Ford Motor Co. v. Ghreiwati Auto, No. 12-14313, 2013 WL 5954488 (S.D. Mich. Nov. 7, 2013)

The issue of whether President Obama’s 2011 executive order instituting an embargo against Syria provided Ford the right to terminate its dealership agreement with a Syrian auto dealer was recently addressed by the U.S. District Court for the Southern District of Michigan in Ford Motor Co. v. Ghreiwati Auto, No. 12-14313, 2013 WL 5954488 (S.D. Mich. Nov. 7, 2013). The court answered in the affirmative, finding that the parties’ dealership agreement, which provided for payment, reimbursement, and shipment of goods directly to Syria, would violate the executive order and thus Ford had the right to terminate it.

Pointing to federal and Michigan case law, the court found that agreements that violate executive orders are unlawful and held that the executive order prohibited Ford’s performance under the agreement. Thus, the court held that Ford had a right to discharge the contract without liability for breach of contract. Bolstering the court’s conclusion was the fact that the agreement expressly allowed Ford to terminate if a law prohibited its performance.

Nevertheless, the auto dealer argued that Ford was obligated to seek out a work-around to the 2011 executive order as it did when in response to President Bush’s executive order limiting exports to Syria. In 2004, the parties were able to continue their relationship based on that order’s “ten-percent de minimus rule,” which allowed products to be shipped to Syria so long as the value of the American products in the total item was less than ten percent of the total value. The court found that Ford’s 2004 “work around” did not create a duty for it to do the same in response to the 2011 embargo and that the auto dealer failed to point to any provision in the agreement that would require Ford to seek a work-around or a provision in the executive order that would allow one. The court also rejected the auto dealer’s argument that Ford should have sought a license to export to Syria, holding that Ford had no obligation to request a license and noting the order’s general prohibition on the approval of license applications.

The court also found that the auto dealer was not entitled to equitable remedies because such remedies would also contravene the executive order. Having found against the auto dealer on all of its claims, the court according granted Ford’s motion for summary judgment on its declaratory judgment claim and the auto dealer’s counterclaims for breach of contract, promissory estoppel, and unjust enrichment.