AAMCO Industries, Inc. v. DeWolf
| Decision Date | 27 January 1977 |
| Docket Number | No. 46394,46394 |
| Citation | 250 N.W.2d 835,312 Minn. 95 |
| Parties | AAMCO INDUSTRIES, INC., et al., Respondents, v. William E. DeWOLF, Appellant. |
| Court | Minnesota Supreme Court |
Syllabus by the Court
1. The failure to raise an issue before the trial court will generally prevent its consideration on appeal.
2. The failure to give a franchisee 24-hour notice to remedy his conduct does not preclude the termination of the franchise under the facts of this case.
3. The evidence supports the termination of the franchise.
Andrew P. Engebretson, St. Paul, for appellant.
Maslon, Kaplan, Edelman, Borman, Brand & McNulty, John C. McNulty and Marcy S. Wallace, Minneapolis, George J. Hayward, Bridgeport, Pa., and R. Michael Kennedy, Jr., Philadelphia, Pa., for respondents.
Heard before KELLY, TODD and MacLAUGHLIN, JJ., and considered and decided by the court en banc.
William E. DeWolf operated an AAMCO transmission service facility franchise in Bloomington, Minnesota. The Consumer Division of the Minnesota Attorney General's office received numerous complaints about the operation of DeWolf's facility. The attorney general's office contacted the AAMCO national consumer affairs office. Through a cooperative investigation between AAMCO and the attorney general's office, evidence of serious consumer fraud was obtained. AAMCO terminated DeWolf's franchise immediately and brought action for declaratory and injunctive relief. The trial court granted the relief sought by AAMCO. We affirm.
AAMCO Transmissions, Inc., is a wholly owned subsidiary of AAMCO Industries, Inc., and is authorized to do business in Minnesota. Hereinafter, these parties will be referred to as "AAMCO." AAMCO is the owner of those registered United States trademarks incorporating the name "AAMCO." It operates a nationwide chain of franchises to provide automobile automatic transmission service. AAMCO has operated in Minnesota for many years. In 1967, as a result of numerous consumer complaints, AAMCO entered into a stipulation of settlement with the State of Minnesota which provided in part as to AAMCO and their franchisees as follows:
As a result of the adverse publicity generated by these proceedings, AAMCO's operations in Minnesota were reduced to a single company-supported facility.
On December 17, 1970, a Federal Trade Commission consent order was entered which states that AAMCO and their franchisees are to cease and desist from the following practices with respect to customers of their facilities:
As part of their rehabilitation program, AAMCO established a manual of procedures to be followed by each of its facilities to insure compliance with the requirements placed on its business operation by the Federal government and various state governments, including Minnesota. In 1973, AAMCO entered into the franchise agreement with DeWolf to operate the AAMCO facility in Bloomington. As part of the agreement, DeWolf specifically agreed to abide by all procedures established by AAMCO and to deal fairly and honestly with his customers so as to not detract from nor bring into disrepute the trade name of AAMCO. From its inception, the DeWolf center was a profitable business enterprise. In 1974, the center reached a pinnacle of achievement within the AAMCO franchise chain when DeWolf was nominated to the president's club, an honorary group of franchisees selected because of the successful nature of their particular operation.
However, during 1975, a series of substantial complaints involving DeWolf's operation were received by the consumer division of the office of the attorney general. In response thereto, the attorney general's office contacted the director of the consumer affairs department at AAMCO's national headquarters to inform him about the alleged questionable practices at the DeWolf center. Due to the nature and number of the complaints, AAMCO and the attorney general's office agreed to conduct a joint investigation of the center without DeWolf's knowledge.
AAMCO immediately dispatched two technical employees to Minnesota and placed them at the disposal of the attorney general's office. The investigative technique that was employed is sometimes referred to as "shopping," which consists of submitting for service vehicles in good operating order except for minor artificially induced malfunctions. To implement the investigation, a temporary garage was acquired and established in Bloomington. Three automobiles were obtained by the attorney general's office and turned over to the AAMCO technicians who completely rebuilt each transmission. The vehicles were road tested to assure proper transmission function. After the initial road test, the technicians artificially induced a minor malfunction in each automobile which could easily be corrected. Then the automobiles were tested with the malfunctions to observe the symptoms; quickly repaired; road tested again to assure proper function; the malfunctions reinduced; and the vehicles road tested for a final time to observe the symptoms.
After the vehicles had been so prepared, employees of the attorney general and AAMCO presented the vehicles at the DeWolf center, describing the characteristics of the automobile as it performed with the induced malfunctions. In each case, DeWolf and his employees failed to note the malfunctions and failed to follow AAMCO procedures for determination of defects. Rather, in direct contravention of suggested procedures, the "customer" was told that an expensive transmission repair was necessary even though the malfunction could have been corrected for a nominal cost. Shortly thereafter, work was performed on each automobile. Nevertheless, the originally induced minor malfunctions were not corrected in two of the vehicles. The parts removed from each automobile were obtained from DeWolf under a search warrant and were introduced at trial.
On August 21, 1975, as a result of these events, AAMCO served DeWolf with a notice terminating, effective...
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