Lawrence E. Lupien v. Harold W. Clarke

United States Court of Appeals
FOR THE EIGHTH CIRCUIT
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Nos. 04-1838/1921
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Stone Motor Company, *
*
Appellant/Cross-Appellee, *
* Appeals from the United States
v. * District Court for the
* Eastern District of Missouri.
General Motors Corporation, *
*
Appellee/Cross-Appellant. *
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Submitted: January 13, 2005
Filed: March 9, 2005
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Before WOLLMAN, MURPHY, and BYE, Circuit Judges.
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MURPHY, Circuit Judge.
This dispute between Stone Motor Company (Stone), a former dealer of
Chevrolet and Geo cars and trucks, and General Motors Corporation (GM), is back
before the court for a second time. In Stone Motor Co. v. General Motors Corp., 293
F.3d 456 (8th Cir. 2002) (Stone I), we reversed in part a judgment of dismissal and
remanded Stone's claims for breach of the duty of good faith and fair dealing and
violations of the Missouri Motor Vehicle Franchise Practices Act. The remanded
issues related to the effect of a release Stone had signed and to GM's allocation of

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1The Honorable Carol E. Jackson, Chief Judge, United States District Court for
the Eastern District of Missouri.
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vehicles. After the record was further developed on remand, the district court1
dismissed Stone's remaining claims and denied GM's request for attorney fees. Stone
appeals the dismissal of its good faith claim, and GM appeals the denial of fees. We
affirm.
Stone purchased a Chevrolet-Geo dealership in Cuba, Missouri in 1995, and
entered into a standard franchise agreement with GM. Business at the dealership did
not go as well as hoped, and Stone contends that the reason for its poor return was
that GM had not allocated it enough of the most desirable vehicles nor a sufficient
number of vehicles. GM contends that it allocated more vehicles to Stone than it had
to the previous franchisee, and that Stone received more vehicles than it was entitled
under GM's standard allocation formula. After two years of poor performance, Stone
decided to sell to Fairground Motors, a dealership in neighboring Rolla, Missouri.
After its talks with Fairground, Stone presented the proposed sale to GM for its
consideration and approval.
Under the terms of Stone's Dealer Service and Sales Agreement with GM,
Stone was obligated to provide GM with written notice if it wished to transfer the
dealership, and GM was required to consider and not arbitrarily refuse any proposed
transfer. The franchise agreement specified factors that GM was to include in that
consideration:
factors such as (a) the personal, business, and financial qualifications of
the proposed dealer operator and owners, and (b) whether the proposed
change is likely to result in a successful dealership operation with
acceptable management, capitalization, and ownership which will
provide satisfactory sales, service, and facilities at an approved location,
while promoting and preserving competition and customer satisfaction.

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The contract further required GM to issue a written decision on any proposed sale
within 60 days of the proposal and to include a statement of its reasons for
disagreement if approval was denied. GM was also entitled under the agreement to
indicate in its written response to a dealer's proposal that it would buy the dealership
rather than approve its sale to a third party.
GM notified Fairground by letter on July 8, 1997 that its "application and
proposal to become a Chevrolet dealer in Cuba, MO ha[d] been approved" and that
GM was "prepared to appoint Fairground Motors....as an authorized Chevrolet dealer,
conditioned on [its] providing [GM] with [stated] information and documentation...."
Included among the listed documents that would be required prior to any execution
of a franchise agreement with Fairground was a release from Stone.
At the closing of Stone's sale of the dealership to Fairground Motors on July
14, 1997, the president of Stone signed a document which:
releas[ed] and forever discharg[ed]...General Motors Corporation,
Chevrolet Motor Division of and from all, and all manner of action and
actions, causes of action, suits, proceedings, debts, dues, contracts,
judgments, damages, claims or demands whatsoever, in law or equity,
which it or he or either of them ever had or now have against...General
Motors Corporation, Chevrolet Motor Division upon or by any reason
of any manner, cause or thing whatsoever occurring or existing at any
time or times prior to or during the entire period of the operation or
arising from the termination of [Stone Motor Company].
This release document also stated that the signing party acknowledged that it was
agreeing to it "for and in consideration of the sum of One Dollar ($1.00) in hand paid
by General Motors Corporation, Chevrolet Motor Division, a Delaware corporation,
receipt of which is hereby acknowledged and other good and valuable consideration."

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Stone's president later testified that he knew that GM's approval of the proposed sale
was contingent upon his signing the instrument.
Stone brought this action against GM nearly two years later, alleging in part
that its unsatisfactory allocation of vehicles to the dealership breached its duty of
good faith and fair dealing and violated the Missouri Motor Vehicles Franchise
Practices Act, Mo. Rev. Stat. §§ 407.810-407.835 (2004) (MVFPA). The district
court dismissed all claims, and Stone appealed. Our court ruled that if the release
were valid, it would bar all of Stone's claims but that it was unclear whether
consideration had been given for it. Stone I, 293 F.3d at 460-62. There also appeared
to be a genuine question as to whether GM had acted in good faith in allocating
vehicles among dealerships. Id. at 464-68. We therefore affirmed the dismissal of
Stone's other claims but remanded the claims that GM had violated the MVFPA and
breached its implied contractual duty of good faith and fair dealing.
After the case was returned on remand, the district court scheduled an
evidentiary hearing to address the validity of the release. The parties filed a joint
motion for continuance, however, because there was a pending motion by GM to
compel production of documents and deposition testimony relating to the release.
Stone then filed an amended complaint based on its two surviving claims, and GM
responded with a counterclaim seeking damages from Stone, including costs and
attorney fees, alleging that Stone had breached the release by filing this action.
GM moved for summary judgment, contending that Stone's claims were barred
by the release, that Stone had abandoned its franchise and therefore lacked standing
under the MVFPA, that GM had delivered Stone more vehicles than were owed under
its standard allocation system and it had not acted in bad faith, and that Stone had not
shown any cognizable damages. The district court granted the motion for summary
judgment on the MVFPA claim since Stone was no longer engaged in the franchise
business at the time it brought this action. The court concluded that it was therefore

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barred from suing under the statute, and Stone has not contested this ruling on appeal.
See Mo. Rev. Stat. 407.830 ("It shall be a defense for a motor vehicle franchisor, to
any action brought under sections 407.810 to 407.835 by a motor vehicle franchisee,
if it be shown that...the motor vehicle franchisee has ceased conducting its business
or has abandoned the franchise."). The motion for summary judgment was denied as
to Stone's claim that GM breached its duty of good faith and fair dealing, as was a
subsequent motion by GM for a scheduling conference. In denying the latter motion,
the court indicated that the question of whether consideration had been given for the
release was a fact issue to be determined at the previously scheduled trial.
The parties prepared for trial and submitted a joint stipulation of uncontested
facts, as well as trial briefs, witness and exhibit lists, and proposed jury instructions.
They also filed a number of motions in limine. On the morning of trial, the district
court met with counsel and indicated that a jury panel would be available later in the
day. The court then asked counsel to set out their positions on two main issues
respecting Stone's claim for breach of the duty of good faith: the validity of the
release and damages. The parties also were given the opportunity to state the
evidence on which they relied. Included in the evidence Stone said it planned to
introduce were GM's July 8, 1997 letter to Fairground Motors and the Dealer Service
and Sales Agreement between the parties. In its discussion GM indicated that it
would rely in part on the deposition testimony of Stone's president, Virgil Stone, and
thereafter the court permitted Stone to summarize any further evidence it would offer
at trial.
After hearing the presentations and arguments of the parties at the conference,
the district court concluded that GM was entitled to judgment on Stone's claim. The
court concluded that Stone lacked submissible evidence on damages but that the case
turned on the release, ruling that the release barred Stone's claim. GM's final
approval of Stone's sale to Fairground provided consideration for the release, making
it a valid contract, the court concluded. The court also indicated that it intended to

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award attorney fees and costs to GM as damages on its counterclaim, reasoning that
Stone had violated the terms of the release by bringing the lawsuit; it requested
memoranda on the amount GM should be awarded. Stone filed a notice of appeal, but
it was dismissed because there was not a final judgment.
The district court later issued a written order for judgment, dismissing Stone's
claim and GM's counterclaim. In departing from its announced intention to award
damages to GM, the court indicated that an award of attorney fees and costs would
be improper in the absence of a statutory or contractual provision authorizing them.
See In re Estate of Cannamore, 44 S.W.3d 883, 885 (Mo. Ct. App. 2001) (fees
appropriate "only where they are provided for by statute or by contract, where very
unusual circumstances exist so it may be said equity demands a balance of benefits,
or where the attorney's fees are incurred because of involvement in collateral
litigation"). Both Stone and GM appeal from the judgment, and we address their
arguments in turn.
We review grants of summary judgment de novo. Lerohl v. Friends of
Minnesota Sinfonia, 322 F.3d 486, 488 (8th Cir. 2003). A district court may grant
summary judgment sua sponte if "the losing party was on notice that she had to come
forward with all of her evidence." Celotex Corp. v. Catrett, 477 U.S. 317, 326
(1986).
Stone argues first that the release was not supported by consideration. GM
responds that there was consideration given for the release, including its decision not
to exercise its statutory right of first refusal. Its primary argument, however, is that
its final approval of Stone's intended sale to Fairground served as consideration since
Stone needed the approval for its sale to be consummated. GM asserts that it had
made clear to Stone's president that its approval of the sale was conditioned on
execution of the release. Stone responds that GM's approval was contractually
required under the dealer agreement because it prohibited GM from arbitrarily

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refusing to approve a dealership sale and there was no evidence it had reason to
refuse. See In re Weinsaft's Estate, 647 S.W.2d 179, 183 (Mo. Ct. App. 1983)
(consideration supplied by doing something the party is not legally required to do).
Stone argues further that GM had approved the sale in its letter to Fairground a week
before it signed the release and that GM's decision not to exercise its right of first
refusal was not consideration because that right was of no benefit to Stone and GM's
preclosing letter to Fairground had implicitly waived it.
Contrary to Stone's assertion, the terms of the Dealer Service and Sales
Agreement did not require GM to approve the sale to Fairground. GM was only
obligated under that agreement to consider Stone's proposal and not to turn it down
arbitrarily. GM retained discretion to base its decision on "the personal, business, and
financial qualifications of the proposed dealer operator and owners." It was also
entitled to consider "whether the proposed change [would be] likely to result in a
successful dealership operation with acceptable management, capitalization, and
ownership which will provide satisfactory sales, service, and facilities at an approved
location, while promoting and preserving competition and customer satisfaction."
The agreement thus gave considerable discretion to weigh the proposed dealership's
qualifications and analyze its prospects for success. The only restriction on that
discretion was that it could not act arbitrarily, and Stone has not shown that under this
agreement GM was required to approve the sale to Fairground.
Stone failed to demonstrate that GM had approved its proposed sale to
Fairground before it furnished a signed release. GM's July 8, 1997 letter to
Fairground did not address Stone's proposal, but rather indicated that the buyer's
separate "application and proposal to become a Chevrolet dealer" had been approved.
Moreover, GM expressly qualified this approval by stating that it was "prepared to
appoint Fairground Motors...as an authorized Chevrolet dealer" on the "condition[]"
that it provided the manufacturer with substantial documentation. Among the
documents required before GM would execute Fairground's Dealer Sales and Service

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2Because GM's final approval of Stone's proposed sale was consideration for
the release, we need not address its other ground for consideration—its decision not
to exercise its right of first refusal. We also decline to address an argument that Stone
raises for the first time on appeal—that enforcement of the release would be contrary
to Missouri public policy since under the MVFPA agreements which limit franchisee
rights are void. Mo. Rev. Stat. § 407.825. See DeArmon v. Burgess, 388 F.3d 609,
614 (8th Cir. 2004).
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Agreement was Stone's release. The district court gave Stone the opportunity to
present other evidence to show that GM had approved Stone's proposal prior to its
signing of the release, but Stone failed to do so. We conclude that the evidence does
not show that GM had approved Stone's proposed sale prior to the execution of the
release or that GM was legally obligated under its agreement with Stone to accept it.
GM's approval of sale, which the president of Stone himself understood to be
conditioned upon signing of the release, served as consideration for Stone's execution
of the release. The release is therefore valid and bars Stone's claims against GM. 2
In its cross appeal GM contends that the district court erred in denying it
attorney fees and costs. GM argues that an award of fees and costs would be
appropriate because Stone breached its contract of release by bringing this action and
such an award would serve as contractual damages. It cites a number of cases from
other jurisdictions in support, but they are not on point. In each of the cited cases the
plaintiff had a contractual obligation not to file a lawsuit; the cases did not involve
a claim for fees under Missouri law or a document merely releasing claims. See
Anchor Motor Freight, Inc. v. Int'l Bhd. of Teamsters, 700 F.2d 1067, 1069 (6th Cir.
1983) ("express term...providing that [plaintiff] would not bring suit"); Widener v.
Arco Oil and Gas Co., Div. of Atlantic Richfield Co., 717 F.Supp. 1211, 1213-14
(N.D. Tex. 1989) (agreement "discharg[ing]...all claims...and...covenant[ing] not to
file a lawsuit to assert such claims"); Riveredge Associates v. Metropolitan Life Ins.
Co., 774 F.Supp. 897, 901 (D.N.J. 1991) (implied contractual obligation not to file
suit in bad faith). Here, Stone did not promise to forgo litigation. Instead, its release

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provided GM with an affirmative defense if Stone were to bring an action against
GM. Stone did not breach a contractual obligation when it filed this action or violate
a contract providing for fees in the event of breach, and GM was not entitled to
damages under Missouri law.
For these reasons, we affirm the judgment of the district court.
BYE, Circuit Judge, concurring in part, dissenting in part.
I join in affirming the district court’s denial of attorney’s fees to GM, but
respectfully dissent from the portion of the opinion which holds GM provided
valuable consideration for the release.
My dissent is based upon a fundamental disagreement with the majority
concerning GM’s contractual obligation under the Dealer Service and Sales
Agreement (the “Agreement”) to approve the sale of Stone to Fairground. The
majority concludes GM had no obligation to approve the sale because GM retained
discretion under the Agreement “to weigh the proposed dealership’s qualifications
and analyze its prospects for success.” Admittedly, GM retained discretion under the
Agreement to weigh the proposed dealer’s credentials, but I submit this discretion
was limited. GM limited its discretion by promising to not arbitrarily refuse approval
of the sale to Fairground as long as the sale met GM’s qualifications, the specific
nature of which the majority sets out in its opinion. In other words, if the sale met
GM’s qualifications, GM had a contractual obligation to approve it.
All the evidence before us suggests the sale to Fairground met GM’s
qualifications, which should not surprise us since Fairground was already an
approved and successful GM franchisee. In addition to the evidence the sale actually
went forward and the inferences we may draw from that evidence, GM sent

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Fairground a letter dated July 8, 1997, which provided conclusive evidence of GM’s
satisfaction with the sale, the letter stating in relevant part:
This will confirm the information you were given on July 8, 1997 that
your application and proposal to become a Chevrolet dealer in Cuba,
MO has been approved and Chevrolet is prepared to appoint Fairground
Motors, LLC, in Cuba, MO, as an authorized Chevrolet dealer,
conditioned upon your providing us with the following information and
documentation by July 10, 1997:
The letter goes on to list the documentary items Fairground must provide. The items
are simple items such as a letter of termination from Virgil Stone, tax identification
numbers, copies of articles of incorporation, a blank void check, enrollment in a
dealer training program, evidence of a financing plan for new vehicles, and minutes
of the Fairground board of directors meeting approving the purchase. These items
were mere formalities, rather than anything of meaningful substance. Thus, by their
very nature it is apparent GM had already made the decision to approve the sale, as
it met the specifications contained in the Agreement.
The majority dismisses the letter as a mere conditional approval. Whether the
letter evinces an actual versus a conditional approval is beside the point, as all the
evidence before us suggests GM had a duty under the Agreement to actually approve
the sale. Nevertheless, temporarily putting aside GM’s duty to approve the sale and
assuming the approval was conditional, Fairground and Stone fulfilled the conditions
spelled out in the letter by delivering the requested documentation.
At such time as the conditions became fulfilled, the approval was realized, even
without an executed release from Stone, because the requirement of a release was not
a valid condition for approval of the sale. The other documentation, although
requested as mere formality, directly related to the factors for which GM agreed to
consider the sale. Noticeably absent from the list of factors GM agreed to consider

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was the potential for litigation from the terminated franchisee. As such, GM’s
approval of the sale did not constitute valuable consideration for the release as GM
had already approved the sale and, even if it had not, it had a preexisting contractual
obligation to do so in the absence of a release as the sale otherwise met GM’s
qualifications. See Zipper v. Health Midwest, 978 S.W.2d 398, 416 (Mo. Ct. App.
1998) (“a promise to do that which a party is already legally obligated to do does not
constitute valid consideration.”).
The majority alludes to GM’s secondary argument–valuable consideration by
way of its decision not to exercise the right of first refusal. GM’s forbearance of the
right of first refusal also cannot constitute consideration as Stone would not benefit,
nor would GM incur a detriment because of it. Penrod v. Branson R-IV Public Sch.
Dist., 916 S.W.2d 866, 867 (Mo. Ct. App. 1996) (“consideration is a benefit a party
making a promise receives in return for the promise, or a loss or detriment incurred
by the party to whom a promise is made.”). GM did not incur a detriment by its
forbearance of the right of first refusal because it no longer had such a right. GM
expressed no desire to exercise the right of first refusal, thus forfeited the right under
section 12.3.1 of the Agreement. Neither can it be successfully argued that Stone
benefitted from GM’s forbearance of the right of first refusal. The forbearance may
have benefitted Fairground, but Stone did not care which entity purchased the
dealership, GM or Fairground, as long as it received fair compensation. GM’s other
secondary arguments concerning consideration are similarly unpersuasive.
In the event we should find the release unsupported by consideration, GM
asserts the district court entered judgment on an independent ground separate and
apart from the release. The district court, according to GM, found Stone had no
admissible damage theory. My review of the transcript leaves me uncertain as to the
district court’s ruling on the matter. Because of the uncertainty of the district court’s
comments, combined with the confusion surrounding the district court’s decision to
cancel trial and enter an oral decision on the record, I would remand to the district

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court to consider the merits of the good faith claim, including the viability of Stone’s
damage theory. In part, I therefore respectfully dissent.
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