Peugeot Motors of America, Inc. v. Eastern Auto Distributors, Inc.

Eastern Auto Distributors (EAD) (defendant), a Virginia company, entered into a distributor agreement with Peugeot Motors of America, Inc. (Peugeot) (plaintiff), a Delaware company with its principal place of business in New Jersey. The agreement had a choice-of-law clause in which the parties agreed to be bound by New York law. The contract also contained a nonrenewal provision that gave both parties, subject to some restrictions, the right to give notice to the other party of its intention not to renew the agreement. Peugeot purported to exercise its option not to renew the agreement and sent the required notice to EAD, then filed a declaratory-judgment action in federal court in Virginia to declare that Peugeot properly exercised its right not to renew the agreement. EAD filed numerous counterclaims alleging violations under New York law. Under New York’s statutory law, the nonrenewal notice would be invalidated because such provisions would not be enforceable in agreements between parties from different states. Under New York’s common law, the provision and Peugeot’s notice would be valid. Peugeot urged that the parties’ choice-of-law clause did not include New York statutory law, and even if it did, there was no violation under these facts. The district court granted EAD summary judgment on Peugeot’s declaratory-judgment claim, and it granted Peugeot summary judgment on EAD’s counterclaims.