Schott Motorcycle Supply, Inc. v. American Honda Motor Co., Inc.

• Decision Date: 06 April 1992
• Docket Number: No. 91-2170,91-2170
• Parties: SCHOTT MOTORCYCLE SUPPLY, INC., Plaintiff, Appellant, v. AMERICAN HONDA MOTOR COMPANY, INC., Defendant, Appellee. . Heard
• Court: U.S. Court of Appeals — First Circuit

Page 58

976 F.2d 58

SCHOTT MOTORCYCLE SUPPLY, INC., Plaintiff, Appellant, v. AMERICAN HONDA MOTOR COMPANY, INC., Defendant, Appellee.

No. 91-2170.

United States Court of Appeals, First Circuit.

Heard April 6, 1992.

Decided Sept. 28, 1992.

Paul F. Macri with whom Anne B. Jud and Berman & Simmons, P.A., Lewiston, Me., were on brief, for plaintiff, appellant.

Robert W. Dickerson with whom Roy L. Anderson, Lyon & Lyon, Los Angeles, Cal., Wayne R. Douglas and Pierce, Atwood, Scribner, Allen, Smith & Lancaster, Portland, Me., were on brief, for defendant, appellee.

Before CYR, Circuit Judge, COFFIN and CAMPBELL, Senior Circuit Judges.

LEVIN H. CAMPBELL, Senior Circuit Judge.

Appellant, Schott Motorcycle Supply, Inc. ("Schott Motorcycle"), a failed Honda motorcycle dealership, sued American Honda Motor Co., Inc. ("Honda") in the district court. Schott Motorcycle complained that Honda had reduced its commitment to the motorcycle market after its representatives had promised otherwise. Honda's conduct was alleged to constitute a breach of contract, a violation of Maine statutory law, Me.Rev.Stat. Ann. tit. 10, § 1174, and fraud. The district court granted summary judgment in favor of Honda on the contract and statutory claims and dismissed the fraud claim. We affirm.

I. BACKGROUND

In February 1985, Schott Motorcycle Supply entered into a "Sales and Service Agreement" with Honda. At that time, Schott Motorcycle Supply was a sole proprietorship owned by Emil Schott. Emil's son, John Schott, was designated in the Agreement as "dealer manager." The Agreement, which established Schott Motorcycle Supply as a Honda franchise dealer, expressly stated that it could be modified only in writing. The Agreement also stated that it was personal to the dealer, dealer owner and the dealer manager and that it could not be transferred or assigned without the prior written consent of Honda.

In 1986, the Schott family was considering a division of the business, which then sold Honda and Harley Davidson motorcycles as well as golf carts. John Schott would take over the existing business, selling only Honda motorcycles. The Harley Davidson and golf cart sales would be split off into a separate business to be run by John Schott's brother.

Before accepting this arrangement, John Schott allegedly spoke to Honda representatives Mark Pearlstein and Mike Kehne. At that March 11, 1986 meeting, Schott disclosed financial records indicating that Schott Motorcycle Supply's retail sales approximated $5 million and that Honda sales accounted for about fifty percent of this total. According to Schott, Pearlstein and Kehne assured him that Honda would remain just as committed to the motorcycle industry as it had been in the past and that new Honda products and programs would cause an increase in Honda sales, enough to make up for the loss of sales from Harley Davidsons and golf carts. Schott told them that he was considering taking on another line of motorcycles, but was advised that, if he did so, Honda would consider establishing another Honda dealer in a nearby area.

Allegedly relying upon the assurances made by Pearlstein and Kehne, John Schott, incorporated as Schott Motorcycle Supply, Inc., proceeded to take over the Honda dealership on January 1, 1987. By August 1990, however, Schott Motorcycle Supply, Inc. had failed and gone out of business.

According to John Schott, his business's failure was a direct result of a reduced commitment on the part of Honda in the motorcycle industry. The factual allegations as to how Honda failed to remain committed to the motorcycle market are somewhat sketchy. In its answers to defendant's interrogatories, Schott claimed that Honda failed to develop products and programs that would have allowed for growth and maintenance in sales as promised. These products included numerous models of motorcycles that, if attractively priced, would supposedly have increased Honda sales. With respect to assistance and service programs, Schott Motorcycle contended that Honda should have provided better wholesale flooring assistance, additional advertising cooperative programs and funds, more assistance at warehouse auctions, continuation of the Exclusive Dealer Program, stronger retail sales and rebate programs, and more flexible first time buyer programs and promotions. The "bottom line," according to Schott Motorcycle, is that "Honda had the resources to develop models, products and programs to at least maintain their 55%-60% of the United States market share" and yet failed to do so.

II. DISCUSSION

A. Breach of Contract

Key to granting summary judgment for Honda on Schott Motorcycle's breach of contract claim was the district court's conclusion that Schott Motorcycle had admitted in its complaint that it was a party to the February 1985 Agreement between the proprietorship and Honda and was, therefore, bound by its terms. Plaintiff's complaint alleged the following with respect to the Agreement:

5. Effective February 1, 1985, Plaintiff and Defendant entered into a "Sales and Service Agreement". A copy of the Agreement marked Exhibit 1, is attached and made a part of this pleading.

6. The mentioned Agreement was a franchise dealership contract, and established Plaintiff as a franchise dealer for American Honda Motorcycle.

7. Plaintiff has at all times during the effective dates of the franchise dealer contracts complied with the terms and provisions of the franchise dealer contracts.

These allegations were reasserted in each count of the complaint and remained consistent through two amended complaints.

The district court held that, by virtue of this pleading, plaintiff admitted that it was bound by the terms of the 1985 Agreement. The court rejected plaintiff's argument, raised for the first time during summary judgment proceedings, and now pressed before us, that the 1985 franchise Agreement was, in effect, revoked when on January 1, 1987 the principals of the dealership were changed and Schott Motorcycle changed from a proprietorship to a corporation. The Agreement provided that it could not be modified except by written instrument signed by an authorized Honda officer. Where no such written instrument was alleged, and where nothing indicated that Honda and Schott Motorcycle, however constituted, had ever discontinued the Agreement, the court saw no merit in plaintiff's claim that the oral representations regarding Honda's commitment to the motorcycle market had written a binding new term into the dealership arrangement. As there was no violation of the terms of the 1985 Agreement itself, the court found no viable claim for breach of contract.

Plaintiff does not challenge the district court's determination that there was no breach of the 1985 Agreement. Rather, Schott Motorcycle contends that the district court erred in holding that plaintiff judicially admitted that "the only operative contract between the parties was the written franchise agreement." Plaintiff contends that the pluralization of the word "contracts" at various points in the complaint as well as the complaint's references to oral representations should have put the defendant and the district court on notice that it was pleading a termination and novation. We disagree.

The judicial admission found by the lower court rested on plaintiff's clear and express statement in its original and amended complaints that "a contract did, in fact, exist between the parties," fortified by an attached copy of the 1985 Agreement. No other agreement was mentioned nor was it suggested the Agreement was nullified or altered, or when or how that occurred.

"A party's assertion of fact in a pleading is a judicial admission by which it normally is bound throughout the course of the proceeding." Bellefonte Re Insurance Co. v. Argonaut Insurance Co., 757 F.2d 523, 528 (2d Cir.1985); see, e.g., Davis v. A.G. Edwards & Sons, 823 F.2d 105, 108 (5th Cir.1987); Ferguson v. Neighborhood Housing Services., 780 F.2d 549, 550-51 (6th Cir.1986). Here, plaintiff clearly and unambiguously alleged in its original complaint and amended complaints that it was a party to the 1985 Agreement. Absent circumstances warranting relief from this judicial admission, the court felt that plaintiff should not be allowed to contradict its express factual assertion in an attempt to avoid summary judgment. Missouri Housing Development Commission v. Brice, 919 F.2d 1306, 1315 (8th Cir.1990) ("admissions in the pleadings are binding on the parties and may support summary judgment against the party making such admissions").

To be sure, a pleading should not be construed as a judicial admission against an alternative or hypothetical pleading in the same case. McCalden v. California Library Association, 955 F.2d 1214, 1219 (9th Cir.1990); Garman v. Griffin, 666 F.2d 1156, 1159 (8th Cir.1981); see Fed.R.Civ.P. 8(e)(2) (allowing alternative and hypothetical pleading). Plaintiff's assertion, however, that it was a party to the 1985 Agreement was not made in the context of an alternative or hypothetical pleading. See 5 Wright & Miller, Federal Practice and Procedure § 1282 at 525 (2d ed. 1990) (generally an alternative claim is drafted in the form of "either-or" and a hypothetical claim is in the form of "if-then"). Rather, plaintiff expressly incorporated the factual allegation that it was a party to the 1985 Agreement in its count alleging breach of contract. See Local 900, United Paperworkers International Union v. Boise Cascade Corp., 683 F.Supp. 280, 283-84 (D.Me.1988) (applying judicial admission to factual assertion that was restated in every count). Moreover, plaintiff marked the 1985 Agreement as "Exhibit 1" and attached it to the original complaint. Thus, the cases noting that judicial admissions should not be applied to undermine the privilege of alleging inconsistent facts in alternative pleadings provide no aid to plaintiff.

Nor do we think that the district court's application of...