CASE ALERTS

‌	October 24, 2022

As we enter the final quarter of 2022, we are pleased to report two HKMP successes in this edition of our Case Alerts. In an automobile franchise contractual dispute, the Superior Court of New Jersey, Law Division, Bergen County granted HKMP’s client summary judgment. In an insurance coverage action, the New York Appellate Division, First Department affirmed summary judgment in favor of HKMP’s client in a dispute over whether a joint venture was covered under an insurance policy provision.   As always, we welcome your thoughts and hope you enjoy this issue of HKMP’s Case Alerts.

SUMMARY JUDGMENT GRANTED IN HARD-FOUGHT DEALERSHIP FRANCHISE CASE NVL, Inc. v. Volvo Car USA LLC, Docket BER-L-4341-18, 2022 N.J. Super. Unpub. LEXIS 1956 (N.J. Super. Ct. Law Div. Oct. 17, 2022) (unpub.) After a 4-year battle, HKMP Partner Paul Daly, with the assistance of Associate Patrick Hagerty, led Volvo Car USA LLC (“Volvo”) to a long-awaited victory, securing summary judgment in a suit arising from the termination of a Letter of Intent (LOI) for opening a dealership in Long Beach, California.   In 2014 Volvo entered the LOI with auto-dealer wunderkind Hooman Nissani, who owned five dealerships in the Long Beach, California area before he was 40. Volvo offered Nissani generous financial incentives to assist with construction costs. Further, when Nissani proposed changing the location of the dealership, Volvo agreed and offered additional incentives in view of anticipated increased construction costs. However, after three years, Nissani made little progress towards opening the dealership. He had not complied with any of the deadlines for architectural plans, construction permits, or construction. Volvo had worked with Nissani with respect to these issues and repeatedly adjusted the time frames to accommodate Nissani.   At last, in July 2017, Nissani  provided construction plans, but had not yet obtained any building permits. In response to Volvo’s insistence, Nissani provided a schedule for opening the dealership. His proposal pushed the opening date off until May 2018, three years after the initial contemplated opening date. At about this time, Volvo learned of the opportunity to open a dealership in Las Vegas with another established company. The relationship with Nissani was eventually terminated and the incentive funds were reallocated to the other company.   Nissani filed a complaint alleging, inter alia, breach of contract, bad faith, fraud, and lost profit damages exceeding $7 million. Plaintiff alleged that the decision to terminate the agreement and re-allocate the funds to Las Vegas was a breach of the implied covenant of good faith and fair dealing. He also alleged that Volvo had never in fact intended to open a dealership with plaintiff and instead sought to tie plaintiff up and stop him from opening other luxury brand dealerships.   The Hon. Robert Wilson, JSC, reviewed the extensive record and found that there was no evidence upon which a reasonable jury could find that Volvo acted in bad faith, or was engaged in any fraudulent practice. He found that the record amply demonstrated that Volvo had in good faith tried to get Nissani to open a dealership. He upheld the LOI’s termination provisions and covenant not to sue and rejected plaintiff’s arguments that the covenant not to sue was unconscionable.   As of this writing, Nissani has not appealed the judgment.

HKMP WINS APPEAL ENFORCING INSURANCE POLICY PROVISION THAT CONDUCT OF UNLISTED JIONT VENTURE NOT COVERED   Zurich Am. Ins. Co. v. ACE Am. Ins. Co. et al., Case No. 2021-01832, ___A.D.3d___, 2022 NY Slip Op 05821 (N.Y. App. Div. 1st Dep’t Oct. 19, 2022)   HKMP Partners John Favate and Arthur Povelones recently obtained a favorable ruling from the New York Appellate Division, First Department affirming a summary judgment ruling in favor of an excess insurer, finding that a policy provision made coverage inapplicable for conduct of a joint venture not scheduled as a named insured.    An employee of a two-party joint venture was injured while unloading a trailer during performance of the work for which the joint venture had been formed. The first party to the joint venture had secured primary and excess commercial auto coverage in favor of itself and the joint venture, and which named general contractor entities as additional insureds. The insurer of the general contractor entities also sought additional insured coverage from the primary and excess insurers of the second party to the joint venture. The primary policy issued to the second party contained an endorsement stating that no organization is an “insured” with respect to the conduct of any joint venture that is not shown as a Named Insured in the Declarations. The excess policy followed form. Neither policy identified the joint venture as a named insured, or otherwise referred to the joint venture.   The First Department held that coverage was not available under the policies issued to the second joint venture party for the underlying claim because the joint venture was not identified as an “insured” in the declarations of the policies. The court rejected the argument of the insurer of the general contractor entities that prefatory language in the primary policy endorsement meant that the endorsement only broadened coverage. The court found that this interpretation “would improperly render the later specific joint venture language meaningless or mere surplusage”, and that the more specific joint venture language prevailed over any potentially conflicting language elsewhere.

As always, if you have any questions regarding any of the cases in this issue of Case Alerts, or if HKMP can be of service to you, then please contact us at [email protected] or 973-912-5222.

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