Acadia Motors, Inc. v. Ford Motor Co., Civ. No. 93-0136-B.

Decision Date15 February 1994
Docket NumberCiv. No. 93-0136-B.
PartiesACADIA MOTORS, INC., et al., Plaintiffs, v. FORD MOTOR COMPANY, Defendant.
CourtU.S. District Court — District of Maine

COPYRIGHT MATERIAL OMITTED

Peter L. Murray, Murray, Plumb & Murray, Michael Kaplan, Preti, Flaherty, Beliveau & Pachios, Portland, ME, Bruce C. Gerrity, Preti, Flaherty, Beliveau & Pachios, Augusta, ME, for plaintiffs.

Carl E. Kandutsch, Verrill & Dana, Portland, ME, Hilde E. Kahn, Arnold & Porter, Washington, DC, for defendant.

Francis E. Ackerman, Asst. Atty. Gen., Augusta, ME, for State of ME.

ORDER AND MEMORANDUM OF DECISION

BRODY, District Judge.

Plaintiffs, thirty-two Maine automobile dealers, bring the instant action against Ford Motor Company protesting Ford's warranty reimbursement practices. Ford moves to Dismiss the Complaint, or, in the alternative, for Summary Judgment. The Dealers move for Partial Summary Judgment.

I. Background

Plaintiffs have entered into franchise agreements with Ford that obligate them to perform warranty work on Ford's behalf, generally without charge to the new motor vehicle owner. Ford then reimburses the dealers for parts and labor thus provided. Ford has a uniform national reimbursement formula under which Ford pays its dealers 30% above dealer list price for parts for 1992 models and earlier, 35% for 1993 models, and 40% for 1994 models. (Letter from Suhay to Bob Chambers Ford of 3/25/93.) Prior to the events leading to this litigation, Ford reimbursed its dealers according to this uniform policy.

From 1975 to 1991, Maine law required manufacturers to "adequately and fairly compensate ... (its motor vehicle dealers) for ... parts" provided in warranty work. Regulation of Business Practices Between Motor Vehicle Manufacturers, Distributors and Dealers, Me.Pub.L.1975, ch. 573 (codified as amended in 10 M.R.S.A. § 1176 (1980 & Supp.1993)). In 1991, however, the Legislature amended § 1176 to require manufacturers to reimburse dealers at each dealer's customary charge for the same part when the dealer performs nonwarranty work.1 Despite this change in statutory reimbursement requirements, Ford continued to reimburse Maine dealers according to its uniform national policy. Ford concedes that its national reimbursement level is generally less than the retail rate customarily charged by most dealers.

Shortly after the amendment of § 1176, one Maine dealer sent Ford a letter demanding reimbursement at the new statutory rate. Another dealer brought suit in Penobscot County Small Claims Court for reimbursement under § 1176. Although the action was dismissed for the dealer's failure to make a proper claim, Ford decided to change its reimbursement policies. Ford informed its Maine dealers that:

As a result of this dealer's demand, all Maine dealers will be reimbursed for parts utilized on Ford-paid repairs performed after April 1, 1993 at the rate of cost plus 63%, which is the average warranty parts markup reflected in the suggested list prices.

(Letter Ross H. Roberts et al. to Bob Chambers Ford 2/12/93.)

In the same letter Ford stated its intention to recoup its increased costs of warranty reimbursement:

To recover this increase in warranty costs, we will increase the wholesale price of each new vehicle sold by your dealership, and every other Ford ... dealership in Maine, through assessment of a warranty surcharge of approximately $160 per vehicle which will appear on your monthly Dealer's Parts Statement in the month following the sale.

Id. Ford later referred to this charge as a "warranty parity surcharge."

The gravamen of the Dealers' complaint is their claim that Ford's reimbursement policy, especially its $160 surcharge, is in direct contravention of § 1176. The Dealers also claim that Ford's intentional noncompliance with § 1176 constitutes, first, an unfair method of competition and deceptive trade practice under 10 M.R.S.A. § 1174; and, second, a "failure ... to act in good faith in performing or complying with any of the terms or provisions of the franchise agreement" actionable under the Automobile Dealers' Day in Court Act, 15 U.S.C. § 1221-25. Finally, the Dealers argue that, even if the warranty surcharge were in conformity with § 1176, it is discriminatory pricing under the Robinson-Patman Act, specifically, 15 U.S.C. § 13(a), and under Maine law, 10 M.R.S.A. § 1174(3)(E)-(F).2

II. Standard

Ford moves, pursuant to Fed.R.Civ.P. 12(b)(6), to dismiss the Complaint for failure to state a claim upon which relief may be granted. In the alternative, Ford moves for summary judgment on all counts, pursuant to Fed.R.Civ.P. 56 and Rule 19 of the Local Rules. Because Ford files a Statement of Material Facts, the Court treats Ford's Motion to Dismiss as a Motion for Summary Judgment. See Fed.R.Civ.P. 12(b) ("If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment.") The Dealers move for Partial Summary Judgment on Count II of their complaint.

"Summary judgment is appropriate where the record, viewed in the light most favorable to the nonmoving party, reveals no trialworthy issue of material fact and the moving party is entitled to judgment as a matter of law." Velez-Gomez v. SMA Life Assurance Co., 8 F.3d 873, 875 (1st Cir.1993).

III. Maine's Warranty Reimbursement Law 10 M.R.S.A. § 1176 (Supp.1993)

The Court first addresses whether Ford's reimbursement policies comply with § 1176. Ford asserts that, before reaching the question of compliance, however, the Court must consider the validity of § 1176 as applied in this case.

Ford raises a variety of challenges to the statute. Ford contends that the 1991 amendment to § 1176, first, was preempted by the Magnuson-Moss Act; second, is in violation of the Sherman Act; and third, should not be applied to contracts entered into before its effective date. Finally, Ford contends that, if the statute is valid and applies to preexisting contracts, it violates the contract clause of both the United States and the Maine Constitutions.

A. Validity of § 1176
1. Magnuson-Moss Act

Ford contends that § 1176 is preempted by § 107 of the Magnuson-Moss Act, 15 U.S.C. § 2307, that provides:

Nothing in this chapter shall be construed to prevent any warrantor from designating representatives to perform duties under the written or implied warranty: Provided, That such warrantor shall make reasonable arrangements for compensation of such designated representatives, but no such designation shall relieve the warrantor of his direct responsibilities to the consumer or make the representative a cowarrantor.

Id. (some emphasis added).

"Congress can preempt state law expressly `by so stating in explicit terms on the face of the statute.'" Motor Vehicle Mfrs. Ass'n v. Abrams, 899 F.2d 1315, 1318 (2d Cir.1990), cert. denied, 499 U.S. 912, 111 S.Ct. 1122, 113 L.Ed.2d 230 (1991) (quoting Environmental Encapsulating Corp. v. City of New York, 855 F.2d 48, 53 (2d Cir.1988)). Ford does not contend that § 1176 has been expressly preempted.

Congress may also preempt state law, without such an express statement in two instances: first, when Congress "intends that federal law occupy a given field;" and second, when state law "actually conflicts with federal law, that is, when compliance with both state and federal law is impossible or when the state law stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." California v. ARC America Corp., 490 U.S. 93, 100, 109 S.Ct. 1661, 1665, 104 L.Ed.2d 86 (1989) (internal quotation and citations omitted).

In this case, Ford must also overcome the "presumption against finding preemption of state law in areas traditionally regulated by the States." Id. at 101, 109 S.Ct. at 1665. "When Congress legislates in a field traditionally occupied by the States, `the Court starts with the assumption that the historic police powers of the States were not to be superseded by the Federal Act unless that was the clear and manifest purpose of Congress.'" Id. (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 1152, 91 L.Ed. 1447 (1947)). "Consumer protection through warranty law is an area of traditional state regulation." Motor Vehicle Mfrs. Ass'n v. Abrams, 899 F.2d at 1319. Ford, therefore, is required to show that preemption was the clear and manifest purpose of Congress. Ford has not met this burden.

Congress did not intend to occupy the field of warranty law when it enacted the Magnuson-Moss Act. In fact, Congress described the standards it established in the Magnuson-Moss Act as minimum requirements. See H.Rep. No. 93-1107, 1974 U.S.C.A.A.N. 7702, 7702 (purpose of Act "to provide minimum disclosure standards for written consumer product warranties ...; and to define minimum Federal content standards for such warranties.") Congress also expressly allowed for stricter state regulation of warranties. See 15 U.S.C. § 2311(b)(1).

Ford has also failed to establish that § 1176 actually conflicts with federal law. Ford cites Jones v. Rath Packing Co., 430 U.S. 519, 525, 97 S.Ct. 1305, 1309, 51 L.Ed.2d 604 (1977), for the proposition that flexible federal laws cannot be usurped by stricter state laws, but Jones is easily distinguished from the case at bar. In Jones, the Supreme Court found that it was Congress's intent to allow reasonable variations from the food weight stated on the label, and that state food labelling requirements not permitting this variation would conflict with that goal. Id. at 542-43, 97 S.Ct. at 1318. Unlike the state law in Jones, § 1176 does not thwart the purposes and objectives of Congress in enacting § 107 of the Magnuson-Moss Act. Ford, therefore, has not overcome the presumption against finding a preemption of § 1176.

2. The ...

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