Autohaus Brugger, Inc. v. Saab Motors, Inc.

• Decision Date: 18 January 1978
• Docket Number: No. 75-2338,75-2338
• Citation: 567 F.2d 901
• Parties: 1978-1 Trade Cases 61,857 AUTOHAUS BRUGGER, INC., Plaintiff-Appellee, v. SAAB MOTORS, INC., and Saab-Scania of America, Inc., Defendants-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 901

567 F.2d 901

1978-1 Trade Cases 61,857

AUTOHAUS BRUGGER, INC., Plaintiff-Appellee, v. SAAB MOTORS, INC., and Saab-Scania of America, Inc.,

Defendants-Appellants.

No. 75-2338.

United States Court of Appeals, Ninth Circuit.

Jan. 18, 1978.

Raoul D. Kennedy (argued), Oakland, Cal., for defendants-appellants.

Jeffrey J. Parish (argued), San Francisco, Cal., for plaintiff-appellee.

On Appeal from the United States District Court for the Northern District of California.

Before BARNES and ANDERSON, Circuit Judges, and CRAIG, ^* District judge.

J. BLAINE ANDERSON, Circuit Judge:

In this case Autohaus Brugger, Inc. (Autohaus), a franchised automobile dealer, brought suit against Saab Motors, Inc. (Saab), alleging breach of their franchise agreement and violation of the Automobile Dealers Day in Court Act (15 U.S.C. §§ 1221-1225). The jury found in favor of Autohaus and awarded $200,000 in damages. The trial court denied Saab's post-trial motions for judgment n. o. v., directed verdict, and new trial. Saab appeals. Because we find the evidence wholly insufficient to support either a breach of contract claim or a violation of the Dealers Day in Court Act, we reverse. ¹

15 U.S.C. § 1222 allowed the dealer to bring his action in the district court below. Our jurisdiction rests with 28 U.S.C. § 1291.

BACKGROUND

Autohaus is an automobile dealership located in Redwood City, California, and is a wholly-owned subsidiary of Brugger Marketing Systems (BMS). Hubert Brugger is the President of Autohaus, as well as the majority shareholder of BMS. Autohaus came into existence in 1965 and had, at that time, one store (a dealership selling point) which was located in Palo Alto, California. At that time it sold and serviced only Mercedes Benz automobiles. In 1968, Autohaus built another store in Redwood City. The Palo Alto store was then managed by another subsidiary of BMS, which in 1969 executed the first of several nonexclusive one-year franchise agreements with Saab to sell and service Saab automobiles in the Palo Alto area. In 1971 Autohaus executed a similar agreement to become a franchised Saab dealer in the Burlingame, California, area.

These one-year franchise agreements were renewed in 1971 and in effect until September 30, 1972, when they came up again for renewal. These agreements were not renewed by either party, although there is convincing, unrebutted evidence in the record to show that Saab tried repeatedly to get Autohaus to renew. Finally, on December 20, 1972, Saab wrote to Autohaus and stated that Saab would not be renewing the franchise agreements. Shortly thereafter, Saab granted the franchise to another dealer who took over the sales and service of Saab automobiles for that area.

I. RELATIONSHIP BETWEEN THE PARTIES

A. THE WARRANTY CLAIMS.

The key to this case is the issue of warranty claims. A warranty claim is a dealer's claim to the automobile manufacturer for reimbursement of the cost of parts and labor that a dealer has put into repairing a retailed automobile which is still covered by the manufacturer's warranty.

Under the franchise agreement ² between Saab and Autohaus, Saab agreed to reimburse From the beginning of their relationship these warranty claims created problems. Autohaus several times complained to Saab that the warranty claims were not promptly and fully reimbursed. These complaints increased in 1972, and, as shall be seen, were a substantial factor in the nonrenewal of the franchise relationship.

Autohaus for defective parts covered by the factory warranty and to reimburse Autohaus for the labor cost involved in installing these parts. The amounts for which Saab agreed to reimburse Autohaus on the labor charge were based on a suggested time schedule and labor rate established by Saab. This rate schedule is referred to as a "flat rate manual." For example, if an automobile was still within the factory warranty period and the crankshaft was found defective, then Autohaus would replace it. If the "flat rate manual" lists this job as a ten-hour job on a Saab model 99, (see e. g., Plaintiff's Exhibit # 291), then a proper claim to Saab for reimbursement would include the cost of the crankshaft as well as ten hours for labor charges.

These warranty claims are the key to this case because Autohaus alleges that Saab owed reimbursement on these claims to Autohaus, that Saab refused to pay, that Saab tried to coerce Autohaus into dropping the claims, and finally that Saab terminated Autohaus because the claims were not dropped. Autohaus contends that this was a violation of the Automobile Dealers Day in Court Act, supra.

Our first inquiry then is to determine whether there is any evidence from which the jury could determine that Saab in fact owed any warranty monies to Autohaus, and, if so, whether they used them to coerce Autohaus in any manner.

At different times Autohaus made varying claims to Saab of amounts which Autohaus considered due. On November 30, 1971, Autohaus wrote to Saab and stated that according to their books Saab owed $4,627.04 on old warranty claims (Pl.Ex. # 9). In June of 1972 this figure was both $10,054.70 (Pl.Ex. # 86) and "over $8,000.00" (Pl.Ex. # 87). In September this figure was both $19,386.23 (Pl.Ex. # 104) and $15,008.08 (Pl.Ex. # 105).

Autohaus arrived at these figures through its warranty claims register. Whenever Autohaus would perform work it felt was warranty related, it entered the claim into the warranty register. If Saab paid (or credited) the claim to Autohaus, then the bookkeeper would credit the warranty register and the amount would no longer be shown as owing. However, if Saab did not give Autohaus credit for the warranty work done or only paid the claim partially, then the remainder of the claim was still shown as owing in the warranty register. This situation occurred even if Saab's rejection and nonpayment of the claim was perfectly valid. This, of course, meant that Autohaus would be carrying a claim that the warranty register said was owing, but which, in fact, was not owing.

The evidence shows that most, if not all, of the remaining claims in the warranty register were the type of claims which Autohaus had improperly submitted or Saab had already validly rejected.

For example, if Saab would receive a warranty claim and the reimbursable labor time claimed by Autohaus was over the allowed "flat rate" time, then Saab would reimburse for the agreed upon "flat rate" time and would reject the remainder of the warranty claim for the excess time. The warranty register still carried the claim for the excess time. Hubert Brugger admitted on cross-examination that "some of these claims showed higher labor than Saab allowed for that particular job to be paid." (R.T. 410) Gary Martin, a parts and service manager for Autohaus, testified that if a warranty repair took four and one-half hours to perform, and if the flat rate manual allowed three hours, then he would "regularly" submit a claim to Saab for the full four and one-half hours. (R.T. 1092) He stated that "if I felt we deserved the time we spent legitimate time on the car, certainly I would claim it." (R.T. 1099) When asked if Saab would honor that additional time, Martin said "In most cases, no." (R.T. 1099)

Charles Grelle was Autohaus' parts and service director. After stating that part of the problem with these warranty claims may have been Saab's fault, he also testified:

"Q. In the course of analyzing the claims and meeting with Mr. Soane, did you form the opinion that part of the reason for the (warranty) dispute was fault on Autohaus Brugger's end?

A. (Grelle) Yes.

Q. And were you able to determine what seemed to be the reason for the fault on Autohaus Brugger's end?

A. Well, the only thing that I could say was I could not substantiate some of them. That's not to say there wasn't substantiation somewhere, but I couldn't find it. Therefore I couldn't very well consider that a proper claim.

Q. Were there any of Autohaus Brugger's claims that you felt had been submitted in an incomplete form?

A. Yes." (R.T. 1367-1368)

On April 5, 1972, Saab's Regional Manager, Mark Boli and its District Sales Manager, Michael Long, met with Hubert Brugger and his assistant, Ronald Bartolucci, to try and clear up these warranty problems. Boli told Bartolucci that he would leave soon for Saab's headquarters in Orange, Connecticut, and he asked Bartolucci to give him copies of the disputed claims and with respect to each claim the claim number, owners' name and chassis number, so that he could have Saab's home-office staff examine them in an effort to resolve the difficulties. (Pl.Ex. # 88) It was not until three months later, on June 27, 1972, when Bartolucci sent Boli a list of 70 claims (Pl.Ex. # 87). However, Saab claims these were without the claim numbers, owners' names, and chassis numbers as Boli had requested at the April 5 meeting. On July 3 Boli acknowledged receipt of the claims, and told Bartolucci that Saab would review them as soon as Autohaus provided it with complete information as requested. (Pl.Ex. # 88)

Shortly after this letter, Bartolucci left Autohaus and the warranty claims problem was assigned to Charles Grelle. In August, Saab's service manager, George Soane, met with Grelle and together the two of them reviewed each of the unpaid claims Saab had not paid, and they took a sampling of those Saab had partially paid. They concluded that Saab owed Autohaus on some of the claims and not on others. On some claims Saab had actually overpaid Autohaus. There were other claims on which they could not reach agreement. (Pl.Ex. # 105)

On August 24, Boli again met with Brugger to try and resolve the warranty dispute. At that time, Brugger claimed that Saab owed Autohaus $15,008.08 on the warranty claims. (Pl.Ex. # 204) He suggested as a compromise that Saab pay the amount it conceded it owed and that the remainder be split on a "fifty-fifty" basis. Boli instead offered to...