The Franchise Memorandum

In another dealership case involving Audi brand automobiles, the Appellate Division of the Supreme Court of New York overturned a decision by a lower court and granted Audi of America, Inc. summary judgment on the plaintiffs’ fiduciary duty claims. Legend Autorama, Ltd. v. Audi of America, Inc., 2012 N.Y. App. Div. LEXIS 7602 (N.Y. App. Div. Nov. 14, 2012). Audi and the plaintiffs, who were franchised Audi dealers, were parties to dealer agreements. After entering into the dealer agreements with the plaintiffs, Audi entered into another dealer agreement with a separate party that enabled that party to operate a dealership in close proximity to the existing dealers. Among other claims, the dealers alleged that by granting the subsequent dealership, Audi breached its fiduciary obligations to dealers. Audi moved for summary judgment on that claim, but the lower court denied Audi’s motion.

The appellate court overturned the lower court’s decision and granted Audi summary judgment on the dealers’ fiduciary duty claims. In doing so, the appellate court stated that a “conventional business relationship, without more, is insufficient to create a fiduciary relationship.” The dealers’ dependence on Audi alone was not enough to create a fiduciary relationship, and they failed to show that there were additional circumstances to create one.