Bronx Chrysler Plymouth, Inc. v. Chrysler Corp.

• Decision Date: 17 June 2002
• Docket Number: No. 98 Civ. 6141(GEL).,98 Civ. 6141(GEL).
• Citation: 212 F.Supp.2d 233
• Parties: BRONX CHRYSLER PLYMOUTH, INC.; Westchester Dodge, Inc.; John Paladino; and Delores Paladino, Plaintiffs, v. CHRYSLER CORPORATION; Chrysler Credit Corporation, Donald Miltz; and Robert Declemente, Defendants.
• Court: U.S. District Court — Southern District of New York

212 F.Supp.2d 233

BRONX CHRYSLER PLYMOUTH, INC.; Westchester Dodge, Inc.; John Paladino; and Delores Paladino, Plaintiffs, v. CHRYSLER CORPORATION; Chrysler Credit Corporation, Donald Miltz; and Robert Declemente, Defendants.

No. 98 Civ. 6141(GEL).

United States District Court, S.D. New York.

June 17, 2002.

Russell J. Shanks, Ellenoff, Grossman, Schole & Cyruli, LLP, New York City, for John Paladino and Delores Paladino.

William DiSalvatore, Hale and Dorr LLP, New York City (George W. Mykulak and Vinita Ferrera, Hale and Dorr LLP, Boston, MA, on the brief), for Defendant Chrysler Corporation.

Richard C. Maider (Jonathan D. Deily, on the brief), Deily, Dautel & Mooney, LLP, Albany, NY, for Chrysler Credit Corporation.

OPINION AND ORDER

LYNCH, District Judge.

This action arises from allegations that the defendants unlawfully coerced the plaintiffs into closing two car dealerships. While the plaintiffs originally asserted seven claims against the four defendants named in the complaint, a number of those claims were dismissed by this Court on September 20, 2000, and the parties have stipulated to the dismissal of several others. See Bronx Chrysler Plymouth, Inc. v. Chrysler Corp., No. 98 Civ. 6141(DAB) (JCF), Report & Recommendation, at 4-5, 19-20 (S.D.N.Y. Aug. 31, 2000) (adopted Sep. 26, 2000) ("R & R"); Chrysler Credit Aff. Ex. C (stipulation of dismissal with prejudice dated Oct. 9, 2001).

There remain in this action three claims asserted by the individual plaintiffs, John Paladino ("Paladino") and Delores Paladino ("Mrs. Paladino"), against defendants Chrysler Corporation ("Chrysler") and Chrysler Credit Corporation ("Chrysler Credit"),¹ and various counterclaims asserted by Chrysler and Chrysler Credit against the Paladinos. Chrysler and Chrysler Credit now move for summary judgment pursuant to Fed.R.Civ.P. 56 in their favor on all of the Paladinos' claims and Chrysler's counterclaims.² For the reasons that follow, the defendants' motions will be granted.

BACKGROUND

A. Factual Background

Chrysler is a motor vehicle manufacturer that sells new vehicles, parts, and accessories to independent, authorized dealers. Bronx Chrysler Plymouth, Inc. ("Bronx Chrysler") was once such a dealer. In December 1977, Chrysler and Bronx Chrysler entered into a Dealer Sales and Service Agreement (the "Bronx Franchise Agreement") that authorized Bronx Chrysler to operate a Chrysler-Plymouth dealership in the Bronx. John Paladino was an officer, a director, and the sole shareholder of Bronx Chrysler. (Chrysler 56.1 Stmt. ¶ 1; Chrysler Credit 56.1 Stmt. ¶ 1-3.) The sole source of financing for that dealership was provided by Chrysler Credit, a wholly-owned but independently-operated subsidiary of Chrysler. (John Paladino Aff. ¶ 5.)

According to Paladino, the defendants informed him sometime in 1991 that they wanted him to relocate his dealership from the Bronx to Westchester County. When Paladino expressed some reluctance, Chrysler and Chrysler Credit allegedly took a number of coercive steps that Paladino maintains were intended to force him to relocate the dealership. Chrysler, for example, allegedly refused to approve Paladino's requests for additional model lines and refused to provide Bronx Chrysler with a proper allocation of popular vehicle models, instead "dumping" less popular vehicles on the Bronx Chrysler dealership. (John Paladino Aff. ¶ 3.) At the same time, Chrysler allegedly provided some of Bronx Chrysler's closest competitors with extensive financial assistance, including preferred leases and real estate arrangements, advertising subsidies, relocation and renovation expenses, preferred financing arrangements, forgiveness or forbearance of monetary obligations owed to the defendants, preferred vehicle allocations, outright monetary grants, the approval of additional model lines for sale, and preferential rebates on vehicle sales. (John Paladino Aff. ¶ 4.)

For its part, Chrysler Credit allegedly pressured Paladino by changing its lending requirements for Bronx Chrysler. Previously, Chrysler Credit had required Bronx Chrysler to sell cars to consumers using "recourse" credit terms, which provided that in the event of consumer default, Bronx Chrysler was obligated to repurchase from Chrysler Credit only those automobiles that had been repossessed by Chrysler Credit and delivered back in good working order. When Paladino indicated his reluctance to relocate the dealership, Chrysler Credit changed its credit terms and required Bronx Chrysler to sell vehicles on "full repurchase" terms, which left the dealership fully liable for any consumer default regardless of whether Chrysler Credit ultimately repossessed the vehicle. (John Paladino Aff. ¶ 5.) Chrysler Credit also allegedly stopped providing Bronx Chrysler with access to the revolving loan the dealership had used to purchase inventory and imposed other consumer financing terms that allegedly hurt Bronx Chrysler's largely low-income consumer base. (John Paladino Aff. ¶ 6.) Chrysler Credit personnel also made comments expressing the lender's view that Paladino should "get out of the Bronx" because the Bronx Chrysler dealership was "deal[ing] with garbage" and "deal[ing] with trash" at that location. (John Paladino Aff. ¶ 5; John Paladino Dep. at 26-27.)

Paladino maintains that as further inducement for him to relocate the dealership to Westchester, the defendants represented that they would forgive the indebtedness that Bronx Chrysler had accrued, a debt totaling approximately $500,000. (John Paladino Aff. ¶ 7; Pl. Resp. to Chrysler 56.1 Stmt. ¶¶ 6, 10.) Allegedly in reliance on that promise. Paladino decided to close Bronx Chrysler, whose financial situation had badly deteriorated. He terminated the Bronx Franchise Agreement in October 1992 and proceeded to negotiate the purchase of a Chrysler dealership located in New Rochelle, New York. (Chrysler 56.1 Stmt. ¶ 1; Chrysler Credit 56.1 Stmt. ¶ 1-3; John Paladino Aff. ¶ 7-8.) While Paladino claims that the defendants promised to finance the full purchase price of the Westchester dealership, Chrysler ultimately lent him only $250,000 (Ferrera Aff. Ex. 2 ("WDI Security/Capital Loan Agreement"); John Paladino Dep. at 110), leaving him to find additional funds by taking a home equity loan and borrowing more than $100,000 from his children. (John Paladino Aff. ¶ 8; Chrysler 56.1 Stmt. ¶¶ 5-6.)

In exchange for lending Paladino the money to purchase the Westchester dealership, Chrysler sought and obtained a personal guaranty from Paladino and his wife, Delores Paladino, for the loan and any future debts that Paladino's new dealership, Westchester Dodge, Inc. ("WDI"), might incur. Ferrera Aff. Ex. 4 ("Continuing Personal Guaranty"). Chrysler also agreed to forbear any immediate efforts to collect the outstanding Bronx Chrysler debts, for which Paladino acknowledged being personally liable, in order to permit Paladino to commence operation of the new dealership without the immediate burden of repaying those debts. In return, the Paladinos and WDI agreed to execute and deliver a promissory note to Chrysler in the principal amount of $352,934.98. (Ferrera Aff. Ex. 5 ("Chrysler Forbearance Agreement"); Ferrera Aff. Ex. 6 ("Chrysler Promissory Note").) The Paladinos and WDI agreed to enter into a similar forbearance agreement with Chrysler Credit and to execute and deliver to Chrysler Credit two promissory notes, one in the amount of $300,000 and one in the amount of $250,000. (Miltz Aff. Ex. A ("Chrysler Credit Forbearance Agreement" and "Chrysler Credit Promissory Note"); Chrysler 56.1 Stmt. ¶ 8.) These forbearance agreements and promissory notes were executed by the parties on June 2, 1993. (Chrysler 56.1 Stmt. ¶ 9.)

The plaintiffs maintain that all of these agreements were entered in the face of the defendants' refusal to honor their previous promise to forgive Bronx Chrysler's debts. According to Paladino, the defendants informed him - after the transaction to purchase the Westchester dealership already had closed - that they would not open the new dealership's credit lines unless the Paladinos personally executed notes acknowledging the Bronx Chrysler debt and agreed to terms for repayment. (John Paladino Aff. ¶ 8; Pl. Resp. to Chrysler 56.1 Stmt. ¶¶ 12-13.) While Paladino objected to the execution of these notes, he maintains that he had no choice but to accede to the defendants' terms, since he already had purchased the new Westchester dealership. (John Paladino Aff. ¶ 9.) Had the defendants not promised to forgive Bronx Chrysler's debt and "properly finance" WDI, Paladino asserts, he never would have agreed to close Bronx Chrysler and open the new Westchester dealership. (John Paladino Aff. ¶ 9; Pl. Resp. to Chrysler 56.1 Stmt. ¶ C.11.)

Nevertheless, upon the conclusion of these various agreements, Chrysler and WDI proceeded to execute a new Dealer Sales and Service Agreement (the "WDI Franchise Agreement"). (Ferrera Aff. Ex. 7-8.) Paladino was the sole shareholder of WDI, which commenced operations on June 7, 1993. (Chrysler 56.1 Stmt. ¶ 10; Chrysler Credit 56.1 Stmt. ¶¶ 7-9; John Paladino Dep. at 25.) Mrs. Paladino served as secretary and treasurer of WDI, but primary decision-making responsibility rested with her husband and the dealership's comptroller. (Maider Aff. Ex. F ("Delores Paladino Dep."), at 16-17.) Unfortunately, WDI too suffered from financial difficulties. (Chrysler 56.1 Stmt. ¶ 12.) As he acknowledges, Paladino contributed to those financial difficulties by causing the dealership to pay his personal debts and to pay a salary to Mrs. Paladino of approximately $150,000 per year when she performed no work. (Chrysler 56.1 Stmt. ¶ 49.)

However, Paladino alleges that the defendants played a substantial role in WDI's financial demise by engaging, once again, in punitive, discriminatory, and threatening practices. According to Paladino, Chrysler again denied his dealership the proper...