05-003680 Nissan North America, Inc. vs. Love Nissan, Inc.; Robert L. Halleen; And Chad A. Halleen Status: Closed Recommended Order on Wednesday, January 18, 2006.

Summary: Petitioners claimed to have transferred the equity in their automobile dealership to a close family member subsequent to a Recommended Order of Termination. Held: the proposed transfer wa a sham and of no effect.

STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

NISSAN NORTH AMERICA, INC., )

)

Petitioner, )

)

vs. ) Case No s . 05 - 3680

) 05 - 3987

LOVE NISSAN, INC.; ROBERT L. )

HALLEEN; AND CHAD A. HALLEEN, )

)

Respondent s . )

)

LOVE NISSAN, INC.; ROBERT L. )

HALLEEN; AND CHAD A. HALLEEN, )

)

Petitioners, )

)

vs. )

)

NISSAN NORTH AMERICA, INC., )

)

Respondent. )

)

RECOMMENDED ORDER

This cause came on for formal hearing before Harry L.

Hooper , Administrative Law Judge with the Division of

Administrative Hearing s , on December 12 , 200 5 , in Tallahassee ,

Florida.

APPEARANCES

For Petitioners/Respondents Love Nissan, Inc.; Robert L.

Halleen; and Chad A. Halleen:

John W. Forehand, Esquire

Lewis, Longman & Walker, P.A.

125 South Gadsden Street, Suite 300

Tallahassee, Florida 32301 - 1525

and Alex Kurkin, Esquire

Pathman Lewis, LLP

One Biscayne Tower, Suite 2400

Two South Biscayn e Boulevard

Miami, Florida 33131

For Respondent /Petitioner Nissan North America, Inc. :

S. Keith Hutto, Esquire

Nelson, Mullins, Riley &

Scarborough, LLP

1320 Main Street

Columbia, South Carolina 29201

and

Dean Bunch, Esquire

Southerland, Asbill & Brennan, LLP

3600 Maclay Boulevard South, Suite 202

Tallahassee, Florida 32323

STATEMENT OF THE ISSUE

The issue is whether Nissan North America , Inc.'s (Nissan)

rejection of the proposed tr ansfer of the equity interest in

Love Nissan , Inc. (Love), from Robert Halleen and Chad Halleen

to Marilyn Halleen, is in violation of the laws regulating the

licensing of motor vehicle dealers and manufacturers,

maintaining competition, providing consumer protection and fair

trade and providing minorities with opportunities for full

participation as motor vehicle dealers, as set forth in Sect i ons

320.61 - 320.70, Florida Statutes.

PRELIMINARY STATEMENT

In April 2004 Nissan pr esented Love a Notice of Termi nation

of its Dealer Sales and Service Agreement. The purpose of this

Notice was to effect a severance of the contractual relationship

between Nissan, a manufacturer of motor vehicles and a

"licensee" of the Florida Department of Highway Safety and Motor

Vehicles (DHSMV) , and Love, a motor vehicle dealer. Upon

receipt of the Notice , Love timely filed a protest with DHSMV ,

which sent the matter to the Division of Administrative Hearings

(DOAH) for a formal administrative hearing.

On July 14, 2005, Administ rative Law Judge Ella Jane Davis

entered a Recommended Order recommending that the Department

uphold the proposed termination. Insofar as the record in this

case reveals, DHSMV has yet to enter a final order in that case.

On July 25, 2005, Robert Halleen and Chad Halleen served

notice on Nissan of their intent to transfer their entire equity

ownership to Marilyn Halleen, the wife of Robert Halleen and the

mother of Chad Halleen. In response, Nissan on September 20,

2005, informed Robert, Chad, and Marilyn Halleen that it was

rejecting the transfer, and by way of explanation, enclosed a

verified Petition for Determination of Invalid Proposed Transfer

p ursuant to Section 320.643, Florida Statutes, and Notice of

Rejection of Proposed Transfer . The verified P etition was filed

with DHSMV on September 21, 2005. DHSMV forwarded th e Petition

to DOAH for formal hearing and it was assigned DOAH

Case N o. 05 - 3680.

The Nissan Petition named Robert Halleen, Chad Halleen, and

Marilyn Halleen as parties . Love moved to dismiss the action on

October 10, 2005. The m otion was denied in part and granted in

part on October 27, 2005 . It was granted only to the extent

that Marilyn Halleen was dismissed as a party.

On October 20, 2005, Robert Halleen and Chad Halleen filed

a Petition for Determination of Wrongful Turndown with DHSMV

that was filed with DOAH on October 26, 2005. It was assigned

DOAH C ase No. 05 - 3987. On November 8, 2005, the two cases were

consolidated for hearing.

At the final hearing Nissan presented the testimony of

Patrick Doody ( v ice p resident of the Southeast Region for

Nissan), Robert Halleen ( p rincipal o wner of Love), Chad Halleen

( m inority o wner and e xecutive m anager of Love), and

Marilyn Halleen (the proposed transferee) . Nissan also

present ed th e deposition testimony of Robert Halleen,

Chad Halleen, and Marilyn Halleen. Nissan's Exhibit s numbered 1

through 12, 14 - 15, and 18 - 20, were admitted into evidence.

At the final hearing Robert and Chad Halleen presented the

testimony of C had Halleen . Love Exhibits numbered 8, 20, 30,

33, and 34 were admitted into evidence.

The two - volume Transcript was filed on December 28, 2005.

After t he hearing, Petitioner and Respondent filed Proposed

Findings of Fact and Conclusions of Law on January 9, 2006.

Be cause the contract in this case was executed in 1999, the

substantive law in existence at that time control s this case.

Accordingly, s tatutory citations are to Florida Statutes (1999)

unless otherwise noted.

FINDINGS OF FACT

1. Nissan is a "licensee" as defined by Section 320.60(8) ,

Florida Statutes .

2. Love is a "motor vehicle dealer" as defined by Section

320.60(11)(a)1 , Florida Statutes . Love serves a territory

centered on Homosassa, Florida.

3. Nissan and Love are parties to a Dea ler Sales and

S ervice Agreement (Agreement) , which is a n "agreement" or

"franchise agreement , " as defined by Section 320.60(1) , Florida

Statutes .

4. Robert Halleen and Chad Halleen became owners of Love

as the result of a 1999 gift of the equity of Love from Robert's

f ather and Chad's grandfather. Subsequent to the donation,

Robert became a 90 percent owner of Love and Chad became a ten

percent owner.

5. Robert Halleen and Chad Halleen entered into the

Agreement with Nissan on March 4, 1999. Since that time

Robert Halleen has served as the Dealer Principal and Principal

Owner of Love Nissan, and Chad Halleen has served as the

Executive Manager and Other Owner . The Agreement has never been

amended.

6. The Agreement clearly states that Nissan relied on the

personal qualifications of the Principal Owner, Other Owner, and

Executive Manager in entering into the Agreement. In addition

to personal qualifications, the Agreement recites expertise,

reputation, integrity, experience, and ability, as

characteristics expected of the Principal Owner, Other Owner,

and Executive Manager.

7. Since Robert and Chad Halleen became owners of Love the

dealership has never met the regional average sales penetration.

The regional average sales penetration is the measurement used

by Niss an to evaluate the sales performance of each of its

dealers. Subsequent to the inception of the Agreement , Nissan

has issued multiple Notices of Default to Love citing Love's

poor sales performance.

8. In an effort to facilitate Love's success, Nissan

co ntracted their primary market a rea on several occasion s . This

and other efforts to bolster Love's performance failed. As a

result, Nissan issued a Notice of Termination of the Dealer

Sales and Service Agreement between itself and Love , dated

April 1, 20 04 . This precipitated a protest and a formal hearing

before Administrative Law Judge Ella Jane Davis who recommended

that DHSMV dismiss the protest and ratify the Notice of

Termination.

9. As noted above , DHSMV has not issued a final order.

Because it h as not, and because an appeal could follow, Nissan

has not yet entered into a franchise with a new dealer for the

Homosassa primary market a rea. It is Nissan's intention to

award the area to a qualified minority candidate.

10. Eleven days after the issua nce of Judge Davis's order,

on July 25, 2005, Robert and Chad Halleen notified Nissan of

their intent to sell all of their stock in Love to

Marilyn Halle en. I n a short letter to Nissan, the selling price

was said to be $100 with an increase to $5,000,000 should the

sale ultimately be made to a third party . The dealership, if

sold on the open market, would bring much more than $100. It

could sell for as much as five million dollars. The letter also

averred that there would not be a change in the executi ve

management.

11. The decision to sell all of the stock in Love to

Marilyn Halleen was made by Robert Halleen. Chad Halleen was

instructed by his father to comply with his decision to sell and

he did as instructed.

12. Prior to the issuance of Judge Davis's Recommended

Order, Robert and Chad Halleen decided that if the termination

case had an unfavorable outcome, they would avoid it by selling

Love to a family member . They attempted to give effect to this

course of action by discussing with Robert Ha lleen's father the

possibility of transferring ownership to him. Robert and

Chad Halleen desired to keep the dealership in the family and to

ensure that Chad remained employed .

13. Pursuant to the contemplated transfer to

Robert Halleen's father , Chad Halleen would continue as

Executive Manager , which was also the case in the proposed

transfer to Marilyn Halleen . The discussion with

Robert Halleen's father did not ripen into a course of action.

14. During their tenure at Love, Robert and Chad Halle en

informally divided the operational responsibilit ies between

themselves. Chad Halleen was primarily respons ible for the

sales department and Robert Halleen focused on supervising the

day - to - day operations of the parts, service , and accounting

department s . However, it is clear that Robert Halleen, has been

since the inception of the Agreement, and was, at least up to

the date of the formal hearing, in ultimate overall charge of

all of the operations of Love.

1 5 . Robert Halleen asserted at the hearing t hat he would

abandon his role in the management of Love. Love attempted to

prove that Chad Halleen was capable of successfully managing the

operation without the aid of his father . However, the evidence

taken as a whole , indicated that he had never opera ted the

dealership without the assistance of Robert Halleen and that he

would have difficulty doing so without that assistance.

1 6 . Subsequent to the proposed transfer , the management of

Love would, allegedly, consist of Marilyn Halleen and

Chad Halle en. They would be, under the Agreement, the

"executive management," which is the term used in the Agreement

to describe the Dealer Principal and the Executive Manager.

1 7 . It is not necessary under the Agreement, for a Dealer

Principal to be actively i nvolved in the daily business of the

dealership , and because a Dealer Principal may own dealerships

in more than one geographical area, it is not unusual to find a

Dealer Principal who is not active in the day - to - day management

of dealerships she or he own s . However, in this case it is

contemplated , and Marilyn Halleen has so stated, that she and

Cha d Halleen would operate the business together . Currently,

Marilyn Halleen's participation in the operation of the

dealership has been working as a bookkeeper in the accounting

department.

1 8 . Marilyn Halleen stated that should the transfer be

approved, she would make the decisions about running the

dealership, how the dealership is capitalized, new car sales,

used car sales, allocation and ordering, marketing, management

of the parts and service departments, and all of the other

myriad responsibilities incumbent on a manager of an automobile

dealership. However, her work experience does not qualify her

to successfully accomplish all of these tasks and this pla n is

contrary to the assertion in the notice to Nissan that there

would be no change in executive management.

1 9 . Marilyn Halleen has never owned a dealership or any

other business. Her management experience is limited to filling

a position as an office manager in a Buick dealership many years

ago. In various automobile dealerships she has worked as a

title clerk, receptionist, cashier, and in a warranty

department. Prior to becoming bookkeeper at Love she worked

full - time selling cosmetics for Mary Ka y.

20 . Nissan was unaware of the details of Marilyn Halleen's

business experience, or lack of it, at the time they determined

that they would reject the proposed transfer. However, the

notice to Love that the proposed transfer was rejected, dated

Septem ber 20, 2005, recited in the attachment that the rejection

was based on Nissan's belief the transfer was a sham.

Marilyn Halleen's lack of experience is evidence tending to

prove that the transfer was a sham. To find as a fact that

Robert and Chad Halle en were really going to give

Marilyn Halleen complete ownership and control over Love would

require a suspension of disbelief .

2 1 . H aving observed the lackluster performance of Robert

and Chad Halleen over a five - year period, Nissan reasonably

concluded that Marilyn Halleen was unlikely to ramp up Love's

performance .

2 2 . Although Section 320.943(2) , Florida Statutes, does

not require that a transfer of an equity interest be at arms -

length, the fact that a purported transfer is not an arms - length

transa ction, when considered with other evidence, may tend to

demonstrate, as it does in this case, that the purported

transfer is a sham.

2 3 . The fact that the purchase price is remarkably below

market value does not in every case mean that a purported

trans fer is a sham. Under the facts of this case, however, the

below market sales price tends to prove that the purported

transfer is illusory .

2 4 . The evidence, taken as a whole, proves that the

purported transfer is an artifice or devi c e designed to avoid

the consequences of the poor performance of Love while under the

command of Robert and Chad Halleen. Thus t he proposed transfer

is not a real transfer; it is a sham designed to avoid Judge

Davis's Recommended Order upholding the termination.

2 5 . Marilyn Halleen, although a human being separate from

her spouse and off - spring, cannot be considered "any other

person or persons." She is the alter ego of Robert and Chad

Halleen and, should the transfer be approved, the evidence

demonstrates she will be a mer e agent or tool of the current

owners and the inept management of Love will continue.

2 6 . It was not proven that Marilyn Halleen lacked good

character as that term is used in Section 320.643(2), Florida

Statutes, which governs the transfer of an equity i nterest in a

dealership.

2 7 . The question of whether or not the proposed transfer

involve d a change in executive management at Love, which might

trigger consideration of Section 320.643(1) or 320.644, Florida

Statutes, a question advanced by Nissan, at the hearing , and in

Nissan's Proposed Recommended Order, need not be addressed for

the reasons set forth in paragraph 2 3 , above . In order for

those sections to be invoked there must first be a valid

transfer.

CONCLUSIONS OF LAW

2 8 . The Division of Adm inistrative Hearings has

jurisdiction over the subject matter of and the parties to this

proceeding. § § 120.57(1) (2005) and 320.643(2) , Fla. Stat.

2 9 . The burden of proof by a preponderance of the evidence

is on Nissan. § § 120.57(1)(j) (2005) and 320 .643(2) Fla. Stat.

30 . Section 320.643(2)(a), Florida Statutes, provides as

follows:

§ 320.643. Transfer, assignment, or sale of

franchise agreements

* * *

(2) Notwithstanding the terms of any

franchise agreement, a licensee shall not,

by contract or otherwise, fail or refuse to

give effect to, prevent, prohibit, or

penalize, or attempt to refuse to give

effect to, prevent, prohibit, or penalize,

any motor vehicle dealer or any proprietor,

partner, stockholder, owner, or other person

who holds or ot herwise owns an interest

therein from selling, assigning,

transferring, alienating, or otherwise

disposing of, in whole or in part, the

equity interest of any of them in such motor

vehicle dealer to any other person or

persons, including a corporation esta blished

or existing for the purpose of owning or

holding the stock or ownership interests of

other entities, unless the licensee proves

at a hearing pursuant to this section that

such sale, transfer, alienation, or other

disposition is to a person who is not, or

whose controlling executive management is

not, of good moral character. A motor

vehicle dealer, or any proprietor, partner,

stockholder, owner, or other person who

holds or otherwise owns an interest in the

motor vehicle dealer, who desires to sel l,

assign, transfer, alienate, or otherwise

dispose of any interest in such motor

vehicle dealer shall notify, or cause the

proposed transferee to so notify, the

licensee, in writing, of the identity and

address of the proposed transferee. A

licensee who receives such notice may,

within 60 days following such receipt, file

with the department a verified complaint for

a determination that the proposed transferee

is not a person qualified to be a transferee

under this section . The licensee has the

burden of proof with respect to all issues

raised by such verified complaint. The

department shall determine, and enter an

order providing, that the proposed

transferee either is qualified or is not and

cannot be qualified for specified reasons;

or the order may p rovide the conditions

under which a proposed transferee would be

qualified . If the licensee fails to file

such verified complaint within such 60 - day

period or if the department, after a

hearing, dismisses the complaint or renders

a decision other than one disqualifying the

proposed transferee, the franchise agreement

shall be deemed amended to incorporate such

transfer or amended in accordance with the

determination and order rendered, effective

upon compliance by the proposed transferee

with any condition s set forth in the

determination or order.

3 1 . A comparison of the statute cited above and the

current version of the statute reveals that amendments

subsequent to 1999 have changed only the procedure.

Substantively, the 1999 version and the law as it e xists at this

writing are identical for purposes of this Recommended Order .

3 2 . Section 320.641(3) , Florida Statutes, entitled Unfair

Cancellation of Franchise Agreements, provides that a motor

vehicle dealer who receives a notice of intent by the license e

to terminate their franchise agreement, may file a complaint for

a determination of whether the action is unfair or prohibited

and sets forth standards for making that determination. A

reading of Section 320.641 , Florida Statutes, in its entirety

reveal s that its purpose is to equalize the relationship between

the licensee and the motor vehicle dealer. The motor vehicle

dealer is protected from arbitrary cancellation by the licensee

by this statute, but the licensee may, when appropriate, sever

its rela tionship with an unsatisfactory dealership.

3 3 . Nissan sought to cancel its agreement with Love

pursuant to Section 320.641 , Florida Statutes, because of its

determination that Love was unable to sell enough automobiles to

suit the reasonable expectation s of Nissan . Love protested and

after an eight - day hearing , Judge Davis found for Nissan and

against Love. Love Nissan v s . Nissan North America, Inc. , Case

No. 04 - 2247 (DOAH July 14, 2005 ) .

3 4 . If Love is permitted to avoid that result by feigning

a tr ansfer of its equity, with the result that Love will be able

to continue to provide disappointing sales, then termination

under Section 320.641 , Florida Statutes, becomes ignis fatuus ,

and is rendered meaningless.

3 5 . Courts are required to adopt statut ory interpretations

which harmonize related, but conflicting provisions, so that

both can be given effect. The proposed tra nsfer cannot b e

viewed in a vacuum. Hawkins v s . Ford Motor Company , 748 So. 2d

993 (Fla. 1999).

3 6 . Courts should avoid interpre tations of statutes which

render them meaningless. Unruh v s . State , 669 So. 2d 242 ( Fla.

1996) . An interpretation of Section 320.643(2) , Florida

Statutes, which would allow an illusory transfer to defeat the

operation of Section 320.641, Florida Statutes , would render the

latter statute meaningless.

3 7 . In matters of statutory construction, it is

fundamental that "legislative intent is the polestar by which

[ the ] C ourt must be guided." State v s . Webb , 398 So. 2d 820,

824 (Fla. 1981). Courts determine l egislative intent by

considering a variety of factors, including the language used,

the subject matter, the purpose designed to be accomplished, and

all other relevant and proper matters. American Bakeries Co.

v s . Haines City , 131 Fla. 790, 809, 180 So. 5 24, 532 (Fla.

1938) .

3 8 . An interpretation of Section 320.643(2) , Florida

Statutes, which permits an automobile dealer to evade the

effects of Section 320.641, Florida Statutes, would be contrary

to the apparent legislative intent. Therefore, there was n o

"transfer" as contemplated by Section 320.643(2) , Florida

Statutes .

3 9 . The facts in this case are no t unlike Nissan Motor

Corporation v s . Rick Starr Lincoln - Mercury, Inc. , Case

No. 94 - 3103 (DOAH August 29, 1994). In that case, Nissan Motor

Corporatio n announced its intent to terminat e the franchise

agreement with Rick Starr Lincoln - Mercury, Inc. The matter

became the subject of a formal administrative hearing in which

an Administrative Law Judge found that Nissan's termination was

appropriate. The e ponymous principal of Rick Starr Lincoln -

Mercury, Inc., Rick Starr, attempted to avoid the effects of the

recommended termination by transferring the franchise agreement

to Nissan of St. Lucie, Inc., which was surreptitiously

controlled by Rick Starr. Adm inistrative Law Judge Joyous D.

Parrish found that the transaction was not to "another person"

but was merely a device created to evade the recommended

termination. The Recommended Order was adopted as a final order

of DHSMV by Order HSMV - 94 - 0740 - FOF - DMV (DHSMV October 4, 1994).

40 . In this case there was a proposed transfer of equity

rather than a transfer of the franchise agreement and the

transferee was to a person rather than a corporation.

Nevertheless, the controlling principl e is the same.

Accord ingly, if for sake of argument one would assert that in

this case a real transfer was proposed, it would nevertheless

not be to an "other person ."

RECOMMENDATION

Based upon the Findings of Fact and Conclusions of Law, it

is

RECOMMENDED that the Departme nt of Highway Safety and Motor

Vehicles enter a Final Order stating that pursuant to Nissan's

ver i fied Petition for Determination of Invalid Proposed Transfer

Pursuant to Section 320.643, Florida Statutes, and Notice of

Rejection of Proposed Trans f er , no t ransfer under Section

320.643 , Florida Statutes, is proposed and Nissan's rejection of

it was proper . Further, the Department of Highway Safety and

Motor Vehicles should enter a Final Order dismissing Robert

Halleen and Chad Halleen's Petition for Determi nation of

Wrongful Turndown.

DONE AND ENTERED this 18th day of January , 200 6 , in

Tallahassee, Leon County, Florida.

S

HARRY L. HOOPER

Administrative Law Judge

Division of Administrative Hearings

The DeSoto Building

1230 Apalachee Parkway

Tallahassee, Florida 32399 - 3060

(850) 488 - 9675 SUNCOM 278 - 9675

Fax Filing (850) 921 - 6847

www.doah.state.fl.us

Filed with the Clerk of the

Division of Administrative Hearings

this 18th day of January , 2006 .

COPIES FURNISHED :

Michael J. Alderman, Esquire

Departmen t of Highway Safety

and Motor Vehicles

Neil Kirkman Building, Room A - 432

2900 Apalachee Parkway

Tallahassee, Florida 32399 - 0500

S. Keith Hutto, Esquire

Nelson, Mullins, Riley &

Scarborough, LLP

1320 Main Street

Columbia, South Carolina 29201

De an Bunch, Esquire

Sutherland, Asbill & Brennan, LLP

3600 Maclay Boulevard South, Suite 202

Tallahassee, Florida 32312 - 1267

John W. Forehand, Esquire

Lewis, Longman & Walker, P.A.

125 South Gadsden Street, Suite 300

Tallahassee, Florida 32301 - 1525

Alex Kurkin, Esquire

Pathman Lewis, LLP

One Biscayne Tower, Suite 2400

Two South Biscayne Boulevard

Miami, Florida 33131

Carl A. Ford, Director

Division of Motor Vehicles

Department of Highway Safety

and Motor Vehicles

Neil Kirkman Building, Room B - 439

Tall ahassee, Florida 32399 - 0600

Enoch Jon Whitney, General Counsel

Department of Highway Safety

and Motor Vehicles

Neil Kirkman Building

2900 Apalachee Parkway

Tallahassee, Florida 32399 - 1701

NOTICE OF RIGHT TO SUBMIT EXCEPTIONS

All parties have the ri ght to submit written exceptions within

15 days from the date of this Recommended Order. Any exceptions

to this Recommended Order should be filed with the agency that

will issue the Final Order in this case.