Key Points

  • The Appellate Court of Maryland held that Ford's right of first refusal in its 2001 franchise agreement with Hunt Ford vested when the agreement was signed, not when a buyer made an offer in 2019.
  • The court found that the 2009 amendment to Md. Code, Transp. § 15-211(d)(2), which begins "Notwithstanding the terms of any franchise agreement," clearly expressed the General Assembly's intent to apply to existing contracts.
  • Applying the amendment retroactively would unconstitutionally impair Ford's vested contract right under Article III, Section 40 of the Maryland Constitution and Article 24 of the Declaration of Rights.
  • The court rejected the argument that the agreement renewed every 120 days, because Maryland law since 1977 has made the at-will termination clause unenforceable.
  • The panel reversed a $5,766,017 jury verdict for Winegardner, remanded for judgment for Ford, and did not reach Ford's challenge to the plaintiff's damages expert.

A Maryland appeals court on Friday threw out a $5.8 million jury verdict against Ford Motor Co., holding that a 2009 state law curbing carmakers' power to block dealership sales could not undo a right Ford secured in a 2001 franchise agreement with a dealer in La Plata.

The Appellate Court of Maryland held that Ford's right of first refusal, which let it match a buyer's offer and take the deal for itself, vested when Ford and Hunt Ford signed their agreement. Applying the later law to that right would violate the Maryland Constitution and Declaration of Rights, Judge Friedman wrote for a three-judge panel that included Judge Graeff and Senior Judge Alexander Wright Jr., sitting by special assignment. The panel reversed and sent the case back for judgment in Ford's favor.

The ruling bars use of the 2009 restriction against the right in Ford's 2001 contract, even though the court agreed lawmakers meant it to reach existing contracts. The court found that the statute's opening words, "Notwithstanding the terms of any franchise agreement," showed that intent. But it held that legislative intent cannot overcome constitutional protection for vested contract rights.

Ford and Hunt Ford had signed a series of sales and service agreements since the early 1970s. The 2001 agreement gave Ford a "right of first refusal to purchase the stock or assets on the same terms and conditions offered or agreed to with such person, regardless of whether the proposed buyer is qualified to be a dealer" if Hunt Ford's owners decided to sell.

In 2019, Charles Winegardner offered to buy Hunt Ford, and the owners, who wanted to retire, notified Ford of the proposed sale. After reviewing the dealership's sales performance, its facilities and local demand, Ford chose to exercise its right and operate the business solely as a service center. It assigned the right to Tom Kody, who owned five other Ford dealerships in Southern Maryland and now runs Hunt Ford as a service center.

Winegardner and Winegardner Ford Inc., a company formed to buy the dealership, sued in the Circuit Court for Charles County for tortious interference, a claim that Ford wrongfully disrupted their purchase contract. They argued that the 2009 amendment to Section 15-211(d)(2) of Maryland's Transportation Article barred Ford from exercising its right against a buyer who meets the manufacturer's reasonable qualifications and is an existing dealer in good standing. Neither side disputed that Winegardner met that description.

The circuit court denied Ford's motion for summary judgment without explanation. On a later motion under Maryland Rule 2-502, which lets a judge separate and decide a discrete issue, the court found that the amendment applied and that Ford was liable. A jury then heard only damages and awarded $5,766,017, the exact figure calculated by Winegardner's expert, David Witherspoon, using a "yardstick" method Ford had challenged as unreliable.

The appeals court began from the presumption that new statutes apply only going forward. Winegardner argued that applying the amendment was not retroactive, because the 2001 agreement let Ford terminate at will on 120 days' notice, so a new agreement took effect every 120 days. "Contrary to Winegardner's assertions, Ford Motor and Hunt Ford did not enter into a new contract every 120 days," Judge Friedman wrote. Since 1977, the opinion noted, Maryland law has barred manufacturers from terminating a franchise unless the dealer fails to substantially comply with its reasonable requirements, which made the at-will clause unenforceable.

On legislative intent, Winegardner prevailed. The court said the word "any" alone would not show that lawmakers wanted a statute to reach backward. "When 'notwithstanding' and 'any' are together, as they are in the 2009 Amendment, there is a clear legislative intent for the statute to apply retroactively," the opinion said.

The case turned on whether Ford's right had vested. Winegardner argued it had not. The court acknowledged that Maryland's only precedent on when a right of first refusal vests comes from the rule against perpetuities, a doctrine that limits remote future interests in property, under which the right vests only when a third party makes an offer. That doctrine asks a different question, Judge Friedman wrote: "the rule against perpetuities concerns the certainty of a right upon its exercise, whereas retroactivity concerns when that right was established."

From the moment the 2001 agreement was signed, the court said, Hunt Ford was contractually restricted in transferring the franchise. "Winegardner's offer to purchase Hunt Ford in 2019 did not vest Ford Motor's right—the right vested when the 2001 Agreement established the parties' expectations of their rights and obligations," the opinion said.

The court described the right as part of a negotiated exchange in which Ford supplied vehicles, warranties and marketing support, and Hunt Ford agreed to sell and service Ford products and maintain its facilities. "This right protected Ford Motor's right to control its dealership network, including who owns them and what services they provide," Judge Friedman wrote. Applying the amendment, the judge added, would "compel Ford Motor to transact with a dealer it did not choose, Winegardner, and to continue services it intended to end, vehicle sales at Hunt Ford."

The panel grounded its holding in Article III, Section 40 of the Maryland Constitution, which bars taking property without just compensation, and Article 24 of the Declaration of Rights, the state's due process guarantee. "That vested right is protected from the General Assembly's retroactive abrogation under the Maryland Constitution and Declaration of Rights," the court concluded.

Because it ruled for Ford on liability, the panel did not decide Ford's separate challenge to the admission of Witherspoon's testimony. The court reversed the Charles County judgment, remanded for judgment in Ford's favor and ordered Winegardner to pay the costs of the appeal.