A federal district court
preliminarily enjoined a dealer's attempt to sell the
dealership to third parties, finding that the manufacturer would
"suffer immediate and irreparable injury" if the
injunction motion had not been granted. Mercedes-Benz USA, LLC
v. Star Automobile Co., et al., No. 3-11-cv-73, Order For
Preliminary Injunction, p. 1 [Doc. 10] (M.D. Ga. June 3,
2011).
Star Automobile Company is an
authorized Mercedes-Benz dealer pursuant to car and light truck
dealer agreements. The dealer agreements give Mercedes-Benz USA,
LLC ("MBUSA") a right of first refusal over the sale of
the Mercedes-Benz "dealership," according to the court.
See id. at p. 2.
Star Automobile entered into an
asset purchase agreement with third-party buyers, intending to sell
the Mercedes "dealership," together with Nissan and
Volkswagen dealerships, as a "package deal" to the
buyers. See id. at pp. 2-3. MBUSA sought to enjoin the
sale in order to exercise its contractual right of first refusal.
See id. at p. 3.
The United States District Court
found that MBUSA is likely to succeed on the merits of its claim,
stating that "[n]ot only do the Dealer Agreements grant MBUSA
a right of first refusal, but Georgia law also grants MBUSA a
statutory right of first refusal. See O.C.G.A. §
10-1-663.1. Under both New Jersey law, which governs the Dealer
Agreements, and Georgia law, deals like the one in this case
violate rights of first refusal." Id. The court found
that the "package deal" selling the three
"dealerships," including the two over which MBUSA had no
power, would likely violate the contractual right of first refusal.
See id. at p. 4.
The court also found that
Mercedes-Benz would likely suffer irreparable harm without
injunctive relief. The court explained: "[i]f the Court were
to allow the sale of Star's Mercedes dealership to close, MBUSA
would lose its right of first refusal under the Dealer Agreements.
Under such circumstances, monetary damages would be difficult, if
not almost impossible, to calculate; thus, an injunction is the
appropriate remedy." Id.
The court also found that the harm
Mercedes-Benz would suffer by the denial of an injunction would
likely exceed any damage that an injunction would cause the
defendants. "If the Court does not enjoin the sale of the
dealership, MBUSA would lose its right of first refusal under the
Dealer Agreements, a loss that would be nearly impossible to
compensate with monetary damages. As to Star, although there will
be a delay in the transfer of the dealership, Star continues to
benefit from the ownership and operation of the dealership and is
in no worse position." Id. at p. 5.
Finally, the court found that
maintaining the status quo by way of a preliminary injunction would
not be against the public interest, noting that "enjoining the
sale is in furtherance of the public's interest in preserving
and maintaining contractual relations." Id.
The court subsequently denied the
dealership's motion to remove the preliminary injunction. In so
ruling, the court found that allowing MBUSA to preserve its right
of first refusal does not nullify a state dealer statutory
provision governing the review and approval of ordinary buy-sell
agreements as applied to dealers, stating that "[t]he approval
provision operates independently from the right of first refusal;
the provisions are not contradictory." Order Denying Motion to
Remove Preliminary Injunction, p. 2 [Doc. 22]. The court also found
"unpersuasive" the dealer's argument that the
existence of the approval provision in the statute is an adequate
replacement for the right of first refusal: "the rights of
first refusal provide a counterweight to the approval provision: it
is a less restrictive form of control a franchisor has over the
identity of its business partners." Id.
The Star Automobile case
supports a manufacturer's right of first refusal as applied to
the sale of dealership assets even where other linemakes for other
manufacturers are at issue.
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