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NISSAN NORTH AMERICA, INC. v. JIM M'LADY OLDSMOBILE

March 23, 2004.

NISSAN NORTH AMERICA, INC., Petitioner,
v.
JIM M'LADY OLDSMOBILE, INC. d/b/a JIM M'LADY NISSAN, Respondent



The opinion of the court was delivered by: JOAN GOTTSCHALL, District Judge

MEMORANDUM OPINION AND ORDER

Petitioner Nissan North America, Inc. ("Nissan") has sued to compel one of its dealers, respondent Jim M'Lady Oldsmobile, Inc. ("M'Lady"). to arbitrate a dispute concerning Nissan's termination of M'Lady's dealership, and to enjoin related, dealership-initiated proceedings before the Illinois Motor Vehicle Review Board. In June of 2001, the district court granted Nissan's petition and compelled arbitration, holding that the termination dispute fell under the arbitration clause of Amendment No. 4 to the parties' Dealer Agreement. However, the Seventh Circuit reversed the district court and remanded the case to this court for further proceedings to resolve the issues (1) whether the Dealer Agreement (and its arbitration clause) had expired, and (2) if so, whether the parties entered into any subsequent agreement covering this dispute. Nissan has moved for summary judgment, arguing that the undisputed facts show that the Dealer Agreement remained in force after its expiration date and that there was no subsequent oral agreement between the parties supplanting the terms of the Dealer Agreement. However, because there are genuine disputes of Page 2 material fact regarding both of the issues that concerned the Seventh Circuit, summary judgment is denied.

FACTUAL BACKGROUND

  hi 1992, Nissan and M'Lady executed a written "Dealer Agreement" that allowed M'Lady to operate as an authorized dealer of Nissan cars and trucks. Among other terms, the Dealer Agreement required M'Lady to construct an "Exclusive Nissan Showroon" by the Agreement's expiration date.*fn1

  The issue before this court — whether the parties' termination dispute should be sent to arbitration — hinges, in part, on whether (and when) the Dealer Agreement expired. The Agreement was initially set to expire automatically on April 1, 1995. However, the parties agreed to several amendments to the Agreement extending its term. The final amendment, "Amendment No. 4," was executed on May 18, 1998 and extended the Dealer Agreement's term to May 1, 1999. Unlike the original Dealer Agreement and prior amendments, Amendment No. 4 contained an expansive arbitration clause, providing that "Binding Arbitration with JAMS/ENDISPUTE, an independent and professional agency providing arbitration services," would be the exclusive means of resolving any dispute "arising out of the Dealer Agreement.

  On April 14, 1999 — about two weeks before the end of the Dealer Agreement's term — Nissan sent M'Lady a written notice of default based on M'Lady's alleged failure to complete an Exclusive Nissan Showroom. The notice gave M'Lady sixty days to cure the default. On June 25, 1999 — after M'Lady indicated that it was planning to commence construction on the showroom project — Nissan informed M'Lady that it would be willing to grant M'Lady a 180-day extension, Page 3 until December 14, 1999, to correct its breach. The June 25, 1999 letter did not expressly offer to extend the Dealer Agreement. After the new December deadline passed, Nissan, on January 19, 2000, issued a Notice of Termination, terminating M'Lady's dealership.

  However, over the following months — amid continuing negotiations between the parties — Nissan agreed to several stays of its termination of M'Lady's dealership. On May 8, 2000 — after M'Lady indicated to Nissan that it was considering selling the dealership — Nissan offered to stay the effective date of termination until July 14, 2000 to allow M'Lady to submit "an acceptable proposed transfer of assets."

  After further telephone cal Is and meetings between the parties, Nissan again offered to extend the termination date. On June 27, 2000, Nissan sent M' Lady a letter offering four different proposals on how the parties could proceed. Among other proposals, Nissan offered to extend the effective date of termination for another 90 days in exchange for M'Lady's promise either to remove all other makers' automobiles from the dealership, or to secure an acceptable proposal to sell the dealership. On July 6, 2000, M'Lady accepted Nissan's proposal. M'Lady claims that the June 27 and July 6 letters evidence that the parties had negotiated a new agreement setting the terms of their relationship.

  On August 2, 2000, Nissan sent M'Lady a proposed "Amendment No. 5" to the Dealer Agreement which reflected the terms of the parties' June 27 and July 6 correspondence and provided for an extension of the Dealer Agreement to January 8, 2001. Although the initial draft of Amendment No. 5 contained an arbitration clause similar to that appearing in Amendment No. 4, a later draft of Amendment No. 5 — signed by Nissan but not by M'Lady — did not contain that Page 4 clause. Ultimately, M'Lady refused to execute Amendment No. 5, telling Nissan that the Amendment did not accurately reflect the agreement of the parties and that M'Lady did not agree to arbitrate disputes between the parties. On October 3, 2000, Nissan issued its final Notice of Termination.

  M'Lady subsequently filed a protest with the Illinois Motor Vehicle Board ("MVB") challenging Nissan's termination of the dealership. M'Lady alleged in its October 20, 2000 protest petition that Nissan did not have good cause to terminate the dealership and, therefore, Nissan violated the Illinois Motor Vehicle Franchise Act, 815 ILCS § 710/4(d)(6).

  In February, 2001, Nissan filed a petition in the federal district court under the Federal Arbitration Act, 9 U.S.C. § 4, to compel arbitration of the termination dispute and enjoin the MVB proceedings. On June 21, the district court issued an order denying M'Lady's motion to dismiss Nissan's petition, staying the Board proceedings, and summarily granting Nissan's petition to compel arbitration. Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc., No. Ol-C-1290, 2001WL 709482 (N.D. Ill. June 25, 2001). The court held that M'Lady was required to arbitrate its dispute pursuant to the arbitration clause contained in Amendment No. 4. Id. at *8.

  On appeal, the Seventh Circuit reversed the district court, holding that outstanding issues regarding the existence of an agreement to arbitrate the termination dispute required further inquiry. Nissan North America, Inc. v. Jim M'Lady Oldsmobile, Inc., 307 F.3d 601, 602 (7th Cir. 2002). The Seventh Circuit remanded the case to this court for further proceedings to decide (1) whether the Dealer Agreement had expired, and (2) what — if any — other agreements governed the relationship between Nissan and M'Lady. Page 5

  ANALYSIS

  Nissan moves for summary judgment claiming that its petition to compel arbitration should be granted because (1) the 1992 Dealer Agreement and Amendment No. 4 to that Agreement remain in force and, therefore, continue to bind the parties to arbitrate their termination dispute, and (2) M'Lady has failed to show any evidence that the ...


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