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Key v. Chrysler Motors Corp.5/31/1996
MINZNER, Justice.
{1} Jack Key and Jack Key Motor Company, Inc. (Key) sued Chrysler Motors Corporation (Chrysler), alleging that Chrysler had unreasonably withheld its consent to the transfer of a Chrysler/Plymouth dealership franchise from the Borman Motor Company (Borman) to Key in violation of the New Mexico Motor Vehicle Dealers Franchising Act, NMSA 1978, ยงยง 57-16-1 to -16 (Repl. Pamp. 1995) (the Act). After a bench trial, the district court concluded that the Act granted Key standing, found that Chrysler had acted unreasonably in violation of the Act, and awarded Key $300,000 in compensatory damages and $125,000 in attorney fees. Chrysler appealed to the Court of Appeals on three issues: (1) whether Key had standing to sue under the Act, (2) whether the trial court applied the proper legal standard in finding that Chrysler unreasonably withheld consent to the transfer, and (3) whether Key's own negligence demanded a reduction of the damages award. Key cross-appealed, arguing that the trial court erred in excluding evidence of lost future profits as damages. The Court of Appeals affirmed. ) (Hartz, J., Dissenting), cert. granted, 119 N.M. 311, 889 P.2d 1233 (1995). We granted certiorari to address the first two issues. We conclude that the Act does not afford standing to all prospective franchisees. Therefore, we overrule the Court of Appeals' rationale in granting Key standing. We also conclude that Key failed to state a cause of action under the Act. Therefore, we vacate the judgment entered in favor of Key and remand with instructions to enter judgment for Chrysler.
I. BACKGROUND
{2} Because the facts of this case have been fully presented in the Court of Appeals opinion, we will not repeat them except as they are relevant to our Discussion of the arguments made to this Court on certiorari. This suit arose out of Chrysler's refusal to approve the transfer of a Chrysler/Plymouth franchise to Key, who already owned and operated a Jeep/Eagle franchise with Chrysler and was seeking to expand the existing business. Key alleges that Chrysler's rejection of his application to acquire the Chrysler/Plymouth franchise violated the Act. Key then sued Chrysler pursuant to the Act.
{3} The Act requires that the manufacturer's "consent [to transfer a franchise] shall not be unreasonably withheld." Section 57-16-5(L). Chrysler rejected Key as a potential franchisee because he failed to meet his Minimum Sales Responsibility (MSR) for the Jeep/Eagle line of vehicles sold under his existing franchise. The MSR is Chrysler's measure of a dealer's sales ability. It is derived from new vehicle registrations within the dealer's sales territory multiplied by a second figure based on Chrysler's sales within a larger sales zone encompassing the dealer's sales territory. The record indicates that in reviewing applications from prospective franchisees who had existing dealerships, Chrysler used a dealer's MSR to evaluate sales performance, but used different criteria for reviewing other prospective franchisees. The trial court found that a dealer's MSR may be a reasonable criterion in evaluating a prospective franchisee; however, in this case local geographic and economic factors distorted its accuracy in evaluating Key's sales performance. The trial court found that fraudulent registration in New Mexico of vehicles owned by Texas residents distorted the number of total new vehicle registrations in Dona Ana County, so that mathematically applying the number of new vehicles registered in the county into the MSR formula was not representative of Key's true percentage sales. Consequently, the trial court found Key proved that Chrysler's reliance on the inaccurate MSR to reject Key as a pote
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