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146722; 146724 LaFontaine Saline Inc v Chrysler Group

LaFontaine Saline, Inc. d/b/a LaFontaine Chrysler Jeep Dodge Ram,
Ward M. Powers
(Appeal from Ct of Appeals)
(Washtenaw – Swartz, D.)
Chrysler Group, LLC,
Jill M. Wheaton
Defendant-Appellee (in 146724),
IHS Automotive Group LLC d/b/a Chrysler Jeep of Ann Arbor,
Mary Massaron Ross
Defendant-Appellant (in 146722).


​The motor vehicle dealers act (MVDA) regulates the relationships among auto manufacturers and their dealers, such as plaintiff LaFontaine Saline and defendant IHS Automotive Group.  The “anti-encroachment provision” of the MVDA requires a manufacturer to give notice to dealers within a “relevant market area” before it enters into a dealer agreement with a new dealer for the same line of cars in the same area. 

In 2007, Chrysler entered into agreements with LaFontaine dealership, allowing LaFontaine the nonexclusive right to purchase and resell certain vehicle lines.  The agreements provided that the sales locale could be shared with other Chrysler dealers, as Chrysler deemed appropriate.  But the MVDA limits Chrysler’s ability to establish other dealers.  MCL 445.1576(2) provides that, “[b]efore a manufacturer or distributor enters into a dealer agreement establishing . . . a new motor vehicle dealer within a relevant market area where the same line make is represented, the manufacturer or distributor shall give written notice to each new motor vehicle dealer of the same line make in the relevant market area . . . . (emphasis added).”  At that time, the MVDA defined the “relevant market area” as an area within a radius of six miles of the proposed new dealer.  Upon receipt of notice, the existing dealer could bring a declaratory judgment action to determine “whether good cause exists for the establishing . . . of a proposed new motor vehicle dealer.”  MCL 445.1576(3). 

In February 2010, Chrysler entered into a letter of intent with defendant IHS Automotive Group as to its Dodge vehicle line.  The letter of intent stated that Chrysler would accept IHS’s offer to enter into a dealer agreement if IHS, among other requirements, provided a new facility for exclusively displaying Chrysler’s vehicle lines. 

On September 3, 2010, LaFontaine sent a letter to Chrysler objecting to the possibility of an additional Chrysler franchise in its market area.  LaFontaine’s letter relied upon the amended version of the MVDA, effective August 4, 2010, which expanded the definition of “relevant market area” from a six-mile radius to a nine-mile radius.  IHS is located more than six miles, but within nine miles, of LaFontaine.

When Chrysler responded that it intended to approve the new vehicle line at IHS, LaFontaine filed this declaratory judgment action under the MVDA, seeking a determination whether good cause existed for the proposed new dealership.

The trial court granted Chrysler and IHS’s motions for summary disposition, holding that the February 2010 letter of intent was a “dealer agreement” under the MVDA and that the definition of “relevant market area” in effect at that time – which provided for a six-mile radius – applied to the case.  Because IHS fell outside the six-mile relevant market area, LaFontaine lacked standing to challenge the new vehicle line at IHS under MCL 445.1576(3), the trial court held.  On reconsideration, the trial court added that LaFontaine’s action was premature and not “ripe” because it focused on contingent, future events. 

But in a published decision, the Court of Appeals reversed the trial court’s ruling and remanded the case for further proceedings.  The appeals court held that the letter of intent was not a binding “dealer agreement,” because it did not govern the legal rights and obligations regarding IHS’s sale of Dodge vehicles.  Any future dealer agreement between Chrysler and IHS would be governed by the 2010 amended definition of “relevant market area,” the appellate panel said.

Moreover, the case was ripe for adjudication, the appellate court held. The question of whether the letter of intent constituted a dealer agreement was irrelevant to the issue of ripeness, the panel reasoned. The MVDA requires notice before the manufacturer enters into a new dealer agreement, and authorizes a dealer to bring a declaratory judgment action upon receipt of that notice.  In other words, LaFontaine’s cause of action -- to determine whether good cause exists for establishing the Dodge vehicle line at IHS -- is expressly provided for by the MVDA, the Court of Appeals explained.  Moreover, “[w]hether good cause exists for the establishment of the Dodge vehicle line at IHS is not contingent on future events that may not occur.”

IHS and Chrysler appealed to the Supreme Court.  On October 2, 2013, the Court granted leave to appeal, directing the parties to address whether the Court of Appeals erred in holding that the 2010 definition of “relevant market area” applied to enable LaFontaine to challenge the future dealer agreement between IHS and Chrysler under MCL 445.1576(3).