1. Which laws did the court consider in deciding this case? Is there a conflict between the laws?

2. Was it critical to the court’s determination that the franchise agreement contained language stipulating that the agreement relied on the “reputation,” “integrity,” and “commitment to fair dealing” of the franchisees?

Giuffre Hyundai (Giuffre) contracted with Hyundai Motor America (HMA) to be an authorized franchised dealer of Hyundai automobiles. The Dealer Sales and Service Agreement (DSSA) provided that “HMA has selected [Giuffre] because of the reputation of its Owners and the General Manager … for integrity and their commitment to fair dealing.” The contract also prohibited the franchisee from “engag[ing] in any misrepresentation or unfair or deceptive trade practices.” A New York State court found that Giuffre had engaged in fraudulent, illegal, and deceptive business practices, including false advertising and strong-arm sales methods. Giuffre paid $500,000 in court-ordered restitution and civil penalties. HMA read about the suit in the New York Post and sent a copy of the article to Giuffre with notice that it would terminate the dealership in ninety days because Giuffre Hyundai was “in material and incurable breach of its obligations ….” HMA stated that it “cannot and will not voluntarily allow its products to be sold and marketed by an organization that has been found to have preyed on the consuming public ….” Giuffre sued to enjoin termination of the dealership, claiming that the New York Vehicle and Traffic Law protects motor vehicle franchisees and that HMA did not provide it with appropriate notice and an opportunity to cure the breach as section 463 of the law requires. The lower court held that section 463 does not require notice and opportunity to cure when the breach is incurable. Giuffre appealed.

JUDICIAL OPINION

SACK, Circuit Judge … The central issue in this appeal is whether HMA’s termination of Giuffre’s franchise complied with New York’s Vehicle and Traffic Law. In an action seeking to enjoin termination of a franchise agreement under section 463, the franchisor must establish that it acted with “due cause.” N.Y. Veh. & Traf. Law 463(2)(e)(2). Due cause exists where there has been “a material breach by a new motor vehicle dealer of a reasonable and necessary provision of a franchise if the breach is not cured within a reasonable time after written notice of the breach.” Id. (emphases added). While we have not found or been pointed to a published decision construing this portion of the statute, there is ample common law precedent interpreting the operative terms under New York law ….

In particular, “‘New York law permits a party to terminate a contract immediately, without affording the breaching party notice and opportunity to cure … when the [breaching party’s] misfeasance is incurable and when the cure is unfeasible.’” …

Turning to the facts of this case we conclude that the state court’s judgment established as a matter of law an incurable, material breach of a reasonable and necessary provision of the DSSA. This provided HMA with due cause to terminate the Agreement without further delay. First, the provision at issue here was self-evidently reasonable and necessary. We will not ascribe to the legislature the intent to bar HMA from conditioning its commercial relationships on basic standards of honesty and fair dealing. See N.Y. Stat. Law 152 (“A construction of a statute which tends to sacrifice or prejudice the public interests will be avoided.”). Second, the breach here was material and not susceptible of cure. The state court judgment established that ………………