Feldmann Imports Inc. v. Mercedes-Benz USA, LLC

Background

Feldmann Imports Inc. operates a franchised motor-vehicle dealership in Bloomington, Minnesota, and sells and services Mercedes-Benz vehicles. Mercedes-Benz USA, LLC manufactures and sells vehicles to dealers, including Feldmann. The parties entered into franchise agreements requiring Feldmann to perform qualifying warranty repairs without charging vehicle owners. The agreements also stated that Mercedes-Benz USA would compensate Feldmann for warranty repairs at rates established by Mercedes-Benz USA.

Minnesota Statutes Section 80E.041, effective August 1, 2018, provides a process for a dealer to establish a retail rate for warranty parts, subject to the manufacturer’s approval. If the manufacturer disapproves the rate and the dealer does not accept the manufacturer’s proposed adjustment, the dealer must file a civil lawsuit within 60 days after receiving the proposed adjustment.

On October 28, 2019, Feldmann asked Mercedes-Benz USA for additional reimbursement for warranty-repair parts, seeking a 94 percent retail rate beginning 30 days after the letter. Mercedes-Benz USA responded on November 19, 2019, stating that Feldmann’s calculation included parts excluded by the statute and referring to a reimbursement program that Mercedes-Benz USA said provided reasonable compensation to its dealers. Feldmann filed this action on March 18, 2020.

Claims and standard

Feldmann asserted five claims: (1) a request for a declaration that Section 80E.041 does not violate the Contract Clause and that Mercedes-Benz USA must comply with the statute; (2) a claim under the Automobile Dealer Day in Court Act; (3) a statutory good-faith claim under Minnesota law; (4) a claim that Mercedes-Benz USA violated Section 80E.041; and (5) a Minnesota common-law claim for breach of the implied covenant of good faith and fair dealing.

Mercedes-Benz USA moved for judgment on the pleadings under Federal Rule of Civil Procedure 12(c). The court applied the same standard used for a motion to dismiss for failure to state a claim under Rule 12(b)(6). At this stage, the court accepted well-pleaded factual allegations as true, drew reasonable inferences for Feldmann, and considered documents embraced by the complaint, including the franchise agreements and the parties’ letters.

Section 80E.041 claim

The court held that Feldmann’s Section 80E.041 claim was untimely. The statute required Feldmann to sue within 60 days after receiving the manufacturer’s proposed adjustment. The court treated Mercedes-Benz USA’s November 19, 2019 letter as proposing an adjustment because the letter rejected Feldmann’s requested rate and referred to Mercedes-Benz USA’s reimbursement program as the alternative rate. Feldmann did not file suit until March 18, 2020. The court rejected Feldmann’s argument that the 60-day period did not begin because the letter lacked reasonable substantiation. This claim was dismissed with prejudice.

Statutory good-faith claim

The court held that Feldmann failed to state a statutory good-faith claim. Section 80E.041 does not expressly include a good-faith requirement, and the court found no basis to imply one from statutory principles or from the private franchise agreements. The court concluded that the relevant statutory warranty obligations did not include a good-faith requirement. This claim was dismissed with prejudice.

Common-law good-faith claim

Under Minnesota law, the implied covenant of good faith and fair dealing enforces existing contractual duties and does not create new duties. Feldmann’s complaint did not identify a particular franchise-agreement term that Mercedes-Benz USA breached. Instead, it alleged that Mercedes-Benz USA failed to perform duties imposed by Section 80E.041. The court concluded that those statutory duties could not support a common-law implied-covenant claim. The motion was granted as to this claim, but the claim was dismissed without prejudice because the record did not establish that Feldmann was legally barred from alleging supporting facts in the future.

Automobile Dealer Day in Court Act claim

The court held that Feldmann failed to state a claim under the Automobile Dealer Day in Court Act. Because Feldmann did not allege that Mercedes-Benz USA terminated, canceled, or failed to renew the franchise, Feldmann had to allege bad-faith performance of a specific franchise-agreement term. The complaint instead relied on alleged violations of Section 80E.041 and did not identify a franchise-agreement term that Mercedes-Benz USA failed to perform or follow. The motion was granted as to this claim, and the claim was dismissed without prejudice.

Declaratory-judgment claim

The court dismissed Feldmann’s requests for declaratory relief without prejudice. For the request concerning the Contract Clause, the complaint did not allege an actual controversy about the constitutionality of Section 80E.041. The possibility that Mercedes-Benz USA might raise a constitutional defense in a future proceeding was too speculative. Feldmann also did not allege an imminent risk that Mercedes-Benz USA would violate Section 80E.041 in the future. The requested declaration therefore would have been an advisory opinion, which federal courts cannot issue.

Order

The court granted Mercedes-Benz USA’s motion for judgment on the pleadings and dismissed Feldmann’s complaint. The Section 80E.041 claim and statutory good-faith claim were dismissed with prejudice. The common-law good-faith claim, Automobile Dealer Day in Court Act claim, and declaratory-judgment claims were dismissed without prejudice. Judgment was ordered to be entered accordingly.