## Facts

- Peugeot Motors of America, Inc., the exclusive U.S. distributor of Peugeot automobiles, entered a 1971 regional Distributor Agreement (through a predecessor) with Eastern Auto Distributors, Inc., a Virginia distributor serving the southeastern United States.
- The Agreement contained a New York choice-of-law clause and an express provision allowing either party, subject to specified conditions and notice, to elect nonrenewal at the end of the term.
- On October 14, 1987, Peugeot sent Eastern written notice that it would not renew the Agreement.
- Peugeot filed a federal diversity action in the Eastern District of Virginia seeking a declaratory judgment that its nonrenewal was valid.
- Eastern counterclaimed under the Automobile Dealer’s Day in Court Act (ADDCA), multiple New York dealer-protection statutes, and for common-law breach of contract.
- The district court granted Eastern summary judgment on Peugeot’s declaratory claim (treating New York dealer statutes as barring the nonrenewal) and granted Peugeot summary judgment on all counterclaims.
- Peugeot appealed the ruling against its declaratory claim; Eastern cross-appealed the adverse rulings on its ADDCA and breach-of-contract counterclaims.

## Issues

1. Whether the contract’s New York choice-of-law clause made New York motor-vehicle dealer regulatory statutes applicable to an out-of-state distribution relationship involving a Virginia distributor with no New York operations.
2. Whether, under New York common law, the Agreement’s express nonrenewal provision was enforceable and properly exercised by Peugeot.
3. Whether Eastern raised a triable issue on its ADDCA and breach-of-contract counterclaims based on Peugeot’s decision not to renew.

## Decision

- The Fourth Circuit held that New York’s motor-vehicle dealer regulatory statutes invoked by Eastern did not apply to Eastern because Eastern did not conduct business in New York and the statutory scheme was directed at regulating and protecting New York dealers.
- Applying New York common-law contract principles, the court held the Agreement’s express nonrenewal provision was valid and enforceable and that Peugeot’s notice of nonrenewal complied with the contract.
- The court vacated the summary judgment for Eastern on Peugeot’s declaratory-judgment claim and remanded for entry of judgment consistent with the appellate ruling.
- The court affirmed summary judgment for Peugeot on Eastern’s counterclaims, including the ADDCA and breach-of-contract claims.

## Legal Principles

- A contractual choice-of-law clause selecting a state’s law does not, by itself, extend the territorial reach of that state’s regulatory dealer-protection statutes to parties and conduct outside the statute’s intended scope.
- Dealer-protection statutes aimed at in-state franchise relationships generally apply only where the dealer is located or operates within the regulating state (or otherwise falls within the statute’s defined coverage).
- Under New York common law, courts enforce an unambiguous contractual nonrenewal right according to its terms when the exercising party satisfies the contract’s notice and condition requirements and no applicable statute restricts nonrenewal.
- ADDCA “good faith” liability requires evidence of coercion, intimidation, or comparable wrongful conduct; a manufacturer’s lawful exercise of an express contractual nonrenewal right, without such conduct, does not violate the Act.
- Where a contract authorizes nonrenewal upon proper notice and the notice is properly given, a breach-of-contract claim premised on the nonrenewal fails absent an independent contractual violation.

## Conclusion

The Fourth Circuit rejected the application of New York dealer-protection statutes to an out-of-state distributor relationship, enforced the parties’ express nonrenewal provision under New York common law, and affirmed dismissal of the distributor’s ADDCA and contract counterclaims, remanding for entry of declaratory relief consistent with the validity of Peugeot’s nonrenewal.


Peugeot Motors of Am., Inc. v. E. Auto Distribs., Inc., 892 F.2d 355 (4th Cir. 1989)