Danvers Motor Co., Inc. v. Ford Motor Co.

• Decision Date: 19 December 2005
• Docket Number: No. 04-3950.,04-3950.
• Citation: 432 F.3d 286
• Court: U.S. Court of Appeals — Third Circuit
• Parties: DANVERS MOTOR CO., INC., a Massachusetts corporation; Bob Chambers Ford, d/b/a Augusta Ford, a Maine corporation; Concord Ford-Lincoln-Mercury, a New York corporation; Fette Ford Inc., a New Jersey corporation; Senator Ford, Inc., a Delaware corporation; Roseville Midway Ford Company, a Minnesota corporation; Fullers' White Mountain Motors, an Arizona corporation; Condon Ford, Inc., an Iowa corporation; G. & S. Management Corporation, d/b/a Tilton Ford, a New Hampshire corporation, on behalf of themselves and all others similarly situated, Appellants v. FORD MOTOR COMPANY.

432 F.3d 286

DANVERS MOTOR CO., INC., a Massachusetts corporation; Bob Chambers Ford, d/b/a Augusta Ford, a Maine corporation; Concord Ford-Lincoln-Mercury, a New York corporation; Fette Ford Inc., a New Jersey corporation; Senator Ford, Inc., a Delaware corporation; Roseville Midway Ford Company, a Minnesota corporation; Fullers' White Mountain Motors, an Arizona corporation; Condon Ford, Inc., an Iowa corporation; G. & S. Management Corporation, d/b/a Tilton Ford, a New Hampshire corporation, on behalf of themselves and all others similarly situated, Appellants v. FORD MOTOR COMPANY.

No. 04-3950.

United States Court of Appeals, Third Circuit.

Argued July 15, 2005.

Filed December 19, 2005.

Eric L. Chase (argued), Genevieve K. LaRobardier, Bressler, Amery & Ross, P.C., Florham Park, NJ, Barry S. Goodman, Greenbaum, Rowe, Smith & Davis, LLP, Woodbridge, NJ, for Appellant.

James F. Hibey (argued), William R. Sherman, Coke Morgan Stewart, Howrey Simon Arnold & White, LLP, Washington, DC, for Appellees.

Before ALITO, VAN ANTWERPEN, and ALDISERT, Circuit Judges.

ALITO, Circuit Judge.

Eight automobile dealers appeal the District Court's dismissal of their claims against the Ford Motor Company for lack of standing. Because their complaint alleges concrete and particularized injuries that are fairly traceable to Ford's behavior and redressable in court, we reverse and remand.

I.

In November 2000, a putative nationwide class of Ford dealers brought suit, claiming that Ford's recently introduced Blue Oval Program ("BOP") violated state and federal law. A District Court dismissed the case without prejudice for lack of standing. Danvers Motor Co. v. Ford Motor Co., 186 F.Supp.2d 530 (D.N.J.2002) ("Danvers I").

Instead of appealing Danvers I, the Plaintiffs revised their complaint and filed it anew on May 6, 2002. Ford responded with a motion to dismiss, which prompted Plaintiffs' latest effort, an "amended and supplemented" complaint filed on January 7, 2003. In an unpublished opinion we will call Danvers II, the District Court held that eight of the nine named Plaintiffs "do not yet have an injury that will support constitutional standing." Joint Appendix ("App.") at 24. The ninth Plaintiff is not a party to this appeal.

A.

"When reviewing an order of dismissal for lack of standing, we accept as true all material allegations of the complaint and construe them in favor of the plaintiff." Conte Bros. Automotive, Inc. v. Quaker State-Slick 50, Inc., 165 F.3d 221, 224 (3d Cir.1998). We therefore relate the facts as alleged in the Plaintiffs' complaint.

Plaintiffs sell Ford automobiles in accordance with "the terms of a standard Ford Franchise Agreement." Complaint ¶¶ 33-36. They claim that Ford's BOP "is part of a coordinated objective to control and micromanage all Ford dealerships." Id. ¶ 42. Ford describes its BOP, introduced in April 2000, as a nationwide customer service and satisfaction incentive program designed to improve dealer performance. It is technically voluntary, but every Ford dealer is forced to bear the costs of the program, while only those who are "BOP certified" may reap its benefits. All eight dealers on appeal have been certified.¹

In order to finance its BOP, Ford charges an additional 1% for its automobiles, leaving the Manufacturer's Suggested Retail Price unchanged. When dealers sell the vehicles, Ford essentially reimburses them by giving them a "bonus" of 1.25% if the dealers met the initial certification requirements by April 17, 2001. The bonus drops to 1% if the dealer applied on or after April 1, 2001, and achieved certification prior to April 1, 2002. Ford originally planned to drop the bonus to .75% in April 2004, and to .5% in 2005, but it has since abandoned this plan. See App. at 77.

Certification entitles dealers to a number of benefits beyond these reimbursements. According to the complaint dealers also receive 10% transportation assistance allowance bonuses; 50% discounts on all retail invoice messages; 401K plans for dealers' employees; access to the Blue Oval Certified Healthcare Plan; and Blue Oval National Advertising. See id. at 78.

Plaintiffs allege that the certification process is onerous, requiring significant expenditures of time and money, and resulting in a substantial loss of control over dealership activities. Certification requires dealers to meet standards under a number of performance criteria, including leadership, concern resolution, sales, service, facilities, and customer service. See id. at 75. As explained at length in the complaint, the criteria are detailed, comprehensive, and difficult to meet.

A necessary condition for BOP certification is the so-called National Voice of the Consumer Target, a creation of JD Power & Associates. To become certified, most dealers must receive sufficiently high survey scores from customers on four survey questions. See Danvers I, 186 F.Supp.2d at 532-33; App. at 79-81. If their scores are high enough, all other certification requirements are waived. Plaintiffs aver that "the only way a dealer's score can increase" is if a customer marks "completely satisfied" in response to every question. Complaint ¶ 72 (emphasis in original).

Another criterion for BOP certification is a set of facilities requirements, which allegedly "encompass all the ordinary routine aspects of running a dealership which are normally within the responsibilities and concerns of the dealer, safe from the intrusion of Ford or its agents." Danvers I, 186 F.Supp.2d at 533. See also App. at 84-85. "Under the current standard, [in densely populated areas,] J.D. Power must deem the dealers's facility equal to or better than two of four full-line dealerships within a ten-mile radius." Complaint ¶ 90.

BOP certification does not end a dealer's obligations. According to the complaint, the Program requires annual recertification, which may involve "unilaterally altered standards." See App. at 81. For example, from 2001 to 2002, Ford increased the Voice of the Customer survey scores necessary to remain certified, and demanded "[o]ne-day service appointment availability, down from two business days." Complaint ¶ 73. "A dealer had to satisfy Ford's requirements each and every year or Ford will decertify the Certified dealers, withhold the reimbursements, and withdraw most benefits." Id. ¶ 74. In 2002, due to increased certification targets, 100 dealers "fell off the Program," and as of November 14, 2002, about 65 remained uncertified. Id. ¶ 77.

The complaint states that the BOP certification and recertification processes constitute nine violations of federal and state law.² More generally, it claims that "Ford's intent, through the Blue Oval Program ... is, has been and will continue to be, to constructively terminate virtually at will the number of dealers it chooses and to increase control of the operations of the remainder." Id. ¶ 101. It seeks declaratory relief, an injunction against the BOP "in its entirety," damages, and attorneys' fees.

B.

Plaintiffs allege that the BOP caused them at least four types of injuries. They say it caused them: 1) to spend money against their will to comply with its certification requirements; 2) to relinquish control over certain aspects of dealership operations; 3) to forfeit interest payments which would be otherwise earned on money spent covering the BOP's mandatory 1% fee; and 4) to face the constant threat of losing certification if Ford chooses to ratchet up BOP standards in the future.

Ford responded to Plaintiffs' complaint with a motion to dismiss for lack of subject matter jurisdiction and a motion to dismiss for failure to state a claim. See Fed.R.Civ.P. 12(b)(1), (6). Limiting its discussion almost exclusively to the fourth species of alleged harm, the District Court granted the 12(b)(1) motion, holding that the Plaintiffs lacked standing. It reasoned that the ongoing threat of termination "is simply too speculative and remote to support a finding of constitutional standing." App. at 24. The Court detected no "affirmative intent by Ford to terminate any dealer who does not achieve Blue Oval Certification." Id. "Although it seems clear that many of the dealers who are currently certified will `fall off the program' by 2006," the Court concluded that "these dealers do not yet have an injury that will support constitutional standing." Id.

Only one sentence in the District Court opinion arguably touches on the Plaintiffs' allegations of past and present harms. This sentence states: "[Plaintiffs'] allegations pertaining to the cost of maintaining their certification in order to avoid potential termination are just not enough to establish a concrete and imminent, rather than conjectural, harm." Id. (citing Complaint ¶¶ 102-32, 162-206, 219-42) (emphasis in original).

The Danvers II opinion relied heavily on the reasoning of Danvers I as further justification for its holding. In Danvers I, the Plaintiffs claimed that they "suffered injury-in-fact by the diversion of dealers' funds, personnel, equipment, and time to the application for Blue Oval Certification, as well as from the severe financial losses attributable to the inequities of the Program." 186 F.Supp.2d at 536. Nevertheless, the Court held that the Plaintiffs "have not articulated that they themselves have suffered any concrete harm" arising "from the mere attempt to certify." Id. at 537.

For example, Plaintiffs aver that in order to satisfy the "facilities" criteria, "the dealer's investment could have to increase sizeably." Additionally, Plaintiffs' allege that the process performed by J.D. Power, as part of Blue Oval certification, is "subject to manipulations [] and to annual unilateral change." Plaintiffs further allege that the attempts to conform to the BOC program "will exact a financial burden that may jeopardize the viability of their dealerships." Finally, Plaintiffs declare that the "hurdles of the Blue Oval Program will predicta...