Bethesda Ford, Inc. v. Ford Motor Co.

• Decision Date: 30 September 1983
• Docket Number: Civ. No. Y-82-206.
• Citation: 572 F. Supp. 623
• Parties: BETHESDA FORD, INC. v. FORD MOTOR COMPANY.
• Court: U.S. District Court — District of Maryland

572 F. Supp. 623

BETHESDA FORD, INC. v. FORD MOTOR COMPANY.

Civ. No. Y-82-206.

United States District Court, D. Maryland.

September 30, 1983.

Elbert R. Shore, Rockville, Md., and M. Albert Figinski, Baltimore, Md., for plaintiff.

Paul V. Niemeyer, Baltimore, Md., and Deborah E. Jennings, Baltimore, Md., for defendant.

MEMORANDUM OPINION AND ORDER

JOSEPH H. YOUNG, District Judge.

This action arises out of the franchise termination of a large automobile dealer in Bethesda, Maryland. Plaintiff Bethesda Ford, Inc. ("Bethesda Ford") originally filed suit in the Circuit Court for Montgomery County. Bethesda Ford's four count declaration alleged breach of contract and violation of three separate "dealer protection" statutes. Md.Transp.Code Ann. § 15-207 (Michie 1977); Md.Transp.Code Ann. § 15-209 (Michie 1977);¹ and 15 U.S.C. § 1222.

Defendant Ford Motor Company ("Ford") promptly removed the action to this Court, 28 U.S.C. § 1441, and counterclaimed for breach of contract. This counterclaim added Ford's wholly owned subsidiary Ford Motor Dealership Facilities Co. ("Facilities Co.") as counterclaim plaintiff and Bethesda Ford's holding company J.J.F. Management Services, Inc. ("J.J.F.") as counterclaim defendant. Fed.R.Civ.P. 13(h). Judge Shirley Jones, former United States District Judge for the District of Maryland, upheld the propriety of this dual joinder in a Memorandum Opinion and Order of May 4, 1982.

Counterclaim defendant J.J.F. thereafter filed its own counterclaim against original counterclaim plaintiffs Ford and Facilities Co. See Fed.R.Civ.P. 13(a) ("pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party" if the counterclaim arises out of the transaction or occurrence that is the subject matter of the opposing party's claim); cf. 6 C. Wright & A. Miller, Federal Practice and Procedure § 1404 at 21 (1971) (additional party brought in under Fed.R.Civ.P. 13(h) for purposes of responding to a counterclaim becomes an "opposing party"). This second counterclaim, which for the sake of clarity will be denominated the "cross-counterclaim," seeks the alternative state law equitable remedies of reformation, specific performance, and cancellation.

Three motions are currently pending before the Court. Ford and Facilities Co. have moved for partial summary judgment on all issues of liability, claiming that certain previous findings of the Maryland Motor Vehicle Administration ("MVA") require the application of the doctrine of res judicata. Fed.R.Civ.P. 56(a). Bethesda Ford has moved for an "interlocutory" injunction, see Fed.R.Civ.P. 65, and for leave to supplement Count IV of its declaration, Fed.R.Civ.P. 15(d).

After careful consideration of the relevant authorities, the Court grants the summary judgment motion in part and denies it in part. Judgment will be entered in favor of Ford on Counts I and II of the original declaration and in favor of Ford and Facilities Co. on all three counts of the cross-counterclaim. In addition, the Court will give "issue preclusion" effect to all appropriate MVA findings in subsequent litigation of Counts II and IV of the original declaration. However, the MVA decision will have neither "claim preclusion" nor "issue preclusion" effect in subsequent litigation of Ford and Facilities Co.'s counterclaim. Finally, the Court grants the motion to file a supplemental pleading and denies the motion for an interlocutory injunction. A more detailed explanation of the nature of and basis for these rulings follows.

FACTUAL AND PROCEDURAL BACKGROUND

Despite the rather vigorous nature of this litigation, many facts are not in dispute. Bethesda Ford became a Ford dealer in 1970. At that time, it executed the standard Ford Sales and Service Agreement ("Sales and Service Agreement") which was to govern the terms of its franchise. Paragraph 5(a) of the Sales and Service Agreement provided that "the Dealership shall establish and maintain at the Dealership Location approved by the Company Dealership Facilities of satisfactory appearance and condition and adequate to meet the Dealer's responsibilities under this Agreement." With the exception of a four month period in 1981, Bethesda Ford's dealership facilities were located on Elm Street in Bethesda for the entirety of its Ford franchise. While the sufficiency of the Elm Street facilities under Paragraph 5(a) of the Sales and Service Agreement is currently in dispute, it does not appear to be contested that Bethesda Ford made attempts to relocate during the 1970's and that Ford assisted it in its efforts.

The present controversy centers around Ford's attempts at "assisting" Bethesda Ford in establishing a new facility on an undeveloped lot near the Montgomery Mall shopping center in Bethesda ("Montgomery Mall property"). To aid Bethesda Ford in establishing this new facility, Ford encouraged Bethesda Ford to avail itself of Ford's capital and expertise through Ford's Turn Key Real Estate Assistance Program ("Turn Key Program"). Bethesda Ford accepted Ford's invitation on October 30, 1978 and entered into a four way agreement ("1978 Agreement") with J.J.F., Facilities Co., and Ford Leasing Development Co. ("Leasing Co."), another wholly owned Ford subsidiary. Under the terms of the 1978 Agreement, which followed the basic pattern of the Turn Key Program, Facilities Co. agreed to purchase the Montgomery Mall property and construct an appropriate facility. J.J.F. would then purchase the improved property from Facilities Co. and lease it to Bethesda Ford. If J.J.F. needed additional financing to make this purchase, Leasing Co. would execute a second mortgage loan to J.J.F. In return, Leasing Co. would acquire the option to lease the facility from J.J.F. and in turn sublease it to Bethesda Ford. Exercise of this option would provide Ford through its subsidiary lessee Leasing Co. with the right of "site control," or the right to ensure that the property would be used exclusively as a Ford dealership for the duration of the Leasing Co. lease. However, this privilege of "site control" would only arise if J.J.F. obtained second mortgage financing from Leasing Co.

For reasons currently under dispute, the parties found it necessary to execute a subsequent and superceding letter agreement for the development of the Montgomery Mall site. On October 1, 1980, the four parties to the 1978 Agreement signed a letter contract ("1980 Agreement")² which expressly terminated the 1978 Agreement and set up a new framework for Bethesda Ford's acquisition of the site. Under this new arrangement, Bethesda Ford would lease the property from Facilities Co. from April 1, 1981 through March 31, 1982. On or before March 31, 1982, J.J.F. would then purchase the property from Facilities Co. "under the terms of the Dealership Facility Purchase Plan ("the DFPP")." The final paragraph of the 1980 Agreement specifically provides:

The Dealer and J.J.F. agree that if (i) the Dealer does not execute the Lease within 30 days after it is requested to do so, (ii) after executing the Lease the Dealer fails to relocate to the new site within 30 days after the commencement of the terms of the Lease, or (iii) the Dealer and J.J.F. fail to purchase the Facility under the DFPP on or before March 31, 1982, the Dealer shall be deemed to have failed to fulfill its responsibilities under Subparagraph 5(a) of the Dealer's Ford Sales and Service Agreement with the Company, and the Company may elect to terminate such Sales and Service Agreement by giving the Dealer the 90 days' prior notice specified in Subparagraph 17(c)(4) thereof.

The crux of the parties' dispute centers around the 1980 Agreement's terms for J.J. F.'s purchase of the property. The letter itself merely specifies that J.J.F. would purchase the property pursuant to the DFPP. Bethesda Ford and J.J.F. maintain that they believed that the DFPP was but another name for the Turn Key Program incorporated into the 1978 Agreement and summarized previously.

However, the DFPP was in fact an entirely distinct Ford program which required J.J.F. to execute a fixed rental twenty year lease of its newly acquired property to Leasing Co. regardless of whether Leasing Co. provided financing to J.J.F. for the purchase. While Leasing Co. would presumably sublease to Bethesda Ford, execution of the twenty year lease would give Ford a lengthy period of "site control" through its subsidiary lessee Leasing Co. As stated earlier, the practical upshot of this provision would be that Bethesda Ford would not be able to switch franchises at the Montgomery Mall facility for at least a twenty year period. Ford and Facilities Co. insist that the signatories of the 1980 Agreement were fully apprised of the relevant provisions of the DFPP at the time they executed the 1980 Agreement, but Bethesda Ford and J.J.F. assert that they only became aware of the variant provisions of the DFPP in April, 1981.

After this alleged misunderstanding arose, Bethesda Ford occupied the Montgomery Mall site from April 24, 1981 to August 31, 1981, but refused to sign the lease required by the 1980 Agreement. When Bethesda Ford returned to its Elm Street location, Ford notified Bethesda Ford on October 5, 1981 that it would be terminating the Bethesda Ford franchise. Ford indicated that the grounds for its decision to terminate were the last paragraph of the 1980 Agreement and paragraph 5(a) of the Sales and Service Agreement. Pursuant to both the supplemental agreement and certain statutory provisions, the termination was not to become effective until February 21, 1982.

After receiving notice of its termination, Bethesda Ford commenced this suit in the Circuit Court for Montgomery County. Bethesda Ford initially obtained an "ex parte" injunction from the Circuit Court which temporarily enjoined its termination. Similar to a federal temporary restraining order, Fed.R.Civ.P. 65(b), the ex parte...