976 F.2d 58 (1st Cir. 1992), 91-2170, Schott Motorcycle Supply, Inc. v. American Honda Motor Co., Inc.

Docket Nº:91-2170.
Citation:976 F.2d 58
Party Name:SCHOTT MOTORCYCLE SUPPLY, INC., Plaintiff, Appellant, v. AMERICAN HONDA MOTOR COMPANY, INC., Defendant, Appellee.
Case Date:September 28, 1992
Court:United States Courts of Appeals, Court of Appeals for the First Circuit

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976 F.2d 58 (1st Cir. 1992)




No. 91-2170.

United States Court of Appeals, First Circuit

September 28, 1992

Heard April 6, 1992.

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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

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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.


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.


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

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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...

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