General Motors Acceptance Corp. breached its contract with a Georgia dealership by failing to extend the full $1.5 million credit line under a floorplan financing arrangement, a federal judge has ruled.
GMAC was contractually bound to provide the entire amount of financing as requested by L. Mitchell Coffee Jr. and LMC Motors Inc. before the arrangement terminated in 1994, U.S. District Judge Dudley Bowen Jr. said.
He ordered a trial on claims of breach of contract, fraud, negligent misrepresentation and violation of the federal Automobile Dealers' Day in Court Act. However, he dismissed claims for interference and violation of the state franchise law.
GMAC spokesman James Kobus said he could not discuss the case. 'With litigation pending, GMAC has elected not to comment on this matter at this time,' he said.
The decision could affect other dealerships with GMAC floorplanning, according to Joseph Burton Jr. and Rosemary Armstrong of Atlanta, lawyers for Coffee and LMC.
'This is in some ways a review of the way GMAC set up its operations and how money flows to the dealers under their floorplan documentation,' Burton said. 'I suspect the treatment this dealer (Coffee) received is very, very typical of the way GMAC treats dealers generally.'
$2.5 MILLION SOUGHT
Coffee and the corporation seek more than $2.5 million in damages. GMAC denies any liability.
Coffee had been 49 percent owner of a Chevrolet-Oldsmobile-Buick-Pontiac- GMC dealership in Eastman, Ga., and purchased the rest of the stock in 1989, changing the name to LMC Motors. GMAC agreed to provide $1.5 million in floorplan financing, enough to cover up to 80 vehicles based on a 60-day supply.
The suit contends GMAC broke that agreement by restricting and adjusting LMC's credit line, suspending it twice and ultimately terminating the financing arrangement in 1994. After the termination, Coffee and two partners formed ABC Motors, which purchased LMC's assets and received floorplan financing from GMAC. Coffee is no longer affiliated with ABC, which is not part of the lawsuit.
In his decision, Bowen said LMC had paid all its obligations on time to GMAC despite 'substantial operating losses during its existence.' The suit contends GMAC's 'repeated and unjustified reductions' in the credit line and refusal to finance the purchase of new vehicles at critical times precipitated the losses, while GMAC blames the losses on poor management.
The judge found GMAC obligated to provide the full amount of financing under the terms of its contracts with LMC, saying, 'There is nothing ambiguous about this aspect of the agreement. If GMAC wished to retain discretion over the lending decision, it easily could have inserted language to that effect in the form contract.
'GMAC was unconditionally obligated to advance up to $1.5 million on LMC's behalf,' the judge said, 'and it would appear GMAC's failure to advance funds or its conditioning funds upon extra-contractual requirements constituted a breach of this agreement.'
SOME CLAIMS REJECTED
He said a jury must determine whether, despite that breach, the two sides had verbally agreed to modify the terms of the agreement, something GMAC claims but LMC and Coffee dispute.
He also said the jury should resolve whether GMAC had valid grounds to terminate the financing agreement on the basis of allegedly inadequate capitalization.
On the federal dealers law claim, he said, 'There is evidence that GMAC had legitimate concerns about LMC's performance and that GMAC treated LMC like any other financially troubled dealership.
'There is some evidence, however, that GMAC acted in a coercive and intimidating manner,' he continued, calling it a jury question whether GMAC acted in bad faith.
Similarly, Bowen ordered a trial on claims for fraud and negligent misrepresentation. But he rejected Coffee's and LMC's claim that GMAC wrongfully interfered with their relationship with General Motors, saying GMAC has a 'legitimate economic interest in the contractual and business relationships between GM and LMC.'
He also threw out a claim under Georgia's franchise law because GMAC is not a franchiser.