Tunis Bros. Co., Inc. v. Ford Motor Co., 90-1797

Citation952 F.2d 715
Decision Date12 February 1992
Docket Number90-1816,Nos. 90-1797,No. 90-1797,No. 90-1816,90-1797,s. 90-1797
Parties1991-2 Trade Cases P 69,668 TUNIS BROTHERS COMPANY, INC.; Richard N. De La Rigaudiere; and David C. Smith, v. FORD MOTOR COMPANY; Ford Motor Credit Company; Wenner Ford Tractor, Inc.; John S. Wenner; John Watson; Douglas N. Crawford; Eugene W. Fraher; E.S. Hasel; Hugh Nickel; Kenneth E. Harris; C.W. Wenzel Ford Motor Company, Ford Motor Credit Company, and Wenner Ford Tractor, Inc., Appellants inTUNIS BROTHERS COMPANY, INC.; Richard N. De La Rigaudiere; and David C. Smith, Appellants inv. FORD MOTOR COMPANY; Ford Motor Credit Company; Wenner Ford Tractor, Inc.; John S. Wenner; John Watson; Douglas N. Crawford; Eugene W. Fraher; E.S. Hasel; Hugh Nickel; Kenneth E. Harris; C.W. Wenzel.
CourtUnited States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Arnold R. Ginsburg (argued), Haverford, Pa., for appellee, cross appellants.

Robert C. Heim (argued), Jeffrey G. Weil, Robert A. Limbacher, and Geanne K. Zelkowitz, Dechert, Price & Rhoads, Philadelphia, Pa., for appellants Ford Motor Co. and cross appellee Ford Motor Credit Co.

Steven T. Stern, Jokelson & Associates, Philadelphia, Pa., for appellant and cross appellee Wenner Ford Tractor, Inc.

Before BECKER, MANSMANN and SCIRICA, Circuit Judges.

OPINION OF THE COURT

MANSMANN, Circuit Judge.

In this appeal arising out of the termination of a franchised tractor dealership, we are presented with several issues stemming from the lengthy trial in which the plaintiff, Tunis Brothers Company, Inc., obtained a jury verdict for $227,605.50 in compensatory damages and $4 million in punitive damages against the defendants, Ford Motor Company, Ford Motor Credit Company and Wenner Ford Tractor, Inc. 1

This lawsuit grew out of the sale of Tunis Brothers, a Ford tractor dealership and hardware business, from its original owner, Richard Tunis, to Richard de la Rigaudiere and David C. Smith, and Ford Motor Company's refusal to transfer the Ford franchise with that sale. At the root of its antitrust claim, Tunis Brothers claims that the three Ford defendants conspired to terminate its Ford tractor franchise in order to benefit a competitor Ford franchisee, defendant Wenner Ford. To evaluate the merits of the antitrust claim, we must visit the "mushroom capitol of the world" and the site of Tunis Brothers--Kennett Square, Pennsylvania--and learn of the preferences of Tunis Brothers' mushroom farming customers. Particularly, we need to assess whether the evidence demonstrates that the farmers' avowed preferences for Ford tractors and a Kennett Square Ford dealership satisfy the plaintiffs' burden of proof on the elements of relevant product and relevant geographic markets. Tunis Brothers' fraud claim, similarly, stems from alleged misrepresentations made by Ford Motor and Ford Credit to induce Tunis to resign as franchise holder prior to the consummation of the sale. Moreover, the propriety of seeking as damages lost gross profits, rather than lost net profits, will be addressed, as well as the level of outrageous conduct required to sustain an award of punitive damages.

I.

Because the facts underlying this appeal are so important to its resolution and because the district court has so thoroughly described those facts in its post-verdict Memorandum and Order dated December 3, 1990, 1990 WL 198822, we shall adopt as our own a large portion of the statement of facts of that Memorandum. We will first provide background for this case, review its procedural history, and then, as we discuss in turn each legal issue, we will more fully set forth particularly relevant facts.

The following background consists of all undisputed facts and facts reasonably inferred from the jury's verdict, taken in the light most favorable to the plaintiffs, the verdict winners, as set forth in the district court's Memorandum Opinion:

Tunis Brothers Company, Inc. was founded by Richard N. Tunis and his brother Robert in 1934 as a tractor and farm supply business in Kennett Square, Pennsylvania, known colloquially as the "mushroom capital of the world." In 1959, Tunis Brothers became a Ford Motor Company franchised dealership selling Ford tractors, equipment and accessories, as well as non-Ford products. From May 1, 1974, until the resignation of Richard Tunis on March 17, 1981, the parties' relationship was governed by a "Dealer Sales and Services Agreement" (the "franchise agreement"). It is undisputed that this franchise agreement expressly required Ford's prior written consent to transfer of ownership of the Ford franchise and additionally permitted termination of the franchise at will on thirty (30) days written notice by Tunis Brothers or on sixty (60) days written notice by Ford.

Richard N. de la Rigaudiere was the nephew of Richard and Isabelle Tunis. He had worked at Tunis Brothers since 1966, eventually becoming the store's parts manager. David C. Smith was the owner of a local company named Fert-L Soil and a steady customer and friend of Richard Tunis. In March 1980, de la Rigaudiere and Smith approached Richard Tunis about the prospect of purchasing Tunis Brothers. The negotiations culminated in the sale of Tunis Brothers to de la Rigaudiere and Smith [on March 16, 1981] for the price of $450,000.00.

Wenner Ford is a Delaware corporation with its principal place of business in Concordville, Pennsylvania--about eleven miles east of Kennett Square. Wenner Ford was the authorized Ford dealer of farm and industrial tractors nearest to Tunis Brothers. It was established as a privately owned dealership by John Wenner, a former Parts Operations Manager for Ford in Michigan, in 1977. As a result of a serious cash-flow problem, John Wenner recapitalized Wenner Ford as a Ford Dealer Development dealership in July, 1979 with the assistance of Ford employees Eugene Fraher, John Watson and Hugh Nickel, and Ford Motor credit employee Howard W. Stoneback. Under the terms of this program, Ford purchased 79% of the equity of Wenner Ford and owned all of its voting stock. John Wenner retained 21% of the equity and operated Wenner Ford as its President and Chief Executive Officer. Wenner was to buy out Ford's interest incrementally and eventually return to private dealer status.

District Court Memorandum Opinion Typescript at 6 -8.

We will detail later the miscommunications characterizing the plaintiffs' negotiations with Ford, but a framework sketch is necessary here to provide a factual context for the legal claims. The plaintiffs first negotiated in April of 1980, with John Watson, Zone Manager for Ford's Tractor Operations, for the franchise held by Tunis in Kennett Square. Watson recommended to de la Rigaudiere and Smith that they relocate Tunis Brothers to the Oxford/Cochranville area approximately 10 miles west of Kennett Square. Watson subsequently issued a report in which he recommended that de la Rigaudiere and Smith were qualified for a franchise in the Cochranville area.

Displeased with Watson's suggestion, de la Rigaudiere and Smith subsequently met with Eugene Fraher, the Northeastern District Manager of Ford Tractor Operations, in Cohoes, New York in June of 1980. Fraher informed them of Ford's designation of the Kennett Square location as an attrition point, and Ford's plan to establish a franchise in the Cochranville area. As an accommodation to the plaintiffs, however, Fraher promised to consider their application for a Kennett Square franchise for a 2-3 year period of time if they submitted a business plan to him, which they subsequently sent to Fraher. Fraher cautioned them, however, that any purchase of the Tunis Brothers Company should be made contingent upon obtaining the Ford franchise. Nevertheless, after they obtained mortgage financing, Smith and de la Rigaudiere failed to so condition their purchase of Tunis Brothers.

On March 3, 1981, Hugh Nickel, dealer replacement representative for the Northern Region of Ford Tractor Operations, and Douglas Crawford, who had succeeded John Watson as the Zone Manager, met with Smith, de la Rigaudiere, and the Tunises at Tunis Brothers. At that meeting Nickel requested that Richard Tunis, as franchise holder, submit an unconditional letter of resignation. The parties dispute whether Nickel represented that this resignation letter would be acted upon with Smith and de la Rigaudiere's franchise application or only after approval of their application. Nickel also took information from Smith and de la Rigaudiere necessary to complete a franchise agreement. The plaintiffs maintain that they informed Nickel of their combined $50,000 investment in the business, however, the application reflected only a $5,000 investment. It is undisputed that Nickel recommended disapproval of the franchise application. The district court's Memorandum Opinion continues:

The closing of the sale of Tunis Brothers took place on March 16, 1981, thirteen days after the meeting with Nickel. On March 17th, Richard Tunis sent his letter of resignation and termination notice to Ford, which were forwarded on March 23rd, by Nickel and Fraher, to Market Representation Manager Kenneth E. Harris for immediate action. Harris, however, held the letter pending the processing of plaintiffs' dealership and credit applications.

* * * * * *

On April 1, 1981, [Howard] Stoneback [, manager of the Philadelphia branch, of Ford Credit,] telephoned Harris to say that Ford Credit would not approve plaintiffs' credit application. On April 2, Richard Tunis was informed by a letter signed by John J.L. Johnson, General Sales Manager of Ford Tractor Operations, that his resignation had been accepted effective immediately. When plaintiffs were informed of this decision, they discovered the erroneous information in their credit application prepared by Nickel. Plaintiffs were subsequently permitted to submit a second credit application...

To continue reading

Request your trial
206 cases
  • Delaware Health Care, Inc. v. MCD Holding Co.
    • United States
    • U.S. District Court — District of Delaware
    • June 30, 1995
    ...or service, but rather is defined as the area where customers would look to buy such a product or service. Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715, 726 (3d Cir.), cert. denied, ___ U.S. ___, 113 S.Ct. 21 The size of a geographic market is impacted by many factors specific to a given......
  • Nichols Motorcycle Supply Inc. v. Dunlop Tire Corp., 93 C 5578.
    • United States
    • U.S. District Court — Northern District of Illinois
    • September 18, 1995
    ...as a whole in the relevant market; to prove it has been harmed as an individual competitor will not suffice. Tunis Bros. Co. Inc. v. Ford Motor Co., 952 F.2d 715 (3d Cir.1991), cert. denied, 505 U.S. 1221, 112 S.Ct. 3034, 120 L.Ed.2d 903 (1992). Insisting on proof of harm to the whole marke......
  • Ginzburg v. Memorial Healthcare Systems, Inc.
    • United States
    • U.S. District Court — Southern District of Texas
    • December 24, 1997
    ...929 F.2d at 1413. The plaintiff bears the burden of proving of establishing a suitable market definition. Tunis Bros. Co., Inc. v. Ford Motor Co., 952 F.2d 715, 724, 726 (3d Cir.1991). 1. Product The relevant product market is "composed of products that have reasonable interchangeablity for......
  • Gurfein v. Sovereign Group, Civ. No. 92-2083.
    • United States
    • U.S. District Court — Eastern District of Pennsylvania
    • June 4, 1993
    ...by the recipient on the misrepresentation, and (5) injury to recipient as a proximate result. See, e.g. Tunis Bros. Co., Inc. v. Ford Motor Co., 952 F.2d 715, 731 (3d Cir.1991), cert. denied, ___ U.S. ___, 112 S.Ct. 3034, 120 L.Ed.2d 903 (1992). In stating a claim for fraudulent misrepresen......
  • Request a trial to view additional results
9 books & journal articles
  • Basic Antitrust Concepts and Principles
    • United States
    • ABA Antitrust Library Antitrust Health Care Handbook, Fourth Edition
    • February 1, 2010
    ...analysis”); Med Alert Ambulance v. Atl, Health Sys., 2007 WL 2297335, at *11 (D.N.J. 2007) (quoting Tunis Bros, Co. v. Ford Motor Co., 952 F.2d 715, 726 (3d 1991), for the proposition that the “geographic market is not comprised of the region in which the seller attempts to sell its product......
  • Antitrust Analysis Of Intellectual Property Agreements
    • United States
    • ABA Antitrust Library Intellectual Property and Antitrust Handbook. Second Edition
    • December 6, 2015
    ...commerce.” 103 98. 1995 IP GUIDELINES, supra note 1, § 4.3. 99. 547 U.S. 28 (2006). 100. Id. at 46. 101. See Tunis Bros. v. Ford Motor, 952 F.2d 715, 722 (3d Cir. 1991); Realcomp II, Ltd. v. FTC, 635 F.3d 815, 824 (6th Cir. 2011). 102. See Addyston Pipe & Steel Co. v. United States, 175 U.S......
  • Relevant Market and Concentration
    • United States
    • ABA Antitrust Library Mergers and Acquisitions. Understanding the Antitrust Issues. Fourth Edition
    • December 6, 2015
    ...market for concert tickets because most ticket buyers will not travel long distances to see a concert); Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715, 726-27 (3d Cir. 1991) (rejecting plaintiffs’ narrow geographic market because evidence showed that farmers did not limit themselves to thi......
  • Fraud and Misrepresentation
    • United States
    • ABA Antitrust Library Business Torts and Unfair Competition Handbook Business tort law
    • January 1, 2014
    ...Cir. 2004) (Missouri law); Coffel v. Stryker Corp., 284 F.3d 625, 637 (5th Cir. 2002) (Texas law). 41. Tunis Bros. Co. v. Ford Motor Co., 952 F.2d 715, 735-36 (3d Cir. 1991). Fraud and Misrepresentation 177 Consequential damages, if proven with reasonable certainty, also are recoverable und......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT