OPINION AND ORDER
LYNCH, District Judge.
This action arises from allegations that the defendants unlawfully coerced the plaintiffs into closing two car dealerships. While the plaintiffs originally asserted seven claims against the four defendants named in the complaint, a number of those claims were dismissed by this Court on September 20, 2000, and the parties have stipulated to the dismissal of several others. See Bronx Chrysler Plymouth, Inc. v. Chrysler Corp., No. 98 Civ. 6141(DAB) (JCF), Report & Recommendation, at 4-5, 19-20 (S.D.N.Y. Aug. 31, 2000) (adopted
There remain in this action three claims asserted by the individual plaintiffs, John Paladino ("Paladino") and Delores Paladino ("Mrs. Paladino"), against defendants Chrysler Corporation ("Chrysler") and Chrysler Credit Corporation ("Chrysler Credit"),
A. Factual Background
Chrysler is a motor vehicle manufacturer that sells new vehicles, parts, and accessories to independent, authorized dealers. Bronx Chrysler Plymouth, Inc. ("Bronx Chrysler") was once such a dealer. In December 1977, Chrysler and Bronx Chrysler entered into a Dealer Sales and Service Agreement (the "Bronx Franchise Agreement") that authorized Bronx Chrysler to operate a Chrysler-Plymouth dealership in the Bronx. John Paladino was an officer, a director, and the sole shareholder of Bronx Chrysler. (Chrysler 56.1 Stmt. ¶ 1; Chrysler Credit 56.1 Stmt. ¶ 1-3.) The sole source of financing for that dealership was provided by Chrysler Credit, a wholly-owned but independently-operated subsidiary of Chrysler. (John Paladino Aff. ¶ 5.)
According to Paladino, the defendants informed him sometime in 1991 that they wanted him to relocate his dealership from the Bronx to Westchester County. When Paladino expressed some reluctance, Chrysler and Chrysler Credit allegedly took a number of coercive steps that Paladino maintains were intended to force him to relocate the dealership. Chrysler, for example, allegedly refused to approve Paladino's requests for additional model lines and refused to provide Bronx Chrysler with a proper allocation of popular vehicle models, instead "dumping" less popular vehicles on the Bronx Chrysler dealership. (John Paladino Aff. ¶ 3.) At the same time, Chrysler allegedly provided some of Bronx Chrysler's closest competitors with extensive financial assistance, including preferred leases and real estate arrangements, advertising subsidies, relocation and renovation expenses, preferred financing arrangements, forgiveness or forbearance of monetary obligations owed to the defendants, preferred vehicle allocations, outright monetary grants, the approval of additional model lines for sale, and preferential rebates on vehicle sales. (John Paladino Aff. ¶ 4.)
For its part, Chrysler Credit allegedly pressured Paladino by changing its lending requirements for Bronx Chrysler. Previously, Chrysler Credit had required Bronx Chrysler to sell cars to consumers using "recourse" credit terms, which provided that in the event of consumer default, Bronx Chrysler was obligated to repurchase
Paladino maintains that as further inducement for him to relocate the dealership to Westchester, the defendants represented that they would forgive the indebtedness that Bronx Chrysler had accrued, a debt totaling approximately $500,000. (John Paladino Aff. ¶ 7; Pl. Resp. to Chrysler 56.1 Stmt. ¶¶ 6, 10.) Allegedly in reliance on that promise. Paladino decided to close Bronx Chrysler, whose financial situation had badly deteriorated. He terminated the Bronx Franchise Agreement in October 1992 and proceeded to negotiate the purchase of a Chrysler dealership located in New Rochelle, New York. (Chrysler 56.1 Stmt. ¶ 1; Chrysler Credit 56.1 Stmt. ¶ 1-3; John Paladino Aff. ¶ 7-8.) While Paladino claims that the defendants promised to finance the full purchase price of the Westchester dealership, Chrysler ultimately lent him only $250,000 (Ferrera Aff. Ex. 2 ("WDI Security/Capital Loan Agreement"); John Paladino Dep. at 110), leaving him to find additional funds by taking a home equity loan and borrowing more than $100,000 from his children. (John Paladino Aff. ¶ 8; Chrysler 56.1 Stmt. ¶¶ 5-6.)
In exchange for lending Paladino the money to purchase the Westchester dealership, Chrysler sought and obtained a personal guaranty from Paladino and his wife, Delores Paladino, for the loan and any future debts that Paladino's new dealership, Westchester Dodge, Inc. ("WDI"), might incur. Ferrera Aff. Ex. 4 ("Continuing Personal Guaranty"). Chrysler also agreed to forbear any immediate efforts to collect the outstanding Bronx Chrysler debts, for which Paladino acknowledged being personally liable, in order to permit Paladino to commence operation of the new dealership without the immediate burden of repaying those debts. In return, the Paladinos and WDI agreed to execute and deliver a promissory note to Chrysler in the principal amount of $352,934.98. (Ferrera Aff. Ex. 5 ("Chrysler Forbearance Agreement"); Ferrera Aff. Ex. 6 ("Chrysler Promissory Note").) The Paladinos and WDI agreed to enter into a similar forbearance agreement with Chrysler Credit and to execute and deliver to Chrysler Credit two promissory notes, one in the amount of $300,000 and one in the amount of $250,000. (Miltz Aff. Ex. A ("Chrysler Credit Forbearance Agreement" and "Chrysler Credit Promissory Note"); Chrysler 56.1 Stmt. ¶ 8.) These forbearance agreements and promissory notes were executed by the parties on June 2, 1993. (Chrysler 56.1 Stmt. ¶ 9.)
The plaintiffs maintain that all of these agreements were entered in the face of the defendants' refusal to honor their previous
Nevertheless, upon the conclusion of these various agreements, Chrysler and WDI proceeded to execute a new Dealer Sales and Service Agreement (the "WDI Franchise Agreement"). (Ferrera Aff. Ex. 7-8.) Paladino was the sole shareholder of WDI, which commenced operations on June 7, 1993. (Chrysler 56.1 Stmt. ¶ 10; Chrysler Credit 56.1 Stmt. ¶¶ 7-9; John Paladino Dep. at 25.) Mrs. Paladino served as secretary and treasurer of WDI, but primary decision-making responsibility rested with her husband and the dealership's comptroller. (Maider Aff. Ex. F ("Delores Paladino Dep."), at 16-17.) Unfortunately, WDI too suffered from financial difficulties. (Chrysler 56.1 Stmt. ¶ 12.) As he acknowledges, Paladino contributed to those financial difficulties by causing the dealership to pay his personal debts and to pay a salary to Mrs. Paladino of approximately $150,000 per year when she performed no work. (Chrysler 56.1 Stmt. ¶ 49.)
However, Paladino alleges that the defendants played a substantial role in WDI's financial demise by engaging, once again, in punitive, discriminatory, and threatening practices. According to Paladino, Chrysler again denied his dealership the proper allocation of popular vehicles, causing WDI to lose business to competitors that were allocated those vehicles, and placed WDI at the lowest tier of its dealer customer satisfaction incentive program, which entitled WDI to receive an incentive of only $75.00 for each car sold, rather than the $300.00 received by dealers at the highest tier. (John Paladino Aff. ¶ 10-11.) While the defendants were contractually entitled to conduct periodic audits to determine the dealership's compliance with its contractual obligations, Paladino alleges that the defendants were selective and arbitrary in their auditing practices, requiring full compliance from WDI while tolerating substantial compliance from other dealers, and in one instance refusing to reschedule an audit on the day of the funeral of Paladino's stepson. (Chrysler 56.1 Stmt. ¶ 40; Chrysler Credit 56.1 Stmt. ¶ 24; John Paladino Aff. ¶ 12.) Paladino maintains that the defendants not only wrongfully denied WDI and its customers access to credit, but also provided considerable financial assistance to other unprofitable dealers in the area. (John Paladino Aff. ¶¶ 13-15.) Finally, Paladino asserts that Chrysler Credit personnel interfered with his operation of WDI, telling WDI employees that WDI soon would be out of business and, in a series of statements to Paladino, threatening to terminate WDI and even to foreclose on the Paladinos' home. (John Paladino Dep. at 561, 594-96, 687).
In February 1997, WDI filed a petition for bankruptcy protection under Chapter 11, voluntarily terminated the WDI Franchise Agreement, and ultimately sold the
B. Procedural History
On July 22, 1998, the Paladinos filed this action in New York State Supreme Court, Bronx County; the defendants removed the case to federal court on August 21, 1998. The plaintiffs filed an Amended Complaint on October 13, 1998. On June 30, 1999, the bankruptcy trustee for WDI sold the debtor's right, title, and interest in all claims against the defendants to Chrysler Credit, which led to a stipulation dismissing with prejudice all of WDI's claims in this action. The plaintiffs accordingly filed a Second Amended Complaint on September 21, 1999.
The defendants then moved pursuant to Fed.R.Civ.P. 12(b)(6) to dismiss all of the claims in the complaint. Adopting a Report and Recommendation ("R & R") prepared by Magistrate Judge James C. Francis IV, the Court (per Judge Deborah A. Batts) dismissed a number of the claims asserted in the Second Amended Complaint as time-barred and for failure to state a claim. The Court also held, however, that three of those claims were properly alleged and survived to the extent that they may have accrued within the applicable limitations periods - i.e., after July 22, 1995:(1) Chrysler's failure to act in good faith in performing or complying with written franchise agreements in violation of the Automobile Dealers' Day in Court Act, 15 U.S.C. §§ 1221-25 (Second Amend. Compl. ¶¶ 90-100); (2) the intentional infliction of emotional distress upon the Paladinos by both Chrysler and Chrysler Credit in violation of New York law (Second Amend. Compl. ¶¶ 77-81); and (3) the breach of a duty of good faith owed the Paladinos by both Chrysler and Chrysler Credit in violation of New York law (Second Amend. Compl. ¶¶ 82-85). (R & R at 8-10.)
The parties have completed discovery, and the defendants now move for summary judgment on the remaining three claims in the Second Amended Complaint and three counterclaims asserted by Chrysler seeking payment of the debts incurred by Bronx Chrysler and WDI for which the Paladinos allegedly are liable.
When adjudicating a motion for summary judgment, all ambiguities must be resolved in favor of the nonmoving party, although "the nonmoving party may not rely on conclusory allegations or unsubstantiated speculation." Scotto v. Almenas, 143 F.3d 105, 114 (2d Cir.1998). The court "is not to weigh the evidence but is instead required to view the evidence in the light most favorable to the party opposing summary judgment, to draw all reasonable inferences in favor of that party, and to eschew credibility assessments." Weyant v. Okst, 101 F.3d 845, 854 (2d Cir.1996). Summary judgment is then appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits ... show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
To establish a genuine issue of material fact, the plaintiff "`must produce specific facts indicating' that a genuine factual issue exists." Scotto, 143 F.3d at 114 (quoting Wright v. Coughlin, 132 F.3d 133, 137 (2d Cir.1998)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). "If the evidence [produced by the nonmoving party] is merely colorable, or is not significantly probative, summary judgment may be granted." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249-50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (internal citations
I. The Paladinos' Claims
A. Automobile Dealers' Day in Court Act
The Automobile Dealers' Day in Court Act ("ADDCA"). 15 U.S.C. §§ 1221-25, "is a remedial statute enacted to redress the economic imbalance and unequal bargaining power between large automobile manufacturers and local dealerships, protecting dealers from unfair termination and other retaliatory and coercive practices." Maschio v. Prestige Motors, 37 F.3d 908, 910 (3d Cir.1994). ADDCA permits a car dealer to sue a manufacturer for its failure "to act in good faith in performing or complying with any of the terms of the franchise, or in terminating, canceling or not renewing the franchise with [the] dealer." 15 U.S.C. § 1222. The statute confers a right of action upon "automobile dealer[s]," id., and defines that term to mean "any person, partnership, corporation, association, or other form of business enterprise ... operating under the terms of a franchise and engaged in the sale or distribution of passenger cars, trucks, or station wagons." 15 U.S.C. § 1221(c).
In its September 2000 order, the Court held that since Mrs. Paladino lacked any interest in WDI, she lacked standing to assert a claim under ADDCA. (R & R at 14.) However, the Court also concluded that Paladino properly stated a claim for relief against Chrysler under ADDCA to the extent that (1) the claim may have accrued after July 22, 1995, and therefore within the three-year ADDCA statute of limitations, 15 U.S.C. § 1223; and (2) Paladino might be able to adduce facts that establish his standing to sue under ADDCA. (R & R at 8-9, 14, 17-18.) Chrysler now argues that (1) Paladino lacks standing to assert a claim under ADDCA; (2) the ADDCA statute of limitations bars consideration of any of Chrysler's conduct before July 22, 1995; and (3) the allegations of coercion or intimidation by Chrysler are insufficient to support a claim under ADDCA.
Under normal principles of corporate law, it would appear that Paladino lacks standing to pursue claims under the ADDCA. As noted above, the Act provides remedies for "automobile dealer[s]," defined as persons or entities "operating under the terms of a franchise and engaged in the sale or distribution of passenger cars, trucks, or station wagons." 15 U.S.C. § 1221(c). As defendants point out, Paladino is not a party to any "franchise"; rather, the party to the relevant franchise agreement is WDI, which is no longer pursuing any claim against defendants. Accordingly, defendants argue, Paladino as an individual simply has no rights under ADDCA. (Chrysler Mem. at 7-9.) Paladino argues, however, that he falls within a recognized exception to these principles, unique to the specific statutory scheme of ADDCA. As more fully discussed below, Paladino's argument fails, because the law of the Second Circuit does not recognize the exception he cites.
A number of courts have recognized exceptions, along the lines that Paladino urges, to the general rule that individual shareholders, officers, and directors of a corporate dealership lack standing under ADDCA. See Lewis, 456 F.2d at 607 (denying motion to dismiss for lack of standing because evidence might "reveal that the course of conduct pursued by the parties is such that, in light of all surrounding circumstances and the object to be accomplished as viewed from the purpose of the parties' association and underlying written agreements," plaintiff acted as an "automobile dealer" within meaning of ADDCA and defendant considered him as such); York Chrysler-Plymouth, Inc., 447 F.2d at 790-91 (permitting two individuals who were sole shareholders, officers, and directors of dealer to sue under ADDCA where those individuals were "inextricably woven" into the franchise agreement and "made essential to the operation of the dealership" by the terms of the agreement); Kavanaugh v. Ford Motor Co., 353 F.2d 710, 716-17 (7th Cir.1965) (holding that sole individual shareholder and operator of dealer is "automobile dealer" and therefore has standing under ADDCA where that individual "was deemed essential to the operation of the dealership" and the manufacturer owned all of the franchise's voting stock and controlled its board of directors); see also Rea v. Ford Motor Co., 497 F.2d 577 (3d Cir.1974) (applying York Chrysler-Plymouth); Empire Volkswagen v. World-Wide Volkswagen, 627 F.Supp. 1202, 1211 (S.D.N.Y.1986) (noting exceptions identified in Kavanaugh and York Chrysler-Plymouth, but finding neither exception applicable), aff'd, 814 F.2d 90 (2d Cir.1987).
In York Chrysler-Plymouth, the case upon which Paladino principally relies, the Fifth Circuit acknowledged that individuals do not have standing under ADDCA "merely because they [a]re sole stockholders, officers and directors of the corporate franchise holder," but nevertheless held that the individual shareholders in that case had standing because the franchise agreement "made [them] essential to the operation of the dealership." York Chrysler-Plymouth, 447 F.2d at 790. The franchise agreement in York Chrysler-Plymouth (1) provided that it was made in reliance "on the active, substantial and continuing participation" of the plaintiff shareholders, (2) required the individual shareholders to maintain beneficial ownership and control of the stock in the dealership corporation, and (3) permitted termination of the agreement if either of the plaintiff shareholders died or failed to continue in the active management of the dealership. Id. at 790-91.
The facts of this case fall squarely within the exception applied in York Chrysler-Plymouth.
WDI Franchise Agreement, introduction. Section 2 of the WDI Franchise Agreement is even more explicit, stating that
WDI Franchise Agreement § 2. The agreement also provides that Chrysler may terminate the agreement if Paladino either dies, fails "to continue active and substantial personal participation in the management" of the dealership, or transfers his ownership interest. WDI Franchise Agreement §§ 28(b)(iii)-(iv) & 34. Moreover, Paladino personally guaranteed WDI's indebtedness to the defendants, thereby making "his personal wealth ... substantially intertwined with the dealership's financial affairs." Coffee v. General Motors Acceptance Corp., 5 F.Supp.2d 1365, 1379 (S.D.Ga.1998).
The undisputed facts therefore establish that Paladino was "essential to the operation" of WDI and would have standing as an "automobile dealer" to sue Chrysler under the exception applied in York Chrysler-Plymouth, if that case correctly states the law. However, York Chrysler-Plymouth appears to depart from the traditional corporate law rule that "where an injury is suffered by a corporation and the shareholders suffer solely through depreciation in the value of their stock, only the corporation itself ..., or a stockholder suing derivatively in the name of the corporation may maintain an action against the wrongdoer." Vincel, 521 F.2d at 1118 (citing Niles v. New York Central & Hudson Riv. R.R. Co., 176 N.Y. 119, 68 N.E. 142 (1903)); see Jones v. Niagara Frontier Transp. Auth., 836 F.2d 731, 736 (2d Cir. 1987) ("A shareholder - even the sole shareholder - does not have standing to assert claims alleging wrongs to the corporation."). Traditional corporate and bankruptcy law principles would deprive Paladino of standing to pursue WDI's ADDCA claim at least upon the dealership's bankruptcy filing - if not earlier - unless the bankruptcy trustee abandoned the claim, either voluntarily or upon order of the bankruptcy court, since a derivative claim brought by a shareholder but owned by the corporate debtor constitutes property of the bankruptcy estate under 11 U.S.C. § 541(a)(1). See Mitchell Excavators, Inc. v. Mitchell, 734 F.2d 129, 131-32 (2d Cir. 1984) (rights of action owned by debtor, including derivative claims brought by shareholders, "pass to the estate created by the commencement of the bankruptcy proceeding" and are "normally vindicated by the trustee" unless abandoned); In re General Development Corp., 179 B.R. 335, 338-39 (S.D.Fla.1995).
Whether Congress intended with ADDCA to adopt traditional corporate law principles or instead to enact a more permissive set of standing rules turns on the interpretation of the definition of "automobile dealer" under the statute. Compare Mark Herrmann, Identifying the Proper Plaintiff to Pursue Claims Under the Automobile Dealers Day in Court Act, 24 Cap. U.L.Rev. 565, 565 n. 1, 577-79 (1995) (arguing that legislative history "provides no guidance" on circumstances in which
The Second Circuit's position on York Chrysler-Plymouth is not entirely clear. While Chrysler argues that Vincel rejected application of the York exception "on facts substantially similar to those present in this case," Chrysler Mem. at 8, Vincel did not expressly reject the reasoning of York Chrysler-Plymouth, instead somewhat cryptically distinguishing that case as one "in which the shareholders are joined with the corporation in a single action." Vincel, 521 F.2d at 1120. Nor did Vincel expressly address consider the argument adopted by the Fifth Circuit in York Chrysler-Plymouth and pressed by Paladino in this case - namely, whether the franchise relationship that makes the plaintiff shareholders "essential to the operation of the dealership" renders those individual shareholders "automobile dealers" within the meaning of ADDCA and therefore entitles them to sue under the Act.
Nevertheless, neither the reasoning nor the result of Vincel can be reconciled with a finding of standing on Paladino's part. Vincel, like Paladino, was the president of the franchisee corporation, owned (with his co-plaintiffs) 100% of its stock, and personally guaranteed the corporation's debt to the manufacturer. 521 F.2d at 1115-16. Although the Court made no reference to any "essential to the operation of the dealership" clause in the franchise agreement, there is little question that Vincel, like the Yorks or Kavanaugh, was the human being who was the effective counterparty to the automobile manufacturer, and was thus not "merely ... someone who desired to invest in a business enterprise or ...
Notwithstanding these facts, the Second Circuit firmly rejected individual standing, at least where (as here and in Vincel) the individual shareholder sues only in his own behalf, and not, as in York Chrysler-Plymouth, alongside the corporate franchisee itself.
Thus, while Vincel does not expressly reject the holding of York Chrysler-Plymouth, it refuses to apply York on facts all but identical to those at issue here, on reasoning inconsistent with plaintiff's position in this case, and distinguishes York on a fact of dubious relevance that is not present in this case. Under these circumstances, to hold that York Chrysler-Plymouth rather than Vincel provides the rule of decision in this case would be irresponsible. Second Circuit law thus precludes according standing to Paladino to pursue the instant claims.
2. The Merits
Even assuming arguendo that Paladino did have standing under ADDCA as an "automobile dealer," his claim fails on the merits in any event. At the outset, the Court notes that Paladino's ADDCA claim suffers from serious statute of limitations problems. "A claim under [ADDCA] accrues, and therefore, the statute of limitations begins to run, when the plaintiff knows or has reason to know that the act providing the basis for its injury has occurred." Salem Mall Lincoln Mercury v. Hyundai Motor America, 103 F.Supp.2d 1032, 1037 (S.D.Ohio 2000); see Leon v. Murphy, 988 F.2d 303, 309 (2d Cir.1993) ("[U]nder federal law, a cause of action accrues when the plaintiff knows or has reason to know of the injury that is the basis of the action." (internal quotation marks omitted)). Paladino contends that Chrysler's actions constitute one continuous tort and, therefore, were "of a nature that the damages flowing therefrom could not have been ascertained until a later date." Pl. Mem. in Opp. at 20 (citing Colonial Ford, Inc. v. Ford Motor Co., 577 F.2d 106,
On the assumptions necessary to support standing, Paladino's argument has some appeal. Since his claim under ADDCA is premised on the notion that he is an "automobile dealer," with a direct claim to relief quite apart from any claims held by Bronx Chrysler or WDI, the fact that Paladino's factual allegations may be divided into two distinct phases, each involving a different corporate entity, is not itself relevant. Nevertheless, Paladino's argument fails. While a cause of action ordinarily does not accrue until "the plaintiff has a complete and present cause of action" and "can file suit and obtain relief," Bay Area Laundry & Dry Cleaning Pension Trust Fund v. Ferbar Corp., 522 U.S. 192, 201, 118 S.Ct. 542, 139 L.Ed.2d 553 (1997) (internal quotes omitted), a plaintiff need not be aware of the full extent of the injuries suffered in order for the claim to accrue. See Corcoran v. New York Power Authority, 202 F.3d 530, 544 (2d Cir.1999) (in order for claim to accrue, plaintiff "need not know each and every relevant fact of his injury or even that the injury implicates a cognizable legal claim") (quoting Kronisch v. United States, 150 F.3d 112, 121 (2d Cir.1998)); Mendez v. United States, 655 F.Supp. 701, 705 (S.D.N.Y. 1987) ("To be aware of an injury, plaintiff need not know the full extent of his or her injury. The statute will run even though the ultimate damage is unknown or unpredictable." (internal quotation marks and citations omitted)). "Rather, a claim will accrue when the plaintiff knows, or should know, enough of the critical facts of injury and causation to protect himself by seeking legal advice." Corcoran, 202 F.3d at 544 (quoting Kronisch, 150 F.3d at 121).
Unlike Colonial Ford, a case upon which Paladino heavily relies, this is not a situation in which the automobile manufacturer's pre-limitations period conduct was "of such a nature that damages could not have been ascertained until an extended period of time had elapsed." Colonial Ford, 577 F.2d at 112; see also Kahn, 970 F.2d at 1039. While Paladino asserts that the consequences of Chrysler's various pre-limitations period actions "could not have been known at the time," Pl. Mem. in Opp. at 21, the undisputed evidence demonstrates otherwise. Paladino clearly had reason to know the injuries caused by Chrysler's actions in connection with Bronx Chrysler and its extensive indebtedness as early as October 1992, when that dealership ceased operations and terminated its franchise agreement with Chrysler, and certainly no later than June 1993, when Chrysler allegedly reneged on its promise to forgive Bronx Chrysler's indebtedness and forced the Paladinos personally to guarantee those debts. The precise amount of Bronx Chrysler's indebtedness, after all, was known to everyone at the time. The fact that Paladino waited for those injuries ultimately to become more severe, as WDI proceeded to fall into ever-greater financial difficulties, is of no moment.
Similarly, Paladino's allegations concerning Chrysler's actions in connection with WDI before July 22, 1995, are also timebarred,
Paladino's ADDCA claim therefore reduces to his allegations that Chrysler denied WDI the proper allocation of vehicle models in 1996, engaged in selective audits and enforcement of audits in 1995 and 1996, and wrongfully terminated the WDI Franchise Agreement. The evidence in support of these allegations is insufficient to withstand the Chrysler's motion for summary judgment. In order to prevail on his ADDCA claim, Paladino must prove that Chrysler failed to act in good faith in "performing or complying with any of the terms of the franchise, or in terminating, canceling or not renewing the franchise with [the] dealer." 15 U.S.C. § 1222. Under ADDCA, "good faith" - defined as "the duty of each party to any franchise, and all officers, employees or agents thereof to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion or intimidation from the other party," 15 U.S.C. § 1221(e) - has a "narrow, restricted meaning." Empire Volkswagen v. World-Wide Volkswagen, 814 F.2d 90, 95 (2d Cir.1987); see Carroll Kenworth Truck Sales, Inc. v. Kenworth Truck Co., 781 F.2d 1520, 1525 (11th Cir.1986) ("Bad faith under [ADDCA] has been defined narrowly and construed strictly. It does not mean simply a lack of fairness but entails a showing of coercion."). To establish the lack of good faith and therefore prevail under ADDCA, the dealer must provide "evidence of a wrongful demand enforced by threats of coercion or intimidation." Empire Volkswagen v. World-Wide Volkswagen, 814 F.2d at 95-96; see Lazar's Auto Sales, Inc. v. Chrysler Financial Corp., 83 F.Supp.2d 384, 388 (S.D.N.Y. 2000) (to prevail under ADDCA, dealer must prove (1) that manufacturer "coerced, intimidated or threatened" the dealer and (2) that "any coercion or intimidation was designed to achieve some improper or wrongful objective"). A wrongful demand may be inferred "from all the facts and circumstances" even in the absence of evidence that a formal, explicit demand was made. Marquis v. Chrysler Corp., 577 F.2d 624, 634 (9th Cir.1978).
Here, Paladino can establish neither that he was coerced or intimidated nor that Chrysler's objectives were improper or wrongful. First, contrary to Paladino's implication, ADDCA "does not afford [an automobile dealer] a statutory right or formula for allocation or delivery of certain cars." Southern Rambler Sales, Inc. v. American Motors Corp., 375 F.2d 932, 935 (5th Cir.1967); see also Colonial Dodge, Inc. v. Chrysler Corp., 11 F.Supp.2d 737, 744 (D.Md.1996) ("A manufacturer's duty toward a dealer is defined initially by its allocation agreement. A dealer is entitled only to the cars due under the allocation system, not to all the automobiles it requests."), aff'd, 121 F.3d 697, 1997 WL 436710 (4th Cir.1997) (table).
Second, the undisputed evidence shows that the audits conducted by Chrysler were authorized by the WDI Franchise Agreement. The WDI Franchise Agreement authorized Chrysler to conduct audits in order to determine whether the dealership was in compliance with the requirements of the contract and the various programs in which WDI elected to participate; the agreement also gave WDI an opportunity to appeal auditors' findings. (Chrysler 56.1 Stmt. ¶ 40; WDI Franchise Agreement ¶ 11(b).) With respect to the two post-July 1995 audits at issue in this case - a December 1995 sales incentive audit and an August 1996 warranty audit - Paladino offers no evidence that Chrysler failed to act in good faith. It is undisputed that WDI had failed to "dot the Is [and] cross the Ts" and therefore was not in compliance with the terms governing the sales incentive program. (Chrysler 56.1 Stmt. ¶ 38; John Paladino Dep. at 156-58, 161.) Similarly, Paladino does not contest that fact that WDI had violated the terms of its franchise agreement by purchasing replacement parts on the open market for cars serviced under warranty claims, rather than purchasing and using only parts supplied by Chrysler, as the WDI Franchise Agreement required. (Chrysler 56.1 Stmt. ¶ 39; John Paladino Dep. at 166-67, 170, 173-74.) It was thus entirely reasonable for Chrysler to conduct audits of these functions, and it is undisputed that the audits uncovered breaches by WDI of its obligations to Chrysler.
Paladino nevertheless protests that Chrysler audits of WDI were arbitrary and discriminatory, since other dealers in the area were treated more leniently. But this allegation - even if true - fails to support an ADDCA claim. Even if Chrysler acted arbitrarily in its auditing practices, "mere arbitrariness on the part of a manufacturer does not constitute a violation of [ADDCA]." Gage v. General Motors Corp., 796 F.2d 345, 351 (10th Cir. 1986). Paladino concedes that WDI had failed to comply with its contractual obligations and that Chrysler had the legal right to audit the dealership and assess charges for any contractual violations. Enforcing its rights, even if it chose to overlook similar violations by others, is not wrongful coercion under ADDCA.
B. Intentional Infliction of Emotional Distress
Under New York law, intentional infliction of emotional distress "predicates liability on the basis of extreme and outrageous conduct, which so transcends the bounds of decency as to be regarded atrocious and intolerable in a civilized society." Freihofer v. Hearst Corp., 65 N.Y.2d 135, 143, 490 N.Y.S.2d 735, 480 N.E.2d 349 (1985). To prevail on their claim for intentional infliction of emotional distress, the Paladinos must prove four elements: "(i) extreme and outrageous conduct; (ii) intent to cause, or disregard of a substantial probability of causing, severe emotional distress; (iii) a causal connection between the conduct and injury; and (iv) severe emotional distress." Howell v. New York Post Co., Inc., 81 N.Y.2d 115, 121, 596 N.Y.S.2d 350, 612 N.E.2d 699 (1993).
In its September 2000 order, the Court held that the Paladinos could maintain their claim for intentional infliction of emotional distress to the extent that the claim may have accrued within the applicable limitations period. (R & R at 9-10.) While the Court previously held that the three-year limitations period set forth in C.P.L.R. 214(4) applied to this claim (R & R at 9-10), this conclusion was mistaken. As a claim involving an intentional tort, the Paladinos' claim against Chrysler Credit for intentional infliction of emotional distress is governed by the one-year limitations period set forth in C.P.L.R. 215(3). See, e.g., Gallagher v. Directors Guild of America, Inc., 144 A.D.2d 261, 533 N.Y.S.2d 863, 864-65 (1st Dep't 1988). The claim is therefore timely only to the extent that it accrued after July 22, 1997. Since the last actionable event in this case - WDI's bankruptcy filing - took place on February 4, 1997, the Paladinos' claim is time-barred under C.P.L.R. 215(3).
Even apart from any statute of limitations problem, however, the plaintiffs' claim of intentional infliction of emotional distress fails on the merits. The claim itself reduces to Paladino's allegations of a pattern of discriminatory conduct by the defendants, since it now is conceded that the defendants did not specifically direct any conduct against Mrs. Paladino, who was not a shareholder or officer of WDI.
For a plaintiff to prevail on a claim for intentional infliction of emotional distress, the defendants conduct "must be so outrageous in character, and so extreme in degree, as to go beyond all possible bounds of decency, and to be regarded as atrocious, and utterly intolerable in a civilized community." Murphy v. American Home Prods. Corp., 58 N.Y.2d 293, 303, 461 N.Y.S.2d 232, 448 N.E.2d 86 (1983) (quoting Restatement (Second) of Torts § 46 cmt. d). Paladino's allegations fall woefully short of that standard. As he concedes, Paladino entered into an agreement that made him personally liable for the debts of his corporate dealerships, failed to make timely payments on the debts incurred by those dealerships, and even submitted inaccurate financial reports to Chrysler and Chrysler Credit during the time periods in question. (John Paladino Dep. at 560-68, 686-88; Chrysler Credit 56.1 Stmt. ¶ 20.) Especially given WDI's deteriorating financial situation, Mr. Paladino cannot be heard to complain now that the defendants decided to audit WDI and ultimately to suspend their financing - in accordance with their undisputed contractual rights (Chrysler 56.1 Stmt. ¶ 40; Chrysler Credit 56.1 Stmt. ¶ 24) - and that its personnel informed him that foreclosure on his house was a possibility if WDI's financial situation did not improve. Viewed in this context,
Summary judgment therefore will be granted in the defendants' favor on the Paladinos' claim for intentional infliction of emotional distress.
C. Breach of Contractual Duty of Good Faith
Count IV of the complaint essentially restates the Paladinos' ADDCA claim on state common law grounds, asserting that the defendants owed the Paladinos a duty "to exercise ordinary and reasonable care to act in good faith in [their] business dealings and otherwise" and that the defendants' conduct constituted a breach of that duty. Second Amend. Compl. ¶¶ 83-84. However, the Paladinos do not identify the source of any such duty in their opposition papers to the defendants' motions for summary judgment - indeed, the Paladinos make no argument in support of this claim at all. Under the circumstances, the Court deems the claim abandoned and will dismiss it on that basis. See Anyan v. New York Life Ins. Co., 192 F.Supp.2d 228, 237 (S.D.N.Y.2002) (dismissing ADEA claim as abandoned where plaintiff fails to address that claim in opposition papers to defendants' motion for summary judgment and presents no specific evidence that age was factor in termination of employment), appeal docketed, No. 02-7497 (2d Cir. May 2, 2002).
Even if this claim were not abandoned, however, it would fail on the merits. Every contract governed by New York law contains an implied covenant of good faith and fair dealing, which "is violated when a party ... acts in a manner that, although not expressly forbidden by any contractual provision, would deprive the other of the right to receive the benefits under the agreement."
Applying New York choice of law rules, see Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941), the contracts to which the Paladinos are parties
Summary judgment therefore will be granted in the defendants' favor on this claim.
II. Chrysler's Counterclaims
Chrysler also seeks summary judgment on its three counterclaims, which seek to enforce the terms of the Continuing Personal Guaranty, the Chrysler Forbearance Agreement, and the Chrysler Promissory Note. Chrysler Ans., Counterclaim ¶¶ 5-25. Chrysler claims that the Paladinos are jointly and severally liable in the amount of $605,759.24, plus interest, and seeks an award of costs and attorneys' fees.
The damages sought by Chrysler fall into two categories: debts incurred by Bronx Chrysler and debts incurred by WDI. Chrysler maintains that when Bronx Chrysler closed in October 1992, it was indebted to Chrysler in the amount of $352,934.98. (Chrysler 56.1 Stmt. ¶ 4.) The Paladinos recite and admit this indebtedness in the Chrysler Forbearance Agreement, which was executed on June 2, 1993. (Chrysler Forbearance Agreement at 1.) On that same date, the Paladinos executed and delivered to Chrysler a promissory note in the amount of $352,934.98, and thereby agreed to be personally liable for Bronx Chrysler's outstanding debt. According to Chrysler, the outstanding balance of this debt upon termination of the WDI Franchise Agreement was $313,034.98. (Chrysler 56.1 Stmt. ¶ 19.)
The debts incurred by WDI consist of the outstanding balance on the WDI Security/Capital Loan Agreement, which Chrysler claims to be $110,152.91, and the outstanding balance on the "dealer account" that WDI maintained with Chrysler pursuant to the WDI Franchise Agreement, which Chrysler claims to be $181,661.35. (Chrysler 56.1 Stmt. ¶¶ 16-17.) According to Chrysler, the Paladinos are personally liable for WDI's indebtedness as a result of the Continuing Personally Guaranty. (Chrysler 56.1 Stmt. ¶ 18.)
The Paladinos do not put up much of a fight on this issue, making no effort at all to dispute the total amount of the debts for which Chrysler contends they are liable.
Having failed to establish that Chrysler ever agreed to forgive Bronx Chrysler's debts, the Paladinos cannot claim duress on the basis of Chrysler's insistence that the Paladinos agree to assume those debts. With no evidence to support the Paladinos' defense of economic duress, summary judgment on Chrysler's counterclaim is therefore appropriate and will be granted.
For the foregoing reasons, the defendants' motions for summary judgment are granted.