The opinion
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
EDDIE TOURELLE’S NORTHPARK CIVIL ACTION
HYUNDAI, LLC
VERSUS NO: 18-11757
HYUNDAI MOTOR SECTION: “H”(1)
AMERICA CORP., ET AL.
ORDER AND REASONS
Before the Court is Defendants’ Second Motion to Dismiss (Doc. 28). For
the following reasons, the Motion is GRANTED IN PART.
BACKGROUND
This lawsuit arises out of the franchise relationship between Plaintiff
Eddie Tourelle’s Northpark Hyundai, LLC and Defendants Hyundai Motor
America Corporation (“HMA”) and Genesis Motor America, LLC (“GMA”).
Plaintiff alleges that it entered into a Dealer Sales and Service Agreement
(“DSS Agreement”) with HMA, which gave Plaintiff the right to purchase and
sell Hyundai products at its dealership, including the Hyundai Genesis. In
2015, HMA announced that the Genesis would be spun-off into a new line of
luxury vehicles. Plaintiff signed an agreement with HMA to be eligible to
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purchase and sell the new Genesis line vehicles (“the Participation
Agreement”). The Participation Agreement required Plaintiff to upgrade its
sales and service facilities in order to sell the Genesis line. To comply with the
Participation Agreement, Plaintiff spent $135,208.50 on renovations and
employee training.
In connection with the re-branding, HMA allegedly made conflicting
representations to the Louisiana Motor Vehicle Commission (“LMVC”)
regarding whether the Genesis vehicles were manufactured by HMA or GMA.
The LMVC found that GMA was the manufacturer/distributor of the new line
and that it had failed to secure proper licensing to sell in Louisiana. As a result,
HMA and GMA ordered Plaintiff and other Genesis dealers in Louisiana to
stop selling the Genesis line. Plaintiff argues that as a result of Defendants’
failure to secure proper licensing, it was prohibited from selling Genesis
vehicles despite complying with the terms of the Participation Agreement.
Plaintiff filed suit in state court, bringing claims for breach of contract,
negligence, violation of the Louisiana Motor Vehicles Act (LMVA), and
violation of the Louisiana Unfair Trade Practices Act (LUTPA) against HMA
and GMA. Defendants removed the case to this Court on diversity grounds.
Defendants then moved to dismiss Plaintiff’s claims, arguing that it had failed
to state a claim for which relief could be granted. This Court granted
Defendants’ motion in part, dismissing Plaintiff’s claims for violations of the
LMVA, violations of LUTPA, negligence, and breach of contract. Plaintiff’s only
remaining claim was its claim against HMA for HMA’s breach of its obligation
to use best efforts under the DSS Agreement. However, the Court also granted
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Plaintiff leave to amend its Complaint to properly plead the claims that had
been dismissed.
Plaintiff thereafter amended its Complaint (“the Amended Complaint”).1
Defendants now move again for dismissal of some of Plaintiff’s claims.2 This
Court will address each of their arguments in turn.
LEGAL STANDARD
To survive a Rule 12(b)(6) motion to dismiss, a plaintiff must plead
enough facts “to state a claim for relief that is plausible on its face.”3 A claim is
“plausible on its face” when the pleaded facts allow the court to “draw
reasonable inference that the defendant is liable for the misconduct alleged.”4
A court must accept the complaint’s factual allegations as true and must “draw
all reasonable inferences in the plaintiff’s favor.”5 The court need not, however,
accept as true legal conclusions couched as factual allegations.6 To be legally
sufficient, a complaint must establish more than a “sheer possibility” that the
plaintiff’s claims are true.7 If it is apparent from the face of the complaint that
an insurmountable bar to relief exists and the plaintiff is not entitled to relief,
the court must dismiss the claim.8 The court’s review is limited to the
1 Doc. 25.
2 Doc. 28.
3 Ashcroft v. Iqbal, 556 U.S. 662 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S.
544, 547 (2007)).
4 Id.
5 Lormand v. U.S. Unwired, Inc., 565 F.3d 228, 232 (5th Cir. 2009).
6 Iqbal, 556 U.S. at 678.
7 Id.
8 Lormand, 565 F.3d at 255–57.
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complaint and any documents attached to the motion to dismiss that are
central to the claim and referenced by the complaint.9
LAW AND ANALYSIS
Defendants have moved for dismissal of some of the claims in Plaintiff’s
First Amended Complaint. Specifically, Defendants seek dismissal of
Plaintiff’s claims for breach of the Participation Agreement, negligent
misrepresentation, negligence, intentional interference with contract, and its
claims under various solidary liability theories.
A. Breach of Participation Agreement
In considering Defendants’ First Motion to Dismiss, this Court dismissed
all of Plaintiff’s allegations for breach of contract except one. The Court held
that Plaintiff had sufficiently alleged a breach of the DSS Agreement’s
requirement that HMA use its “best efforts” to provide Plaintiff with Hyundai
Products. The provision of the DSS Agreement that Plaintiff alleges HMA
breached states that “HMA will use its best efforts to provide Hyundai
Products to [Plaintiff] subject to available supply from FACTORY, HMA’s
marketing requirements, and any change or discontinuance with respect to
any Hyundai Product.”10 This Court specifically noted that Plaintiff had not
pointed out a similar provision in the Participation Agreement, and therefore
Plaintiff had not sufficiently alleged a breach of the Participation Agreement.
In its First Amended Complaint, Plaintiff now states that the
Participation Agreement “specifically contemplated that sales of Genesis
9 Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498 (5th Cir. 2000).
10 Doc. 16-2, p. 16.
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Products from HMA to Northpark would be governed by the terms and
conditions set forth in the [DSS Agreement]” and that HMA therefore breached
its obligation under the Participation Agreement to use “best efforts” to provide
Plaintiff with Genesis products.
Defendants move for dismissal of this claim, arguing that no provision of
the Participation Agreement supports this allegation. Plaintiff opposes,
pointing to the following provisions of the Participation Agreement in support
of its argument that the Participation Agreement “clearly contemplated” that
the terms of the DSS Agreement, including the “best efforts” clause, would
govern the parties’ relationship regarding the Genesis vehicles:
1. “Nothing in this Agreement removes, modifies, discharges or releases
any of [HMA’s] obligations under the [DSS Agreement] or any other
agreement between Dealer and HMA.”
2. “Dealer must at all times remain in full compliance with this
Agreement and the [DSS Agreement].”
3. “HMA reserves the right to withdraw Dealer’s authorization to sell
and/or service the Genesis Branded Products at any time in the event
the Dealer fails to adhere to any of its obligations under this
Agreement or the [DSS Agreement].”
4. HMA may “create and offer a separate Genesis Dealer Sales and
Service Agreement . . . for the Genesis Branded Products.”
5. “To the extent of any conflict between the [DSS Agreement] and this
Agreement, this Agreement shall control with respect to Genesis
Branded Products.”11
11 Doc. 16-2.
5
While these provisions certainly indicate that the parties contemplated
that the two agreements would work together to define the parties’
relationship, they do not support Plaintiff’s position. None of these provisions
indicate that HMA undertook the same obligations to provide Genesis products
that it had previously undertaken in the DSS Agreement in relation to
Hyundai products. This Court declines to read into the Participation
Agreement an obligation that is simply not there. Accordingly, Plaintiff’s claim
for breach of the Participation Agreement is dismissed.
B. Negligence Claims
In its original Complaint, Plaintiff alleged a claim of state law negligence
against Defendants. This Court held that the negligence allegations in the
Complaint failed because Defendants do not owe a general duty to Plaintiff,
either because of their relationship or by statute, to obtain certain licensing or
offer certain vehicles for sale. The Court found that those duties arose out of
the Agreements between the parties and sounded in contract.
Plaintiff’s Amended Complaint now seeks to reassert a negligence claim
against both HMA and GMA. Plaintiff alleges that Defendants were negligent
in failing to ensure that all licensing requirements had been met, providing
confusing representations about whether the vehicles were Genesis or
Hyundai, and failing to fulfill their obligations to allow Genesis automobiles to
be sold in Louisiana. The Amended Complaint states that “Defendants owed a
legal duty to conform to a standard of conduct imposed by the law for the
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protection of automobile dealers and consumers against unreasonable risks of
harm.”12
Defendants argue that these claims should again be dismissed for the
same reasons as already articulated by this Court. This Court agrees.
Plaintiff’s defense essentially amounts to a disagreement with this Court’s
prior order. An amended complaint is not the proper vehicle to make such an
argument, and anyway, this Court is not compelled to change its prior holding.
Plaintiff has not identified a tort duty to support a claim of ordinary negligence.
Its negligence claims are again dismissed.
C. Negligent Misrepresentation Claims
In its Amended Complaint, Plaintiff now asserts a claim for negligent
misrepresentation. To state a claim for negligent misrepresentation, Plaintiff
must allege that:
(1) the defendant, in the course of its business or other matters in
which it had pecuniary interest, supplied false information, (2) the
defendant had a legal duty to supply correct information to the
plaintiff, (3) the defendant breached its duty, which can be
breached by omission as well as by affirmative misrepresentation,
and (4) the plaintiff suffered damages or pecuniary loss as a result
of the its justifiable reliance upon the omission or affirmative
misrepresentation.13
Plaintiff’s Complaint alleges that Defendants had a duty to supply correct
information to it and that they breached that duty by misrepresenting the
following facts: (1) that Genesis vehicles were validly licensed for sale in
12 Doc. 25. The Amended Complaint also alleges that HMA had a duty to supply
Plaintiff with correct information. This duty is discussed in regard to Plaintiff’s claim for
negligent misrepresentation.
13 Sys. Eng’g & Sec., Inc. v. Sci. & Eng’g Ass’ns, Inc., 962 So. 2d 1089, 1092 (La. App.
4 Cir. 2007).
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Louisiana; (2) that Genesis vehicles were Genesis luxury cars and not high-end
Hyundai cars; and (3) that dealers who upgraded their dealerships to comply
with the Participation Agreement would be guaranteed a Genesis dealership.
Plaintiff alleges that it relied on these representations to its detriment.
Defendants argue that Plaintiff’s allegations fail to state a claim for
negligent misrepresentation for several reasons. First, Defendants argue that
there is no duty of care owed by GMA to Plaintiff because there is no
contractual relationship between them. The Louisiana Supreme Court,
however, has expressly recognized that there may be a tort duty to supply
correct information in cases where privity of contract is absent.14 The court
noted that a duty of reasonable care is owed when a tortfeasor knows of the
prospective use of the information by its intended user.15 Plaintiff has alleged
facts suggesting that GMA was aware that Plaintiff would use the information
it provided regarding the licensing of Genesis vehicles. Accordingly, the
Complaint sufficiently alleges a duty owed by GMA to Plaintiff to provide
correct information.
Second, Defendants argue that Plaintiff cannot sustain a claim for
negligent misrepresentation on the basis of the statements identified.
Defendants argue that the first statement—that Genesis vehicles were validly
licensed for sale in Louisiana—was alleged to have been made only by HMA
and therefore cannot support a negligent misrepresentation claim against
GMA. This argument fails in light of paragraph 30 of the Amended Complaint,
which states that GMA did not become a licensed distributor in Louisiana
14 Barrie v. V.P. Exterminators, Inc., 625 So. 2d 1007, 1015 (La. 1993).
15 Id.
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despite holding itself out as such and representing to Plaintiff that it would
obtain all necessary licenses.16
Next, Defendants argue that second and third statements—that the
automobiles branded as Genesis were Genesis branded cars and not Hyundai
cars and that dealers who upgraded their dealerships in compliance with the
Participation Agreement would receive a Genesis point—cannot support a
claim for negligent misrepresentation because they were contradicted by other
information in Plaintiff’s possession and therefore cannot have been justifiably
relied on. Defendants point out that the Amended Complaint alleges that the
vehicle certificates of origin and window stickers identified HMA as the
manufacturer of the vehicles at issue. Further, the Participation Agreement
expressly stated that HMA could terminate the Agreement at any time and
does not guarantee that Plaintiff would be offered a “Genesis Dealer
Agreement” in the future. Even so, this Court must view the allegations of the
Complaint in a light most favorable to Plaintiff and finds that a determination
of whether its reliance was reasonable is inappropriate at this stage.
Accordingly, Defendants’ arguments for the dismissal of Plaintiff’s negligent
misrepresentation claims fail.
D. Intentional Interference with Contract Claim
Next, Defendants move for dismissal of Plaintiff’s claim that GMA
interfered with HMA’s obligation to use best efforts under the DSS Agreement.
16 Doc. 25.
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Defendants argue that under Louisiana law, an intentional interference with
contract claim cannot be maintained against a corporate entity.
In 9 to 5 Fashions, Inc. v. Spurney, the Louisiana Supreme Court
recognized for the first time a narrow claim for tortious interference with
contract based on “a corporate officer’s duty to refrain from intentional and
unjustified interference with the contractual relation between his employer
and a third person.”17 Most courts have refused to expand this holding to allow
an intentional interference with contract claim in other contexts.18
“Jurisprudence has held that only a corporate officer, and not a manager or a
corporation, may be liable to the corporation for tortious interference with
contract.”19
Plaintiff argues that while the court’s holding in Spurney was narrow, it
does not bar an action for tortious interference against a corporate entity. It
points out that some courts hold that to bring a tortious interference with
contract claim the plaintiff need only show that the defendant had a duty not
to interfere with the Agreements. Indeed, the Fifth Circuit has stated that
“[w]here the Louisiana appellate courts have found a viable cause of action for
tortious interference with a contract, the courts have identified a narrow,
individualized duty between the plaintiff and the alleged tortfeasor.”20 Despite
this argument, Plaintiff does not identify any individualized duty owed to it by
GMA. In addition, it does not cite this Court to any case actually recognizing a
17 9 to 5 Fashions, Inc. v. Spurney, 538 So. 2d 228, 234 (La. 1989).
18 See Am. Waste & Pollution Control Co. v. Browning-Ferris, Inc., 949 F.2d 1384,
1391 (5th Cir. 1991).
19 Haydell Indus., LLC v. Petrucci, 702 F. Supp. 2d 688, 696 (W.D. La. 2010).
20 Petrohawk Props., L.P. v. Chesapeake Louisiana, L.P., 689 F.3d 380, 395–96 (5th
Cir. 2012).
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claim for tortious interference against a corporate entity under Louisiana
law.21 “[I]t is not for this diversity court to expand that cause of action in the
face of Louisiana’s expressed unwillingness to do so.”22 Accordingly, Plaintiff’s
claim for intentional interference with contract against GMA is dismissed.
E. Solidary Liability Theories
In its Amended Complaint, Plaintiff alleges facts attempting to hold
GMA and HMA solidarily liable for its damages under several theories,
including veil-piercing, alter ego, single business enterprise, assumption of
liability, estoppel, de facto merger, and mere continuation. Defendants argue
that Plaintiff has not alleged facts sufficient to support a claim under any of
these theories. This Court will consider each in turn.
1. Alter-Ego Theories
“Under Louisiana’s choice-of-law rules, the law of the state of
incorporation governs a request to pierce the corporate veil.”23 The parties
agree then that because GMA and HMA were incorporated under the laws of
California, California law applies to Plaintiff’s claims under a veil-piercing,
single-business-enterprise, or alter-ego theory. “In California, common
principles apply regardless of whether the alleged alter ego is based on piercing
the corporate veil to attach liability to a shareholder or to hold a corporation
21 Plaintiff cites to Petrohawk Properties, L.P., 689 F.3d at 396, which held that the
plaintiff could not “identify a narrow, individualized duty” to support an intentional
interference claim against a corporate entity, and Neel v. Citrus Lands of Louisiana, Inc., 629
So. 2d 1299, 1301 (La. App. 4 Cir. 1993), which held only that the plaintiff may be able to
maintain an intentional interference claim if he could establish that the corporate entity
owed him a duty.
22 Am. Waste & Pollution Control Co., 949 F.2d at 1391.
23 In re Gulf Fleet Holdings, Inc., 491 B.R. 747, 784 (Bankr. W.D. La. 2013).
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liable as part of a single enterprise.”24 To plead an alter-ego doctrine under
California law:
[T]wo elements must be alleged: First, there must be such a unity
of interest and ownership between the corporation and its
equitable owner that the separate personalities of the corporation
and the shareholder do not in reality exist. Second, there must be
an inequitable result if the acts in question are treated as those of
the corporation alone. . . . Among the factors to be considered in
applying the doctrine are commingling of funds and other assets of
the two entities, the holding out by one entity that it is liable for
the debts of the other, identical equitable ownership in the two
entities, use of the same offices and employees, and use of one as a
mere shell or conduit for the affairs of the other.25
In support of its claim that GMA should be liable under an alter-ego
theory, Plaintiff alleges that HMA wholly owns GMA and that the companies
maintain the same management and operate from the same corporate location.
It also alleges that the Defendants’ misleading comments regarding which
company is the manufacturer of the Genesis brand vehicles warrants piercing
the corporate veil. While this Court doubts seriously that these allegations are
sufficient to satisfy the first prong required to allege an alter-ego claim under
California law, Plaintiff makes no attempt to satisfy the second. There is no
allegation that would support a finding that some inequity would result from
holding GMA or HMA liable for its acts alone. Accordingly, Plaintiff has not
alleged a claim under any alter-ego doctrine.
24 Toho-Towa Co. v. Morgan Creek Prods., Inc., 159 Cal. Rptr. 3d 469, 480 (Cal. Ct.
App. 2013).
25 Gerritsen v. Warner Bros. Entm’t Inc., 116 F. Supp. 3d 1104, 1136–37 (C.D. Cal.
2015); LSREF2 Clover Prop. 4, LLC v. Festival Retail Fund 1, LP, 208 Cal. Rptr. 3d 200, 212
(Cal. Ct. App. 2016), as modified (Oct. 6, 2016) (applying factors to a single business
enterprise analysis).
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2. Contractual Assumption of Liability and Estoppel
Plaintiff’s claims under the theories of assumption and estoppel are set
out in a single paragraph:
In or around November 2016, HMA formed GMA as a new entity
to now or in the future distribute the Genesis line to United States
dealerships. As a result GMA has assumed all liability of HMA
under the Dealer Agreement and Participation Agreement that
HMA may have to Northpark with regard to the sale and/or
distribution of Genesis vehicles, including the “Genesis Sedan” and
“Genesis Coupe.” Alternatively, principles of estoppel preclude
GMA from denying liability of HMA to Northpark under the
Dealer Agreement and Participation Agreement.26
At the outset, the parties disagree regarding whether these claims
should be governed by California or Louisiana law. Plaintiff argues that the
law of the state of incorporation—California—should apply. Defendants argue
that Louisiana law should apply because these are contractual issues that have
nothing to do with corporate form.27 This Court agrees with Defendants.
Plaintiff’s Amended Complaint alleges that HMA formed GMA to assume its
liabilities under the Agreements. These arguments arise out of contract and
are unrelated to the corporate form or the “internal affairs of a business entity,”
as Plaintiff argues.28
Under Louisiana law, “[a]n obligor and a third person may agree to an
assumption by the latter of an obligation of the former.”29 However, in order
for that assumption “[t]o be enforceable by the obligee against the third person,
26 Doc. 25.
27 See LA. CIV. CODE art. 3537; Doc. 16-2, p.38 (selecting Louisiana as choice of law in
DSS Agreement).
28 See Doc. 31.
29 LA. CIV. CODE art. 1821.
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the agreement must be made in writing.”30 There is no written assumption of
liability between GMA and HMA in this case. Accordingly, Plaintiff cannot
hold GMA liable for HMA’s obligations in the Agreements.
To bring a claim for equitable estoppel, a plaintiff must allege “(1)
representation by conduct or word, (2) justifiable reliance in representation,
and (3) change in position to detriment because of reliance.”31 “Any party
seeking to invoke estoppel must specifically plead and prove the factual
elements of the doctrine.”32 Defendants argue that Plaintiff’s estoppel claim
should be dismissed because the Complaint does not allege that GMA ever
represented that it would be honoring HMA’s obligations under the DSS or
Participation Agreements. This Court agrees.
3. Successor Liability
Finally, Plaintiff next seeks to hold Defendants solidarily liable under
several successor liability theories, including implied assumption of liability,
de facto merger, and mere continuation. Under both California and Louisiana
law, the general rule of successor corporate liability is that, when a corporation
purchases the principal assets of another corporation, it is not liable for the
seller’s debts or liabilities unless:
(1) there is an express or implied agreement of assumption, (2) the
transaction amounts to a consolidation or merger of the two
corporations, (3) the purchasing corporation is a mere continuation
30 Id.
31 Babkow v. Morris Bart, P.L.C., 726 So. 2d 423, 427 (La. App. 4 Cir. 1998); see LA.
CIV. CODE art. 1967.
32 Knippers v. Lambard, 620 So. 2d 1368, 1375 (La. App. 2 Cir. 1993).
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of the seller, or (4) the transfer of assets to the purchaser is for the
fraudulent purpose of escaping liability for the seller’s debts.23
“However, the threshold requirement to trigger successor liability . . . is that
one corporation must have purchased all the assets of the other.”®4 There is no
allegation that GMA purchased any assets of HMA. Accordingly, these theories
are inapplicable here. Plaintiff has not sufficiently plead facts to support a
holding that HMA and GMA are solidarily liable for its damages under the
aforementioned theories.
CONCLUSION
For the foregoing reasons, Defendants’ Motion is GRANTED IN PART.
Plaintiffs claims for breach of the Participation Agreement, negligence,
intentional interference with contract, and solidary liability are DISMISSED
WITH PREJUDICE.
Plaintiff's claims for breach of the DSS Agreement against HMA, breach
of the warranty of fitness against HMA, and negligent misrepresentation
against HMA and GMA remain.
New Orleans, Louisiana this 9th day of December, 2019.
J TRICHE MILAZ
UNITED STATES DISTRICT JUDGE
33 Hernandez v. Enter. Rent-A-Car Co. of San Francisco, 249 Cal. Rptr. 3d 467, 471
(Cal. Ct. App. 2019); see Russell v. SunAmerica Sec., Inc., 962 F.2d 1169, 1175 (5th Cir. 1992).
84 Monroe v. McDaniel, 207 So. 3d we 1181 (La. App. 5 Cir. 2016).