Carroll Kenworth Truck Sales, Inc. v. Kenworth Truck Co., a div. of Paccar, Inc., s. 85-7119

• Decision Date: 10 February 1986
• Docket Number: 85-7139,Nos. 85-7119,s. 85-7119
• Citation: 781 F.2d 1520
• Parties: 42 UCC Rep.Serv. 1206 CARROLL KENWORTH TRUCK SALES, INC., a corporation, Plaintiff-Appellee, v. KENWORTH TRUCK COMPANY, A DIVISION OF PACCAR, INC., Defendant-Appellant. CARROLL KENWORTH TRUCK SALES, INC., a corporation, Plaintiff-Appellant, v. KENWORTH TRUCK COMPANY, A DIVISION OF PACCAR, INC., Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1520

781 F.2d 1520

42 UCC Rep.Serv. 1206

CARROLL KENWORTH TRUCK SALES, INC., a corporation, Plaintiff-Appellee, v. KENWORTH TRUCK COMPANY, A DIVISION OF PACCAR, INC.,

Defendant-Appellant.

CARROLL KENWORTH TRUCK SALES, INC., a corporation, Plaintiff-Appellant, v. KENWORTH TRUCK COMPANY, A DIVISION OF PACCAR, INC.,

Defendant-Appellee.

Nos. 85-7119, 85-7139.

United States Court of Appeals Eleventh Circuit.

Feb. 10, 1986.

John H. Morrow, Braxton Schell, Jr., Bradley, Arant, Rose & White, Birmingham, Ala., for defendant-appellant, and defendant-appellee.

Ronald G. Davenport, Robert A. Huffaker, Rushton, Stakely, Johnston & Garrett, Montgomery, Ala., for plaintiff-appellee, and plaintiff-appellant.

Appeals from the United States District Court for the Middle District of Alabama.

Before GODBOLD, Chief Judge, JOHNSON, Circuit Judge, and TUTTLE, Senior Circuit Judge.

TUTTLE, Senior Circuit Judge:

The plaintiff Carroll Kenworth Truck instituted this action against Kenworth Truck Company under 15 U.S.C. Sec. 1221-1225, the Automobile Dealers Day in Court Act, and its Alabama equivalent, Section 8-20-1, et seq. of the Alabama Code of 1975, the Alabama Motor Vehicle Franchise Act. The plaintiff sought damages for the wrongful termination and/or non-renewal of its franchise agreement with Kenworth Truck Company. After a two-day jury trial, the jury rendered a six hundred and sixty-five thousand dollar ($665,000) verdict in favor of Carroll. Defendant filed a motion for judgment notwithstanding the verdict, or alternatively for a new trial on the ground that there was insufficient evidence to support the jury verdict. The district court denied defendant's motion for judgment notwithstanding the verdict and granted its motion for a new trial unless plaintiff agreed to a remittitur to reduce the verdict to four hundred thousand dollars ($400,000). Plaintiff agreed to the remittitur and was also awarded eighteen thousand nine hundred dollars ($18,900) in attorney's fees under the Alabama Motor Vehicle Franchise Act.

On this appeal, the defendant urges that there was no evidence to support the jury's verdict, that a new trial should have been granted because of plaintiff's improper argument, and that the verdict was so excessive that a new trial should have been granted or at a minimum a much larger remittitur should have been ordered. We partially agree with the defendant-appellant's first contention. We believe the evidence was sufficient to support a jury verdict under the Alabama statute but not under the federal statute. In accordance with this conclusion, we remand for a new trial.

FACTS

Buddie Carroll and other members of his family formed Carroll Kenworth Truck Sales, Inc. in Montgomery, Alabama in 1971. In 1972, they entered into a one-year dealership agreement with appellant Kenworth, a manufacturer of Class 8 Diesel trucks (full size, eighteen wheel, over the road trucks). Kenworth sells its trucks solely through a network of dealerships such as Buddie Carroll's. Carroll's Montgomery dealership is located in Kenworth's Southeast Region, which is headquartered in Atlanta, Georgia.

After an initial one-year agreement, Carroll received renewals of its dealership agreement for three year terms in 1973, 1976, and 1979. One basis for determining whether a dealership would be renewed was whether it sold its quota of trucks. Until 1982, Kenworth used the following formula to arrive at a dealership's sales quota.

Kenworth first used various industry projections and attempted to determine how many heavy duty trucks would be sold in the United States as a whole during the upcoming year. The dealership's territory was then viewed from an historical standpoint to determine what percentage of the national market it comprised. Next, Kenworth reviewed sales figures on a regional basis to determine its market penetration in the Region to which each dealer was assigned. It then assigned each dealership a quota which would allow it to achieve that penetration in its territory. For example, if industry forecasts indicated that 100,000 trucks would be sold in the United States for the upcoming year, and a given dealership had historically had one (1%) percent of all new trucks sold registered in its territory, Kenworth would project that 1,000 trucks would be sold in that dealer's territory during the upcoming year. If Kenworth's historical market penetration in that dealer's region was 10%, Kenworth would assign that dealer a quota of 100 trucks, or 10% of the total anticipated registrations in his territory. At trial, a Kenworth employee, Ms. Torkko, testified that the actual computation of each individual quota simply involved the application of a mathematical formula to the projection and registration figures, and that quotas were assigned to every Kenworth dealer on a uniform basis.

From 1973 to 1979, Carroll exceeded its quota every year except 1975 when it reached 58% of its quota and 1976 when it reached 89% of its quota. After 1979, its sales declined significantly. It failed to reach its quota in both 1980 and 1981. In 1980, its quota was 51 but it sold only 26 trucks, 51% of its quota. In 1981, it sold 23 trucks as against its quota of 47, 49% of quota.

In 1982, Kenworth changed one element of the method of calculating quotas. Rather than use Kenworth's historical penetration percentage for each region, Kenworth chose a target penetration percentage which it hoped to obtain for the upcoming year in each region, and assigned quotas based on that target percentage of anticipated registration in each dealer's territory. This new method was used to determine quotas for all Kenworth dealerships. Under this new formula, Carroll's quota for 1982 was seventy. At the end of the first three months of 1982, however, it had sold only three trucks.

The final three year contract between Carroll and Kenworth extended from March 1979 to March 1982. In determining whether to offer a renewal contract to a dealer, Kenworth customarily began its dealer evaluation approximately six months prior to the termination of the existing contract. As a part of this evaluation, a representative from each of the various departments of the region, Truck Sales, Parts, Service, Credit and Dealer Development makes a recommendation as to renewal. The final recommendation is made by the Regional Manager in conjunction with the head of Dealer Development. That recommendation, along with the underlying evaluations, is then sent to the home office in Seattle, which makes the final decision.

Kenworth began its evaluation of Carroll in the fall of 1981. Representatives for Service, Parts, and Credit evaluated Carroll favorably and recommended a three-year term for renewal. The Dealer Development representative recommended renewal of Carroll's contract but made no recommendation as to term. The Sales representative recommended a one-year term, explaining that:

The main intent for recommending a one year contract versus the three year contract is to get Buddie's attention for his lack of aggressiveness to deliver new trucks. The fact that he is not going to be given the security of a three year contract may awaken him and get him to perform for Kenworth. Two of the three years of his last contract, he did not attain quota.

The regional office ultimately recommended to the national office that Carroll be given a two-year contract. The National Dealer Development Manager, Robert Sergeson, decided on a one-year renewal. In making this decision, Mr. Sergeson wrote an interoffice memo pointing out the deficiencies in Carroll's dealership:

Attached is the Dealer Agreement evaluation prepared by the Southeastern Region for the subject dealer.

All departments have recommended a three-year renewal except the New Truck Department, who recommended one year. Regional management is recommending two years. The evaluation indicates conservative management in all departments, but particularly so in new and used truck merchandising. The new truck evaluation suggests implementing target account solicitation, adding two salesmen, and aggressively calling on the available potential accounts. This is a relatively modest requirement, and should be accomplished within a twelve (12) month period.

The region also requests that monthly financial statements be supplied. Please revise paragraph 13 to read:

Dealer agrees to provide to Kenworth on Kenworth forms, not later than the 25th day of the month, financial data and information for the previous month's operation.

Please prepare a one (1) year dealer agreement.

The one-year renewal contract was sent to Carroll on March 10, 1982, six days before the expiration of the existing contract. Kenworth's own internal policy required submission of the renewal contract to the dealer at least ninety days before the expiration of the current term, as did the Alabama Motor Vehicle Franchise Act. Because of the delay in transmitting the renewal contract, Kenworth extended Carroll's contract for sixty (60) days and subsequently for an additional two weeks.

Along with the one-year contract, Charles Womble, Regional Manager, sent Carroll a letter stating:

Attached, in triplicate, is a one year Dealer Agreement which should be signed and returned to my attention for completion of the renewal process.

Carroll Kenworth Truck Sales failed to achieve assigned truck quotas for 1980 and 1981 and predicated on past performance and current attitudes, is unlikely to achieve quotas for 1982. You should note that continued performance below quota guidelines will be a substantial concern to us in reviewing whether there is sufficient basis for continuing our relationship when this contract expires in March, 1983.

The following recommendations are, therefore, of major importance if Carroll Kenworth Truck Sales is to become representative of a successful Kenworth franchise:

1. Employ a qualified Sales Manager for new and used trucks and extend...