Arim v. General Motors Corp.
| Decision Date | 06 July 1994 |
| Docket Number | 147502,Docket Nos. 145204,148304 and 154046,145205 |
| Citation | 520 N.W.2d 695,206 Mich.App. 178 |
| Parties | William ARIM and Robert Ditta, Plaintiffs-Appellants, and Pentco Enterprises, Inc., Plaintiff, v. GENERAL MOTORS CORPORATION, Fairfax Group Ltd., Transmissions By Lucille, and Lucille Treganowan, Defendants-Appellees. AMERICAN TRANSMISSIONS, INC., American Transmissions Land Company, Inc., Jay Enterprises, Inc., Commercial Transmissions, Inc., John F. Folino, Joyce Folino, John A. Folino, Thomas A. Folino, Mario Bossio, and B & C Corporation, Inc., Plaintiffs-Appellants, v. GENERAL MOTORS CORPORATION, Fairfax Group Ltd., Transmissions By Lucille, and Lucille Treganowan, Defendants-Appellees. AMERICAN TRANSMISSIONS, INC., Mario Bossio, Emilio Daloisio, and Mary Daloisio, Plaintiffs-Appellants, v. Walter CURTIS and Frederick Pirochta, Defendants-Appellees, and General Motors Corporation, Defendant, and State of Michigan, Nonparty. JAY ENTERPRISES, INC., Plaintiff-Appellant, and American Transmissions, Inc., American Transmissions Land Company, Inc., JJ & T, Inc., Commercial Transmissions, Inc., John F. Folino, Joyce Folino, John A. Folino, Thomas A. Folino, Mario Bossio, B & C Corporation, Inc., Trans-4, Inc., Emilio Daloisio, Mary Daloisio, and M & E Corp., Inc., Plaintiffs, v. Frederick PIROCHTA and Walter Curtis, Defendants-Appellees. Mario BOSSIO, B & C Corporation, Inc., and Trans-4, Inc., Plaintiffs-Appellants, v. Frederick PIROCHTA and Walter Curtis, Defendants-Appellees. |
| Court | Court of Appeal of Michigan — District of US |
Stringari, Fritz, Kreger, Ahearn, Hunsinger, Bennett & Crandall, P.C. by Martin E. Crandall and Janice A. Kyko, Detroit, for William Arim and Robert Ditta, and American Transmissions, Inc., American Transmissions Land Co., Inc., Jay Enterprises, Inc., JJ & T, Inc., Commercial Transmissions, Inc., John F. Folino, Joyce Folino, John A. Folino, Thomas A. Folino, and B & C Corporation, Inc., and Trans-4, Inc.
James T. Loftus and Lee A. Schutzman, Detroit, and Kirkland & Ellis by Jeffrey A. Rosen and Karen A. Walker, Washington, DC, for General Motors Corp., Transmissions by Lucille, Lucille Treganowan, and Fairfax Group, Ltd.
Bendure & Thomas by Mark R. Bendure, Detroit, for Mario Bossio, B & C Corp., Inc., and Trans-4, Inc.
Williams, Schaefer, Ruby & Williams by James J. Williams, Birmingham, for Emilio Daloisio, Mary Daloisio, and M & E Corp., Inc.
Frank J. Kelley, Atty. Gen., Thomas L. Casey, Sol. Gen., Stewart H. Freeman, Asst. in Charge, and Brian D. Devlin, Asst. Atty. Gen., for Frederick Pirochta and Walter Curtis.
Before FITZGERALD, P.J., and CONNOR and BATTANI, * JJ.
These consolidated appeals arise from a 1986 investigation, known as "Operation Shifty," that was conducted by the Department of State's (DOS) Bureau of Automotive Regulation (BAR) in conjunction with the Office of the Attorney General (OAG) into fraudulent practices by transmission repair facilities pursuant to the Motor Vehicle Service and Repair Act (the Act), M.C.L. § 257.1301 et seq.; M.S.A. § 9.1720(1) et seq.
The BAR and its director, Frederick Pirochta, and its mechanic, Walter Curtis, together with the OAG, received the technical support and assistance of General Motors Corporation, Lucille Tregowan and her Pennsylvania corporation, Transmissions by Lucille, and the Fairfax Group Ltd. (hereinafter referred to as the private defendants) in implementing the investigation. General Motors supplied four vehicles, twenty transmissions, garage facilities, and technical engineering assistance. Transmissions by Lucille rebuilt the transmissions and prepared them for use. Pursuant to the directions of state officials, Transmissions by Lucille filled the transmissions with used transmission fluid, sprayed the pans with graphite to create the appearance of "dirty pans," and added metallic debris to the pans. Fairfax provided the "cover stories" to explain why the cars were brought in for servicing.
During the summer of 1986, state employees took the vehicles with rebuilt transmissions to various franchised facilities, posing as customers in response to advertisements for low-priced transmission tune-ups. At thirteen repair facilities, expensive "tear-down" inspections were performed even though the transmissions were in good working order.
As a result of the investigation, the thirteen transmission repair facilities were charged on August 6, 1986, with violations of the Act. Among them were the AAMCO repair shop in Grand Rapids operated by Pentco Enterprises, Inc., that was owned by plaintiffs Arim and Ditta, and three American Transmissions, Inc., repair shops in Plymouth, Garden City, and Ann Arbor that were owned and operated by the Folino plaintiffs (who also owned plaintiffs Jay Enterprises, Inc., JJ & T, Inc., and Commercial Transmissions, Inc.). On the same day, the Secretary of State summarily suspended the certifications and registrations of the three American Transmissions repair facilities owned by the Folinos.
On August 11, 1986, the OAG filed an administrative complaint against Pentco and its owners and their repair facility licenses were also summarily suspended. On the same day, the OAG also filed a civil complaint for injunctive relief and penalties against Pentco in the Kent Circuit Court. The OAG also filed criminal charges against plaintiff Jay Enterprises, Inc. (owned by the Folinos) and its employee, Michael Rutherford, for obtaining money under false pretenses. 1 Plaintiff Mario Bossio, the owner of B & C Corp., Inc., and Trans-4, Inc. (hereinafter the Bossios), and plaintiffs Emilio and Mary Daloisio, the owners of M & E Corporation, Inc. (hereinafter the Daloisios), which also operated transmission repair facilities, were investigated but were not charged with any violations under the Act.
On August 12, 1986, at the close of the investigation, Attorney General Frank Kelley and Secretary of State Richard Austin held a joint press conference and issued a press release stating the nature of the undercover investigation and the identity of thirteen registered transmission repair facilities that had been charged with violation of the Act. On that same day, Attorney General Kelley discussed the investigation and the prosecution of the thirteen repair shops when he was interviewed by Bill Bonds of WXYZ-TV in Detroit.
On August 19, 1986, the DOS commenced administrative hearings regarding the suspension and revocation of the certification and registration of the three American Transmissions facilities owned and operated by the Folino plaintiffs. In the final administrative decision issued by the administrative hearing officer and entered by the Secretary of State on February 17, 1989, it was determined that all three American Transmissions shops owned by the Folinos committed unfair and deceptive acts and violated §§ 7 and 33 of the Act, M.C.L. § 257.1307; M.S.A. § 9.1720(7) and M.C.L. § 257.1333; M.S.A. § 9.1720(33), as well as various provisions of the BAR's General Rules. As a result, a cease and desist order was entered against the Folinos, whose registrations and certifications were permanently revoked. The hearing officer specifically found that these American Transmissions shops had misrepresented the condition of the transmissions and the need for expensive "tear-down" work, charged for services not performed, unnecessarily replaced a working transmission, or performed unnecessary repairs in order to profit.
During the administrative proceedings, the Folino plaintiffs attacked the integrity of Operation Shifty, contending that the BAR had violated § 26(2)(d) of the Act, M.C.L. § 257.1326(2)(d); M.S.A. § 9.1720(26)(2)(d), which prohibits the BAR from "deliberately misrepresent[ing] the condition of the vehicle" used in an investigation. Specifically, the Folinos argued that GM improperly cooperated with state officials, and that the use of old transmission fluids, the failure to flush the cooling lines, the alteration of the transmission pans to make them appear dirty, and the use of "coercive cover stories" would be misleading to an honest and reasonable transmission repair facility employee or mechanic. The hearing referee rejected these claims and found that the investigative method was not improper.
The administrative decision was affirmed on appeal by the Wayne Circuit Court on May 8, 1990. 2 On September 11, 1990, application for leave to appeal was denied by this Court. 3 On March 29, 1991, the Michigan Supreme Court denied leave to appeal. 4
During the pendency of the administrative proceedings involving the Folinos' American Transmissions repair shops, the Pentco plaintiffs, Arim and Ditta, agreed to waive trial and surrender their repair facility license under an administrative decision entered on May 19, 1987. Subsequently, on March 9, 1988, the Kent Circuit Court entered a consent injunction that permanently enjoined the Pentco plaintiffs from having an ownership interest in any repair facility or performing any automotive repair work for five years. In late 1991, Pentco was dissolved.
On July 10, 1989, the plaintiffs in Docket No. 145204 () filed the instant action against the private defendants alleging a violation of due process under 42 U.S.C. § 1983, as well as claims of fraud, injurious falsehood, tortious interference with advantageous business relationship, intentional infliction of emotional distress, and abuse of process. Principally, these plaintiffs contend that defendant GM initiated the Operation Shifty investigation to shut down franchised transmission repair facilities because the franchisees were informing their customers of their rights under a 1982 Federal Trade Commission (FTC) consent decree that required GM to submit to binding arbitration to repair defective transmissions in approximately five...
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