individual operator provides the remaining capital. Ford receives preferred, voting stock in exchange for 50% of its capital investment and takes a long-term note for the remainder of its investment. The operator receives common, non-voting stock in exchange for his or her capital investment. The operator is to purchase stock from Ford until he or she owns all of the stock in the dealership corporation. At that point, Ford's investment in the dealership is terminated.
Plaintiff and Ford executed a Dealer Development Agreement, as well as other agreements, on May 1, 1978. JCF was incorporated on April 25, 1978 and commenced operation on May 4, 1978.
Plaintiff invested $40,000 in JCF for which he received non-voting common stock. Ford invested $80,000 in JCF for which it received voting preferred stock and a long-term note.
During its period of operation, the dealership lost money. In March 1979, Mellon Bank cancelled the dealership's floor-plan line of credit because of its deteriorating financial condition.
Plaintiff requested a floor-plan line of credit from FMCC but was refused because of the dealership's losses and poor financial condition.
On April 3, 1979, Ford terminated its Dealer Development Agreement with Plaintiff. The management contract between JCF and Plaintiff was terminated on the same day. On July 5, 1979, Ford informed Plaintiff that it would discontinue JCF.
Plaintiff brought the present action in the United States District Court for the District of Columbia pursuant to § 10(b) of the Securities Exchange Act of 1934, 15 U.S.C. § 78j(b), and Rule 10b-5, 17 C.F.R. § 240.10b-5, promulgated thereunder by the Securities and Exchange Commission (Count I); the Dealer Day in Court Act, 15 U.S.C. §§ 1221-1225 (Count II); and § 2(e) of the Robinson-Patman Act, 15 U.S.C. § 13(e) (Count VI).
Plaintiff also alleges breach of fiduciary duties (Count III), common law fraud (Count IV), and unconscionability (Count V). On September 25, 1981, upon motion of Defendants, the case was transferred to this District.
Defendants Ford, FMCC, Brown, Mallon and Coleman filed counterclaims against Plaintiff for breach of contract, tortious interference with contract and bad faith. Defendant JCF counterclaimed against Plaintiff for breach of contract, breach of fiduciary duties and bad faith.
Defendants FMCC, Brown, Mallon and Coleman have subsequently filed Motions for Summary Judgment as to all six counts of the Complaint. Ford has filed its Motion for Partial Summary Judgment as to Counts I, III, and VI of the Complaint.
Plaintiff has consented to the entry of summary judgment in favor of Defendants FMCC, Brown, Mallon and Coleman as to Count II. Therefore, this Court need not address that count at this juncture. Plaintiff's claim under the Dealer Day in Court Act shall proceed to trial as against Defendant Ford.
Plaintiff has also consented to the entry of summary judgment in favor of FMCC as to Counts III and V.
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Under Fed.R.Civ.P. 56(c), summary judgment may be entered only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." The Court of Appeals for the Third Circuit has made clear that any doubts as to the existence of genuine issues of fact are to be resolved against the moving parties. Continental Ins. Co. v. Bodie, 682 F.2d 436, 438 (3d Cir. 1982); Hollinger v. Wagner Mining Equipment Co., 667 F.2d 402, 405 (3d Cir. 1981). Further, the facts and the inferences to be drawn from the facts must be viewed in the light most favorable to the party opposing the motion. Continental Ins. Co. v. Bodie, supra at 438; Betz Laboratories, Inc. v. Hines, 647 F.2d 402, 404 (3d Cir. 1981).
Under Fed.R.Civ.P. 56(e), however, parties resisting summary judgment motions may not rest upon bare assertions or conclusory allegations. Ness v. Marshall, 660 F.2d 517, 519 (3d Cir. 1981). In particular, they may not rely upon the statements in their pleadings. Rather, their response, by affidavits or otherwise, "must set forth specific facts showing that there is a genuine issue for trial. If (they) do not so respond, summary judgment, if appropriate, shall be entered against (them)." Fed.R.Civ.P. 56(e).
As a general rule, courts do not favor the summary disposition of cases on their merits. Nevertheless, in an appropriate case, an early disposition may save the parties needless and often considerable time and expense which otherwise would be incurred during trial. At minimum, a partial disposition of the case at an earlier stage will refine the issues which remain for final resolution.
With the above standard in mind, we will consider the challenges to each claim separately and will resolve them accordingly.
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I. CLAIM UNDER THE SECURITIES EXCHANGE ACT
Defendants contend that Plaintiff does not have a cause of action under § 10(b) and Rule 10b-5 because the stock he purchased and the contracts into which he entered were not securities within the meaning of the Securities Exchange Act. Specifically, Defendants maintain that the "economic realities" test described in United Housing Foundation, Inc. v. Forman, 421 U.S. 837, 44 L. Ed. 2d 621, 95 S. Ct. 2051 (1975), must be applied to this transaction and that under this test, Plaintiff did not purchase securities within the meaning of the Act.
Plaintiff replies that the "economic realities" analysis should be used only if the stock he purchased lacks the traditional attributes of stock. According to Plaintiff, his stock possessed most of the traditional characteristics of stock and therefore constitutes a security within the meaning of the Act.
Section 10(b) of the Securities Exchange Act of 1934 applies to the purchase or sale of a security. 15 U.S.C. § 78j(b).
The term, "security" is defined, "unless the context otherwise requires," as:
. . . any note, stock, treasury stock, bond, debenture, certificate of interest or participation in any profit-sharing agreement or in any oil, gas, or other mineral royalty or lease, any collateral -- trust certificate, preorganization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit, for a security, or in general, any instrument commonly known as a "security" . . . (emphasis added)