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REA v. FORD MOTOR CO.

December 18, 1975

Edward C. Rea and 22 Ford Inc.
v.
Ford Motor Co.


Knox, D.J.


The opinion of the court was delivered by: KNOX

Retrial of Issue of Damages for Violation of Automobile Dealers Day in Court Act Claim

 KNOX, D.J.:

 The history of this protracted litigation, which has now been pending for eight and one-half years, is fully set forth in the decision of this court denying motion for new trial and judgment NOV reported at 355 F. Supp. 842 (W.D. Pa. 1973) and in the decision of the Court of Appeals for this Circuit, Rea v. Ford Motor Co., 497 F.2d 577 (1974).

 A short resume of this history is, however, necessary for an understanding of the problem presently before the court. Edward C. Rea and the corporation known as 22 Ford, Inc. in which he, Rea, was the principal stockholder sued Ford Motor Company on a variety of claims. As finally presented at the first trial of this action, these included a claim for damages for breach of an oral contract to convey real estate, claims for treble damages under the Sherman Act, 15 U.S.C. §§ 1 and 2, claims for violation of the Robinson Patman Act and a claim for damages for violation of the Automobile Dealers' Day in Court Act, 15 U.S.C. § 1221, et seq. At the conclusion of the evidence, this court directed a verdict for the defendant Ford on claims under the Robinson Patman Act, 15 U.S.C. §§ 13(d) and (e). We subsequently held the verdict excessive to the extent that it exceeded $1,000,000 and directed a new trial unless a remittitur was filed. Plaintiffs did file a remittitur, but the defendant took an appeal.

 On appeal, the Third Circuit denied recovery for breach of oral contract to convey real estate and also denied recovery for violations of the Sherman Antitrust Act, 15 U.S.C. §§ 1 and 2 to the extent that the verdict was based upon the operation of company-owned and dealer-development outlets in the Pittsburgh, Pennsylvania, area. The court did hold, however, that the facts justified the jury's finding as to liability for violation of the Automobile Dealers' Act and that there was sufficient evidence of price fixing between Ford and the national rental companies, Hertz and Avis, to justify this claim being submitted to the jury. The court, however, decided that it could not determine to what extent the jury's verdict was based upon violations of the Sherman Act other than price fixing with Hertz and Avis and directed that a new trial concerning this price fixing be awarded. The court directed with respect to the Automobile Dealers' Act that a new trial on the issue of damages only be awarded. This new trial on damages has been held and is before the court presently for determination on the merits.

 With respect to the price fixing arrangements between Ford on the one hand, and Hertz and Avis, the national car rental companies, on the other, trial of this issue was severed from the issue of damages under the Automobile Dealers Act, and considerable discovery was had in preparation for retrial. The plaintiff has, however, elected not to make discovery of certain evidence in accordance with the orders of this court (which directed that making its records available to the defendant would be sufficient) and rather than make such discovery withdrew the cause of action for such price fixing. Therefore, the determination of damages for violation of the Automobile Dealers' Act -- if, as and when finally decided -- will finally put an end to this lengthy litigation.

 The parties agreed that the question of damages for violation of the Automobile Dealers' Act would not require a jury but the same was submitted to the court for trial non-jury.

 Violation of the Automobile Dealers' Act, as to which the evidence has been held by the Circuit to be sufficient to justify the jury verdict on liability, is based upon the following facts, as recited in the opinion of the circuit, 497 F.2d 577 at 582.

 
"For a time in 1964 Edward C. Rea, Inc. operated in a temporary facility because a new Ford facility, whose preparation and use required a substantial amount of capital, was not yet available. Sometime between February and August 1964, before the new facility was available, Rea suggested to McClanathan, then district manager for Ford, that Rea Olds might not liquidate its operation. Rea testified that in response McClanathan threatened to stop shipping Ford automobiles to the Monroeville dealership unless Rea Olds resigned its Oldsmobile franchise. McClanathan denied making the alleged threat to withhold cars, but he did testify that he told Rea that he thought the Oldsmobile dealership should be liquidated in order to assure an adequate source of capital for the conduct of the Ford dealership in the new Monroeville facility. Thereafter Rea Olds resigned the Oldsmobile franchise, retained part of its assets, and sold the remainder to another corporation. Sometime after August 31, 1964, Rea Olds changed its name to 22 Ford, Inc., the present plaintiff, and took over operation of the Ford Monroeville dealership in its new facility. The Ford franchise agreement at Monroeville was assigned to 22 Ford on March 9, 1966, by Edward C. Rea, Inc., which was then dissolved. This assignment was accepted and consented to by Ford on April 21, 1966."

 The court has held a full hearing on the question of damages resulting from the violation of the Automobile Dealers' Act, liability having been determined by the jury, and has also held full argument and considered extensive briefs with respect thereto and is now prepared to decide the matter on the merits. This apparently simple question bristles with difficult problems.

 (A) Limitation on Amount of Damages by Jury's Verdict in First Trial.

 In the first trial the jury, having found that Ford had violated the Automobile Dealers' Act, awarded plaintiffs $350,000 damages representing the loss of profits as a result of the forced sale of the Oldsmobile franchise. The Circuit held that defendant was not entitled either to entry of judgment in its favor or to a new trial to determine the question of liability on this claim. After discussing the question of liability, the Circuit then went on to hold as follows:

 
"While we thus conclude that the jury's finding that Ford violated the Automobile Dealers' Act should be sustained, we hold that its award of damages thereunder is excessive and must be set aside. The jury's award of $350,000, apparently represents a straight-line projection of Rea Olds' estimated profits over the period from its termination of the GM franchise in September 1964 to the time of trial in May 1972, based upon a formula devised by Dr. Staelin, 22 Ford's expert. It has been held that an automobile dealer may recover damages for the loss of future profits resulting from the manufacturer's wrongful conduct under the franchise agreement. See American Motors Corp. v. Semke, 384 F.2d 192 (10th Cir. 1967). However, the jury's award here failed to reflect the fact that in 1964 Rea Olds sold certain of its assets for $60,000. and that this cash and the remaining assets of the company were thereafter devoted to the operation of the Monroeville Ford franchise. To award 22 Ford recovery of anticipated profits from the Oldsmobile franchise without any deduction for the asset sale or for the fact that it benefited by having the retained cash and assets available for the operation of the new Ford franchise is to permit a double recovery. Cf. Gustafson v. General Motors Acceptance Corp., 470 F.2d 1057 (8th Cir. 1973). The award of damages in favor of plaintiffs for defendant's violation of the Dealers' Act will, therefore, be vacated and the case remanded for a redetermination of such damages in light of this opinion."

 In its conclusion the Circuit directed and the district court, pursuant to the Circuit's mandate, ordered: "A new trial on the issue of damages on the cause of action for violation of ...


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