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Motor Werks Partners, LP v. General Motors LLC

United States District Court, N.D. Illinois, Eastern Division

March 14, 2017

Motor Werks Partners, LP, Plaintiff,
v.
General Motors LLC, Defendant.

          MEMORANDUM OPINION AND ORDER

          Manish S. Shah, United States District Judge

         Plaintiff Motor Werks and defendant General Motors are parties to a dealership agreement that governs the sale and service of Cadillac cars. When GM denied Motor Werks's request to relocate its Cadillac dealership, Motor Werks brought this action against GM under the Illinois Motor Vehicle Franchise Act. Motor Werks moves for summary judgment on Counts I and II of its first amended complaint. Count I seeks damages under the IMVFA and Count II seeks a declaration that GM violated the IMVFA. For the following reasons, Motor Werks's motion is denied.

         I. Background

         GM manufactures new motor vehicles and distributes its vehicles through a network of dealers. [146-3] at 2, ¶ 2.[1] GM authorizes dealers to sell GM's products and services using GM's trademarks through a Dealer Sales and Service Agreement. [146-3] at 2, ¶ 2. Through this agreement, GM seeks to protect its control over the use of its trademarks, including the way that its trademarks, such as Cadillac, are used at GM dealerships. [146-3] at 5, ¶¶ 11-12.

         Motor Werks has been a Cadillac dealer for GM since 1989. [146-1] ¶ 1. For at least the first nine years of its dealership business, Motor Werks operated its Cadillac dealership from an auto mall on South Barrington Road, in Barrington, Illinois.[2] Id. In 2000, GM authorized Motor Werks to relocate its Cadillac dealership to a property on Cook Street in Barrington, where Motor Werks would also begin operating an Oldsmobile dealership for GM.[3] Id.; [142-4] 13:13-24. Throughout their business relationship, Motor Werks and GM have been parties to several contracts.[4]

         Motor Werks and GM executed a Dealer Sales and Service Agreement on June 29, 2012. [146-3] at 10. It states:

If Dealer wants to make any change in the location(s) or Premises, or in the uses previously approved for those Premises, Dealer will give General Motors written notice of the proposed change, together with the reasons for the proposal, for General Motors [sic] evaluation and final decision in light of dealer network planning considerations. No change in location or in the use of Premises, including addition of any other vehicle lines, will be made without General Motors [sic] prior written authorization pursuant to its business judgment.[5]

         Earlier, in a Dealer Bulletin dated October 1, 2001, GM outlined its “Non-GM Dual Policy.” [146-1] ¶ 3. The policy discouraged dealers from selling or servicing non-GM products at GM dealerships because GM believed that diminished sales and service performance resulted from the commingling of GM and non-GM products. [146-3] at 69. As an incentive to dealers who complied with the non-dualing policy, GM offered discretionary benefits and privileges; seven such benefits and privileges were outlined in a non-exhaustive list in the Bulletin: (1) “Dealership eligible for Dealer Network Change Assistance if available”; (2) “Dealer Operator eligible for consideration for an additional dealer point established or supported by GM”; (3) “Dealership eligible for another GM brand at its dealership if available and consistent with GM Dealer Network Plan”; (4) “Dealership eligible for facility image stipend”; (5) “Dealer Operator eligible for new Motors Holding Investment if available”; (6) “Dealer Operator eligible to participate on GM dealer advisory boards as openings occur”; (7) “Dealership and Dealer Operator eligible for GM recognition activities commencing after January 1, 2002.” [146-3] at 69-70. Dealers who did not comply with the non-dualing policy were not eligible to receive these benefits or privileges. [146-3] at 70.

         Representatives from Motor Werks and GM met in 2011 to discuss a potential relocation of the Cadillac dealership; GM warned that it would require compliance with its policies, including the non-dualing policy. [146-1] ¶ 5. In August 2012, Motor Werks initiated a Change Request with GM to relocate the Cadillac dealership from the Cook Street location to the auto mall on South Barrington Road.[6] [146-1] ¶¶ 8, 12. Motor Werks explained in its correspondence to GM that the auto mall was undergoing renovations that it believed would “substantially increase service capacity.” [146-1] ¶ 12. Although Motor Werks had not submitted all the necessary information, GM replied to Motor Werks and explained that the auto mall violated the non-dualing policy and failed to meet GM's facility size standards, among other issues.[7] [146-1] ¶¶ 12-13; [146-3] at 6, ¶ 16. GM told Motor Werks it could relocate to the auto mall only if the Cadillac dealership was a separate standalone exclusive facility (per the non-dualing policy).[8] [142-6] 7:20-8:6. GM's disapproval of Motor Werks's proposal was only based on the preliminary information available, as GM noted: “Motor Werks has not yet supplied all the information needed to conduct a final review and assessment of Motor Werks's proposed relocation and, as a result, GM has not yet been able to determine whether Motor Werks's proposal would comply with GM's other requirements for approval.” [148-1] ¶ 29; [142-5] 8:11-21.

         Motor Werks continued to meet and corresponded with GM representatives about its relocation proposal. [146-1] ¶ 12. Simultaneously, Motor Werks enrolled in the Essential Brand Elements program (one of the facility image programs GM uses to encourage dealers to comply with the non-dualing policy).[9] [146-1] ¶ 9. Through the EBE program, GM gives dealers funds at the end of each quarter if they satisfy certain requirements in the areas of digital marketing, customer sales and service retention, facility image, and training. Id. If the dealer fails to satisfy one of these requirements while enrolled in the EBE program, it would not receive funds at the end of that quarter. [142-5] at 27. To help administer the EBE program, GM made arrangements with Gensler, a third-party architectural firm, to assist dealers in understanding the aesthetics and specific requirements of the facility image program, and to help dealers make design decisions when building or renovating a facility so that it complies with the EBE program. [142-5] at 34.

         Motor Werks obtained a consultation with Gensler for the Cook Street location. [146-1] ¶ 9. As part of the consultation, Gensler requested drawings as-built of the Cook Street location; Motor Werks had to hire an independent architect to create those drawings for Gensler. [142-4] 20:11-15. After Gensler analyzed the drawings, it sent Motor Werks a report about what changes would need to be made to bring the Cook Street location into compliance with the image requirements of the EBE program. [142-4] 20:16-24. Ultimately, Motor Werks decided it would not invest in making the Cook Street location compliant.[10] [142-4] 21:4-9. Motor Werks considered what it would cost to build a standalone exclusive Cadillac dealership at a separate Motor Werks site on Grove Street. [142-4] 14:12-24. James Hub, the president of Motor Werks, estimated it would cost six million dollars to build a standalone Cadillac facility at Grove Street.[11] [142-4] 15:4-21. He did not consider the cost of a standalone exclusive Cadillac facility at the auto mall because the property does not have the physical space to accommodate another building. [142-4] 17:1-7.

         From the time that Motor Werks enrolled in the EBE program in November 2012, until it fell out of compliance with the requirements in 2013, it received $879, 000 in payments from GM. [146-1] ¶¶ 9-10. If Motor Werks had continued to comply with the EBE program's requirements, GM would have paid Motor Werks approximately $641, 000 additional funds through September 30, 2016. [148-1] ¶ 11.

         In October 2013, Motor Werks offered to enter into a Performance Agreement and/or relinquish compliance with the EBE program in order for GM to authorize relocation of the Cadillac dealership to the auto mall. [146-1] ¶ 15. GM did not agree as it believed the proposal violated the non-dualing policy and was not in the best interest of the Cadillac brand. Id. Negotiations broke down and Motor Werks filed this lawsuit.

         The future location of Motor Werks's Cadillac dealership remains uncertain. Even if Motor Werks were to implement GM's suggestions for how to have a standalone exclusive Cadillac facility at the auto mall, Motor Werks would have to submit a new change request reflecting the new proposal; in turn, GM would start its process of reviewing the new proposal. [142-5] 7:9-8:7. GM would have to approve key metrics with respect to Motor Werks's new proposal, including: (1) site approval; (2) various milestone commitments (e.g., deadlines for real estate, facilities plans and deadlines related to image obligations, construction deadlines, beginning operations); (3) facility image requirements (in both appearance and layouts); (4) facility requirements (including space/premises requirements related to New Vehicle Display space/stalls requirements, both interior and exterior, Used Vehicle Display space/stalls requirements, and building size requirements); (5) new working capital requirements related to ...


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