Opinion
No. 20-CV-2039 CJW-KEM
2022-05-23
GENERAL MOTORS LLC, Plaintiff, v. KAR AUTO GROUP OF DECORAH, INC., d/b/a Decorah Chevrolet Cadillac, an Iowa Corporation, Defendant.
Jacob F. Fischer, Pro Hac Vice, Mark Thomas Clouatre, Pro Hac Vice, Megan Mary Ratcliffe, Pro Hac Vice, Nelson Mullins Riley & Scarborough LLP, Denver, CO, Stephen E. Doohen, Whitfield & Eddy PLC, Des Moines, IA, for Plaintiff. Aaron Thom, Pro Hac Vice, Thom Ellingson, PLLP, Minneapolis, MN, James H. Arenson, James W. Radig, John William Hofmeyer, IV, Arenson Law Group, PC, Cedar Rapids, IA, for Defendant.
Jacob F. Fischer, Pro Hac Vice, Mark Thomas Clouatre, Pro Hac Vice, Megan Mary Ratcliffe, Pro Hac Vice, Nelson Mullins Riley & Scarborough LLP, Denver, CO, Stephen E. Doohen, Whitfield & Eddy PLC, Des Moines, IA, for Plaintiff.
Aaron Thom, Pro Hac Vice, Thom Ellingson, PLLP, Minneapolis, MN, James H. Arenson, James W. Radig, John William Hofmeyer, IV, Arenson Law Group, PC, Cedar Rapids, IA, for Defendant.
ORDER
C.J. Williams, United States District Judge
TABLE OF CONTENTS
I. BACKGROUND...749
II. APPLICABLE LAW...750
A. Summary Judgment Standard...750
B. Iowa Breach-of-Contract...751
C. Iowa Code Chapter 322A...751
D. Iowa Law Regarding Additional Line-Makes...753
E. Iowa Law of Statutory Interpretation...754
III. DISCUSSION...754
A. The Applicability of Section 322A.22...755
B. Whether Section 322A.22 Voids the Contractual Provisions at Issue...757
1. Article 4.4.3...758
2. Article 4.4.2...762
IV. CONCLUSION...764
This matter is before the Court on defendant's motion for partial summary judgment on Count I of plaintiff's complaint. (Doc. 98). Plaintiff timely resisted this motion. (Doc. 113). Defendant timely filed a reply. (Doc. 121). For the reasons described below, the Court grants this motion.
This dispute turns on whether the terms "prohibit" and "restrict" in Iowa Code Section 322A.22 void contractual terms between the parties that do not on their face limit a dealership from adding or continuing other line-makes of vehicles but nevertheless affect a dealer's ability to do so. Based on the text and structure of Section 322A.22, the Court finds that they do. As a result, the contractual terms that plaintiff seeks to enforce against defendant in Count I are void such that they cannot support a breach-of-contract claim. The Court thus grants summary judgment in favor of defendant on Count I.
I. BACKGROUND
Plaintiff General Motors, LLC ("plaintiff" or "GM") is a manufacturer and distributor of motor vehicles that is organized under Delaware law and maintains a principal place of business in Detroit, Michigan. (Doc. 63, at 1). Defendant KAR Auto Group of Decorah, Inc., d/b/a/ Decorah Chevrolet Cadillac ("defendant") is an automobile dealer in Decorah, Iowa, that is organized under Iowa law and maintains a principal place of business in Decorah, Iowa. (Id. ). In 2003, defendant entered into two dealer sales and service agreements (the "Agreements") with plaintiff. (Docs. 63, at 3; 113-1, at 1). Under the Agreements, defendant was authorized to sell and service two General Motors "line-makes" of vehicles, namely Chevrolet and Cadillac, from the premises identified in the Agreements (the "GM Dealership Premises"). (Docs. 63, at 2; 113-1, at 1). Defendant formerly operated a separate automobile dealership adjacent to its GM Dealership Premises. (Docs. 113-1, at 6). The adjacent dealership (the "CDJR dealership") sold the Chrysler, Dodge, Jeep and Ram ("CDJR") line-makes, which are manufactured by Fiat Chrysler. (Id. ). In March of 2020, the entity operating the CDJR dealership merged into defendant. (Doc. 113-1, at 7). On June 10, 2020, defendant merged its CDJR operations into the operations at the GM Dealership Premises. (Id. ). The combination of line-makes from different manufacturers at a single dealership is called "dualing." (Doc. 63, at n.5).
Plaintiff raised a claim for breach-of-contract arising out of specific terms of the Agreements. (Doc. 63, at 18). In its orders, the Court provisionally recognized that those terms appear void by Section 322A.22. (Docs. 24, at 20; 163, at 1).
Plaintiff also requested declaratory judgments invalidating Section 322A.22 for violating the Contract Clauses of the United States Constitution and the Iowa Constitution. (Doc. 63, at 23, 26). On defendant's motion (Doc. 70), the Court dismissed plaintiff's requests for declaratory judgment for lack of ripeness. (Doc. 161, at 3–4). Therefore, it does not reach defendant's argument that plaintiff cannot avoid the operation of Section 322A.22 due to its constitutional challenge. (Docs. 98-1, at 8–9; 121, at 10–11). Similarly, because there are no constitutional claims at this stage, the Court does not reach plaintiff's argument that the Court should find that a narrower interpretation of Section 322A.22 applies, and thus not void 4.4.3 and 4.4.2, to "remove or ameliorate at last some of GM's constitutional concerns with the statute." (Doc. 113, at 21–22).
Plaintiff moved for orders requiring defendant "to conduct Chevrolet and Cadillac Dealership Operations in accordance with the Dealer Agreements[,]" preventing defendant from "using the GM Dealership Premises for any purpose not approved by [plaintiff] in writing, by any court, or by any other governmental authority with jurisdiction, specifically including without limitation an injunction prohibiting CDJR dealership operations at the GM Dealership Premises[,]"—that is, an injunction preventing defendant from "dualing." (Doc. 63, at 26). At the Court's direction, plaintiff also moved to appear before an administrative hearing to show "good cause" as to why it should terminate or refuse to continue the Agreements with defendant. (See Doc. 114).
II. APPLICABLE LAW
A. Summary Judgment Standard
Summary judgment is appropriate when "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). When asserting that a fact is undisputed or is genuinely disputed, a party must support the assertion by "citing to particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations ..., admissions, interrogatory answers, or other materials." FED. R. CIV. P. 56(c)(1)(A) ; see Celotex Corp. v. Catrett , 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Alternatively, a party may show that "the materials cited do not establish the absence or presence of a genuine dispute, or that an adverse party cannot produce admissible evidence to support the fact." FED. R. CIV. P. 56(c)(1)(B). More specifically, "[a] party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence." FED. R. CIV. P. 56(c)(2).
A fact is "material" if it "might affect the outcome of the suit under the governing law." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citation omitted). "An issue of material fact is genuine if it has a real basis in the record." Hartnagel v. Norman , 953 F.2d 394, 395 (8th Cir. 1992). It is also genuine "when a reasonable jury could return a verdict for the nonmoving party on the question," Woods v. DaimlerChrysler Corp. , 409 F.3d 984, 990 (8th Cir. 2005) (internal quotation marks omitted). Evidence that presents only "some metaphysical doubt as to the material facts," Matsushita Elec. Indus. Co. v. Zenith Radio Corp. , 475 U.S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), or evidence that is "merely colorable" or "not significantly probative," Anderson , 477 U.S. at 249–50, 106 S.Ct. 2505, does not make an issue of fact genuine. In sum, a genuine issue of material fact requires "sufficient evidence supporting the claimed factual dispute" that it "require[s] a jury or judge to resolve the parties’ differing versions of the truth at trial." Id. at 249, 106 S.Ct. 2505 (citation and internal quotation marks omitted).
The party moving for summary judgment bears "the initial responsibility of informing the district court of the basis for its motion and identifying those portions of the record which show a lack of a genuine issue." Hartnagel , 953 F.2d at 395. The plaintiff may not then simply point to allegations made in her complaint but must identify and provide evidence of "specific facts creating a triable controversy." Jaurequi v. Carter Mfg. Co. , 173 F.3d 1076, 1085 (8th Cir. 1999) (internal quotation marks omitted). When considering a motion for summary judgment, "[t]he court need consider only the cited materials, but it may consider other materials in the record." FED. R. CIV. P. 56(c)(3). Even so, the moving party does not meet its burden by simply providing a massive record, and the Court "will not sort through a voluminous record in an effort to find support for the plaintiff's allegations." Howard v. Columbia Pub. Sch. Dist. , 363 F.3d 797, 800 (8th Cir. 2004).
The moving party's burden of production turns on its burden of persuasion at trial. If the moving party bears the burden of persuasion on the relevant issue at trial, it must support its motion with credible evidence available under Rule 56(c) that would entitle it to a directed verdict if not challenged at trial. Celotex Corp. , 477 U.S. at 331, 106 S.Ct. 2548 ; Firemen's Fund Ins. Co. v. Thien , 8 F.3d 1307, 1310 (8th Cir. 1993). But, if the moving party does not bear the burden of persuasion at trial, it has two options to satisfy its Rule 56 burden of production. First, it may submit affirmative evidence that negates an essential element of the nonmoving party's claim. Celotex Corp. , 477 U.S. at 331, 106 S.Ct. 2548 ; see also Bedford v. Doe , 880 F.3d 993, 996 (8th Cir. 2018). Second, it may show that the nonmoving party's evidence is insufficient to establish an essential element of the nonmoving party's claim. Celotex Corp. , 477 U.S. at 331, 106 S.Ct. 2548 ; see also Bedford v. Doe , 880 F.3d at 996.
Once the moving party meets its burden of production, the nonmoving party must go beyond the pleadings and show by depositions, affidavits, or other evidence "specific facts which create a genuine issue for trial." See Mosley v. City of Northwoods , 415 F.3d 908, 910 (8th Cir. 2005) (internal quotation marks omitted). In determining whether a genuine issue of material fact exists, courts must view the evidence in the light most favorable to the nonmoving party, giving that party the benefit of all reasonable inferences that can be drawn from the facts. Tolan v. Cotton , 572 U.S. 650, 651, 134 S.Ct. 1861, 188 L.Ed.2d 895 (2014) ; Matsushita , 475 U.S. at 587–88, 106 S.Ct. 1348 (citation omitted); see also Reed v. City of St. Charles , 561 F.3d 788, 790 (8th Cir. 2009). A court does "not weigh the evidence or attempt to determine the credibility of the witnesses." Kammueller v. Loomis, Fargo & Co. , 383 F.3d 779, 784 (8th Cir. 2004). Rather, a "court's function is to determine whether a dispute about a material fact is genuine." Quick v. Donaldson Co. , 90 F.3d 1372, 1377 (8th Cir. 1996).
B. Iowa Breach-of-Contract
The Court hears plaintiff's breach-of-contract claim in diversity jurisdiction. (Doc. 63, at 1). In a diversity action, the Court is bound by the substantive law of the state in which it sits. Purina Mills, L.L.C. v. Less , 295 F. Supp. 2d 1017, 1027 (N.D. Iowa 2003). Neither party disputes that Iowa law governs, and both parties rely on and address Iowa statutory law in their briefs. (Docs. 113, at 5; 98-1, at 7). Under Iowa law, the elements of a breach-of-contract claim are:
(1) [T]he existence of a contract; (2) the terms and conditions of the contract; (3) that it has performed all the terms and conditions required under the contract; (4) the defendant's breach of the contract in some particular way; and (5) that plaintiff has suffered damages as a result of the breach.
Iowa Arboretum, Inc. v. Iowa 4-H Found. , 886 N.W.2d 695, 706 (Iowa 2016) (citation omitted).
C. Iowa Code Chapter 322A
Iowa Code Chapter 322A governs the legal relationship between vehicle franchisers and franchisees—that is, between vehicle manufacturers and vehicle dealers. "[C]hapter 322A was enacted ‘to assure the public that motor vehicle franchisers would not, without good cause, terminate or discontinue dealerships or open additional dealerships in any Iowa community.’ " Craig Foster Ford, Inc. v. Iowa Dep't of Transp. , 562 N.W.2d 618, 622 (Iowa 1997) ; accord Sioux City Truck Sales, Inc. v. Iowa Dep't of Transp. , 965 N.W.2d 192 (Iowa Ct. App. 2021). "In other words, if a franchiser introduces its new vehicles to an Iowa market, it must ensure that consumers retain continued access to dealer service." Id. The preamble to Iowa's Motor Vehicle Franchisers Act, which embraces Chapter 322A, "plainly states that ‘proper motor service is important to highway safety.’ " 1970 Iowa Acts ch. 1160; Id. , at 621–22 (Iowa 1997) (quoting Beckman v. Carson , 372 N.W.2d 203, 207 (Iowa 1985) ). It also reflects "that the statute was enacted ‘to provide for fair trade practices by motor vehicle franchisers.’ " 1970 Iowa Acts ch. 1160, p. 206; Beckman v. Carson , 372 N.W.2d 203, 207 (Iowa 1985).
For purposes of this order, the Court refers to franchisees and dealers interchangeably.
To accomplish this end, Section 322A.2 requires a franchiser who wishes to "terminate or refuse to continue any franchise" to establish two facts in an adversarial hearing: first, that the franchiser has good cause to terminate or refuse to continue the franchise; and second, that upon termination or noncontinuance, either another franchiser in the same line-make will become effective in the same community without diminishing motor vehicle service, or the community cannot be reasonably expected to support such a dealership. IOWA CODE § 322A.2.
Section 322A.2 also permits a franchiser to "terminate a franchise for a particular line-make if the franchiser discontinues that line-make" and to "terminate a franchise if the franchisee's license as a motor vehicle dealer is revoked pursuant to the provisions of chapter 322." Iowa 322A.2(2). Neither provision applies here.
At the hearing, the franchiser can show good cause to terminate or not continue based on certain circumstances or grounds, but not limited to these circumstances or grounds. IOWA CODE § 322A.15. These circumstances and grounds are:
a. Amount of business transacted by the franchisee[;]
b. Investment necessarily made and obligations incurred by the franchisee in the performance of the franchise's part of the franchise[;]
c. Permanency of the investment[;]
d. Whether it is injurious to the public welfare for the business of the franchisee to be disrupted[;]
e. Whether the franchisee has adequate motor vehicle service facilities, equipment, parts and qualified service personnel to reasonably provide consumer care for the motor vehicles sold at retail by the franchisee and any other motor vehicles of the same line-make[;]
f. Whether the franchisee refuses to honor warranties of the franchiser to be performed by the franchisee, provided that the franchiser reimburses the franchisee for such warranty work performed by the franchisee[;]
g. Except as provided in section 322A.11, failure by the franchisee to substantially comply with those requirements of the franchise which are determined by the department of inspections and appeals to be reasonable and material[; and]
h. Except as provided in section 322A.11, bad faith by the franchisee in complying with those terms of the franchise which are determined by the department of inspections and appeals to be reasonable and material.
In contrast, Section 322A.11 sets out several facts that cannot support a finding of good cause to terminate or refuse to continue a franchise:
1. The sole fact that franchiser desires further penetration of the market.
2. The change of ownership of the franchisee's dealership or the change of executive management of the franchisee’ dealership, unless the franchiser, having the burden of proof, proves that such change of ownership or executive management will be substantially detrimental to the distribution of the franchiser's motor vehicles in the community and that good cause for the termination or
noncontinuation of the franchise or for the establishment of an additional dealership otherwise exists.
3. The fact that the franchisee refused to purchase or accept delivery of any motor vehicle or vehicles, parts, accessories or any other commodity or service not ordered by the franchisee.
4. The fact that the dealership moved to another facility and location within the dealership's community which are equal to or superior to the dealership's former location and facility or the fact that the dealership added an additional line-make to the dealership if the dealership's facility is adequate to accommodate the additional line-make.
5. The fact that the dealership does not meet an index or standard established by the franchiser, unless the franchiser proves that the failure of the dealership to meet the index or standard will be substantially detrimental to the distribution of the franchiser's motor vehicles in the community and that good cause for the termination or noncontinuation of the franchise or for the establishment of an additional dealership otherwise exists.
Notably, franchisers cannot support good cause to terminate a dealer agreement with "the fact that the dealership added an additional line-make to the dealership if the dealership's facility is adequate to accommodate the additional line-make." IOWA CODE § 322A.11(4).
Section 322A.2 is not limited to the termination of a franchise relationship. See, e.g. , IOWA CODE § 322A.4 (barring a franchiser from "enter[ing] into any franchise for the purpose of establishing an additional motor vehicle dealership in any community in which the same line-make is then represented"); IOWA CODE § 322A.3A (barring a franchiser from "unreasonably alter[ing] a franchisee's community"). Most relevantly, Section 322A.22 voids any agreement term prohibiting or restricting a dealership's ability to add or continue an additional line-make.
D. Iowa Law Regarding Additional Line-Makes
Several provisions govern the present situation, where the franchisee purportedly violated a term of the franchise agreement when it added or continued additional line-makes in the dealership. Section 322A.22 voids any condition, stipulation, or provision in a franchise "prohibiting or restricting the franchisee from continuing another line-make at the dealership or adding an additional line-make to the dealership[.]"
Chapter 322A voids several other contractual terms. "A condition, stipulation, or provision in a franchise requiring a franchisee to waive compliance with or relieving a person of a duty or liability imposed by or a right provided by this chapter or order under this chapter is void." Iowa Code § 322A.21. Terms that require "the application of a law of another state" or that state that "the franchise is to be governed by or construed in accordance with the law of another state" are void. Iowa Code § 322A.20. Terms that "restrict[ ]" jurisdiction to a forum outside this state, or that provide that the franchisee consents to jurisdiction of a forum outside this state, are void. Iowa Code § 322A.19. Terms that require the franchisee to "provide its customer lists or service files to the franchiser" are void, but this does "not apply to notification by the franchisee to the franchiser of the delivery of a new motor vehicle to a customer[.]" Iowa Code § 322A.23.
Therefore, if the terms in the franchise agreement are found to prohibit or restrict the franchisee from continuing another line-make or adding another line-make to the dealership, then those terms are void, and the Court cannot enforce them. Miller v. Marshall Cnty. , 641 N.W.2d 742, 751 (Iowa 2002) ; RESTATEMENT (SECOND) OF CONTRACTS § 7 (1981). Furthermore, the franchiser cannot establish good cause for termination based solely on the franchisee's failure to substantially comply with the voided terms or to comply in good faith with those voided terms. Those grounds are available only if the department of inspections and appeals determines those terms to be "reasonable and material." IOWA CODE § 322A.15(g)–(h).
The franchiser, however, can still show "good cause" to terminate the franchisee under Sections 322A.2 and 322A.11 based on the franchisee's addition or continuation of another line-make if "the franchisee's dealership facility is not adequate to accommodate an additional line-make that has been added to the franchisee's dealership." IOWA CODE § 322A.22. It follows, of course, that the franchiser may not terminate the franchise if "the dealership's facility is adequate to accommodate the additional line-make." IOWA CODE § 322A.11(4).
E. Iowa Law of Statutory Interpretation
Because this dispute turns on the proper meaning of several terms in Section 322A.22, the Court recites the applicable law of statutory interpretation. Iowa courts "look for ‘a statute's meaning in the text of the statute, the words chosen by the legislature.’ " Schueller v. Gillies , 2021 WL 211166, at *6 (Iowa Ct. App. 2021) (quoting Fishel v. Redenbaugh , 939 N.W.2d 660, 663 (Iowa Ct. App. 2019) ) (collecting cases); see also Doe v. State , 943 N.W.2d 608, 610 (Iowa 2020) ("[I]n questions of statutory interpretation, ‘[w]e do not inquire what the legislature meant; we ask only what the statute means.’ ") (quoting Oliver Wendell Holmes, The Theory of Legal Interpretation , 12 HARV. L. REV. 417, 419 (1899) ). Using traditional interpretive tools, the Court seeks to determine the ordinary and fair meaning of the statutory language at issue. Doe , 943 N.W.2d at 610. If the "text of a statute is plain and its meaning clear, we will not search for a meaning beyond the express terms of the statute or resort to rules of construction." In re Estate of Voss , 553 N.W.2d 878, 880 (Iowa 1996) ; see also State v. Richardson , 890 N.W.2d 609, 616 (Iowa 2017) ("If the language is unambiguous, our inquiry stops there."); Sioux City Truck Sales, Inc. v. Iowa Dep't of Transp. , 965 N.W.2d 192 (Iowa Ct. App. 2021) (citing Krull v. Thermogas Co. , 522 N.W.2d 607, 612 (Iowa 1994) ). If the language of the statute is ambiguous or vague, the Court "may resort to other tools of statutory interpretation." State v. Doe , 903 N.W.2d 347, 351 (Iowa 2017) ; Doe , 943 N.W.2d at 610. Though the courts have avoided interpretations of statutes that appear contrary to their purposes, Iowa courts also "see no better way to advance the legislature's purposes than to give effect to the legislature's words[.]" Schueller , 2021 WL 211166 at *7 ; see also State v. Palmer , 554 N.W.2d 859, 865 (Iowa 1996) ("We will not undermine the legislature's policy decision[s] by ignoring the plain language of the statute.").
Dictionaries may help determine "the common and ordinary meaning of a word." Schueller , 2021 WL 211166 at *6. In determining the ordinary and fair meaning of the statutory language at issue, the Court considers the language's relationship to other provisions of the same statute and other provisions of related statutes. Doe , 943 N.W.2d at 610. Iowa courts do not interpret statutes so that they contain surplusage; put another way, each statutory word must be given legal effect. Bribriesco-Ledger v. Klipsch , 957 N.W.2d 646, 650–51 (Iowa 2021).
III. DISCUSSION
The Court grants defendant's motion for summary judgment on Count I because the terms of the Agreement on which plaintiff sues are void under Iowa Code Section 322A.22. Defendant argues that plaintiff's breach-of-contract claim fails as a matter of law because the contractual provisions are purportedly void by operation of Section 322A.22. (Doc. 98-1, at 3). Defendant then argues that plaintiff's own allegations concede that Section 322A.22 voids these terms. Plaintiff resists, asserting that Section 322A.22 does not apply to these terms for several reasons. (Doc. 113, at 10). Plaintiff then argues that even if Section 322A.22 applied, it does not void the terms breached. (Id. , at 13).
Because the Court finds that the terms of the Agreement are void, it does not reach defendant's contention that plaintiff "concedes and has represented to the Court that Iowa Code § 322A.22 voids ‘the provisions that [plaintiff] contends [defendant] has breached.’ " (Doc. 98-1, at 11–13).
Plaintiff alleges three specific breaches. First, plaintiff alleges that defendant breached Article 4.4.3 when it failed to maintain a GM Dealership Premises that satisfied plaintiff's minimum lot and building space requirements when defendant added CDJR operations and thus reduced the space available for Chevrolet and Cadillac sales and service at the GM Dealership Premises. (Doc. 63, at 18). Second, plaintiff alleges that defendant breached Article 4.4.2 when it added CDJR operations to the Dealership Premises without seeking or obtaining plaintiff's "prior written authorization." (Id. , at 19). Third, plaintiff alleges that defendant breached Article 4.4.2 when it refused to give plaintiff advance written notice of any proposed change in the use of the GM Dealership Premises, along with the reason(s) for the proposed change and instead gave "limited information that is incomplete, ambiguous, contradictory, insufficient, and yet still demonstrates plainly that (1) the GM Dealership Premises is not large enough for combined Chevrolet, Cadillac, and CDJR operations; and (2) [defendant] has unilaterally relocated Chevrolet and Cadillac Dealership Operations away from the GM Dealership Premises." (Id. , at 19–20).
Originally, plaintiff also alleged that defendant breached Article 4.4.1 when it appeared to be conducting Chevrolet and Cadillac Dealership Operations away from the GM Dealership Premises and in multiple disconnected buildings unauthorized by plaintiff, violating defendant's contractual requirement to conduct GM Dealership Operations only at the GM Dealership Premises. (Doc. 63, at 19). Plaintiff, however, appears to have withdrawn this allegation, asserting that it was based on admittedly incorrect information. (Doc. 113, at 13 n.3). The Court thus does not consider Article 4.4.1.
A. The Applicability of Section 322A.22
Plaintiff argues that Section 322A.22 does not apply to the asserted provisions. First, plaintiff asserts that defendant "provide[d] no evidence to support its assertions regarding section 322A.22." (Doc. 113, at 10).
As a preliminary matter, the Court rejects plaintiff's argument that defendant's lack of argument and evidence on the question of whether a provision prohibits or restricts defendant from adding an additional line-make defeats its motion for summary judgment. (See, e.g. , Doc. 113, at 10). The legal effect of a contract is a question of law, not fact. Grinnell Select Ins. Co. v. Cont'l W. Ins. Co. , 639 N.W.2d 31, 33 (Iowa 2002). Thus, defendant is not required to show there is no genuine issue of material fact regarding whether the contractual provisions violate Section 322A.22.
Second, plaintiff asserts that Section 322A.22 does not apply to the term of the Agreements because defendant relocated line-makes in June 2020 but did not add them. (Id. , at 11). Plaintiff argues that Section 322A.22 does not apply to this conduct because "[t]he statute voids only ‘[a] condition, stipulation, or provision in a franchise prohibiting or restricting the franchisee from ... adding an additional line-make to the dealership.’ " (Id. , at 11) (quoting IOWA CODE § 322A.22 ). Plaintiff first interprets the term "dealership" to mean the business entity, not the dealership facility or premises. (Id. ). Plaintiff then asserts that defendant "did not ‘add’ an additional line-make to its dealership in June 2020—it relocated operations for line-makes it already owned, from one building to another building on the same real estate parcel." (Id. ). Here, plaintiff argues, Section 322A.22 does "not address a dealership combining line-makes it already has into a single facility, which is what [defendant] did here." (Id. , at 13) (emphasis in original). The Court rejects this argument for several reasons.
First, this argument puts the car before the horse. The "[a]nalysis of whether a contract has been breached begins by determining whether the contract is enforceable." Ag Spectrum Co. v. Elder , 191 F. Supp. 3d 966, 970 (S.D. Iowa 2016), aff'd , 865 F.3d 1088 (8th Cir. 2017) (applying Iowa law). Thus, the question of whether Section 322A.22 voids the Agreement provisions does not first turn on how defendant purportedly breached those provisions.
Second, plaintiff's argument also veers off the plain text of Section 322A.22. As defendant notes (Doc. 121, at 6), and contrary to plaintiff's characterization (Doc. 113, at 11), Section 322A.22 voids "[a] condition, stipulation, or provision in a franchise prohibiting or restricting the franchisee from continuing another line-make at the dealership or adding an additional line-make to the dealership[.]" IOWA CODE § 322A.22 (emphasis added). Here, even if the Court found that defendant did not add a new line-make to the dealership in June 2020, the Court would nevertheless find that defendant continued the challenged line-makes. Therefore, Section 322A.22 would still apply to this conduct.
Even if the Court found that the terms did not restrict defendant from continuing another line-make, it would reject plaintiff's interpretation of the term "dealership" as the business entity, not the facility. (Doc. 113, at 11). Plaintiff identifies a difference between "the franchisee's dealership facility" and the term "dealership" in Section 322A.22. (Id. ). Plaintiff then asserts that the ordinary and commonly understood meaning of "dealership," as derived from dictionaries, is a business entity. (Id. ). Merriam-Webster defines "dealership" as "an authorized sales agency." Dealership, Merriam-Webster , https://www.merriam-webster.com/dictionary/dealership (last visited May 3, 2022). Collins defines "dealership" as "a company that sells cars, usually for one car company." Dealership, Collins , https://www.collinsdictionary.com/dictionary/english/dealership (last visited May 3, 2022). Black's Law Dictionary defines "dealer" as, most applicably, "one who buys to sell." Dealer , BLACK'S LAW DICTIONARY (10th ed. 2014).
The Court, however, rejects plaintiff's definition of "dealership" as the business entity, based on the other provisions of the same statute and other provisions of related statutes. Though plaintiff also asserts that Section 322A.22 refers both to a "dealership" and a "dealership facility" and therefore "the term ‘dealership’ must refer to something different from the particular facility where dealership operations are conducted" (Doc. 113, at 11), the other provisions of Chapter 322A defeat this argument.
First, though Section 322A.1 does not define a dealership, it defines a franchisee as "a person who receives motor vehicles from the franchiser under a franchise and who offers and sells such motor vehicles to the general public." IOWA CODE § 322A.1(6). Defining "dealership" as the business organization would therefore render the term "franchisee" surplusage within Section 322A.22.
A "person" is a "sole proprietor, partnership, corporation, or any other form of business organization." Iowa Code § 322A.1.9.
Second, also as defendant notes (Doc. 121, at 5), Section 322A.1 defines an "[a]dditional motor vehicle dealership" to "include[ ] a facility providing manufacturer-authorized or distributor-authorized service or warranty work for motor vehicles ... of a line-make in a community in which the same line-make is represented." This definition also supports a finding that the term "dealership" in Section 322A.22 does not embrace the business organization.
Third, plaintiff's offered reading ignores the geographical phrase "continuing another line-make at the dealership," which cannot be reconciled with plaintiff's definition of dealership as solely the legal business entity.
Furthermore, as defendant notes, to the extent plaintiff argues that Section 322A.22 only protects franchisees’ business mergers, that construction would be surplusage when read in conjunction with Section 322A.12, which permits franchisees to sell or transfer ownership of a "franchisee's dealership" without the franchiser's permission. (Doc. 121, at 7). Thomas v. Gavin , 838 N.W.2d 518, 524 (Iowa 2013) ("We do not interpret statutes so they contain surplusage."); see also Iowa Code § 4.4(2) ("In enacting a statute, it is presumed that ... [t]he entire statute is intended to be effective.").
Last, as defendant notes (Doc. 121, at 5), Section 322A.4 provides that "[n]o franchiser shall enter into any franchise for the purpose of establishing an additional motor vehicle dealership in any community in which the same line-make is then represented[.]" The use of community indicates that the dealership is understood to be situated in a community, an area of responsibility as stipulated in the franchise. IOWA CODE § 322A.1(2). In other words, it embodies an idea of a physical location, not a business entity.
The Court finds, therefore, that Section 322A.22 applies to the terms of the Agreements at issue.
B. Whether Section 322A.22 Voids the Contractual Provisions at Issue
The Court next considers whether Section 322A.22 voids the terms of the Agreements on which plaintiff sues for breach-of-contract. As plaintiff notes, the alleged breaches "implicate two provisions of the Dealer Agreements: Articles 4.4.2 and 4.4.3." (Doc. 113, at 13).
The Court previously asserted that Articles 4.4.2 and 4.4.3 appear void under Iowa Law, but that determination is accorded no binding force. (Doc. 24, at 20).
Parties’ arguments turn on whether the terms "prohibit" and "restrict" in Section 322A.22 void contractual terms that do not on their face limit a dealer's ability to add or maintain other line-makes but nevertheless do so. Based on the text and structure of Section 322A.22, the Court finds that they do. As a result, the Court finds that the terms of the Agreements that plaintiff seeks to enforce against defendant in Count I are void. Therefore, they do not support a breach-of-contract claim.
Plaintiff argues that Articles 4.4.2 and 4.4.3 do not "prohibit" or "restrict" defendant from continuing or adding another line-make. (Doc. 113, at 13–19). First, plaintiff argues, the statutory terms "prohibiting" and "restricting" only apply to direct prohibitions and direct restrictions on dualing. (Id. , at 14). Second, plaintiff argues that the statutory term "restricting" does not apply to de minimis or minor burdens. (Id. , at 16). For the reasons discussed below, the Court rejects both arguments.
Again, Iowa courts "look for ‘a statute's meaning in the text of the statute, the words chosen by the legislature.’ " Schueller , 2021 WL 211166 at *6 ; see also Doe , 943 N.W.2d at 610. Using traditional interpretive tools, the Court seeks to determine the ordinary and fair meaning of the statutory language at issue. Id. If the "text of a statute is plain and its meaning clear, we will not search for a meaning beyond the express terms of the statute or resort to rules of construction." In re Estate of Voss , 553 N.W.2d at 880 ; see also State v. Richardson , 890 N.W.2d at 616 ; Sioux City Truck Sales, Inc. , 965 N.W.2d at 192. If the language of the statute is ambiguous or vague, the Court "may resort to other tools of statutory interpretation." State v. Doe , 903 N.W.2d at 351 ; Doe , 943 N.W.2d at 610. Though the courts have avoided interpretations of statutes that appear contrary to their purposes, Iowa courts also "see no better way to advance the legislature's purposes than to give effect to the legislature's words[.]" Schueller , 2021 WL 211166 at *7 ; see also State v. Palmer , 554 N.W.2d at 865.
Dictionaries may help determine "the common and ordinary meaning of a word." Schueller , 2021 WL 211166 at *6. In determining the ordinary and fair meaning of the statutory language at issue, the Court considers the language's relationship to other provisions of the same statute and other provisions of related statutes. Doe , 943 N.W.2d at 610. Iowa courts do not interpret statutes so that they contain surplusage; put another way, each statutory word must be given legal effect. Bribriesco-Ledger , 957 N.W.2d at 650–51.
1. Article 4.4.3
Plaintiff argues that Article 4.4.3 does not prohibit or restrict defendant from dualing. Article 4.4.3 states the following:
4.4.3 Size
Dealer agrees to provide Premises at its approved location(s) that will promote the effective performance and conduct of Dealership Operations, and General Motors image and goodwill. Consistent with General Motors dealer network planning objectives and General Motors interest in maintaining the stability and viability of its dealers, Dealer agrees that its facilities will be sized in accordance with General Motors requirements for that location.
(Doc. 63, at 5).
Plaintiff first argues that a term must directly prohibit or restrict the franchisee from dualing, rather than impose an indirect burden by being more difficult to satisfy after adding an additional line-make. Plaintiff argues that contractual provisions "are only voided if they actively serve as a prohibition or restriction on adding an additional line-make." (Doc. 113, at 18). They are not voided, plaintiff says, based off "[t]he mere fact that [they] become[ ] more difficult to meet after an additional line-make is added[.]" (Id. ). For example, provisions that become more expensive to comply with upon the addition or continuance of an additional line-make would not "restrict" the franchisee from adding or continuing the line-make. (Id. , at 16). Terms of the Agreements that are "not affected by the addition of a non-GM line-make" and "do not differ based on whether [the] dealers have other, non-GM line-makes in their facility" would not "have [a] direct effect on an Iowa dealer's ability to add additional line-makes." (Id. , at 14). Provisions that the franchisee could breach even without adding an additional line-make would not fall under "restricting," under plaintiff's telling. (Id. , at 15). Obligations that are "not linked to the addition of a line-make" would not restrict the ability to add a new line-make. (Id. , at 16).
Section 322A.22 states:
A condition, stipulation, or provision in a franchise prohibiting or restricting the franchisee from continuing another line-make at the dealership or adding an additional line-make to the dealership is void. This section does not limit a franchiser from establishing good cause for the termination of a franchise pursuant to sections 322A.2 and 322A.11 on the grounds that the franchisee's dealership facility is not adequate to accommodate an additional line-make that has been added to the franchisee's dealership.
Chapter 322A does not define "prohibiting" or "restricting." IOWA CODE § 322A.1. Therefore, the Court must find the ordinary and common usage of those terms. Black's Law Dictionary defines "prohibition" as "a law or order that forbids a certain action." Prohibition , BLACK'S LAW DICTIONARY (10th ed. 2014). Similarly, Merriam-Webster defines "prohibiting" as to "forbid by authority" or to "prevent from doing something." Prohibit, Merriam-Webster , https://www.merriam-webster.com/dictionary/prohibiting (last visited May 3, 2022).
In contrast, Black's Law Dictionary defines "restriction" as: a "[c]onfinement within bounds or limits; a limitation or qualification" or alternatively "a limitation (esp[ecially] in a deed) placed on the use or enjoyment of property." Restriction , BLACK'S LAW DICTIONARY (10th ed. 2014). Merriam-Webster, as of 2022, defines "restrict" as "to confine within bounds" or to "place under restrictions as to use or distribution." Restrict, Merriam-Webster , https://www.merriam-webster.com/dictionary/restrict (last visited May 3, 2022).
These dictionary definitions do not resolve whether a contractual term "restricts" dualing only if it directly or on its face limits a dealership's ability to dual. Under the above definitions, a restriction may best be read as a confinement within bounds or limits. Whether by itself or in context with the word "prohibiting," the dictionary definitions do not say anything about whether this restriction is direct, that is, written in the contract term, or indirect, coming about as a practical consequence.
Turning to the statutory structure, however, the Court finds that interpreting "prohibiting" and "restricting" to mandate a "direct effect" and apply only to terms that explicitly discuss dualing would render the rest of Section 322A.22 to be surplusage. Again, Iowa courts also look to "the context of the language at issue." Thomas , 838 N.W.2d at 523. Furthermore, Iowa courts do not interpret statutes to contain surplusage. Id. at 524. A statute is to be assessed "in its entirety, not just isolated words or phrases." Willard v. State , 893 N.W.2d 52, 61 (Iowa 2017) (quoting DuTrac Cmty. Credit Union v. Hefel , 893 N.W.2d 282, 294 (Iowa 2017) ).
Here, the first line of Section 322A.22 voids any term in a franchise "prohibiting or restricting the franchisee from continuing another line-make at the dealership or adding an additional line-make to the dealership[.]" IOWA CODE § 322A.22. Therefore, if those terms are found to prohibit or restrict the franchisee from continuing another line-make or adding another line-make to the dealership, they cannot support a breach-of-contract claim in federal court. In addition, if those terms are void, the franchiser cannot establish good cause for termination based solely on the franchisee's failure to substantially comply with the voided terms or to comply in good faith with those voided terms. Those grounds are available only if the department of inspections and appeals determines those terms to be "reasonable and material." IOWA CODE § 322A.15(g)–(h).
Chapter 322A's other use of "restrict" does not support plaintiff's proposed definition. It provides that terms that "restrict[ ]" jurisdiction to a forum outside this state are void. Iowa Code § 322A.19. Even here, the Court finds nothing that limits "restrict" to a facial restriction on jurisdiction. Should any contractual terms that indirectly affect jurisdiction be created, there is no textual reason this provision does not apply. Furthermore, unlike Section 322A.19, Section 322A.22 supplies the word "prohibiting" in addition to the word "restricting." Therefore, even if Section 322A.19 were to void only "direct" restrictions, its definition would not apply to Section 322A.22 ’s use of "restricting."
The statutory structure and the second sentence of Section 322A.22 show that a term "prohibiting or restricting the franchisee from [dualing]" embraces terms governing the adequacy of the dealership's facilities that do not limit dualing on their face but limit dualing in effect—for example, making dualing more expensive. As defendant notes (Doc. 131, at 7) and contrary to plaintiff's argument (Doc. 113, at 18), if "restricting" were limited only to direct/facial "restrictions" of dualing, there would be no need for the rest of Section 322A.22. Plaintiff's reading would not void terms governing the adequacy of the dealership's facilities, for instance, terms that only make dualing more expensive. Therefore, the franchiser could raise the failure to comply with these terms as good cause to terminate the franchise agreement through Subsections 322A.15(g) and (h). There would be no need to reiterate that the franchiser may assert good cause to terminate the franchise because the dealership facility is not adequate to accommodate an additional line-make.
Plaintiff, seeking to enforce the terms of the Agreements (Doc. 63, at 26), appears to argue that when the franchisee breaches the terms of the franchise, termination of the contract cannot sensibly be the only means to escape the franchise agreement, because "a franchiser cannot terminate a franchise based on contract principles alone." (Id. , at 18) (citing Craig Foster Ford , 562 N.W.2d at 622 ). This argument, however, misreads the case: though Craig Foster Ford notes that a franchiser cannot terminate a franchise based on contract principles alone, this is because the franchiser cannot terminate the franchise unless it shows to an administrative agency good cause for termination or noncontinuance and shows that another franchise in the same line-make will be effective in the same community. Craig Foster Ford , 562 N.W.2d at 622 (discussing IOWA CODE § 322A.2). That case does not discuss the availability or lack of other remedies.
The Court rejects plaintiff's argument that any other interpretation "leads to absurd and negative results." (Doc. 113, at 16). To the extent plaintiff worries about the "many obligations under the Dealer Agreements that could potentially be affected by the addition of a new line-make[,]" (Id. , at 12–13), Section 322A.22 again does not prevent the franchiser from "establishing good cause for the termination of a franchise ... on the grounds that the franchisee's dealership facility is not adequate to accommodate an additional line-make that has been added to the franchisee's dealership." IOWA CODE § 322A.22.
The Court finds that this interpretation of "restricting" does not "result[ ] in the wholesale erasure of fundamental provisions of the Dealer Agreements[,]" and thus does not reach plaintiff's argument about whether "such a massive loophole" fits the legislative scheme. (Doc. 113, at 17). Even if it did, plaintiff's assertion that a franchiser's ability to "selectively void various obligations by adding a line-make" does not serve Chapter 322A's purposes (id. , at 13), misunderstands those purposes. Again, "chapter 322A was enacted ‘to assure the public that motor vehicle franchisers would not, without good cause, terminate or discontinue dealerships or open additional dealerships in any Iowa community.’ " Craig Foster Ford, Inc. , 562 N.W.2d at 618, 622 ; accord Sioux City Truck Sales, Inc. , 965 N.W.2d 192. "In other words, if a franchiser introduces its new vehicles to an Iowa market, it must ensure that consumers retain continued access to dealer service." Id. Chapter 322A's purposes are served by requiring the franchiser to show good cause to terminate a franchise, beyond the franchisee's violation of the franchise terms. If the franchisee's addition of another line-make impairs the adequacy of its dealership facility, the franchiser may raise that addition as good cause to terminate the franchise. IOWA CODE § 322A.22.
Finally, plaintiff's cited precedent on the analysis of "restrict" does not apply, because it stems from an analysis of a different statute using different language. (Doc. 113, at 16). In that case, the Court of Appeals for Iowa considered the meaning of the term "use restrictions" in Section 614.24(1). Schueller , 2021 WL 211166, at *7. The court began by analyzing the word "use." From dictionaries, it found that "use" means "the act or practice of employing something." See id. (citing Use , Merriam-Webster.com, https://www.merriam-webster.com/dictionary/use (last visited Dec. 18, 2020); accord Use , BLACK'S LAW DICTIONARY (11th ed. 2019) (defining "use" as the "employment of something")). From there, it found that a "use restriction" on a townhouse would mean a "limitation on" how the townhouse can be "employ[ed]." Id. ; see also Restriction , Merriam-Webster.com, https://www.merriam-webster.com/dictionary/restriction (last visited Dec. 18, 2020) (defining "restriction" to mean, among other things, "a limitation on the use or enjoyment of property or a facility"). The court then discussed an amendment codified after the conduct in question, which defined the term "use restrictions"; the court, however, did not decide the amendment's applicability to the conduct. Schueller , 2021 WL 211166, at *8. Though plaintiff characterizes the Schueller court as saying that "restrictions" are not "merely obligations to pay money," and though plaintiff applies that purported definition, the Schueller court instead said that "use restrictions" are not merely obligations to pay money. Id. , at *7 (emphasis added).
Here, the language is different. In the statute analyzed by the Schueller court, the term "restrictions" only appeared in the phrase "use restrictions," which a later-added provision defined to include "prohibitions." IOWA CODE § 614.24(5). Until that amendment, the term "restrictions" never accompanied the term "prohibitions." IOWA CODE § 614.24(5). Here in contrast, in Section 322A.22, the term "restricting" follows the term "prohibiting" in the text of the same provision. To avoid surplusage, the Court cannot read "restricting" to mean the same thing as "prohibiting." Furthermore, Chapter 322A furnishes no definition of restriction, let alone one that includes the term "prohibits."
The Court does not reach plaintiff's argument that the terms of the Agreements are only contractual obligations, not restrictions, because that argument stems from a reading of "restriction" that the Court has rejected. (Doc. 113, at 16).
For the reasons above, the Court does not read "restricting" to be limited only to direct restrictions.
The Court turns to whether Article 4.4.3 restricts defendant's ability to dual, where "restricting" is not limited to limitations on the face of the terms of the Agreements. Again, under that Article, the "Dealer agrees that its facilities will be sized in accordance with General Motors requirements for that location." (Doc. 1, at 3–4). These space requirements limit the franchisee's ability to dual because the franchiser may impose size requirements that leave aside insufficient room for vehicles of other line-makes. For example, the General Motors requirements could require facility sizes that preclude the addition of other line-makes. Furthermore, as defendant notes (Doc. 121, at 9–10), it appears that plaintiff also views these space requirements as limiting defendant's ability to dual: plaintiff claims that the terms of the Agreements were violated when defendant added other line-makes, and seeks to use those terms to "prohibit[ ] CDJR dealership operations at the GM Dealership Premises." (Doc. 63, at 26). The Court does not find persuasive plaintiff's argument that defendant "could have taken any number of actions that would have allowed it" to dual without violating Article 4.4.3 (Doc. 113, at 14–15), because a party is subject to a restriction even if that party can comply with that restriction.
Plaintiff has provided specific facility size standards for franchisees such as defendant. (Doc. 18-2, at 24).
The Court thus finds that the terms of the Agreements restrict defendant's ability to add or continue another line-make. Therefore, they are void under Iowa law, and cannot support a breach-of-contract claim.
2. Article 4.4.2
Article 4.4.2 states the following:
4.4.2 Change in Location or Use of Premises: If Dealer wants to make any change in 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 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 prior written authorization pursuant to its business judgment.
(Doc. 63, at 4) (emphasis added).
The first sentence imposes a "written notice" requirement: that the dealership give plaintiff written notice of the proposed change for plaintiff's evaluation and final decision. (Id. ). The second sentence imposes a "prior written authorization" requirement for the addition of any other vehicle lines. (Id. ). The Court finds that both requirements restrict the franchisee's ability to sell other line-makes at the dealership, and both are therefore void.
Turning first to the "written notice" requirement, the Court rejects plaintiff's argument that the obligations to submit accurate and complete information do not relate to or focus on adding line-makes but are rather merely fundamental to operating a dealership. (Doc. 113, at 19). The Court construes this as an argument that only provisions directly affecting the ability to dual are provisions "restricting" the ability to dual. For the reasons above, the Court rejects that argument. Therefore, the fact that these obligations do not "relate to or focus on adding line-makes" does not save them from Section 322A.22 ’s voiding provision. (Id. ).
The Court also rejects plaintiff's argument that "[p]roviding [it] with notice of a proposed change in use of a dealership premises represents a very minor burden compared to the work involved in combining operations of multiple line-makes." (Id. ). First, this argument misconstrues the Agreements’ terms itself because the franchisee must give this notice "for [plaintiff's] evaluation and final decision in light of dealer networking planning considerations." (Id. ) (emphasis added). The final decision implies the possibility of denial, thus creating a restriction. Second, the Court rejects plaintiff's argument that the term "restricting" does not apply to facial terms that only impose "minor burdens." (Id. ). Plaintiff argues that a term restricts a franchisee from continuing another line-make or adding another line-make only when it actually prevents the franchisee "from acting in a certain way, whether partially or fully[,]" not when the operation of the term imposes a de minimis effect or burden on the franchisee's ability to add or continue a line-make. (Id. , at 16). The Court, however, finds nothing in the text of Section 322A.22 to support this reading.
Again, absent a statutory definition, the Court looks for the ordinary meaning, and may use dictionaries for this purpose. Black's Law Dictionary defines "prohibition" as: "a law or order that forbids a certain action." Prohibition , BLACK'S LAW DICTIONARY (10th ed. 2014). Similarly, Merriam-Webster, as of 2022, defines "prohibiting" as to "forbid by authority" or to "prevent from doing something." Prohibit, Merriam-Webster , https://www.merriam-webster.com/dictionary/prohibiting (last visited May 3, 2022). In contrast, Black's Law Dictionary defines "restriction" as: a "[c]onfinement within bounds or limits; a limitation or qualification" or alternatively "a limitation (esp[ecially] in a deed) placed on the use or enjoyment of property." Restriction , BLACK'S LAW DICTIONARY (10th ed. 2014). Merriam-Webster, as of 2022, defines "restrict" as "to confine within bounds" or to "place under restrictions as to use or distribution." Restrict, Merriam-Webster , https://www.merriam-webster.com/dictionary/restrict (last visited May 3, 2022). Here, reading "restricting" in the context of "prohibiting," the Court finds that "restricting" is meant to capture burdens that fall short of an outright prohibition. The dictionary definitions, however, do not provide a lower bound for these burdens. These definitions do not indicate that the ordinary and common understood meaning of "restrict" excluded an unspecified lower bound, or a de minimis restriction.
Turning to statutory structure, the Court notes that the Iowa legislature is capable of clearly exempting certain actions from a statutory provision's scope. In Chapter 322A, certain provisions do exempt conduct. For example, terms that require the franchisee to "provide its customer lists or service files to the franchiser" are void, but "[t]his section shall not apply to notification by the franchisee to the franchiser of the delivery of a new motor vehicle to a customer." IOWA CODE § 322A.23. Here, in contrast, the text of Section 322A.22 provides no such exemption.
So too with a de minimis exception. Iowa courts look to the statute itself to determine whether a de minimis exception exists. Ladd v. Iowa W. Racing Ass'n , 438 N.W.2d 600, 602 (Iowa 1989). Here, though the Iowa Code in its entirety refers to de minimis exceptions, see, e.g. , IOWA CODE § 88.7, no provision in Chapter 322A contains any reference to any de minimis exception. The Court can infer that had the Iowa legislature intended a de minimis exception anywhere in Section 322A.22, it would have expressly provided it in the text.
Similarly, the Court finds that the structure does not mandate a de minimis exception to protect terms that concern the adequacy of a dealership facility to accommodate additional line-makes. Should such a term be voided, the administrative agency may still consider the adequacy of a dealership to accommodate an additional line make.
Turning to the "prior written authorization" requirement, plaintiff argues that this requirement does not "prohibit or restrict adding an additional line-make, because the only burden it creates on [defendant] is again the minimal burden of submitting accurate paperwork, and waiting for [plaintiff]’s response." (Doc. 113, at 20). Again, nothing in the text of Section 322A.22 supports an exemption for minimal burdens. Furthermore, plaintiff is capable of denying said authorization. (See id. ).
Plaintiff asserts as "strong evidence that Section 322A.22 does not void the requirement to submit Change Requests" a now-settled 2018 case between Tauke Motors and plaintiff, where "this Court ordered an Iowa dealer to submit a Change Request to GM for a change in premises use triggered by the unauthorized addition of CDJR operations to its premises." (Id. , at 20). The Court is not persuaded by plaintiff's argument. As a preliminary matter, that Change Request form was filed "for approval of Chevrolet dealership operations[,]" not CDJR operations. (Doc. 113-3, at 134–35). It is not clear from this record whether Chevrolet line-makes were authorized or unauthorized under the Tauke Agreements. (See id. ). Furthermore, this Order followed a joint motion to dismiss, where the parties stipulated that Tauke would submit the Change Request form. (Case No. 2:18-cv-01022, Doc. 11). In that case, the Court made no finding on whether the requirement to submit a Change Request was void under Section 322A.22, because no motion raised this question before settlement. (Id. ). Furthermore, the Court reserved to the dealership "all rights existing under the Dealer Agreement and Iowa law to contest or challenge GM's decision relative to the Change Request." (Doc. 113-3, at 135).
For these above reasons, the Court finds that Article 4.4.2 of the Dealer Agreements is void and thus cannot support a breach-of-contract claim.
The Court does not reach plaintiff's argument that defendant does not provide evidence that Section 322A.22 voids its requirement to submit Change Requests. (Doc. 113, at 20–21). Again, the legal effect of a contract is a question of law, not fact. Grinnell Select Ins. Co. , 639 N.W.2d at 33. Thus, defendant is not required to show there is no genuine issue of material fact regarding whether the contractual provisions violate Section 322A.22. Nor does the Court reach plaintiff's argument that defendant has unreasonably refused to sign the corresponding submission acknowledgement. (Id. ). Again, the "[a]nalysis of whether a contract has been breached begins by determining whether the contract is enforceable." Ag Spectrum Co. , 191 F. Supp.3d at 970. Thus, the question of whether Section 322A.22 voids the terms of the Agreements does not first turn on how defendant purportedly breached those provisions.
In sum, neither Article 4.4.3 or Article 4.4.2 can support plaintiff's breach-of-contract claim. Thus, plaintiff's breach-of-contract claim must fail.
IV. CONCLUSION
For the above reasons, the Court finds that the terms of the Agreements that plaintiff seeks to enforce against defendant in Count I are void. Therefore, the Court grants summary judgment in favor of defendant on Count I.
IT IS SO ORDERED this 23rd day of May, 2022.