In re: Shakopee Chevrolet Inc. v. General Motors LLC

Background

Shakopee Chevrolet Inc., a Minnesota new motor vehicle dealer, sued General Motors LLC under Minnesota’s Motor Vehicle Sale and Distribution Act, codified in Chapter 80E of the Minnesota Statutes. The dispute concerns the dealership’s Area of Primary Responsibility, or APR—the geographic area in which the dealer is responsible for selling, servicing, and representing the manufacturer’s products.

The parties’ 2015 dealer agreement covered seven census tracts. In 2016, GM notified Shakopee Chevrolet that it intended to expand the APR to 13 census tracts. Shakopee Chevrolet objected, asserting that the expansion violated Minnesota law and that it would substantially increase the dealership’s sales obligations. Shakopee Chevrolet alleges that the proposed expansion never became effective because it was unlawful.

When the agreement was due for renewal in 2020, GM provided documents that included an APR covering the same 13 census tracts. GM told Shakopee Chevrolet that failing to sign the renewal documents, including acceptance of the larger APR, would result in termination of the franchise relationship. Shakopee Chevrolet then filed this case in state court, and GM removed it to federal court based on diversity jurisdiction.

Claims and motion

Shakopee Chevrolet asserted three claims:

GM moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint alleges enough facts to state a legally plausible claim. GM argued that the law in effect in 2016 did not prohibit expanding an APR, that § 80E.13(p) exclusively governed APR changes, and that the deadline for challenging the 2016 modification had expired. GM also argued that the 2020 APR was not a new change because it matched the 2016 APR Notice.

Court’s analysis

The court rejected GM’s argument that § 80E.13(p) prevented Shakopee Chevrolet from relying on § 80E.13(k). The court noted that Minnesota courts had applied § 80E.13(k) to significant sales-territory modifications that substantially impaired a dealership’s sales or service obligations or investments. Although the dealer agreement gave GM discretion to modify the APR, the court distinguished a modest or proportionate increase from the alleged increase here. The court calculated that the 2016 proposal would have increased the population served by more than 66% and could have threatened Shakopee Chevrolet’s ability to meet its sales obligations and serve demand in the territory.

The court therefore found plausible Shakopee Chevrolet’s claim that the 2016 APR proposal threatened to alter the rights and obligations of the franchise. Because the claims under §§ 80E.135 and 80E.12(j) were closely connected to the alleged § 80E.13(k) violation, the court also allowed those claims to proceed at the pleading stage.

For Count II, the court concluded that Shakopee Chevrolet had adequately alleged that GM’s attempt to require acceptance of the expanded APR as a condition of renewing the dealer agreement could violate §§ 80E.135 and 80E.12(j), assuming the 2016 modification was unlawful.

For Count III, the court did not decide whether the amended § 80E.13(p) applies every time a new APR notice is issued or only when an APR is initially assigned or specific census tracts are later changed. Instead, because Shakopee Chevrolet plausibly alleged that the 2016 modification was unlawful and ineffective, it also plausibly alleged that the 2020 notice constituted a change covered by the amended statute. The court found sufficient the allegations that the 2020 modification was arbitrary or failed to account for current sales and registration patterns, and that Shakopee Chevrolet sued within 90 days of receiving the notice.

Disposition

In Shakopee Chevrolet Inc. v. General Motors LLC, Judge John R. Tunheim denied GM’s motion to dismiss. All three counts survived the Rule 12(b)(6) challenge. The order did not finally determine whether GM violated Minnesota law. The court stated that Shakopee Chevrolet would face a significant hurdle at summary judgment, including showing that it suffered an injury connected to a modification it contends never lawfully took effect.