                                                                                                                           Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


1-11-2008

Maple Shade Mtr Corp v. Kia Mtr Amer Inc
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-3971




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                                                                 NOT PRECEDENTIAL

                     UNITED STATES COURT OF APPEALS
                          FOR THE THIRD CIRCUIT


                                     No. 06-3971


                   MAPLE SHADE MOTOR CORPORATION
                D/B/A MAPLE SHADE KIA OF TURNERSVILLE,

                                                               Appellant

                                           v.

                          KIA MOTORS AMERICA, INC.

                                   _____________

           Appeal from Orders Entered by the United States District Court
                            for the District of New Jersey
                           Civil Action No. 04-cv-02224
                     District Judge: Honorable Joseph E. Irenas
                                    ____________

                    Submitted Under Third Circuit L.A.R. 34.1(a)
                               on January 8, 2008
                                 ____________

          Before: FISHER, HARDIMAN AND ALDISERT, Circuit Judges

                               (Filed January 11, 2008)



                                      OPINION


ALDISERT, Circuit Judge

     Because we write exclusively for the parties and the parties are familiar with the
facts and proceedings below, we will not revisit them here.

                                                I.

       The District Court did not err in granting summary judgment in favor of Kia

Motors America, Inc. (“KMA”) with respect to KMA’s good cause termination of its

franchise agreement with Maple Shade Motor Corporation. The New Jersey Franchise

Protection Act, N.J. STAT. ANN. §§ 56:10-1, et seq., (“NJFPA”) prohibits a franchisor

from terminating a franchise agreement without giving proper notice to the franchisee and

without good cause for the termination. Id. § 56:10-5. When evaluating the “good cause”

requirement for the termination of a franchise agreement, courts have focused their

inquiries on whether a franchisee has breached a material obligation of the franchise

agreement. See Gen. Motors Corp. v. New A.C. Chevrolet, Inc., 263 F.3d 296, 315-317

(3d Cir. 2001). In addressing this materiality requirement, this Court has stated that “a

breach is material if it ‘will deprive the injured party of the benefit that is justifiably

expected’ under the contract.” Id. at 315 (quoting 2 E. ALLEN FARNSWOTH, FARNSWORTH

ON CONTRACTS     § 8.16, at 497 (2d ed. 1998)).

       Here, the Addendum to the franchise agreement signed by Maple Shade and KMA

expressly stated that Maple Shade’s obligation to build an exclusive Kia showroom was a

material term of the parties’ agreement. This statement indicates that KMA was justified

in expecting Maple Shade to build the Kia showroom as it was integral to the parties’

agreement. See New A.C., 263 F.3d at 316. In addition, KMA’s conduct following Maple

Shade’s failure to meet the deadline for construction of the showroom emphasizes the

                                                2
materiality of the provision. KMA repeatedly admonished Maple Shade for its failure to

construct the showroom and encouraged Maple Shade to bring itself into compliance with

the agreement.

       Because Maple Shade failed to construct the showroom described in the

Addendum, Maple Shade breached a material and reasonable term of the parties’

agreement. Contrary to Maple Shade’s argument, its existing facilities did not

substantially comply with the terms of the Addendum as its existing facilities did not

provide KMA with a benefit that it justifiably expected under the Addendum, an

exclusive Kia showroom. By failing to construct the exclusive Kia showroom required by

the Addendum, Maple Shade committed a material breach of the franchise agreement and

gave rise to KMA’s good cause termination of the franchise agreement.

       Therefore, exercising plenary review, Northview Motors, Inc. v. Chrysler Motors

Corp., 227 F.3d 78, 87-88 (3d Cir. 2000), we are satisfied that the District Court did not

err in granting summary judgment in favor of KMA as no genuine issue of material fact

existed concerning KMA’s good cause termination of the franchise agreement.

                                             II.

       The District Court did not err in granting summary judgment in favor of KMA

with respect to Maple Shade’s claim that KMA improperly rejected its proposed transfer

of the Kia franchise to Vallee & Bowe, Inc. The NJFPA describes circumstances for a

franchisee’s proper transfer of an existing franchise and a franchisor’s proper rejection of

a franchisee’s proposed transfer. See N.J. STAT. ANN. § 56:10-6. In this case, KMA’s

                                             3
rejection of the proposed transfer was proper.

       According to the terms of the Consent Agreement executed at the outset of this

litigation, Maple Shade had only an interest in a franchise agreement subject to a notice of

termination. The Consent Agreement did not nullify the notice of termination; instead, it

preserved the status quo without “modify[ing], increas[ing] or diminish[ing] any of the

rights or obligations that either party would otherwise have after the dealer’s receipt of a

notice of termination.” App. 398A. The status quo at the time the Consent Agreement was

entered into was that Maple Shade had no rights in the franchise transferrable “free and

clear” of the notice of termination. See Restatement (Second) of Contracts § 336 cmt. b.

Because the District Court found that KMA had good cause to terminate the franchise

agreement with Maple Shade and the Consent Agreement preserved the status quo as it

existed after KMA issued the notice of termination, KMA’s rejection of the proposed

transfer “free and clear” did not contravene the NJFPA.

       In addition, the proposal for the transfer of the Kia franchise from Maple Shade to

Vallee & Bowe anticipated Vallee & Bowe temporarily housing Kia vehicles in its

Cadillac showroom until Vallee & Bowe could build a separate Kia showroom. When

Maple Shade presented the transfer proposal to KMA, Vallee & Bowe was unable to

provide any assurances that General Motors consented to the dualing of the Cadillac and

Kia vehicles in Vallee & Bowe’s Cadillac showroom. Therefore, Vallee & Bowe was

unable to commit to providing any Kia dealership facilities, let alone the exclusive

showroom required by the Addendum. Because Vallee & Bowe could not agree to meet

                                              4
all of the requirements of the existing franchise agreement, KMA’s rejection of the

proposed transfer was not prohibited by the NJFPA. See N.J. STAT. ANN. § 56:10-6.

       Therefore, exercising plenary review, Northview Motors, 277 F.3d at 87-88, we

are satisfied that the District Court did not err in granting summary judgment as Maple

Shade’s attempt to transfer the franchise “free and clear” of the notice of termination and

Vallee & Bowe’s inability to demonstrate that it could fulfill the requirements of the

agreement were proper bases for KMA to reject the proposed transfer.

       We have considered all of the contentions raised by the parties and conclude that

no further discussion is necessary.

       Accordingly, the judgment of the District Court will be affirmed.




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