reasonably be characterized as asserting that it was entitled
to sell a Volkswagen line of vehicles under the terms of the
Dealer Agreement, and that GM's persistent refusal to
permit such "dualing" constituted an attempt by GM to
pressure New AC into forfeiting this entitlement. To be sure,
as the District Court recognized in its opinion, Article 4.4.2
unambiguously requires that a franchisee receive prior
written authorization from GM before adding a vehicle line
to its dealership, and GM's actions could be characterized
as a mere attempt to require New AC to comply with its
reasonable franchise obligations. Again, however, a dealer
can state an ADDCA claim against a manufacturer,
notwithstanding the manufacturer's reliance on an
objectively valid contractual provision, by establishing that
the manufacturer's motive is a pretextual or bad faith one.
New AC's complaint in this case, when construed under our
liberal Fed. R. Civ. Pro. 12(b)(6) standard, see Weston, 251
F.3d at 425, can be fairly read as alleging that GM's
reliance on Article 4.4.2 of the Dealer Agreement was not a
good-faith business decision, but rather a pretextual
attempt to have New AC forfeit its right to sell additional
non-GM vehicle lines.

3.

Although we conclude that the District Court erred in
dismissing Count One of New AC's counterclaim, we believe
the Court's error to be harmless, as it did not impact New
AC's substantial rights. See 28 U.S.C. S 2111 ("On the
hearing of any appeal . . . in any case, the court shall give
judgment after an examination of the record without regard
to errors or defects which do not affect the substantial
rights of the parties."); Fed. R. Civ. Pro. 61 ("[N]o error or
defect in any ruling or order or in anything done or omitted

                               47
by the court . . . is ground for . . . vacating, modifying, or
otherwise disturbing a judgment or order, unless refusal to
take such action appears to the court inconsistent with
substantial justice.").18 We hold a non-constitutional legal
error harmless if it is highly probable that the error did not
affect the judgment. See McQueeney v. Wilmington Trust
Co., 779 F.2d 916, 924-25 (3d Cir. 1985). Thus, in making
this harmless error determination, we must be well-
satisfied that the error did not prejudice a party, but we
need not disprove every reasonable possibility of prejudice.
See Ballay v. Legg Mason Wood Walker, Inc., 925 F.2d 682,
694 n.15 (3d Cir. 1991); United States v. Jannotti, 729 F.2d
213, 219-20 & n.2 (3d Cir. 1984).

It is clear that New AC was not prejudiced by the District
Court's failure to liberally construe Count One of the
counterclaim. With respect to New AC's claim that GM
violated the ADDCA when it terminated New AC for
"dualing" a Volkswagen line, we note that the Court
permitted Count II of GM's amended complaint to proceed
to discovery. Count II of the amended complaint, seeking a
declaration that New AC's termination did not violate the
ADDCA, is a mirror image of the relevant portion of Count
One of the counterclaim, and thus necessarily requires an
adjudication as to whether GM's termination decision
amounted to coercion and intimidation within the meaning
of 15 U.S.C. S 1221(e). Count II remained alive through
discovery, thus affording New AC the opportunity to obtain
evidence of coercive or intimidating conduct on the part of
GM in connection with the Chevrolet franchise termination,
and to have that evidence considered by the District Court.19
_________________________________________________________________

18. Although Fed. R. Civ. Pro. 61 technically applies only to the district
courts, see Fed. R. Civ. Pro. 1 ("These rules govern the procedure in the
United States district courts . . . ."), the Supreme Court has admonished
the Courts of Appeals to "act in accordance with the salutary policy
embodied in Rule 61." McDonough Power Equip., Inc. v. Greenwood, 464
U.S. 548, 554 (1984). Moreover, the Supreme Court has observed that
the federal harmless error statute, 28 U.S.C. S 2111, applies directly to
the Courts of Appeals, and "incorporates the same principle as that
found in Rule 61." Id.
19. In its March 8, 2000 opinion, the District Court in fact granted
summary judgment in GM's favor on Count II, observing that New AC,
even after the completion of discovery, failed to furnish any facts
establishing coercion or intimidation on GM's part. See General Motors
Corp. v. New A.C. Chevrolet, Inc., 91 F. Supp. 2d 733, 740 (D.N.J. 2000).

                               48
We reach the same conclusion with respect to New AC's
claim that an ADDCA violation occurred when GM
approved the 1995 DiFeo relocation. This ADDCA claim is
inextricably linked with New AC's "Project 2000" bad faith
theory. See supra Part II.C (summarizing the"Project 2000"
theory). Paragraph 93 of the counterclaim, for instance,
explicitly alleges that the decision to approve DiFeo's
relocation was made as a result of GM's "Project 2000"
"hidden agenda." In essence, New AC is contending that
GM's relocation approval was motivated by a desire to
constructively or formally terminate New AC as a Chevrolet
franchisee so as to establish a competing dealership, DiFeo,
as GM's exclusive Chevrolet dealer in Jersey City, in
furtherance of a the single-dealer goal embodied in the
"Project 2000" business strategy.

This close nexus between New AC's "Project 2000" theory
and its bad faith allegations proves significant to our
harmless error analysis. Although an erroneous dismissal
of a claim will ordinarily work a prejudice on the party
asserting the claim, in that the dismissal will remove the
claim from the litigation and prohibit the party from
pursuing discovery with respect to the dismissed claim, the
factual and procedural circumstances of this case clearly
indicate that New AC's opportunity to gather evidence
regarding the "Project 2000" plan was not impeded in any
respect. The history of the proceedings before the District
Court demonstrates that New AC has had a full and fair
opportunity to participate in discovery concerning the
"Project 2000" theory, and thus had the chance to establish
a genuine issue as to whether GM did indeed act in bad
faith in its course of conduct toward New AC. As explained
at length supra in Part II.C, New AC failed to furnish the
record evidence necessary to create a genuine issue that
GM adopted, in bad faith, a strategy designed to eliminate
New AC's franchise in Jersey City. Thus, even if the
relocation portion of Count One had remained live in the
litigation, we are firmly convinced, based on the clear
record evidence in this case, that New AC would not have
succeeded in establishing a genuine issue that GM's
approval of the DiFeo relocation was actuated by a bad-
faith, "Project 2000" motive.

                               49
We are thus satisfied that the District Court's legal error
in construing the allegations made in Count One of the
counterclaim did not work a prejudice on New AC.
Accordingly, we will affirm the District Court's dismissal of
Count One.

B. Count Four (Breach of Dealer Agreement)

In Count Four of the counterclaim, New AC alleges,
rather inartfully, that certain actions taken by GM with
respect to New AC violated the express and implied terms
of the Dealer Agreement. The relevant allegations are
contained in paragraph 116 of the counterclaim, which
states in full:

        During the ongoing term of the NEW AC franchise,
       [GM] breached the expressed and implied terms and
       provisions of those agreements: by relocating/adding a
       Chevrolet/Geo franchise and thereby establishing a
       Chevrolet/Geo dealership within an unreasonable
       geographic and marketing distance from NEW AC; by
       attempting to interfere with, render impotent and/or
       otherwise terminate NEW AC's Chevrolet/Geo franchise
       by destroying the economic viability of same by
       relocating/adding a Chevrolet/Geo franchise and
       dealership to a geographic location whereby it will draw
       and drain significant business away from NEW AC, and
       by affording and sanctioning DiFEO Chevrolet/Geo's
       resultant and grossly unfair competitive advantage to
       the direct disadvantage of and damage to NEW AC; by
       refusing to comply with its self-imposed mediation
       process, and by using the unfair competitive advantage
       of the dualed DiFEO dealership to effect the actual or
       constructive termination of NEW AC in order to reduce
       the number of Chevrolet/Geo dealers in the New York
       New Jersey Metropolitan area in accordance with the
       dictates of Project 2000 as expressed.

Based on these allegations, New AC presents two
principal contentions. First, New AC asserts that the
District Court erred in deciding that Count Four did not
encompass a claim that GM breached an implied duty of
good faith and fair dealing by predetermining the outcome

                               50
of its own management review process. In addition, New AC
contends that the District Court erroneously concluded that
an implied duty of good faith and fair dealing did not even
arise in connection with the provision of the Dealer
Agreement governing GM's power to authorize and approve
the relocation of a competing franchisee.20 Before turning to
_________________________________________________________________

20. New AC also argues that the District Court erroneously construed
Count Four as not encompassing a claim that GM's refusal to permit the
addition of a Volkswagen line to New AC's dealership breached the
express terms of the Dealer Agreement. We agree that the Court's
reading of New AC's complaint was erroneous. To be sure, paragraph
116 of Count Four of the counterclaim, quoted above, does not reference
GM's refusal to permit New AC to operate a Volkswagen franchise.
Nonetheless, a few dozen paragraphs earlier, New AC clearly makes the
requisite allegation: In paragraph 92, New AC states that GM's "refusal
to permit NEW AC to establish a Volkswagen franchise. . . is in violation
of the FRANCHISE [i.e., the terms of the Dealer Agreement]." Although
New AC's complaint is awkwardly drawn--its breach of contract claim
based on GM's refusal to allow the "dualing" of a Volkswagen line is not
included with the general list of contract claims raised in Count Four,
but rather is set forth in paragraph 92, under the caption "The New AC
Volkswagen Franchise Acquisition"--given our liberal notice pleading
regime, see Weston, 251 F.3d at 429-30, we will not hold New AC's
drafting irregularities against it.

Nonetheless, we will affirm the District Court's dismissal of this
portion of Count Four, concluding that any error committed by the
District Court was harmless, as it did not work a prejudice on New AC.
See supra Part III.A.3. (setting forth the applicable harmless error
standard). Although the District Court dismissed Count Four of the
counterclaim, Count I of GM's amended complaint remained alive in the
litigation. The claim asserted by GM in that count--that GM's
termination of New AC, on the ground that New AC persisted in
operating a Volkswagen franchise over GM's objection, was lawful under
the terms of the Dealer Agreement--fairly encompasses New AC's claim
that GM's refusal to permit the Volkswagen addition represented a
breach of the franchise agreement. By adjudicating Count I, the District
Court would necessarily determine whether GM's objection to the added
Volkswagen franchise was in accordance with the Dealer Agreement
between GM and New AC. Because Count I remained active in the
litigation, proceeded to discovery, and was ultimately adjudicated by the
District Court, see General Motors Corp., 91 F. Supp. 2d at 738-39, we
conclude that the District Court's failure to fully apply the liberal
pleading rules to New AC's claims respecting GM's objection to the
Volkswagen franchise did not affect New AC's substantial rights, and
thus amounted to nothing more than harmless error.

                               51
each of these contentions, we note that the District Court
decided, and the parties on appeal agree, that Michigan law
governs the implied covenant of good faith issue. This is
because of the express choice of law provision contained in
Article 17.12 of the Dealer Agreement, which states in
relevant part that "[t]his agreement is governed by the laws
of the State of Michigan."21

1.

New AC contends that the District Court erred in
construing New AC's counterclaim when the Court
concluded that Count Four did not include a claim for a
breach of the implied covenant of good faith and fair
dealing based on the fact that GM allegedly predetermined
the outcome of its management review process. The District
Court declined to address this breach of contract claim on
the ground that such a contention appeared nowhere in
Count Four of the counterclaim. New AC submits that the
District Court's decision was erroneous, in that the Court
failed to liberally construe the allegations of New AC's
counterclaim. We disagree.

The franchise agreement between GM and New AC
establishes a private mechanism for the resolution of
disputes between the manufacturer and dealer arising out
of the respective obligations imposed on them by the
franchise arrangement. This mechanism is described in a
document entitled "Dispute Resolution Process for
Chevrolet, Pontiac, Oldsmobile or GMC Truck Dealers," and
the basic procedure is summarized in that document's
foreword. In essence, if a dealer is dissatisfied with one of
GM's decisions, believing it to be inconsistent with its rights
under the Dealer Agreement, its first recourse is to seek
"Division Management Review."

In general, the dealer initiates the "Division Management
Review" process by sending a letter to GM's General Sales
_________________________________________________________________

21. New Jersey gives effect to contracting parties' private choice of law
clauses unless they conflict with New Jersey public policy. See
Instructional Sys., Inc. v. Computer Curriculum Corp., 614 A.2d 124, 133
(N.J. 1992). We ascertain no such conflict here.

                                52
and Service Manager within 60 days of receipt of the
challenged decision. The letter must clearly request
management review and state the reasons for the dealer's
challenge. If the dealer objects to the result of the "Division
Management Review" process, it can seek binding
arbitration as an alternative to instituting a legal action,
but such binding arbitration will occur only if both the
dealer and GM mutually agree to pursue it. At the same
time, the administrator of the private dispute resolution
process can attempt to explore the option of informal, non-
binding mediation with GM and the dealer. Again, however,
the dispute will be mediated only upon the dealer's and
GM's mutual agreement. In considering New AC's
contention, we assume arguendo that Michigan law would
impose an obligation on GM to conduct its private dispute
resolution process in good faith. Nonetheless, examining
the substance of New AC's counterclaim, it is evident that,
in its counterclaim, New AC fails to allege the facts
necessary to show that a breach of such an implied
covenant occurred.

New AC's counterclaim does reference the Management
Review process described above in several places, although
no such allegations appear under the Count Four heading.
In various paragraphs of its counterclaim, New AC states
that it sought administrative review of two decisions made
by GM: GM's 1998 decision to terminate New AC's
Chevrolet franchise, and its earlier 1996 decision refusing
to permit the addition of a Volkswagen line to New AC's
dealership. First, in paragraph 72 of its counterclaim, New
AC alleges that on January 26, 1998, it requested
"Management Review of GM's January 5, 1998 termination
notice." Importantly, New AC does not, however, claim that
GM's response to this Management Review request was
improper in any fashion, let alone assert that GM's conduct
of the review procedure breached an implied covenant of
good faith. Put simply, with regard to administrative review
of GM's decision to terminate New AC's Chevrolet franchise,
New AC's complaint simply alleges that such review was
sought; it does not claim that GM's handling of the review
process was wrongful in any respect. Accordingly, we
cannot say that this allegation suffices for 12(b)(6) purposes

                               53
to state a claim for a breach of an implied covenant of good
faith.

New AC does go somewhat further in its allegations
concerning administrative review of GM's earlier 1996
decision to refuse New AC's request to add a Volkswagen
franchise to its dealership. In paragraphs 37 through 43 of
the counterclaim, New AC alleges that it sought
Management Review of this refusal, and, in paragraph 47,
New AC asserts that the Management Review that was
conducted "did not comport with the purpose, intent and
spirit of [GM's] mandated dispute resolution process."
Although this last allegation does maintain that GM's use
of the Management Review procedure was faulty in some
abstract sense, New AC fails to allege the reasons why GM's
internal review was unlawful in general, or in breach of an
implied covenant of good faith in particular. Moreover, New
AC's allegations do not establish the factual basis for this
claim. That is, New AC's counterclaim does not include
factual allegations demonstrating why the administrative
review GM conducted in connection with its 1996 refusal of
the Volkswagen addition did not comply with the purpose
of the Management Review process.

Perhaps New AC could have alleged that the review
omitted the steps specified in GM's "Dispute Resolution
Process" document, or that New AC was denied a
meaningful opportunity to present its case to the relevant
decision-makers, but New AC's counterclaim does not
contain these types of allegations. New AC's minimalist,
conclusory allegations--amounting, in essence, to nothing
more than a bare bones claim that GM's decision was
"wrongful in the air"--do not suffice to cross the 12(b)(6)
threshold. Cf. 2 James Wm. Moore, Moore's Federal
Practice S 12.34[1][b], at 12-61 to 12-63 (3d ed. 2001)
("Liberal construction has its limits, for the pleading must
at least set forth sufficient information for the court to
determine whether some recognized legal theory exists on
which relief could be accorded the pleader. . . .[C]onclusory
allegations or legal conclusions masquerading as factual
conclusions will not suffice to prevent a motion to dismiss.
While facts must be accepted as alleged, this does not
automatically extend to bald assertions, subjective

                               54
characterizations, or legal conclusions.") (internal quotation
marks, citations, and footnotes omitted).

Finally, New AC also relies on language in paragraph 116
of Count Four, which states inter alia that GM "breached
the expressed and implied terms and provisions" of its
franchise agreement "by refusing to comply with its self-
imposed mediation process." However, as set forth above in
our summary of the "Dispute Resolution Process"
document, such voluntary mediation is initiated only when
the administrator of the dispute resolution process seeks to
explore such an option with GM and the dealer, and
requires the mutual agreement of both GM and the dealer
before it can be pursued. Canvassing New AC's
counterclaim, we can find no allegation that either New AC
or the dispute resolution administrator requested the
institution of voluntary mediation, or that any such request
was denied. Thus, New AC's conclusory allegation that GM
breached an implied covenant of good faith "by refusing to
comply with its self-imposed mediation process" does not
clear the 12(b)(6) hurdle.

2.

New AC also contends that the District Court erred in
deciding, as a matter of law, that the Dealer Agreement
provision granting GM the power to approve the relocation
of competing franchisees did not give rise to an implied
covenant that GM would make that decision in good faith.
The District Court offered this construction in connection
with its dismissal of the portion of Count Four in which
New AC alleged that GM breached an implied covenant of
good faith and fair dealing by approving the 1995 relocation
of DiFeo Chevrolet, a competing franchisee, to a more
desirable commercial location, thereby siphoning business
away from New AC.22

Although Michigan law on the implied covenant of good
_________________________________________________________________

22. New AC made a virtually identical contention regarding GM's
approval of the DiFeo relocation in paragraph 93 of Count One of its
counterclaim, which appeared to allege inter alia that this relocation
approval violated the ADDCA. See supra Part III.A.2.

                               55
faith is rather sparse, it can be fairly said that Michigan
recognizes that such a covenant can arise in certain
circumstances, depending on the nature of the contractual
arrangement between the parties. Specifically, two
principles supply the framework for analyzing whether a
contractual provision gives rise to an implied covenant of
good faith. First, under Michigan law, "[w]here a party to a
contract makes the manner of its performance a matter of
its own discretion, the law does not hesitate to imply the
proviso that such discretion be exercised honestly and in
good faith." Burkhardt v. City Nat'l Bank of Detroit, 226
N.W.2d 678, 680 (Mich. Ct. App. 1975). At the same time,
"Michigan law does not imply the good faith covenant where
parties have `unmistakably expressed' their respective
rights." Hubbard Chevrolet Co. v. General Motors Corp., 873
F.2d 873, 877 (5th Cir. 1989) (applying Michigan contract
law).23
_________________________________________________________________

23. In its appellate brief, GM argues that this portion of Count Four of
the counterclaim does not state a claim for legal relief because Michigan
law does not recognize an independent cause of action for breach of an
implied covenant of good faith. This characterization of Michigan law is
technically correct, as Michigan courts have stated on numerous
occasions that "Michigan does not recognize an independent tort action
for an alleged breach of a contract's implied covenant of good faith and
fair dealing." Ulrich v. Federal Land Bank of St. Paul, 480 N.W.2d 910,
911 (Mich. Ct. App. 1991) (per curiam) (emphasis added); see also Kewin
v. Massachusetts Mut'l Life Ins. Co., 295 N.W.2d 50, 56 (Mich. 1980);
Dahlman v. Oakland Univ., 432 N.W.2d 304, 306 (Mich. Ct. App. 1988)
(per curiam). However, we do not believe this settled Michigan rule to be
applicable to New AC's specific claim. As the allegations set forth in
paragraph 116 of New AC's counterclaim make clear, see supra Part
III.B, New AC is not asserting that GM's alleged bad faith breached a
duty that GM owed to New AC independent of the contractual obligations
fixed by the Dealer Agreement and is not claiming that such a breach
should be independently actionable, cf. Kewin , 295 N.W.2d at 56;
Dahlman, 432 N.W.2d at 306. Rather, fairly read, Count Four of New
AC's counterclaim alleges that GM's conduct in approving the DiFeo
relocation breached an implied covenant of good faith emanating from
the terms of the Dealer Agreement. As noted in the text above, cases
such as Hubbard and Burkhardt make clear that, under Michigan law,
such an implied obligation can arise when, for instance, the specific
contractual terms make a party's performance under the contract
entirely discretionary.

                               56
New AC's allegation concerning GM's approval of the
DiFeo relocation thus required the District Court to
determine whether the terms of the Dealer Agreement
regarding GM's approval of competing dealers' relocations
gave rise, under the framework set forth above, to an
implied covenant that GM render that decision in good
faith. The pertinent provision of the Dealer Agreement is
Article 4.3, captioned "Establishment of Additional
Dealers," which provides:

        [GM] reserves the right to appoint additional dealers
       but [GM] will not exercise this right without first
       analyzing dealer network planning considerations.

        Prior to establishing an additional dealer within
       Dealer's Area of Primary Responsibility, [GM] will
       advise Dealer in writing and give Dealer thirty days to
       present relevant information before [GM] makes a final
       decision. [GM] will advise Dealer of the final decision,
       which will be made solely by [GM] pursuant to its
       business judgment. . . .

        Neither the appointment of a dealer at or within
       three miles of a former dealership location as a
       replacement for the former dealer nor the relocation of
       an existing dealer will be considered the establishment
       of an additional Dealer for purposes of this [section].
       Such events are within the sole discretion of [GM],
       pursuant to its business judgment.

(emphasis added).

It is difficult (if not impossible) to read Article 4.3 as
anything other than a provision making the relocation
decision a matter for GM's own discretion, a provision that,
under existing Michigan contract law, would give rise to a
good faith obligation. Article 4.3, by its terms, states that
the "relocation of an existing dealer"--in this case, the
moving of DiFeo Chevrolet from its Kennedy Boulevard
location to a site closer to Route 440--is "within the sole
discretion of [GM], pursuant to its business judgment."
Michigan law, through decisions such as Burkhardt, clearly
teaches that it is these precise situations--situations in
which one party retains unfettered control over part of its
performance under a contract--that call most strongly for

                               57
the application of an implied covenant of good faith. See,
e.g., Burkhardt, 226 N.W.2d at 680 ("Where a party to a
contract makes the manner of its performance a matter of
its own discretion, the law does not hesitate to imply the
proviso that such discretion be exercised honestly and in
good faith."); see also Ferrell v. Vic Tanny Int'l, Inc., 357
N.W.2d 669, 672-73 (Mich. Ct. App. 1984) (per curiam)
(holding that a health club's authority, under its contract
with club members, to promulgate rules and regulations
governing the use of its facilities was sufficiently
discretionary to give rise to an implied covenant of good
faith and fair dealing); cf. Paradata Computer Networks, Inc.
v. Telebit Corp., 830 F. Supp. 1001, 1006 (E.D. Mich. 1993)
(observing that "discretion is the hallmark of the covenant"
of good faith).24
_________________________________________________________________

24. The District Court reached the opposite conclusion, deciding that
Article 4.3 of the Dealer Agreement unambiguously expressed the
obligations of the parties in regard to the DiFeo relocation decision, and
thus did not yield any implied covenant of good faith. In so doing, the
Court relied almost exclusively on Hubbard, a case from the Court of
Appeals for the Fifth Circuit, applying Michigan law to a dispute between
an automobile dealer and the vehicle manufacturer concerning the
relocation of a franchise, a dispute similar to the disagreement between
GM and New AC in this case over the DiFeo relocation.

In Hubbard, a Chevrolet franchisee sought to move its location to a site
other than the one specified in its dealership agreement. Much like the
agreement in this case, the contract in Hubbard required the franchisee
to receive prior written approval from GM for any move of the dealership
premises. See Hubbard, 873 F.2d at 874. GM denied its franchisee's
request, and the franchisee brought suit alleging inter alia that the
relocation provision requiring GM's prior written approval carried with it
an implied covenant that GM's decision would be made in good faith. See
id. at 875. The Fifth Circuit disagreed, concluding that the relevant
relocation provision did not give rise to any implied covenant, since it
unmistakably and fully expressed the respective rights of GM by
precisely identifying the dealer's original location and "flatly
preclud[ing]
relocation absent GM's approval." Id. at 878. The Court stressed that the
dealer agreement "gave GM the authority to approve or disapprove
relocation for its own reasons, and thus set out the limits of what the
contract requires of the parties." Id.

In this case, the District Court concluded that Article 4.3 of the Dealer
Agreement was analogous to the contractual provision at issue in

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However, our conclusion that the District Court
committed error in construing Michigan law does not
necessitate reversal of this portion of the Court's January
13, 1999 order, because we consider this error to be
harmless. See supra Part III.A.3 (setting forth the applicable
harmless error standard). It is abundantly clear from New
AC's amended counterclaim, its appellate brief, and its
contentions at oral argument, that New AC's theory behind
GM's bad faith is integrally and inextricably linked with the
manufacturer's "Project 2000" or "Plan 2000" business
strategy. For instance, paragraph 113 of Count Four of the
counterclaim expressly states that GM's relocation decision
was intended "to effect the actual or constructive
termination of NEW AC in order to reduce the number of
Chevrolet/Geo dealers in the New York New Jersey
Metropolitan area in accordance with the dictates of Project
2000 as expressed."

As we explained supra in Part II.C and again in Part
III.A.3, New AC has had a full and fair opportunity to
participate in discovery concerning the "Project 2000"
theory, in order to establish a genuine issue as to whether
GM did indeed act in bad faith. Yet, New AC has not
succeeded in establishing a genuine issue that GM adopted
a strategy designed to eliminate New AC's franchise in
_________________________________________________________________

Hubbard, in that both clearly conferred manufacturer GM with the
authority to approve or disapprove the dealership move for its own
reasons. We believe this conclusion and rationale is at considerable odds
with the principle of Michigan law stated in Burkhardt, which makes
clear that an implied covenant of good faith arises precisely in those
situations "[w]here a party to a contract makes the manner of its
performance a matter of its own discretion." Burkhardt, 226 N.W.2d at
680. Most provisions conferring blanket discretion on a decision maker,
such as the relocation provision in Article 4.3, will give that decision
maker the power to make the choice for its own reasons; such is the
nature of the exercise of unfettered discretion. Were we to construe
Article 4.3's language--which on its face confers unfettered and
unbounded discretion to GM--as an unmistakable and exhaustive
expression of the parties' obligations, we would leave few if any
situations in which the implied covenant of good faith would ever arise.
We believe such a result would be in significant tension with extant
Michigan contract law.

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Jersey City and thus acted in bad faith in its course of
dealing with New AC. Therefore, even if the District Court's
interpretation of Michigan contract law had not been in
error, and New AC's claim concerning the DiFeo relocation
approval had remained active in the litigation, we are firmly
convinced, based on the clear record evidence in this case,
that New AC would not have succeeded in establishing a
genuine issue that GM's approval of the DiFeo move was
actuated by a bad-faith, "Project 2000" motive.
Consequently, we are satisfied that New AC was not
prejudiced by the District Court's error, and consider such
error to be harmless.

3.

In sum, we conclude that none of New AC's challenges
with respect to the District Court's January 13, 1999 order
necessitate reversal of that order. Accordingly, the District
Court's January 13, 1999 order will be affirmed in its
entirety.25
_________________________________________________________________

25. In addition to the four principal points discussed in the text above,
New AC also raises a series of challenges to four other sets of orders,
and to the District Court's award of attorneys fees in GM's favor.
Because we find these arguments insubstantial and unpersuasive, we
deal with them summarily here.

The May 15, 1998 Order

Following the filing of its counterclaim, New AC moved for a
preliminary injunction blocking GM's scheduled termination of New AC's
Chevrolet franchise. The District Court denied New AC injunctive relief in
a May 15, 1998 order. The challenge to this order that New AC raises on
this appeal presents a straightforward application of the claim preclusion
doctrine, since the propriety of this preliminary injunction denial has
already been appealed to this Court by New AC on a prior occasion and
been resolved against New AC. All of the elements necessary to grant our
prior order claim preclusive effect are present: The prior order
represents
a final adjudication of the question whether New AC was entitled to
preliminary injunctive relief; that question was litigated before this
Court
by the same parties that are before us today; and New AC's current
appeal raises the exact question that was decided in our prior order. See
Corestates Bank, N.A. v. Huls America, Inc., 176 F.3d 187, 194 (3d Cir.
1999) (setting forth the elements of the claim preclusion doctrine). Quite

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IV. Conclusion

We affirm the orders of the District Court in all respects.

(Text continued on page 63)
_________________________________________________________________

clearly, the claim preclusion doctrine does not permit New AC to re-visit
and re-argue issues already decided by this Court in the same litigation.
Accordingly, we dismiss the portion of New AC's appeal challenging the
District Court's May 15, 1998 order.

The August 26, 1998 Order

On June 16, 1998, New AC moved to dismiss GM's declaratory
judgment action under Fed. R. Civ. Pro. 12(b)(6). The District Court
denied New AC's motion in an order entered on August 26, 1998, and
New AC now challenges that dismissal. Our review of the District Court's
denial of a motion to dismiss is plenary. We accept all factual
allegations
in the complaint as true, and we draw all reasonable inferences in the
light most favorable to the non-movant. See Weston v. Pennsylvania, 251
F.3d 420, 425 (3d Cir. 2001). We believe that a mere examination of the
face of GM's original complaint suffices to establish its legal adequacy
for
12(b)(6) purposes, and therefore affirm the District Court's August 26,
1998 order.

The March 8, 1999 and April 28, 1999 Discovery Orders

New AC also questions the propriety of two orders entered by the
Magistrate Judge during the course of discovery, on March 8, 1999 and
April 28, 1999, respectively. According to New AC, as part of the
discovery conducted on Counts Two and Three of its counterclaim,
alleging that GM violated the NJFPA by inter alia imposing unreasonable
standards of performance on New AC in contravention of S 56:10-7(e),
New AC sought documents from GM regarding GM's dealer network. In
the March 8, 1999 order, the Magistrate Judge rejected New AC's broad
request, and instead required GM to furnish only those documents
related to New AC. On April 28, 1999, the Magistrate Judge denied New
AC's motion for reconsideration of the March 8, 1999 decision. On
appeal, New AC contends that this limitation was erroneous, since New
AC should have been allowed to gather information regarding GM's
relationships with other franchisees--e.g., the type of performance
standards imposed on those franchisees--in order to help establish that
the standards placed on New AC were unreasonable.

Under Fed. R. Civ. Pro. 72(a), once a magistrate judge to whom a
nondispositive pretrial matter is referred enters a written order, the
parties have ten days after service of that order within which to serve

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and file objections, which will be considered by the district court. See
Fed. R. Civ. Pro. 72(a). The Rule makes clear that, following this ten-day
period, "a party may not thereafter assign as error a defect in the
magistrate judge's order to which objection was not timely made." Id.;
see also Continental Cas. Co. v. Dominick D'Andrea, Inc., 150 F.3d 245,
252 (3d Cir. 1998). The record contains no indication that New AC
attempted to file objections to the Magistrate Judge's March 8, 1999 or
April 28, 1999 decisions with the District Court. Accordingly, New AC
has waived any challenge it had to these two discovery orders.

The August 4, 1999 Order

New AC also employs the instant appeal to challenge the District
Court's August 4, 1999 denial of its motion seeking the recusal of the
District Judge originally assigned to the litigation and the vacatur of
all
of the orders entered by that Judge during the course of the litigation.
In June of 1999, New AC brought this motion seeking the
disqualification of the Judge pursuant to 28 U.S.C.SS 144 and 455. The
District Court forcefully rejected New AC's motion both on the ground
that the motion was untimely and that it failed on the merits. We review
a district court's denial of a motion for recusal for abuse of discretion.
See Blanche Road Corp. v. Bensalem Township, 57 F.3d 253, 265 (3d
Cir. 1995). We agree with the District Court that New AC's recusal
motion fell outside of 28 U.S.C. S 144's 10-day time limit, see 28 U.S.C.
S 144 (providing that an affidavit setting forth the facts and reasons for
recusal "shall be filed not less than ten days before the beginning of the
term at which the proceeding is to be heard, or good cause shall be
shown for failure to file it within such time"). We also agree that it was
entirely lacking in merit. We therefore conclude that the Court did not
abuse its discretion in denying the motion, and affirm the Court's
August 4, 1999 order.

Attorneys Fees

In the conclusion of its opening appellate brief, New AC requests that
we set aside all attorneys fees and costs awarded by the District Court
to GM in this case. The District Court granted these fees in connection
with its determination, in its April 5, 2000 order, that New AC knowingly
infringed GM's trademarks and breached Article 17.5 of the Dealer
Agreement by continuing to use GM marks even after its termination as
a Chevrolet franchisee, and in connection with its May 11, 2000 order
holding New AC in civil contempt for failing to comply with the Court's
directive to cease the use of GM marks.

We find no basis for vacatur of the District Court's attorneys fees and

                               62
A True Copy:
Teste:

       Clerk of the United States Court of Appeals
       for the Third Circuit
_________________________________________________________________

costs award. New AC has never challenged the Court's grant of summary
judgment in GM's favor on the trademark infringement claims or on the
claim that New AC's post-termination use of the marks constituted a
breach of Article 17.5, and has never argued that the Court's civil
contempt finding was erroneous. Because our jurisprudence makes clear
that "[a]n issue is waived unless a party raises it in its opening brief,"
Reform Party of Allegheny County v. Allegheny County Dep't of Elections,
174 F.3d 305, 316 n.11 (3d Cir. 1999) (citation omitted), and because we
believe that a mere conclusory request for relief, unaccompanied by any
proffered basis for the grant of such relief, does not suffice to raise an
issue, we will deny New AC's request to vacate the District Court's
attorneys fees and costs award.

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