Barney Motor Sales v. Cal Sales, Inc.

• Decision Date: 03 November 1959
• Docket Number: Civ. No. 54-59-TC.
• Parties: BARNEY MOTOR SALES, a California Corporation, Plaintiff, v. CAL SALES, INC., a California Corporation, Defendant.
• Court: U.S. District Court — Southern District of California

178 F. Supp. 172

BARNEY MOTOR SALES, a California Corporation, Plaintiff, v. CAL SALES, INC., a California Corporation, Defendant.

Civ. No. 54-59-TC.

United States District Court S. D. California, Central Division.

November 3, 1959.

Potruch & Lerten, Los Angeles, Cal., for plaintiff.

H. Spencer St. Clair, Los Angeles, Cal., for defendant.

THURMOND CLARKE, District Judge.

This suit is brought by a dealer in Triumph motor cars for failure to renew his franchise contrary to the provisions of the Automobile Dealers' Day in Court Act of 1956, 15 U.S.C.A. §§ 1221-1225. Defendant has moved for summary judgment on the grounds that it is not a "manufacturer" as contemplated by the terms of the Act.

In substance, the affidavits and pleadings before the court show that defendant is a California corporation engaged in the distribution of Standard-Triumph Motor Cars in the State of California and in certain other western states. The stock ownership of the corporation is in the hands of Walter G. Danielson, Dorothy Deen, and Paul Bernhardt, citizens of the State of California. The manufacturer of Standard-Triumph motor cars, an English corporation, has no ownership interest whatever in the defendant distributing company. Defendant contends that its arrangement with the Standard-Triumph Motor Co. of Coventry, England, is precisely the sort of franchise agreement which would give the defendant a cause of action under the Day in Court Act in appropriate circumstances against the English manufacturer. It follows from this, according to the defendant, that its own franchising arrangements with the ultimate retail dealers in Standard-Triumph motor cars are exempt from the coverage of the Act in question, which in pertinent part reads:

"(a) The term `automobile manufacturer' shall mean any * * * form of business enterprise engaged in the manufacturing or assembling of passenger cars * * * including any * * * corporation which acts for and is under the control of such manufacturer * * * in connection with the distribution of said automotive vehicles." (Emphasis supplied.)

If this section were reasonably read to require only ownership control in order for an automobile distributor to be charged with manufacturer's liability under the Act, the granting of defendant's motion would be a matter of course. Plaintiff contends, however, that the agency and control intended by the statute are de facto subordination to the wishes and interests of the automobile manufacturer, whether expressed in a written contractual form, or in a course of dealing. This being a case of first impression on the question of law at hand, the court has had recourse to the legislative history of the statute, and to the learned commentary of Prof. Friedrich Kessler in "Automobile Dealer Franchises", 66 Yale L.J. 1135, for which grateful acknowledgment is hereby given.

Without going into the details of the history of franchise bargaining in the automobile industry, it may be said that Congress has recognized that the bargaining power of the manufacturer vis-à-vis the dealer is so great that the terms of any franchise agreement can be dictated virtually in their entirety by the manufacturer;¹ the resulting "contract of adhesion" could be designed to include exculpatory clauses immunizing the manufacturer from suits based upon bad faith termination of the agency relationship,² or it could be framed so vaguely as to be unenforceable in the courts because of indefiniteness of terms.³ In short, any recognized legal device which would obviate dealer's suits upon the franchise against the grantor of the franchise could be exacted by the latter. The history of the devices used to effectuate this single end of immunization of the manufacturer from dealers' suits is an interesting commentary on the evolution of the law of contract;⁴ suffice it to say here, however, that Congress in enacting the legislation at hand was directing itself to the basic evil—the disparity in bargaining power between the parties to the franchise arrangement—in requiring that the termination of franchises, whether by non-renewal or otherwise, be done only in good faith for sufficient reasons.⁵ The dealer was to be given his day in court on an allegation of bad faith termination regardless...