Opinion
No. 602591–14.
09-21-2015
LUXURY AUTOS OF HUNTINGTON, INC. d/b/a Audi of Huntington, Plaintiff, v. VOLKSWAGEN GROUP OF AMERICA, INC. d/b/a Audi of America Inc. and Biener Auto Group, Inc., Defendants.
Arent Fox, LLP, Russel P. McRory, Esq., James M. Westerlind, Esq., Mark A. Bloom, Esq., Lee Andrew Pepper, Esq., New York, Attorneys for Plaintiff (Luxury Auto). Cullen and Dykman, LLP Peter J. Mastaglio, Esq. Thomas Baylis, Esq. Garden City, Attorneys for Defendant (Volkswagon). Sahn Ward Coschignano & Baker, PLLC, Jon A. Ward, Esq., Andrew Michael Roth, Esq., Uniondale, Attorneys for Defendant (Beiner Audi).
Arent Fox, LLP, Russel P. McRory, Esq., James M. Westerlind, Esq., Mark A. Bloom, Esq., Lee Andrew Pepper, Esq., New York, Attorneys for Plaintiff (Luxury Auto).
Cullen and Dykman, LLP Peter J. Mastaglio, Esq. Thomas Baylis, Esq. Garden City, Attorneys for Defendant (Volkswagon).
Sahn Ward Coschignano & Baker, PLLC, Jon A. Ward, Esq., Andrew Michael Roth, Esq., Uniondale, Attorneys for Defendant (Beiner Audi).
VITO M. DeSTEFANO, J.
The following papers and the attachments and exhibits thereto have been read on this motion:
Notice of Motion 1
Affidavit in Support 2
Memorandum of Law in Support 3
Memorandum of Law in Opposition 4
Affirmation in Opposition 5
Notice of Motion 6
Affirmation in Support 7
Memorandum of Law in Support 8
Memorandum of Law in Opposition 9
Affirmation in Opposition 10
Memorandum of Law in Reply 11
Affirmation in Reply 12
Motion Sequence No. 5 by the Defendant Volkswagen Group of America, Inc. d/b/a Audi of America Inc. ("Audi") pursuant to CPLR 3211(a)(1) and (7) for judgment dismissing the first, second and fourth causes of action asserted in the amended complaint is granted in part and denied in part.
Motion Sequence No. 6 by Defendant Biener Auto Group, Inc. ("Biener") pursuant to CPLR 3211(a)(1) and (7), and CPLR 3013, for judgment dismissing the third cause of action asserted in the amended complaint is denied.
Background
Since 1993, the Plaintiff, Luxury Autos of Huntington, Inc. d/b/a Audi of Huntington ("Huntington") has granted an Audi dealership located on East Jericho Turnpike in Huntington Station, New York.
In March 2009, Huntington entered into a Dealer Agreement with Audi which included certain Standard Provisions, including article 2(1) wherein Audi did "not give Dealer any exclusive right to sell or service Authorized Products in any area or territory".
In February 2013, Audi and Huntington entered into an Audi Exclusive Facility Construction Agreement ("Facility Construction Agreement") pursuant to which Huntington agreed to "construct and/or substantially renovate an Exclusive Audi facility" in exchange for Huntington's receipt of "Exclusive Standards Bonus Payments" (incentives for dealers who are compliant with Audi's standards for exclusive facilities).
In a letter dated December 19, 2013, Audi advised Huntington that Biener (an Audi franchise in Great Neck, New York), with the approval of Audi, intends to establish a new Audi dealership at 1038 Brush Hollow Road in Westbury, New York (the "Westbury site"). The Westbury site is approximately ten miles from Huntington's dealership.
On July 1, 2014, Huntington commenced the instant action against Audi and Biener. An amended complaint, which was served and filed on October 17, 2014, asserted the following five causes of action: breach of contract (the Dealer Agreement); breach of the implied covenant of good faith and fair dealing; tortious interference with contract; violation of the Vehicle and Traffic Law ("VTL") § 463(2)(ff)(3) ; and breach of contract and violation of VTL 463(2)(jj) (Ex. "A" to Motion Seq. No. 6).
Audi moves for an order pursuant to CPLR 3211(a)(1) and (7) dismissing the first, second and fourth causes of action asserted against it. Biener also moves for an order pursuant to CPLR 3211(a)(1), 3211(a)(7), and CPLR 3013 dismissing the third cause of action asserted against it.
For the reasons that follow, Audi's motion is granted in part and denied in part and Biener's motion is denied.
The Court's Determination
On a motion to dismiss, the complaint is to be afforded a liberal construction, the facts alleged are presumed to be true, the plaintiff is afforded the benefit of every favorable inference, and the court is to determine only whether the facts as alleged fit within any cognizable legal theory (Simkin v. Blank, 19 NY3d 46, 52 [2012] ; Leon v. Martinez, 84 N.Y.2d 83, 87–88 [1994] ). When a party moves under CPLR 3211(a)(7) for dismissal based on the failure to state a cause of action, the test is whether the pleading states a cause of action, not whether the plaintiff has a cause of action (Sokol v. Leader, 74 AD3d 1180, 1180–1181 [2d Dept 2012] ). "Whether a plaintiff can ultimately establish [his or her] allegations is not part of the calculus in determining a motion to dismiss" (EBC I, Inc. v. Goldman, Sachs & Co., 5 NY3d 11, 19 [2005] ). However, conclusory averments of wrongdoing are insufficient to sustain a complaint unless supported by allegations of ultimate facts (DiMauro v. Metropolitan Suburban Bus Auth., 105 A.D.2d 236 [2d Dept 1984] ). Thus, bare legal conclusions and factual allegations "flatly contradicted by documentary evidence in the record are not presumed to be true, and [i]f the documentary proof disproves an essential allegation of the complaint, dismissal pursuant to CPLR 3211(a)(7) is warranted even if the allegations, standing alone, could withstand a motion to dismiss for failure to state a cause of action" ' (Deutsche Bank National Trust Co. v. Sinclair, 68 AD3d 914, 915 [2009], quoting Peter F. Gaito Architecture., LLC v. Simone Dev. Corp., 46 AD3d 530, 530 [2007] ).
Audi's Motion to Dismiss
Breach of Contract
In the first cause of action, Huntington alleges that Audi breached certain Standard Provisions of the Dealer Agreement by "trying to open the New Dealership on the doorstep of Huntington's Dealer's Area, and has done so in bad faith" (Ex. "A" to Motion Seq. No. 6). As alleged, the Standard Provisions purportedly breached include the following sections of Article 1:
The court overlooks Audi's failure to annex the amended complaint to its motion to dismiss inasmuch as the amended complaint was annexed as an exhibit to Biener's motion which is being decided herewith.
2) Audi will actively assist Dealer in all respects of Dealer's Operations through such means as Audi considers appropriate ... and
3) In the conduct of its business, Audi will ... [a]void all discourteous, deceptive, misleading, unprofessional, or unethical practices.
The elements of a cause of action to recover damages for breach of contract are: 1) the existence of a contract; 2) the plaintiff's performance under the contract; 3) the defendant's breach of the contract; and 4) resulting damages (Palmetto Partners, L.P. v. AJW Qualified Partners, LLC, 83 AD3d 804 [2d Dept 2011] ).
Audi argues that Huntington's breach of contract cause of action must be dismissed because, inter alia, Huntington's rights under the Dealer Agreement are governed by VTL 463(2)(cc) , which became effective in January 2009 (Audi Memorandum of Law in Support at
Pursuant to VTL 463(2)(cc) :
It shall be unlawful for any franchisor, notwithstanding the terms of any franchise contract ... [t]o enter into a franchise establishing an additional new motor vehicle dealer or relocating an existing new motor vehicle dealer into the relevant market area of an existing franchise motor vehicle dealer of the same line make unless the franchisor provides notice pursuant to the terms of this subdivision.... In any action brought by the dealer, the franchisor shall have the burden of proving that there exists good cause for any such addition or relocation....
pp 12–13). Otherwise known as the "relevant market area statute" of the Dealer Act, the section provides that a franchisor must establish good cause for the addition of a new dealership in the relevant market area of an existing dealership. As applicable to the facts at bar, the relevant market area is defined as a radius of six miles from an existing dealer's principal place of business. It is undisputed that the proposed dealership to be located in Westbury is not within the six-mile relevant market area of Huntington's dealership.
Article 17–A of the VTL is known as the Franchised Motor Vehicle Dealer Act ("the Dealer Act").
In opposition, Huntington argues that the Dealer Act does not preempt or "abrogate any common law rights available to dealers" and that the Dealer Act "provides for common law and other statutory claims in addition to those provided for under the Dealer Act" (Huntington Memorandum of Law in Opposition at pp 17–18).
It is a basic tenet of contract law that, "unless a contract provides otherwise, the law in force at the time the agreement is entered into becomes as much a part of the agreement as though it were expressed or referred to therein, for it is presumed that the parties had such law in contemplation when the contract was made and the contract will be construed in the light of such law" (Dolman v. United States Trust Co. of NY, 2 N.Y.2d 110, 116 [1956] ; see also Mayo v. Royal Ins. Co. of America, 242 A.D.2d 944 [4th Dept 1997] ; Matter of Andy Floors, Inc. (Tyler Const. Corp.), 202 A.D.2d 938 [3d Dept 1994] ; Kasen v. Morrell, 6 A.D.2d 816 [2d Dept 1958] [the parties to a contract are presumed to contract in reference to the law of this State] ).
The effect of the "relevant market area statute" being a "part of" the Dealer Agreement between Audi and Huntington (because the relevant market area statute was in effect at the time the Dealer Agreement was entered into) (see Dolman v. United States Trust Co. of NY, 2 N.Y.2d at 116, supra ) is to incorporate into the Dealer Agreement language which affords a dealer particular rights if a dealer were to establish a new dealership within the relevant market area of an existing dealership without good cause. The incorporation of such language into the Dealer Agreement, however, does not render as unviable Luxury's common law breach of contract claim—that Audi breached a provision of the Dealer Agreement wherein it promised to "actively assist [Luxury] in all respects of [Luxury's] Operations". In this regard, it is not inconsistent for Audi to breach the Dealer Agreement (as asserted in the amended complaint) without violating the Dealer Act by adding the Westbury site outside of Huntington's relevant market area.
As a matter of statutory construction, the "common law is never abrogated by implication, but on the contrary it must be held no further changed than the clear import of the language used in a statute absolutely requires" (Gottlieb v. Kenneth D. Laub & Co., Inc., 82 N.Y.2d 457, 465 [1993] [quoting Statutes § 301[b] ). The Dealer Act fails to clearly and plainly manifest a legislative intent to abrogate the common law. Rather, a review of the legislative history demonstrates that the Dealer Act "serves the public interest by better balancing the relationship between franchisors and franchised dealers" (New York Bill Jacket, 2008 S.B. 8678, ch. 490). Since the legislative intent of the Dealer Act was to protect dealers from the unequal bargaining power possessed by the manufacturer (see id. ), it would be antithetical to that legislative intent to construe the statute in a manner that restricts dealers' common law rights.
According to the New York State Senate Committee on Transportation:
The above referenced bills would amend the Vehicle and Traffic Law so as to provide for equality in the relationship and bargaining power between motor vehicle manufacturers and motor vehicle dealers.
For many years there has been a great inequity in the business dealings between motor vehicle manufacturers and motor vehicle dealers, often resulting in franchises being jeopardized. The manufactures-dealer franchise agreements which have been developed over a number of years do not provide the dealer with the protections necessary to allow him to continue in a working relationship with the manufacturer while providing both of them with significant protections.
Huntington additionally argues that the motion must be denied based on Legend Autorama, Ltd. v. Audi of America, Inc. (100 AD3d 714 [2d Dept 2012] ) ("Legend "), where the court denied Audi's motion to dismiss the dealers' claims for breach of the dealer agreement (Memorandum of Law in Opposition at p. 13). The dealer agreements in Legend entered into between the plaintiffs and Audi contained the same Standard Provisions allegedly breached here (Audi's agreement to "actively assist" its dealers and Audi's agreement to avoid unprofessional or unethical practices).
While the court is unsure as to the dates in which the dealer agreements in Legend were entered into, it is undisputed that they were executed prior to the enactment of the relevant market area statute of the VTL in 2009.
In 2007, Audi created a new Audi dealership in West Islip which bordered the market areas assigned to the plaintiffs' Audi dealerships (in Smithtown and Huntington) and, as such, portions of plaintiffs' market areas were reassigned to the new Audio dealership. The Legend plaintiffs thereafter commenced an action against, inter alia, Audi, seeking injunctive relief as well as damages for breach of contract, breach of the covenant of good faith and fair dealing, breach of fiduciary duty, and tortious interference with contract.
The plaintiffs in Legend alleged that Audi created the West Islip dealership after Audi had persuaded plaintiffs to invest millions of dollars in their facilities in order to be eligible for bonus and promotional programs that they needed to remain competitive. The plaintiffs also alleged that the West Islip dealership did not have any rational business justification, that it was not supported by Audi's own market studies, and that it was, in fact, opposed by Audi executives responsible for the Long Island market.
In denying the branch of Audi's motion for summary judgment dismissing the second cause of action for breach of contract and breach of the covenant of good faith and fair dealing, the Supreme Court stated:
The second cause of action for breach of contract and breach of the implied covenant of good faith and fair dealing is asserted against Audi only. Audi contends, inter alia, that it is entitled to summary judgment dismissing this cause of action because the parties' dealer agreements gave it the unfettered right to establish dealerships wherever it chose. However, the dealer agreements also imposed upon Audi the obligation to actively assist its dealers in all aspects of the dealers' operations through such means as Audi considered appropriate. Audi contends that it created the West Islip dealership ... because it thought that the Long Island market was underperforming. Smithtown Audi and Huntington Audi contend that Audi did not advise them of its dissatisfaction with their performance and did not give them an opportunity to correct the purported deficiencies in their performance prior to opening the West Islip dealership. The court finds that, under these circumstances, there is a triable issues [sic] of fact regarding whether Audi breached its contractual obligation to provide dealer assistance to Smithtown Audi and Huntington Audi. There is also a triable issue of fact regarding whether Smithtown Audi and Huntington Audi were damaged thereby (Legend Autorama, Ltd. v. Audi of America, Inc., 32 Misc.3d 1216(A) [Sup Ct Suffolk County 2011] [internal citations omitted] ).
On appeal, the Second Department affirmed so much of the Supreme Court's order which denied Audi's motion for summary judgment on the cause of action for, inter alia, breach of the express terms of the dealer agreements, holding as follows:
Audi failed to make a prima facie showing of entitlement to judgment as a matter of law dismissing so much of the second cause of action in the second amended complaint as alleged the breach of the express terms of the Dealer Agreements, including Audi's obligation to "actively assist Dealer in all aspects of Dealer's Operations through such means as Audi considers appropriate." Audi submitted transcripts of depositions in which its executives testified that the normal approach to underperformance issues was to discuss such issues with the dealers and give them time to implement action plans prior to opening a newly franchised dealership. Audi also submitted testimony that such an approach was not followed here. Accordingly, Audi failed to meet its burden of eliminating all material, triable issues of fact on this claim and, as such, that branch of the motion was properly denied (Legend Autorama, Ltd. v. Audi of America, Inc., 100 AD3d 714 [2d Dept 2012] [internal citations omitted] ).
Given the absence of any legislative intent in the Dealer Act to abrogate common law claims, coupled with the Second Department's holding in Legend, the branch of the motion seeking dismissal of the first cause of action is denied.
Breach of the Implied Covenant of Good Faith and Fair Dealing
In the second cause of action, Huntington alleges a claim for breach of the covenant of good faith and fair dealing implied in all contracts, including the Dealer Agreement and the Facility Construction Agreement. Specifically, Huntington alleges that: the Dealer Agreement and the Facility Construction Agreement are valid and enforceable and Huntington has fully performed its obligations under both agreements and are not in breach; that under Article 2(I) of the Standard Provisions in the Dealer Agreement, it states, "Dealer assumes the responsibility in Dealer's Area for the promotion and sale of Authorized [Audi] Products and for the supply of Genuine Parts and customer service for Authorized Products"; that by awarding a new dealership to Biener "in or on the doorstep" of Huntington's assigned market area, Audi has breached the implied covenant of good faith and fair dealing in both agreements and had the effect of "frustrating, destroying or injuring" the right of Huntington to receive the fruits of both of the agreements; that Huntington has been damaged in the form of the amounts paid to renovate its facilities and future monies based on analysis performed by Huntington's consultants; and that if the Westbury dealership is allowed to open, Huntington will sustain irreparable harm to its business.
"For a complaint to state a cause of action alleging breach of an implied covenant of good faith and fair dealing, the plaintiff must allege facts which tend to show that the defendant sought to prevent performance of the contract or to withhold its benefits from plaintiff" (Aventine Investment Mgt. v. Canadian Imperial Bank of Commerce, 265 A.D.2d 513, 514 [2d Dept 1999] ). While the duties of good faith and fair dealing do not imply obligations inconsistent with other terms of the parties' contractual relationship, they do encompass any promises that a reasonable person in the position of the promisee would understand to be included in the parties' agreement (511 W. 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 153 [2002] ).
Audi argues that the cause of action for breach of the implied covenant of good faith and fair dealing must be dismissed because it is duplicative of Huntington's express breach of contract claim. According to Audi, "the conduct allegedly constituting a breach of contract is virtually identical to that constituting a breach of the implied covenant" (Audi Memorandum of Law in Support at p. 20).
A cause of action to recover damages for breach of the implied covenant of good faith and fair dealing cannot be maintained where the alleged breach is "intrinsically tied to the damages allegedly resulting from a breach of the contract" (Deer Park Enterprises, LLC v. Ail Systems, Inc., 57 AD3d 711 [2d Dept 2008] [where conduct and resulting injury alleged in cause of action alleging breach of implied covenant of good faith and fair dealing was identical to those alleged in the causes of action alleging breach of contract, breach of implied covenant of good faith and fair dealing cause of action should have been dismissed as duplicative of the breach of contract causes of action]; see also Barker v. Time Warner Cable, Inc., 83 AD3d 750 [2d Dept 2011] [as pleaded in complaint, cause of action alleging breach of the implied covenant of good faith and fair dealing was dismissed as being duplicative of the cause of action alleging breach of contract] ).
Although some of the damages alleged in the claim for breach of the covenant of good faith and fair dealing may be "intrinsically tied" to the damages resulting from Audi's alleged breach of the Dealer Agreement, Huntington's claim of breach of the implied covenant of good faith and fair dealing also pertains to the Facility Construction Agreement. Notably, Huntington does not allege that Audi breached the Facility Construction Agreement until its third cause of action for tortious interference with contract. Therefore, while Huntington's claims for breach of contract and breach of the implied covenant of good faith and fair dealing may involve some overlap with respect to the Dealer Agreement, the second cause of action for breach of the implied covenant of good faith and fair dealing (insofar as the Facility Construction Agreement is concerned) consists of distinct, non-duplicative claims independent of the breach of contract claim (see Dialcom, LLC v. AT & T Corp, 20 Misc.3d 1111 [A] [Sup Ct Kings County 2008] ).
Moreover, as set forth in the amended complaint, the contract provisions of the Dealer Agreement allegedly breached in the first cause of action are Standard Provisions articles 1[2] and 1[3] while the alleged wrongdoing in the second cause of action for breach of the implied covenant of good faith and fair dealing concerns article 2[1] of the Standard Provisions.
Standard Provisions articles 1[2] and 1[3] of the Dealer Agreement provide that: "Audi will actively assist Dealer in all respects of Dealer's Operations through such means as Audi considers appropriate" and "[i]n the conduct of its business, Audi will ... [a]void all discourteous, deceptive, misleading, unprofessional, or unethical practices" (see discussion supra at p. 3). Article 2[1] of the Standard Provisions provides that the "Dealer assumes the responsibility in Dealer's Area for the promotion and sale of Authorized [Audi] products and for the supply of Genuine and customer service for Authorized Products".
Audi further argues that the "duties of good faith and fair dealing do not imply obligations inconsistent with other terms of the parties' contractual relationship, and only encompass promises that a reasonable person in the position of the promisee would understand to be included in the parties' agreement". Accordingly, given that the Dealer Agreement and Facility Construction Agreement were entered into after the enactment of the relevant market area provisions of the VTL, "it would be unreasonable as a matter of law for Huntington to believe that it had any implied contractual right to challenge a new dealership outside of its six-mile relevant market area" (Audi Memorandum of Law in Support at p. 19).
Although it is true that "no obligation can be implied that would be inconsistent with other terms of the contractual relationship' " (Dalton v. Educational Testing Serv., 87 N.Y.2d 384, 389 [1995] ), and while Audi retained the discretion to add new dealerships within an existing dealers' market territory, "even an explicitly discretionary contract right may not be exercised in bad faith so as to frustrate the other party's right to the benefit under the agreement" (Legend Autorama, Ltd. v. Audi of America, Inc. (100 AD3d 714, 716 [2d Dept 2012] ; see also Lonner v. Simon Prop. Group, Inc., 57 AD3d 100, 108 [2d Dept 2008] [where the contract contemplates the exercise of discretion, the pledge that neither party shall do anything which will have the
effect of destroying or injuring the right of the other party to receive the fruits of the contract includes a promise not to act arbitrarily or irrationally in exercising that discretion] ).
Accordingly, the court denies the branch of the Audi's motion seeking dismissal of the second cause of action.
Violation of the Dealer Act
Huntington alleges in its fourth cause of action that: establishment of the Westbury dealership would result in a reassignment of a portion of Huntington's market territory to it; and the resulting reassignment of market territory violates VTL 463(2)(ff)(3) inasmuch as it "is not being undertaken in good faith, is not being undertaken by Audi for good cause, and would adversely and substantially alter the rights, obligations, investments and return on investments of Huntington" (Amended Complaint at ¶¶ 128–129). According to Huntington, the Westbury site would result in the loss of business, would undermine Huntington's ongoing facility renovations, and would result in the reassignment of a portion of Huntington's market territory to the Westbury dealership; and that since a modification under the Dealer Act is defined as "any change ... of any franchise if such change or replacement may substantially and adversely affect the new motor vehicle dealer's rights, obligations, investment or return on investment", the opening of the Westbury dealership "would be a modification' as defined under the Dealer Act" (Huntington Memorandum of Law in Opposition at p. 7).
Pursuant to VTL 463(2)(ff)(1) :
It shall be unlawful for any franchisor, notwithstanding the terms of any franchise contract ... [t]o modify the franchise of any franchised motor vehicle dealer unless the franchisor notifies the franchised motor vehicle dealer, in writing, of its intention to modify the franchise of such dealer at least ninety days before the effective date thereof, stating the specific grounds for such modification.
A cause of action under this provision requires the franchisor to prove that the modification is fair and not prohibited (VTL 463[2][ff][3] ). Pursuant to VTL 463(2)(ff)(3), "A modification is deemed unfair if it is not undertaken in good faith; is not undertaken for good cause; or would adversely and substantially alter the rights, obligations, investment or return on investment of the franchised motor vehicle dealer under an existing franchise agreement. In any action brought by the dealer, the franchisor shall have the burden of proving that such modification is fair and not prohibited."
Audi seeks dismissal of the fourth cause of action on the ground that the relevant market area provision of the Dealer Act "provides the exclusive mechanism under that act to challenge the addition/relocation of a same line make dealership" (Audi Memorandum of Law in Support at p. 9).
Conversely, Huntington argues that the proposed Westbury dealership is outside Huntington's statutory relevant market area so the relevant market area provision has not been triggered. According to Huntington,
[T]his Court erred [in the related JJM case] by concluding that the RMA Provision is the exclusive provision of the Dealer Act by which an existing dealer can challenge a new or relocating dealership. There is nothing in the text or legislative history of the Dealer Act that precludes a claim under the Modification Provision of the Dealer Act when the modification of a franchise has been threatened in the manner at issue here (Huntington Memorandum of Law in Opposition at p. 8).
Given this court's prior analysis of the Dealer Act and its legislative history (see JJM Sunrise Automotive, LLC v. Volkswagen Group of America, Inc., et al., 46 Misc.3d 755 [Sup Ct Nassau County 2014 [DeStefano, J.] ), the court dismisses Huntington's fourth cause of action based upon Audi's alleged violation of VTL 463(2)(ff)(3).
To the extent the court in Van Wie Chevrolet, Inc. d/b/a Evans Chevrolet v. General Motors, LLC and Sharon Chevrolet, Inc. (Index No. 12–0284 [Sup Ct Onondaga County] ) granted summary judgment on the plaintiff's claim that the proposed relocation of an existing General Motors Dealership franchise would modify—as that term is defined under VTL 463(2)(ff) —another franchisee's existing General Motors franchise, this court declines to follow it.
The Dealer Act, with great particularity, establishes a relevant market area, imposes a notice requirement on franchisors if a same line make dealership is to be added/relocated into the relevant market area, and creates a right of action in the dealer in the event that a dealership is so introduced, with the burden of proof being placed on the franchisor to show good cause for the addition/relocation. The natural and logical conclusion to be drawn from this specific legislative pronouncement, which involves the creation of legal rights and duties, is that it provides the exclusive means of establishing a Dealer Act right of action based on the addition/relocation of a same line make dealership. To conclude otherwise—that is, to interpret the other sections of Dealer Act cited by [Huntington] so as to permit the assertion of claims of "modification" ... based on the addition/relocation of a same line make dealership outside the relevant market area, would render meaningless the relevant market area limitation in the Dealer Act and the cause of action that it creates. Consequently, the addition/relocation of a same line make dealership outside the relevant market area creates no Dealer Act right of action (Id. ).
Biener Motion to Dismiss
The third cause of action in the amended complaint is a claim against Biener for tortious interference with contract. Specifically, the amended complaint alleges that: the Dealer Agreement and the Facility Construction Agreement each constitute a valid contract; Biener has been aware of a Dealer Agreement between Audi and Huntington and is aware that Huntington is renovating and expanding to meet Audi's projections of future sales and service volume in Huntington's Dealer Area; Biener intentionally procured Audi's breach of Huntington's Dealer Agreement and Facility Construction Agreement by convincing Audi to create and award Biener a new add-point location within or immediately adjacent to Huntington's assigned market area; that Audi was not considering a new point in Westbury at the time that Biener approached Audi
and persuaded Audi to award a new dealership to Biener; Audi agreed to Biener's requests in order to placate them because Audi was adding a new point in Queens to another owner; Biener's tortious interference has caused Audi to breach the Dealer Agreement and the Facility Construction Agreement; "[b]ut for Biener's demands to Audi" that Audi award it the Westbury dealership and "tortious interference with Huntington's contracts with Audi, Audi would not have breached its contracts with Huntington"; Biener's conduct was performed with malice inasmuch as Biener intended to wrongfully put Huntington out of business ("Biener's desire to poach business from Huntington's assigned market area, without justification and in violation of the norms, customs and practices in the industry"); and, Huntington has been damaged as a result of Biener's tortious interference, in the form of amounts paid to renovate its facilities, and Huntington will be further damaged in the future if the Westbury dealership is permitted to open.
The elements of a claim for tortious interference with contract are: 1) the existence of a valid contract between the plaintiff and a third-party; 2) the defendant's knowledge of that contract; 3) the defendant's intentional procurement of the third-party's breach of that contract without justification; 4) actual breach of the contract; and 4) resulting damages (Lama Holding Co. v. Smith Barney, 88 N.Y.2d 413, 424 [1996] ). To avoid dismissal of a tortious interference claim, a plaintiff must support his claim with more than speculation (Ferrandino & Son, Inc. v. Wheaton Bldrs., Inc., LLC, 82 AD3d 1035, 1036 [2d Dept 2011] ).
Biener argues that the claim for tortious interference asserted against it must be dismissed for several reasons: Huntington does not have a breach of contract claim against Audi and, therefore cannot state a claim for tortious interference with contract against Biener; Huntington has failed to allege facts establishing that Biener "intentionally procured" Audi's alleged breach of contract with Huntington; Huntington has failed to allege facts showing that Biener acted "without economic justification" in procuring from Audi the award for the Westbury dealership; Huntington has failed to allege facts showing that Biener used "wrongful means" to procure the Westbury's dealership; and Huntington has not alleged facts showing that it has suffered "actual damages" as a result of Biener's alleged conduct (Biener Memorandum of Law in Support at p. 1).
Presuming the allegations in the amended complaint to be true, and affording Huntington the benefit of every favorable inference, the amended complaints sets forth a claim for tortious interference with the Dealer Agreement (see Simkin v. Blank, 19 NY3d 46, 52 [2012] ; Leon v. Martinez, 84 N.Y.2d 83, 87–88 [1994] ). Moreover, Biener has not established the applicability of the defense of economic justification as a matter of law that would warrant dismissal at the pleading stage (see Kronish Lieb Weiner & Hellman LLP v. Tahari, Ltd., 35 AD3d 317 [1st Dept 2006] ["Since the cause of action is for interference with an existing contract, rather than a prospective economic relationship, the defense of economic justification is inapplicable and it is not necessary to allege that defendant used improper means or that its conduct was for the sole purpose of harming plaintiff] ).
While New York courts regularly dismiss claims for tortious interference with contract at the pleading stage when the defendant has an economic or legal interest in the breaching party and the plaintiff fails to allege malice or illegal means (see, e.g., Foster v. Churchill, 87 N.Y.2d 744, 749–750 [1996] ; Torrenzano Group, LLC v. Burnham, 26 AD3d 242, 242–243 [1st Dept 2006] ), a plaintiff need not plead that defendant's actions are not economically justified, rather economic justification is a defense to a claim of tortious interference with contract (see White Plains Coat & Apron Co., Inc. v. Cintas Corp., 8 NY3d 422 [2007] [economic justification is a defense to a claim of tortious interference with contractual relations] ). Huntington was therefore not required to plead that Biener lacked an economic justification for its alleged actions (see Fallon v. Wall Street Clearing Co., 182 A.D.2d 245, 250 [1st Dept 1992] [motion court improperly shifted burden to plaintiffs to plead and prove a lack of justification] ).
Conclusion
Based on the foregoing, it is hereby
Ordered that the motion by the Defendant Volkswagen Group of America, Inc. d/b/a Audi of America Inc. (Motion Sequence No. 5) for an order dismissing the first, second and fourth cause of action asserted in the amended complaint is denied, except for the fourth cause of action, which is dismissed; and it is further
Ordered that the motion by Defendant Biener Auto Group, Inc. (Motion Sequence No. 6) for an order dismissing the third cause of action asserted in the amended complaint is denied.
This constitutes the decision and order of the court.