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Holloway Automotiv Group v. Giacalone

Supreme Court of New Hampshire

February 15, 2017

HOLLOWAY AUTOMOTIVE GROUP
v.
STEVEN GIACALONE

          Argued: November 17, 2016

         9th Circuit Court-Manchester District Division

          Coughlin, Rainboth, Murphy & Lown, P.A., of Portsmouth (Bradley M. Lown on the brief and orally), for the plaintiff.

          Gallagher, Callahan & Gartrell, Professional Corporation, of Concord (R. Matthew Cairns and Lisa M. Lee on the brief, and Mr. Cairns orally), for the defendant.

          DALIANIS, C.J.

         The plaintiff, Holloway Automotive Group (Holloway), appeals the order of the Circuit Court (Michael, J.) ruling that the liquidated damages clause contained in the parties' contract is unenforceable. We reverse and remand.

         The relevant facts follow. Holloway is an authorized franchise dealer of Mercedes-Benz North America, Inc. (MBUSA), with a principal place of business in Manchester. On November 15, 2014, the defendant, Steven Giacalone, purchased a new Mercedes-Benz automobile from Holloway for $71, 630.

         At the time of the purchase, the defendant signed an "AGREEMENT NOT TO EXPORT" (the Agreement). (Bolding and underlining omitted.) The Agreement stated that "MBUSA prohibits its authorized dealers from exporting new Mercedes-Benz vehicles outside of the exclusive sales territory of North America and will assess charges against [Holloway] for each new Mercedes-Benz vehicle it sells . . . which is exported from North America within one (1) year." Therefore, the defendant promised "not [to] export the Vehicle outside North America . . . for a period of one (1) year" from the date of the Agreement and, if he did so, to pay Holloway $15, 000 as liquidated damages.

         The vehicle was subsequently exported within the one-year period. Holloway sued the defendant, claiming breach of contract and misrepresentation and seeking liquidated damages in the amount of $15, 000, plus interest, costs, and attorney's fees.

         The trial court held a hearing on the merits at which Holloway acknowledged that MBUSA had not assessed any charges against it due to the vehicle's export. Nonetheless, Holloway made an offer of proof, itemizing the damages it may suffer due to the export of the vehicle by a customer. These damages include loss of income from maintaining and servicing the vehicle, future sales of additional vehicles, warranty work, resale income, financing income, and detriment to the rating and ranking of the dealership.

         With the trial court's permission, Holloway submitted a post-trial supplemental memorandum of law to which it attached its responses to the defendant's interrogatories itemizing its potential losses over three years as: $4, 800 in lost income from servicing the vehicle; lost "referral business, service income, aftersales of vehicles or products or warranty extensions, [and] potential resale income"; $1, 969 in lost finance income; $3, 060 in lost lease income; $300 in payment by Mercedes-Benz "as compensation for reduced risk due to automatic withdrawal"; and $5, 955 in lost profit "on various products and services."

         The trial court found that the Agreement was entered into "between the parties to protect [Holloway] from a claim by [MBUSA], " but that MBUSA did not, in fact, charge Holloway any fees despite the vehicle having been exported. In addition, the court found that

the amount of $15, 000.00 was a 'guesstimate' of difficult-to-ascertain damage at the time the parties agreed to it. . . . In this instance, [Holloway] suggests that the vehicle might return for maintenance, that there may be further customer sales, that the plaintiff may need warranty work on a vehicle (this is speculative, especially since the liquidated damage agreement is only in force for one year and this is a new vehicle), and the potential resale income if the car is traded. . . . It is difficult to see how maintenance on a new vehicle, perhaps a couple of oil changes, further sales and warranty work on a new vehicle, as well as potential resale income, would be anywhere near $15, 000.00, because of the one year contract time frame.

         The court reasoned that "the one year contract period" had passed, "[i]n retrospect there were no fees charged by [MBUSA], " and "[o]ther than wild guesses there [was] certainly no indication of any of the damages associated with the breach." Thus, because the "actual losses to [Holloway] during the one-year period were essentially zero, " the trial court declined to enforce the liquidated damages clause in the ...


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