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A Better Partnership
June 13, 2014

MSC finds that the statutory geographic limitations on exclusive car dealership that were in place in 2007 apply to a 2007 Dealer Agreement, despite a 2010 statutory amendment

In LaFontaine Saline, Inc. v. Chrysler Group, LLC, the Michigan Supreme Court found that the 2010 Amendment amendment to the Motor Vehicle Dealers Act (“MVDA”) does not apply retroactively to a 2007 manufacturer-dealer agreement. In 2007, Lafontaine Saline Inc. (“LaFontaine”) and Chrysler Group LLC (“Chrysler”) entered into a Dealer Agreement.  The agreement was subject to the MVDA, which limited Chrysler’s right to establish dealers of the same line of vehicles as LaFontaine within a relevant market area.  At the time of the 2007 Dealer Agreement, “relevant market area” was defined as a 6-mile radius.  However, in August 2010, the Legislature amended the MVDA to extend the relevant market area to a 9-mile radius.  Prior to the amendment, in February 2010, Chrysler and IHS Automotive Group, LLC (“IHS”), another Dodge automobile dealer, entered into a Letter of Intent (LOI).  The LOI provided that Chrysler would allow IHS to sell Dodge vehicles upon IHS’s satisfaction of certain conditions.  The proposed location for IHS’s Dodge dealership was outside six miles but within nine miles of LaFontaine’s existing dealership.  LaFontaine subsequently brought an action against Chrysler and IHS, challenging the proposed dealership.  Chrysler and IHS filed a motion for summary disposition, alleging that the LOI predated the 2010 amendment and that the 2010 amendment should not be applied retroactively.
 
The Washtenaw circuit court granted the defendants’ motions for summary disposition, finding that the LOI between Chrysler and IHS constituted a dealer agreement under the MVDA and that the 2010 amendment should not be applied retroactively.  The Court of Appeals reversed.  It concluded that the issue of retroactivity was immaterial because the LOI was not a dealer agreement.  Moreover, it held that LaFontaine had standing to sue since any dealer agreement would occur after the effective date of the 2010 amendment and the MVDA allows a dealer to bring a declaratory judgment upon notice of a manufacturer’s intent to establish a like-line dealership.
 
The Michigan Supreme Court agreed with the Court of Appeals that the LOI between Chrysler and IHS was not a “dealer agreement.”  The LOI did not establish their legal rights and obligations with regard to the purchase and sale or resale of new motor vehicles and accessories for motor vehicles, as the MVDA required.  At most, the LOI was an agreement to agree to a dealer agreement.  The Court found, however, that the Court of Appeals erred by limiting its analysis to the LOI.  First, the Court found that the 2007 Chrysler-LaFontaine Dealer Agreement did constitute a “dealer agreement” within the meaning of the MVDA.  The laws in existence when the agreement was made in 2007 should thereby establish the parties’ contractual rights.  The expansion of the relevant market area would create substantive rights for a dealer and diminish a manufacturer’s rights and expectations under contracts executed before the 2010 amendment.  Second, the Court found that nothing in the language of the statute suggested the Legislature’s intent that the law applies retroactively.  The Court found it compelling that the Legislature had used specific retroactive language in the past when amending the MVDA, but remained silent here.  Thus, the Court held that the six-mile relevant market area in effect in 2007 governs the 2007 manufacturer-dealer agreement at issue.
 
The Court vacated the judgment of the Court of Appeals and remanded the case to the trial court for reinstatement of summary disposition in favor of the defendants.

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