United States District Court, N.D. Illinois
March 23, 2004.
NISSAN NORTH AMERICA, INC., Petitioner,
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
material fact regarding both of the issues that concerned the Seventh
Circuit, summary judgment is denied.
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
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
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,
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
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
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.
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 parties proceeded
under a different agreement altering the terms of the Dealer Agreement.
Summary judgment is appropriate "if the pleadings, depositions, answers
to interrogatories, and admissions on file, together with the affidavits,
if any, show that there is no genuine issue as to any material fact and
that the moving party is entitled to a judgment as a matter of law."
Fed.R.Civ.P. 56(c). When considering a motion for summary judgment, the
court must view the record and any inferences to be drawn from it in the
light most favorable to the party opposing summary judgment. See
Griffin v. Thomas, 929 F.2d 1210, 1212 (7th Cir. 1991). The party
opposing summary judgment may not rest upon the pleadings, but "must set
forth specific facts showing that there is a genuine issue for trial."
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). There
is no genuine issue for trial unless there is "sufficient evidence
favoring the non-moving party for a jury to return a verdict for that
In this case, the Seventh Circuit found that there is a genuine issue
as to whether a viable arbitration agreement governs the parties'
termination dispute. The Seventh Circuit, therefore, expressly asked this
court to resolve two key questions bearing on the arbitrability of that
dispute: (1) whether the Dealer Agreement containing the arbitration
clause expired on May 1, 1999, and (2) whether the parties entered into
any other agreements governing their relationship.
In so ordering, the Seventh Circuit expressed "doubts as to whether
Nissan produced sufficient evidence of arbitrability." M'Lady, 307 F.3d
at 602. Nissan has not presented additional undisputed facts in support
of its summary judgment motion that resolve those doubts and could allow
this court to rule as a matter of law. To the contrary, genuine disputes
of material fact remain regarding both of the issues that caused the
Seventh Circuit to remand.
First, there is a genuine dispute of material fact regarding the very
existence of an agreement to arbitrate this dispute. As the Seventh
a contract that by its own terms expired in 1999
cannot possibly be the basis of the parties' current
dealership arrangement, and thus the termination of
the current relationship cannot, at least absent
additional evidence, be said to relate in any way to
the expired contract.
M'Lady, 307 F.3d at 604. Nissan argues as it did before the Seventh
Circuit-that it "waived" the expiration date of the Dealer Agreement when
it repeatedly offered to extend the date of its Termination Notice.
However, that argument has the same flaw it had when it was rejected by
the Seventh Circuit. As the Seventh Circuit noted, "Nissan offers only
letters it sent to M'Lady offering to extend the term and never explains
whether or how M'Lady accepted those offers." Id. Moreover, the letters
on which Nissan relies do not contain offers to extend the contract
term, but rather offers by Nissan to forbear early termination of the
dealership based on M'Lady's purported breaches. Id.
Contrary to Nissan's argument that the Dealer Agreement is still in
force, M'Lady has offered evidence that (a) the Dealer Agreement expired
by its own terms on May 1, 1999, (b) Nissan's subsequent extension
letters made no express mention of extending the term of the Agreement,
(c) M'Lady expressly refused to sign Amendment No. 5 because it purported
to extend the Dealer Agreement's arbitration clause, and (d) in an April
14, 2000 conversation with M'Lady, Nissan's
Regional Vice President, Thomas Hushek, informed M'Lady that the
dealership was operating without a Dealer Agreement in place.*fn2 When
viewed in the light most favorable to M'Lady, those facts could allow a
reasonable juror to find that the Dealer Agreement expired on May 1, 1999
and that the parties did not agree to extend the expiration date.
Second, there is a genuine dispute of material fact as to the existence
of-and terms of-any agreements entered into by the parties after the
Dealer Agreement's expiration date. Nissan is correct that Jim M'Lady's
deposition sheds little light on M'Lady's allegation that the parties
entered into an oral contract subsequent to May 1, 1999. However, the
undisputed facts clearly reflect that the parties engaged in
near-constant negotiations after that date and that, in at least one
instance-the June 27 and July 6 correspondence appear to have entered
into an agreement that deviates in some respects from the requirements of
the Dealer Agreement. Nissan counters that even if the Dealer Agreement
expired by its terms the parties' "course of dealing" reflects the
parties' understanding of an implied extension to the Agreement. It is
possible that, after May 1, 1999, notwithstanding other negotiations, the
parties proceeded with the understanding mat their-relationship was still
governed by the strict terms of the Dealer Agreement. However, Nissan
not presented sufficient undisputed facts that would allow the court to
make that determination as a matter of law.
Resolution of the issues raised by the Seventh Circuit will require a
fact-intensive inquiry into the parties' intentions regarding the terms
governing their relationship throughout the termination dispute. For that
reason, summary judgment is inappropriate and this matter should proceed
to trial as contemplated in Section 4 of the Arbitration Act. 9 U.S.C.A.
§ 4 ("if the making of the arbitration agreement . . . be in issue, the
court shall proceed summarily to the trial thereof).