Northview Motors Inc. v. Chrysler Motors Corp.

• Decision Date: 08 September 2000
• Docket Number: No. 99-3873,99-3873
• Parties: (3rd Cir. 2000) NORTHVIEW MOTORS, INC., APPELLANT V. CHRYSLER MOTORS CORPORATION; JOSEPH P. NIGRO, TRUSTEE
• Court: U.S. Court of Appeals — Third Circuit

Page 78

227 F.3d 78 (3rd Cir. 2000)

NORTHVIEW MOTORS, INC., APPELLANT

V.

CHRYSLER MOTORS CORPORATION; JOSEPH P. NIGRO, TRUSTEE

No. 99-3873

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued August 8, 2000

Filed September 8, 2000

On Appeal from the United States District Court for the Western District of Pennsylvania, D.C. Civ. No. 93-1722, District Judge: Hon. William L. Standish

[Copyrighted Material Omitted]

Christopher M. DeVito (argued) Morganstern, McAdams & Devito 1406 W. Sixth Street, Suite 400 Cleveland, Ohio 44113, Attorneys for Appellant

Mark F. Kennedy Christopher J. Meyer (argued) Wheeler, Trigg & Kennedy 1801 California Street, Suite 3600 Denver, Colorado 80202, Attorneys for Appellee

Before: Barry, Weis and Greenberg, Circuit Judges

OPINION FOR THE COURT

Greenberg, Circuit Judge.

I. INTRODUCTION

This matter comes on before this court on appeal from a final order of the district court entered September 28, 1999, granting judgment as a matter of law in favor of defendant Chrysler Motors pursuant to Fed. R. Civ. P. 50(a) after the close of all the evidence on plaintiff Northview Motors's breach of contract and Automobile Dealers Day in Court Act ("ADDCA"), 15 U.S.C. SS 1221-25, claims. Northview also appeals from (1) an order entered March 7, 1995, to the extent that it granted Chrysler summary judgment on Northview's Pennsylvania Board of Vehicles Act ("BVA"), Pa. Stat. Ann. tit. 63, SS 818.1 et seq., claims on the ground that they were barred by the statute of limitations and (2) an order entered February 9, 1996, to the extent it granted Chrysler summary judgment on Northview's claim for violation of a provision of Pennsylvania's Uniform Commercial Code ("UCC") which obligates contracting parties to act in good faith. See 13 Pa. Cons. Stat. Ann. S 1203. We will affirm the orders entered by the district court, although we do so with respect to the March 7, 1995 and February 9, 1996 orders for reasons which differ from those the district court set forth.

A. Factual Background

At the times material to this action, Northview, a Delaware corporation with its principal place of business in Pittsburgh, Pennsylvania, was an automobile dealership franchise selling and servicing Jeep and Eagle vehicles. Frank Cuda, Northview's sole shareholder, oversaw the dealership's operations. Chrysler, a Delaware corporation with its principal place of business in Detroit, Michigan, at the times material to this opinion manufactured Jeep and Eagle vehicles as successor to American Motors Corporation.

Cuda had been involved in the automobile industry since he was a child. See app. at 258. He began in the industry by working at his father's dealership between 1954 and 1968. See id. at 260. In 1968, Northview began selling new cars as an American Motors dealer in the North Hills section of Pittsburgh. See id. at 261. Cuda testified that throughout the 1970s and 1980s, Northview was a successful dealership consistently ranking as one of the top one hundred American Motors dealerships in the nation. See id. at 287. As an American Motors dealership, Northview marketed both the Jeep and Eagle lines of vehicles.

This case arose directly from events commencing on or about December 11, 1987, when Northview entered into an American Motors Sales Corporation Eagle Sales and Service Agreement ("Eagle SSA") and an American Motors Sales Corporation Jeep Sales and Service Agreement ("Jeep SSA") (collectively, the "SSAs"). Chrysler subsequently acquired American Motors Sales Corporation's Jeep and Eagle lines and became its successor in interest to the Jeep and Eagle SSAs in contractual privity with Northview.¹

Inasmuch as the suit Northview filed against Chrysler evolved out of the two SSAs to which Chrysler became a party after it purchased American Motors's Jeep and Eagle product lines, we set forth significant parallel portions of the agreements. Section 11(a) of the SSAs obligated Northview to use its best efforts to sell aggressively and effectively each and every model of the Jeep and Eagle product lines. See, e.g., exhs. at 152. Section 12 required that Northview be a member in good standing of the Dealer Advertising Association, an association which advertised lines of vehicles sold by its dealer members. See id. at 156.

Section 28 of the SSAs governed their termination. See exhs. at 161. It provided, in relevant part:

(C) Notwithstanding the provisions above, this Agreement will terminate automatically without notice from either party on:

... (vi) the failure of DEALER to fully conduct its Dealership Operations for seven (7) consecutive business days...

Id. at 162 (emphasis added).

Northview asserts that Chrysler had problems with the allocation of vehicles and parts availability immediately following the absorption of the Jeep and Eagle dealers into the Chrysler system. Thus, Northview presented evidence that it continuously was unable to obtain desired vehicles from Chrysler to sell to the public and was unable to fill a fleet order for Alamo Rent-A-Car. See id. at 305.

In addition to the supply problems Northview experienced under Chrysler, it asserts that it had problems because it was unable to obtain answers from local Chrysler management concerning questions critical to the efficient operation of its dealership. For example, Northview asserts that Chrysler never explained its system for new vehicle allocation properly, despite Northview's numerous attempts to obtain the information. Further, Northview alleges that Chrysler never gave it a sufficient explanation of its warranty processing system which is known as Expense Per Unit Repaired or EPUR. Northview argues that the lack of an adequate explanation caused its service department to be audited and placed in a restrictive warranty approval category.

Clearly there was animosity between Northview personnel and Cuda on the one hand and local Chrysler management, or zone employees, on the other. Northview asserts that the only response Chrysler gave it to its inquiries about Chrysler's processes was "That's the system." Chrysler employees, however, documented instances in which Cuda was uncooperative and verbally abusive towards them.

Northview asserts that its supply problems and the confusion at the dealership concerning Chrysler's operating procedures, combined with the personal animosity between Northview and Cuda and Chrysler zone personnel, caused it increasing financial problems. Northview claims that because it could not obtain vehicles it could sell, and instead was left with unwanted or slow moving vehicles, it was forced to sell vehicles out of trust.² When Mellon Bank, Northview's floor plan lender, discovered that Northview was selling out of trust, it revoked Northview's floor plan agreement and required Northview to enter into an agreement for repayment of its loan. When Northview was unable to make the required payments, Mellon Bank closed the dealership on July 10, 1991.

Upon learning that Northview was closed for business, Chrysler, on July 19, 1991, sent it notice that it was canceling the Jeep and Eagle SSAs. After Northview failed in attempts to sell its dealership, it filed for protection under Chapter 11 of the Bankruptcy Code, but the bankruptcy court would not allow for a restructuring of the failing dealership. Chrysler sent its final notice of termination to Northview on December 12, 1991.

Although Northview argues that its financial troubles were attributable directly to the actions of Chrysler and its employees, plainly other factors contributed to its problems. Notably, in May 1984, the Attorney General of Pennsylvania filed suit against Northview alleging that it committed 109 separate violations of Pennsylvania's consumer protection laws, see app. at 605, an action that led to negative press coverage of Northview. See id. at 609-10. During the trial concerning the consumer fraud violations in May 1988, the Pittsburgh Press quoted Cuda as stating that the lawsuit had cost Northview a lot of money and that Northview's sales had "plunged from... one hundred ten cars a month to twenty or thirty cars." Id. at 603.

B. Procedural History

Northview and Cuda, individually, filed the complaint in this action in the district court on October 20, 1993, alleging claims predicated on Chrysler's alleged breach of contract and violation of state and federal statutory law, including claims under the BVA, the UCC, and the ADDCA. In particular, count one alleged that Chrysler breached the Jeep and Eagle SSAs as well as various statutory and contractual duties of good faith by conduct which demonstrated its:

(a) failure to act in good faith;

(b) failure to provide financial assistance as promised;

(c) failure to provide products and vehicles (d) failure to treat dealership [(Northview)] in equitable manner; and

(e) discriminatory practices against Plaintiffs.

Northview alleged that as a result of this conduct it was forced to cease doing business and that the Jeep and Eagle SSAs were terminated on July 10, 1991.

In count two, Northview and Cuda alleged that Chrysler, through its acts and omissions, violated the BVA. Specifically, the count alleged that Chrysler violated the following provisions of the Act by coercing Northview with respect to:

(a) S 818.9(a)(1) - ordering or accepting delivery of new vehicles which were not voluntarily ordered;

(b) S 818.9(a)(3) - participating monetarily in advertising campaign at expenses of new vehicle dealer; and

(c) S 818.9(a)(4) - threatening to terminate or cancel franchise unless prejudicial act performed by dealer;

The count also charged Chrysler with:

(d) S 818.9(b)(1) - failure to deliver new vehicles;

(e) S 818.9(b)(2) - discriminating among its new vehicle dealers; and

(f) S 818.9(c) - unfairly and without just provocation canceling the franchise of the new vehicle dealer.³

In count three, Northview and Cuda alleged that Chrysler's intentional and/or...