B. Interpretation of Pennsylvania Law
The jurisdiction of the court is founded upon diversity of citizenship. 28 U.S.C. § 1332. A federal court sitting in diversity must apply the substantive law of the state whose laws govern the action. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78, 82 L. Ed. 1188, 58 S. Ct. 817 (1938). The substantive law at issue is section 9(a)(3) of the Pennsylvania Board of Vehicles Act. Pa. Stat. Ann. tit. 63, § 818.9(a)(3) (Supp. 1992). The parties do not agree as to how this section of the Act should be interpreted. Plaintiff argues that GM's advertising initiative is proscribed by the plain language of the Act. GM, on the other hand, contends that the Act must be interpreted to prohibit only coerced participation in limited, special promotional campaigns. In an instance such as this, the "federal court must predict how the state's highest court would resolve the issue." Lomax v. Nationwide Mutual Ins. Co., No. 91-3694, slip. op. at 5 (3d Cir. May 18, 1992) (citing Rabatin v. Columbus Lines, Inc., 790 F.2d 22, 24 (3d Cir. 1986)); see, Sarah Borse v. Piece Goods Shop, Inc., 963 F.2d 611 (court must predict how Pennsylvania's highest court would resolve the issue); Smith v. Calgon Carbon Corp., 917 F.2d 1338, 1341 (3d Cir. 1990), cert. denied, 113 L. Ed. 2d 660, 111 S. Ct. 1597 (1991) (same). Decisions of the lower state courts as well are not to be "disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise." West v. AT&T, 311 U.S. 223, 237, 85 L. Ed. 139, 61 S. Ct. 179 (1940).
As noted above, the pertinent part of the statute speaks in terms of an advertising campaign or contest, promotion and training materials, display decorations or materials. The focus of our inquiry is on the phrase "advertising campaign." There is no relevant case law to guide or assist the court and the legislative history is non-existent. Even the Agency charged with enforcing the law is unable to define "advertising campaign."
It is plaintiff's position that the 1% increase is not a price increase but a mandatory fee dealers must pay to support GM's contractual obligation to advertise.
plaintiff thus contends that instead of GM using its own funds to meet its contractual obligation to advertise, GM is raising the needed funds by forcing the dealers to pay a higher price for the automobiles. plaintiff points out:
The GM marketing adjustment is not included in the Chevrolet price schedules. The funds received by General Motors Corporation are not reported on any gross receipts or gross revenue tax returns. Finally, neither the revenue generated by the GM marketing adjustment nor the advertising expense disbursed are included in the General Motors Consolidated Annual Report as revenues or advertising expense.
Pl.'s Mem. of Law in Opp'n to Def.'s Mot. for Summ. J. at 20).
I am not persuaded that culpability under the Act ought to turn on how the revenue from a price increase is accounted for or not accounted for on the books of GM, or whether it is included on the invoice as a line item or allocated under some other heading. Such a resolution begs the question of whether a general price increase to defray advertising costs amounts to coercive participation in an advertising campaign. In effect, plaintiff is arguing that the Act prohibits automobile manufacturers from spending funds derived from the sale of vehicles to their franchised dealers to advertise their products.
It would prevent the manufacturers from charging off or passing through the cost of advertising. If manufacturers of automobiles were unable to recover the pro rata cost of advertising in the price of the automobiles sold to Pennsylvania dealers they would soon cease doing business in this Commonwealth to the great detriment of the citizens. Obviously the Legislature did not intend such a result.
Reason and common sense dictate that the interpretation advocated by plaintiff must be rejected. Upon closer examination of the language it becomes apparent that the terms "advertising campaign or contest" encompass time-restricted, special advertising programs intended for a target audience. For example, an auto manufacturer elects to have a "4th of July" sales promotion replete with red, white and blue banners, streamers, posters and specific media buys. The manufacturer then charges its local new car dealer franchises for the special advertising and promotional materials, providing them no opportunity to "opt-out" of the special promotion. Dealers who refuse to accede, in retribution are denied the opportunity to purchase the more popular, fast-selling car models for their dealerships. Thus, when "advertising campaign" is defined within the context of the other terms incorporated in section 9(a)(3) - "promotional materials, training materials, showroom or other display decorations" - it is clear that the Legislature was targeting a particular form of economic strongarm other than a general price increase to be used to offset advertising costs.
Clearly section 9(a)(3) does not preclude auto manufacturers from making uniform price increases to its dealers, whether the amount is separately identified or included in the dealer base price.
Plaintiff argues that GM's change in its billing procedure as of March 1, 1992 is an admission of liability for the period of time preceding that date. I disagree. The statute was not designed to regulate the billing practices or the manner in which the manufacturer allocates its costs, but to prevent the manufacturer from forcing the dealer to participate in a special promotional advertising campaign. Such is not the case here. A mere change in the billing practice transferring a 1% price increase from a line item to the base price is of no moment since the economic impact on the dealer is the same.
For the foregoing reasons, I predict that the Pennsylvania Supreme Court would conclude that section 9(a)(3) of the Pennsylvania Board of Vehicles Act, Pa. Stat. Ann. tit. 63, § 818.9(a)(3) (Supp. 1992), does not prohibit a general price increase to dealers to defray advertising costs nor can a violation of the Act be predicated upon a billing practice that identifies the price increase as a separate item to be used for advertising. Defendant's motion for Summary Judgment will be GRANTED. An order follows.
AND NOW this 30th day of July, 1992, upon consideration of defendant General Motors' Motion for Summary Judgment and plaintiff's opposition thereto, it is hereby
that defendant's motion is GRANTED. Plaintiff's complaint is dismissed with prejudice.
BY THE COURT:
JOSEPH L. MCGLYNN, JR., J.