Jerry Meek, Distribution and Tax Lawyer

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Claims by Two NY Audi Dealers Move Forward

By Jerry Meek

Elsewhere, I’ve written about the power of the implied covenant of good faith and fair dealing as a litigation tool.  Last week, a New York appellate court proved the point, holding that claims by two auto dealers, based both on the express language of the Dealer Agreements and the implied covenant of good faith and fair dealing, could move forward.

In Legend Autorama, Ltd. v. Audi of America, Inc., 2012 WL 5503626 (N.Y.A.D.2 Dept.), Audi appealed the lower court’s decision denying Audi’s motion for summary judgment.  The plaintiffs in the case were two franchised Audi dealers, operating pursuant to identical Dealer Agreements with Audi.  They filed suit after Audi appointed a new dealer to operate at a location within 13 miles of the plaintiffs’ location.

The plaintiff dealers asserted three claims against Audi.  First, they argued that Audi was in breach of the express terms of the Dealer Agreement.  Second, they argued that Audi’s conduct constituted a breach of the implied covenant of good faith and fair dealing implied in that agreement.  Third, they argued that Audi had breached fiduciary duties they owed to the dealers.

The appellate court rejected the plaintiffs’ breach of fiduciary duty claims, noting that “a conventional business relationship, without more, is insufficient to create a fiduciary relationship.”  But the court allowed the plaintiffs’ breach of contract claims – based both upon the express provisions and the implied covenant – to go forward.

Echoing other courts, the New York Court observed that “implicit in every contract is a covenant of good faith and fair dealing, which encompasses any promise that a reasonable promisee would understand to be included.”  Audi argued that, since the Dealer Agreement specifically provided that the plaintiffs would be nonexclusive distributors, Audi had discretion to add new dealers even within existing dealers’ territories.  The Court rejected the argument, noting that “even an explicitly discretionary contract right may not be exercised in bad faith so as to frustrate the other party’s right to the benefit under the agreement.”

The plaintiffs also argued that Audi’s conduct breached an express provision of the Dealer Agreement, under which Audi agreed to “actively assist Dealer in all aspects of Dealer’s Operations through such means as Audi considers appropriate.”  There was evidence that, when other dealers were underperforming, Audi would permit them to implement action plans prior to opening new dealers in the area.  This they did not do in the case of the plaintiff dealers.  This evidence, according to the Court, was sufficient to allow the express breach of contract claim to move forward.

In the end, the Court’s decision to deny summary judgment on the implied covenant claim reflects the fact specific inquiry that any such claim requires.  Ordinarily, questions of good faith are to be decided by the jury and thus are inappropriate issues for summary judgment.  Here, the dealer plaintiffs got a bonus – even their express breach of contract claim survived.

Why Jerry Meek?

  • A practical problem solver who has helped businesses around the world meet the challenges of an increasingly complex legal and tax environment
  • A genuine commitment to offering legal services that exceed your expectations for a fair and reasonable fee
  • A lawyer with both impeccable academic credentials and real-world business experience
  • A seasoned litigator with a proven track record in the courtroom, with judgments in favor of clients as high as $45 million
  • The versatility to offer exceptional service across a comprehensive array of business needs
  • The unique insight that comes from representing business clients from Texas and New York to England and Wales
  • A passion to understand your business goals and to find smart, innovative ways to achieve them.

US-UK Legal Services

As a lawyer dually qualified both in several U.S. States and in England and Wales, Jerry is distinctively situated to assist U.S. companies doing business in the U.K. and U.K. companies doing business … Read More

Distribution Law

Jerry has extensive experience advising clients, across a range of industries and service sectors, that are engaged at all levels of the distribution chain.  He has represented clients ranging from heavy equipment manufacturers and dealers to … Read More

About Jerry

Jerry Meek has more than 23 years of experience in the law. He has represented clients in 18 states, providing outstanding service and excellent results in substantial and complex legal matters.  Jerry is licensed to practice law in North … Read More

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