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09/22/89 the Kawasaki Shop of v. Kawasaki Motors

September 22, 1989

THE KAWASAKI SHOP OF AURORA, INC., PLAINTIFF-APPELLEE AND CROSS-APPELLANT

v.

KAWASAKI MOTORS CORPORATION, U.S.A., DEFENDANT-APPELLANT AND CROSS-APPELLEE



APPELLATE COURT OF ILLINOIS, SECOND DISTRICT

544 N.E.2d 457, 188 Ill. App. 3d 664, 136 Ill. Dec. 4 1989.IL.1482

Appeal from the Circuit Court of Kane County; the Hon. Patrick J. Dixon, Judge, presiding.

APPELLATE Judges:

JUSTICE NASH delivered the opinion of the court. McLAREN and REINHARD, JJ., concur.

DECISION OF THE COURT DELIVERED BY THE HONORABLE JUDGE NASH

Defendant, Kawasaki Motors Corporation, U.S.A. (the Manufacturer), appeals from a judgment in favor of plaintiff, The Kawasaki Shop of Aurora, Inc. (the Dealer), for $323,690 as compensatory damages, and $79,422.50 for attorney fees, in this action for breach of contract and alleged violation of the Motor Vehicle Franchise Act (Ill. Rev. Stat. 1987, ch. 121 1/2, par. 751 et seq.). The Manufacturer contends that the trial court erred in instructing the jury and that the verdict was against the manifest weight of the evidence.

In a cross-appeal, the Dealer contends that the trial court erred when it refused to treble the damage award, as it may do under the Act. We affirm the judgment of the circuit court in both the appeal and the cross-appeal.

The Kawasaki Shop of Aurora, Inc., maintained a Kawasaki dealership in Aurora, Illinois, under a franchise agreement entered into with Kawasaki Motors Corporation, U.S.A., in 1971. From 1971 to 1980, the business was located at Route 2 and U.S. 30 then relocated to New York Street, where it remained until 1982 when it moved to Hill Avenue. In 1980, the Dealer became a subsidiary of Capital Control, Ltd., when Capital Control acquired 100% of the stock of the Dealer from the owners, Bruce and Cathy Riemenschneider, in return for 30% of its own stock. Capital Control, which maintains a number of motorcycle sales franchises doing business as Fox Valley Cycles, was attempting to consolidate the market in motorcycle dealerships in Aurora with the ultimate aim of operating a multiple-brand dealership from one store. Capital Control had purchased a Suzuki franchise which it intended to move to a store from which it sold Honda products, and was also negotiating to purchase a Yamaha franchise to add to the Honda and Suzuki lines in one building. Capital Control wished to move the Dealer into the same shop. In the fall of 1981 the Dealer advised the Manufacturer that it intended to move the Kawasaki franchise and did move to 419 Hill Avenue in 1982, where the Honda and Suzuki franchises were located. Yamaha moved into the same store in 1985.

Following the change of ownership of Dealer in June 1981, a new dealership agreement was entered into between the Manufacturer and Dealer which provided in relevant part:

"A. DISTRIBUTOR hereby grants to DEALER during the continuance of this Agreement the privilege of purchasing for resale at DEALER'S place of business in the city and at the location indicated above designated Kawasaki brand motorcycles, and parts and accessories therefor supplied by DISTRIBUTOR (hereinafter collectively called 'Products').

B. DEALER will not move its place of business to any new or different location than that described in Paragraph 1, or establish any additional place or places of business for the sale, servicing or display of Products without the prior written consent of DISTRIBUTOR."

While the agreement required approval by the Manufacturer prior to a move to a new or different location, a dealer is not required to get approval to take on competitive motorcycle lines, and, in contemplation of this possibility, in paragraph 11, the agreement states the dealer's responsibility to provide representation of the Kawasaki products equal to that provided other brands or lines of products also sold. The contract further provided that the Manufacturer and Dealer agree that the Dealer's area of primary responsibility for the sales and service of the Kawasaki products shall be a five-mile radius of the dealer's place of business as specified in the contract. In June 1981, when the agreement was entered, the Kawasaki dealership had been located on New York Street for about a year. However, the agreement listed the dealer location as Route 2, U.S. 30, in Aurora, the address where it had been located from 1972 until 1980. Each of the locations at which the Dealer operated its Kawasaki franchise was within a five-mile radius of the location specified in the agreement.

In September 1981, Bruce Riemenschneider met with James Shevlet, the regional sales manager for the Manufacturer, who advised Riemenschneider that the Hill Avenue location was not suitable and he would not allow Riemenschneider to move in with Honda. In October 1981, Riemenschneider received a letter from the Manufacturer advising that Shevlet disapproved of the move from the Route 2, U.S. 30, address to the Hill Avenue location.

In February 1982, the Dealer moved from its actual location on New York Street to Hill Avenue. According to Riemenschneider, there had been no problems with the Manufacturer because of the past move, and they thought they had a good new location. In fact, the Manufacturer's district manager, Mr. Johnson, had assisted in the first move knowing that no written permission had been given. The move was within the same market area described in the contract and was made primarily to keep overhead down and to offer more convenient shopping for customers which would result in discounted prices to buyers. By letter of February 1982, effective May 1, 1982, the Manufacturer terminated Dealer's franchise contract, and it subsequently opened a new Kawasaki dealership about a mile and a half south of the Hill Avenue location to which it had objected.

The Dealer brought this action alleging that the Manufacturer's termination of the franchise violated the Motor Vehicle Franchise Act (Ill. Rev. Stat. 1987, ch. 121 1/2, par. 751 et seq.) and, in a second count of its complaint, alleged that the Manufacturer had breached its dealership contract. The complaint sought treble damages under the statutory action, alleging that the Manufacturer's conduct was willful and wanton, and attorney fees. The Manufacturer counterclaimed, alleging that the Dealer had breached its dealership contract by not obtaining approval prior to the move. The jury returned verdicts under both counts of the complaint in favor of the Dealer and assessed damages at $323,690. In response to a special interrogatory, the jury also found that the Manufacturer's violations of the Motor Vehicle Franchise Act were "willful and wanton." The trial court awarded the Dealer $79,422.50 as attorney fees pursuant to the Act, but did not award treble damages which are also allowed by the statute, finding it was not warranted in this case.

On appeal, the Manufacturer contends that certain instructions to the jury relating to the application of the Motor Vehicle Franchise Act were fatally defective. We consider first its argument that the jury was improperly instructed on the issue of "site control," which the Manufacturer was alleged to have unreasonably restricted in violation of the Act.

The court gave an instruction tendered by the Dealer, as follows:

"It shall be unlawful directly or indirectly to impose unreasonable restrictions on the motor vehicle dealer or franchisee relative to transfer, sale, right to renew, termination, discipline, site-control, compliance with subjective standards, and assertions of legal or equitable rights."

This instruction was based on section 7 of the Motor Vehicle Franchise Act, which provides:

"Unreasonable dealer or franchise restrictions. It shall be unlawful directly or indirectly to impose unreasonable restrictions on the motor vehicle dealer or franchisee relative to transfer, sale, right to renew, termination, discipline, non-competition covenants, site-control (whether by sublease, collateral pledge of lease, or otherwise), right of first refusal to purchase, option to purchase, compliance with subjective standards and assertion of legal or equitable rights." Ill. Rev. Stat. 1987, ch. 121 1/2, par. 757.

The Manufacturer objected on the grounds the instruction did not define the term "site-control" or include the parenthetical explanation in the statute "(whether by sublease, collateral pledge of lease, or otherwise)." It argues that no issue of site control was present in the case, asserting that the statute intended only to prohibit a manufacturer from controlling a dealership through a property interest in the real estate and buildings from which the dealership operated. The Manufacturer considers that the legislative intent to so limit application of the ...


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