American Motors Sales Corporation v. Semke

• Decision Date: 03 November 1967
• Docket Number: No. 8797.,8797.
• Citation: 384 F.2d 192
• Parties: AMERICAN MOTORS SALES CORPORATION, a Corporation, Appellant, v. L. G. SEMKE, Appellee.
• Court: U.S. Court of Appeals — Tenth Circuit

384 F.2d 192 (1967)

AMERICAN MOTORS SALES CORPORATION, a Corporation, Appellant, v. L. G. SEMKE, Appellee.

No. 8797.

United States Court of Appeals Tenth Circuit.

September 28, 1967.

Rehearing Denied November 3, 1967.

C. Harold Thweatt, Oklahoma City, Okl. (William E. Carroll, Detroit, Mich., William J. Holloway, Jr., Crowe, Boxley, Dunlevy, Thweatt, Swinford & Johnson, Oklahoma City, Okl., on the brief), for appellant.

William J. Otjen, Jr., Enid, Okl. (Loyd Benefield, of Savage, Gibson, Benefield & Shelton, Oklahoma City, Okl., on the brief), for appellee.

Before MURRAH, Chief Judge, and HILL and SETH, Circuit Judges.

HILL, Circuit Judge.

The appeal is from a judgment entered upon a jury verdict in an action brought under 15 U.S.C. §§ 1221-1225, commonly referred to as "The Automobile Dealers' Day in Court Act." The judgment and verdict were in favor of appellee-plaintiff, Semke, and against appellant-defendant, American Motor Sales Corporation.

Semke, formerly a franchised dealer for American Motors, by his complaint, in pertinent part, alleged: That during the years 1959, until late in 1962, American Motors pursued a course of action that coerced and intimidated him into terminating his dealership agreement; that American Motors breached the conditions of the Franchise Agreement; that such course of conduct was in violation of 15 U.S.C. § 1222 and as a result of such conduct he had suffered a monetary loss of $600,000.00 which he sought to recover from American Motors. Other claims for damages are alleged but not allowed by the jury and not pertinent here. The applicable part of the statute¹ upon which the cause of action is based provides the dealer with two basic causes of action against an automobile manufacturer. These are for failure of the manufacturer to act in "good faith" to perform or comply with the terms of the provisions of the automobile dealer's franchise or in terminating, cancelling or not renewing the franchise. Semke apparently sought damages under both of these causes of action, primarily for the loss of future profits resulting from the termination of the Franchise Agreement. In addition he sought to recover damages resulting from American Motors' refusal to approve an assignment of his franchise to another dealer in Enid and also asked for punitive and exemplary damages. From the record we glean that some kind of a pretrial was had in the case but we find no pretrial order. We must observe that this case was certainly an appropriate one for the use of effective pretrial procedure. There the claims of the parties would be clearly set out, the triable issues would be agreed to by parties or delineated by the trial judge and everyone concerned with the case, including this court, would derive benefit. We believe the foregoing comment is appropriate because the form of verdict used does not reflect all of the claims made by the appellee-plaintiff in his complaint and we are unable to accurately tell from the record what happened to the cause of action for alleged breach of the Franchise Agreement or what prompted the trial judge to submit the case as he did.² The appellee does not complain about the form of verdict or the method of submission so actually our only concern here is adequacy of the instructions given and the sufficiency of the proof to support the verdict returned. The jury's verdict awarded $18,000.00 for loss of profits resulting from the termination of the Franchise Agreement.

Appellant claims generally, as error, the overruling of its motion for a directed verdict and refusal to set aside the verdict of the jury. Specifically and to support these points, appellant urges error by the trial court in the admission of certain evidence concerning warranty claims and in the trial court's instructions to the jury. It also points to a number of other claimed trial errors by the trial court; however, none of these are substantial enough to merit comment.

To affirm the judgment this court must first resolve two questions in favor of the appellee. The first of these is whether the Act contemplates recovery by a plaintiff-dealer for termination when the termination is apparently initiated by the plaintiff-dealer. The second is whether the evidence adduced at the trial is legally sufficient to support a finding of lack of "good faith" by the appellant-defendant.

A brief general discussion of this statutory cause of action seems appropriate. We find no case expressly holding that the Act covers a situation where the manufacturer forces a termination by a dealer under circumstances which would warrant a court in concluding that even though in appearance the termination was voluntary it was in fact coerced by the manufacturer. A California District Court assumed this fact without deciding it. Pinney & Topliff v. Chrysler Corp., D.C., 176 F.Supp. 801. In that case the court found that the evidence did not show any acts of coercion or intimidation by Chrysler and thus the court did not need to expressly decide the above question. In support of allowing the action is a statement from the legislative history that "Manufacturer coercion or intimidation or threats thereof is actionable by a dealer * * * where it relates to the termination, cancellation, or nonrenewal of the dealer's franchise." U.S.Code Congressional and Administrative News 1956, p. 4603. If coercion or intimidation does compel the dealer to terminate his franchise then certainly "it relates" to the termination and would thus appear to be actionable by the dealer. The lower court instructed the jury that it had to find that the termination by the plaintiff of his dealership was coerced and forced upon him "and that except for the coercive acts of intimidation by defendant's agent he would not have terminated same" before he could recover for the alleged wrongful franchise termination. We believe it reasonable to interpret the Act as covering an action based on a wrongful termination of a franchise where the dealer was forced to terminate because of the coercive and intimidative acts of the manufacturer.

The next question is whether the evidence adduced by appellee is sufficient to support the jury finding of lack of "good faith" in American Motors' actions. Good faith is defined in section 1221(e) of the Act.³ This statutory definition has been construed literally by the courts so that the existence or non-existence of good faith must be determined in a context of actual or threatened coercion or intimidation. 7 A.L.R.3d 1182. Judicial treatment of the factual question of what constitutes a lack of good faith has been primarily negative as courts have set out what does not constitute a lack of good faith rather than setting standards of what constitutes lack of good faith. Courts have, for example, held that a threat of cancellation if there should be a prolonged failure on the part of the dealer to heed the recommendations or yield to persuasions of the manufacturer that the dealer make a bona fide effort to comply with its undertakings does not constitute coercion or intimidation, Woodard Motor Co. v. General Motors Corp., 5 Cir., 298 F.2d 121, cert. denied 369 U.S. 887, 82 S.Ct. 1161, 8 L.Ed.2d 288; that it is not coercion or intimidation for a manufacturer to refuse to accept a person as a dealer because of an honest belief that the prospective dealer lacks either the ability or the financial resources to be a successful dealer, Pierce Ford Sales Co., Inc. v. Ford Motor Company, 2 Cir., 299 F.2d 425, cert. denied 371 U.S. 829, 83 S.Ct. 24, 9 L.Ed.2d 66; that a manufacturer may terminate a franchise because it was shown that the dealer's sales performance was substandard both in terms of the objective assigned to him and in comparison with other dealers and that he failed to live up to his contractual commitment to provide adequate facilities, Milos v. Ford Motor Company, 3 Cir., 317 F.2d 712, cert. denied 375 U.S. 896, 84 S.Ct. 172, 11 L.Ed.2d 125; and that it was not coercion or intimidation for a manufacturer to terminate the franchise of a dealer when it was shown that the dealer failed to fulfill his contractual obligations relating to sales and when he admittedly failed to meet the sales objectives established under the franchise, there being no claim that the criteria established therein were unreasonable, unfair, oppressive, or arbitrary. Kotula v. Ford Motor Co., 8 Cir., 338 F.2d 732, cert. denied 380 U.S. 979, 85 S.Ct. 1333, 14 L.Ed.2d 273.

Congressional comments concerning good faith are enlightening. It is stated that: "The existence of coercion or intimidation depends upon the circumstances arising in each particular case and may be inferred from a course of conduct. For example, manufacturer pressure, direct or indirect, upon a dealer to accept automobiles, parts, accessories, or supplies which the dealer does not need, want, or feel the market is able to absorb, may in appropriate instances constitute coercion or intimidation. Similarly coercion or intimidation may be found where the manufacturer attempts to require the dealer to handle exclusively, or sell a specified quota of, parts, accessories, and tools made or approved by the manufacturer." U.S. Code, Congressional and Administrative News 1956, p. 4603.

In the instant case, appellee, in substance, alleged three basic types of conduct by appellant as proof of coercion or intimidation: (1) Refusal to supply him with automobiles unless he ordered unwanted American model automobiles; (2) refusal to honor and/or credit him with services performed under the warranty arrangements of the franchise agreement; and (3) refusal to approve a proposed assignment of his franchise. It would appear that only the first two of these allegations could be considered in determining the sufficiency of the proof to show that Semke was forced to terminate his franchise as the third allegation goes to actions taken after the decision to terminate had been...