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Globe Motors Inc. v. Corporation.

filed: March 6, 1964.


Author: Smith

Before HASTIE, GANEY and SMITH, Circuit Judges.

Opinion of the Court

By SMITH, Circuit Judge: This action under the Automobile Dealers Day in Court Act, 15 U.S.C.A., §§ 1221-1225, resulted in a jury verdict and judgment in favor of the appellee. The case was tried to the jury solely on the basis of alleged violations of the Act. At the close of all the evidence the trial judge reserved decision on appellant's motion for a directed verdict and the case was submitted to the jury. Within ten days after the return of the verdict the appellant moved for judgment in accordance with his earlier motion and, in the alternative, for a new trial. Fed. Rules Civ. Proc. rule 50(b), 28 U.S.C.A. The motion was denied and the present appeal followed.

This case differs from others heretofore decided in that the alleged wrong was not the termination of the dealer's franchise but the failure of the manufacturer "to act in good faith in performing or complying with . . . the terms and provisions of the franchise." The appellee charges specifically that the appellant (1) discriminated against the appellee and in favor of a competitor in the allocation of Studebaker "Lark" automobiles at a time when the car was in short supply and considerable demand; (2) imposed upon the appellee burdensome financial requirements; and (3) refused to sell and deliver Mercedes-Benz automobiles to the appellee for retail sale. It is charged that the conduct of the appellant violated the Act in that it was oppressive and coercive. We view the evidence, as we must, in the light most favorable to the appellee.

The statute was heretofore construed by this Court in the case of Milos v. Ford Motor Company, 317 F.2d 712 (1963), in which it was held, at page 715:

"The Act grants a dealer the right to sue for damages by reasons of the failure of the manufacturer 'to act in good faith in performing or complying with any of the terms or provisions of the franchise, . . .' 15 U.S.C.A. § 1222. The critical term is 'good faith' which is defined as 'the duty of each party to any franchise, and all officers, employees, or agents thereof to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party; PROVIDED, That recommendation, endorsement, exposition, persuasion, urging or argument shall not be deemed to constitute a lack of good faith.' 15 U.S.C.A. § 1221(e)."

The statute did not provide a new remedy for breach of contract but created a new cause of action. An indispensable element of the statutory cause of action is not the lack of good faith in the ordinary sense but a lack of good faith in which "coercion, intimidation or threats" thereof are at least implicit.

The appellee argues that the term "lack of good faith" should be liberally construed and not confined to the context of coercion and intimidation. This argument was fully answered in the case of Milos v. Ford Motor Company, supra, at 715. See also Garvin v. American Motor Sales Corporation, 318 F.2d 518 (3rd Cir. 1963); Pierce Ford Sales, Inc. v. Ford Motor Company, 299 F.2d 425 (2d Cir. 1962), cert. den. 371 U.S. 829; Woodard v. General Motors Corporation, 298 F.2d 121, 127, 128 (5th Cir. 1962), cert. den. 369 U.S. 887; reh. den. 370 U.S. 965. Acceptance of the appellee's argument would effectively deprive the statutory definition of "good faith" of its full import and perhaps raise serious doubts as to the constitutionality of the statute.

The inadequacy of the appellant's appendix and the failure of the appellee to print an appendix has made it necessary for us to review a voluminous transcript which is replete with matter not relevant to the questions raised on this appeal; in fact, the brief of the appellee refers only to the transcript. Since the parties apparently failed to agree upon a joint appendix, the evidence upon which the appellee seems to rely should have been printed in an appropriate separate appendix. LOCAL RULE 24(4)(e), 28 U.S.C.A. The cited rule was intended to aid this Court in its dispatch of business and should be followed.

After preliminary negotiations between one Adolph Fram, who later became president of the appellee, and authorized representatives of the appellant, the appellee was organized for the purpose of becoming a franchised dealer in the appellant's products.The franchise was granted on the appellee's written application. The franchise was on its face an integrated contract consisting of two agreements entitled "Dealer Sales Agreement," and "Dealer Sales Agreement Standard Provisions." The latter was incorporated in the former by specific reference.

The first agreement contains the following pertinent provision: "This Agreement terminates and supersedes all prior written, or oral agreements, if any, between Seller and Dealer relating to the subject matter hereof . . ." This language is followed by the enumeration of several exceptions not relevant in the instant case. The second agreement contains the following pertinent provision: "Dealer . . . acknowledges that there is no other agreement or understanding, either oral or in writing, between the Dealer and Seller or Manufacturer affecting this Agreement or relating to the subject matter thereof."

The agreement authorized the appellee to purchase the appellant's products for resale in the area of "Pittsburgh in the county of Allegheny, state of Pennsylvania." However, the franchise was not exclusive; under the terms of the contract the appellant reserved the right to sell its products "to the others (including without limitation other dealers) without obligation or liability of any kind" to the appellee. The products which the appellee was authorized to purchase for resale were designated as "new passenger automobiles, trucks, and chassis bearing the trademarks 'Studebaker' or 'Packard' or the trade names 'Packard-Clipper' or 'Clipper,' parts, accessories and equipment therefor, and other products which from time to time may be offered by Seller to Dealer for resale." When the franchise was granted, the appellant was the exclusive national distributor of Mercedes-Benz automobiles but significantly no mention was made of them in the written agreements between the parties.

The franchise here in question was granted on January 20, 1958, and soon thereafter the appellee commenced operations on a limited scale. The limited operations were necessary because of the inadequacy of its facilities, particularly a suitable showroom. It appears from the testimony, viewed in the light most favorable to the appellee, that early in 1958 the representatives of the appellant urged the appellee to expand its operations. The appellee, in anticipation of this expansion, leased a suitable building later constructed by a corporation of which Adolph Fram was the principal stockholder. The expanded operations commenced on November 8, 1958, and continued thereafter until February of 1960, when the appellee suspended business. The franchise was never formally terminated by either party although each had a right to do so under the express terms of the contract.

It appears from the evidence that the business relations between the appellant and the appellee were harmonious until early in September of 1958. Thereafter there occurred a series of incidents upon which the appellee here rests its charges. There is a sharp conflict in the testimony as to the nature of the incidents and the circumstances surrounding them. However, it does appear that there were differences of opinion as to the obligation of the appellee to maintain a minimum net working capital, the scope of the appellee's franchise, and the right of the appellee to an exclusive dealership in the territory. It further appears that in the latter part of ...

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