Aamco Automatic Transmissions, Inc. v. Tayloe

• Decision Date: 29 November 1973
• Docket Number: Civ. A. No. 73-391 and 73-1615.
• Citation: 368 F. Supp. 1283
• Parties: AAMCO AUTOMATIC TRANSMISSIONS, INC. v. Harry M. TAYLOE et al. Gordon G. PARO et al. v. AAMCO AUTOMATIC TRANSMISSIONS, INC.
• Court: U.S. District Court — Eastern District of Pennsylvania

368 F. Supp. 1283

AAMCO AUTOMATIC TRANSMISSIONS, INC. v. Harry M. TAYLOE et al.

Gordon G. PARO et al. v. AAMCO AUTOMATIC TRANSMISSIONS, INC.

Civ. A. Nos. 73-391 and 73-1615.

United States District Court, E. D. Pennsylvania.

November 29, 1973.

COPYRIGHT MATERIAL OMITTED

Martin H. Katz, Bridgeport, Pa., for Aamco.

Oliver C. Biddle, Ballard, Spahr, Andrews & Ingersoll, Richard L. Sherman, Philadelphia, Pa., for Tayloe & Paro.

MEMORANDUM OPINION AND ORDER

VANARTSDALEN, District Judge.

On March 29, 1966, plaintiff, Aamco Automatic Transmissions, Inc., and defendant, Harry M. Tayloe, entered into a written franchise agreement pursuant to which defendant Tayloe was granted a license to operate an Aamco Automatic Transmission Repair Shop in Bailey Crossroads, Virginia. On February 22, 1973, plaintiff filed a complaint in the district court alleging breach of that franchise agreement by defendant Tayloe. The complaint also alleged two claims for relief against defendants Jimran Corporation (Jimran), Crossroads Transmissions, Inc. (Crossroads), and Edward R. Valencia (Valencia): (1) conspiracy with defendant Tayloe to violate the above franchise agreement and (2) intentional interference with contractual relations. On April 30, 1973, defendants Tayloe, Jimran, Crossroads and Valencia filed an answer to the complaint denying the allegations as to breach of contract, conspiracy and intentional interference with contractual relations, and asserting, as affirmative defenses, lack of subject matter jurisdiction and lack of personal jurisdiction over Jimran, Crossroads and Valencia. In the answer, defendant Tayloe filed an individual counterclaim against Aamco alleging wrongful termination of the franchise agreement and a class action counterclaim alleging violation by Aamco of Section 1 of the Sherman Antitrust Act, 15 U.S.C. § 1. In a separate suit, Gordon G. Paro, also an Aamco franchisee, instituted a similar class action against Aamco under Sections 1 and 2 of the Sherman Antitrust Act. On October 18, 1973, this court consolidated the class action counterclaim of defendant Tayloe in Civil Action 73-391 with the class action claim of plaintiff Paro in Civil Action 73-1615.

Over the course of these events, several motions and countermotions were filed in Aamco v. Tayloe, thus necessitating this decision. Although all of the motions discussed herein are pending in Aamco v. Tayloe, one motion is common to both cases, i. e., Aamco's motion to dismiss the antitrust class action for failure to state a claim upon which relief may be granted. In this opinion the sufficiency of the antitrust claim is assessed in view of the counterclaim filed by defendant Tayloe in Aamco v. Tayloe. However, my ruling with respect to it is fully applicable and dispositive of the similar motion in Paro v. Aamco.

1. Defendant Tayloe's Motion for Leave to Amend the Individual Contract Counterclaim and the Class Action Antitrust Counterclaim.

Although plaintiff has objected to defendant Tayloe's motion for leave to amend, these objections do not warrant deviation from the express mandate of Federal Rule 15(a) that "leave to amend shall be freely given when justice so requires" in light of the Supreme Court interpretation of that rule in Foman v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). In that case, Mr. Justice Goldberg set forth the standard to be followed in the application of Rule 15(a).

In the absence of any apparent or declared reason — such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc. — the leave sought should, as the rules require, be "freely given."

Id. at 182, 83 S.Ct. at 230.

In applying this standard to the facts of this case, the amendments are proper. The motion to amend was filed approximately one month after the filing of the answer (April 30, 1973-June 5, 1973). In the context of this case, it cannot be said that this constitutes undue delay. As this is defendant's initial request for an amendment, the case does not involve "repeated failure to cure deficiencies by amendments previously granted." In light of my ruling that the proposed amended counterclaims do establish a claim for relief, infra, it is obvious that the amendments are not futile. Finally, there is no evidence of undue prejudice to the opposing party by virtue of the allowance of this amendment. Since the individual contract counterclaim and the class action antitrust counterclaim were pleaded by defendant Tayloe in his original answer, plaintiff has had continual notice of these claims. Now, via this amendment, defendant seeks not to change the scope or substance of these claims or to add a new or different claim, but merely to further clarify the essential elements of these originally asserted counterclaims. Based on these facts, I am unable to foresee "undue prejudice" to the plaintiff by the allowance of this amendment.¹

As this case is well within the purview of Rule 15(a), the motion to amend the individual and class action counterclaim will be granted.

2. Plaintiff's Motion to Dismiss the Individual Contract Counterclaim and the Class Action Antitrust Counterclaim of Defendant Tayloe.

In assessing any motion to dismiss for failure to state a claim upon which relief can be granted, Fed.R.Civ. P. 12(b)(6), the court must begin with the well-settled principle established in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957), that:

a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.

Id. at 45-46, 78 S.Ct. at 102. (emphasis added). Supchak v. United States, 365 F.2d 844, 845 (3rd Cir. 1966); Melo-Sonics Corporation v. Cropp, 342 F.2d 856, 858-859 (3rd Cir. 1965); Hughes v. Local No. 11 of International Assn. of Bridge, Structural & Ornamental Ironworkers, 287 F.2d 810, 814 (3rd Cir.), cert. denied, 368 U.S. 829, 82 S.Ct. 51, 7 L.Ed.2d 32 (1961); See 5 C. Wright & A. Miller, Federal Practice and Procedure, §§ 1356, 1357 (1969). Moreover, in making this determination, the court must treat

all facts contained in the complaint and every inference fairly deducible therefrom . . . as admitted and proved, viewing the same in the light most favorable to the plaintiff.

Melo-Sonics Corporation, supra at 858 of 342 F.2d (emphasis added).

In applying this standard to the defendant's amended counterclaims,² I conclude that sufficient claims for relief have been set forth.

A. The Individual Contract Counterclaim.

In his amended individual counterclaim, defendant alleges a written franchise agreement with plaintiff entered into on March 29, 1966. He asserts that in December, 1972 plaintiff wrongfully breached the agreement when plaintiff unilaterally terminated it without cause. As a consequence of plaintiff's breach, defendant claims damages in the amount of $75,000.00. It is plaintiff's contention that defendant's claim for relief is insufficient in that it fails to allege the performance of all contractual obligations on the part of the defendant.

Assuming that performance is a necessary allegation to establish a claim for relief in this case, it cannot be said that defendant's counterclaim is defective in this regard. As noted earlier, the court, in assessing the sufficiency of a claim, must treat all alleged facts and every inference fairly deducible therefrom as admitted and proved and view all in a light most favorable to (in this instance) defendant. Melo-Sonics Corporation, supra at 858. Following this liberal standard, it is possible to infer performance of contractual obligations by defendant from the denial in his answer (para. 5) of each and every allegation of breach set forth in plaintiff's complaint. With the drawing of this inference of performance, plaintiff's objections on this point are satisfied.³

Plaintiff also asserts as a ground for dismissal that defendant's counterclaim fails to disclose adequate information concerning the basis of defendant's claim for relief. Suffice it to say that the policy of the Federal Rules is "notice pleading", Conley v. Gibson, 355 U.S. 41, 47-48, 78 S.Ct. 99, 2 L.Ed. 2d 80 (1957), and under Federal Rule 8(a)(2) only "a short and plain statement of the claim showing that the pleader is entitled to relief" is required. As defendant has alleged a contract, a breach of that contract, resultant damages and, inferentially, performance of his contractual duties, he has satisfied the requirements of Rule 8(a)(2). If plaintiff is, nevertheless, unable to form a responsive pleading, his proper remedy is a motion for more definite statement under Rule 12(e). It is clear, however, that defendant's claim is based on an improper termination of the franchise agreement, and pretrial discovery can supply all necessary factual information.

B. The Class Action Antitrust Counterclaim.

Defendant alleges in his amended counterclaim that plaintiff has illegally restrained competition in violation of the antitrust laws by:

17. . . . compelling defendant Tayloe and the other members of the class to purchase initial mechanical equipment from plaintiff by tying the purchase of such initial mechanical equipment to the franchises granted to defendant Tayloe and the other members of the class.

18. . . . compelling defendant Tayloe and the other members of the class to purchase their entire requirement of repair parts from plaintiff, including repair kits of plaintiff, by tying the purchase of such repair parts to the franchises granted to defendant Tayloe and the other members of the class.

19. . . . threatening to terminate the franchises of defendant Tayloe and the other members of the class if they did not purchase repair parts from plaintiff.

In...