Coast Cities Truck Sales v. NAVISTAR INTERN. TRAN.
| Decision Date | 29 December 1995 |
| Docket Number | Civ. No. 92-0886 (GEB). |
| Citation | 912 F. Supp. 747 |
| Parties | COAST CITIES TRUCK SALES, INC.; Plaintiff, v. NAVISTAR INTERNATIONAL TRANSPORTATION CO.; Navistar Financial Corp.; Harco National Insur. Co.; Defendants, v. COAST CITIES LEASING, INC.; Douglas M. Gallagher; Arlene Gallagher; Thomas Gallagher; Dorothy A. Gallagher; Counterclaim Defendants. |
| Court | U.S. District Court — District of New Jersey |
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Alan S. Fellheimer, Fellheimer & Eichen, P.C., Camden, NJ, for Coast Cities Truck Sales, Inc.
Ezra D. Rosenberg, Dechert, Price & Rhoads, Princeton, NJ, for Navistar International Transportation Company.
John Vena Fiorella, Archer & Greiner, P.C., Haddonfield, NJ, Ezra D. Rosenberg, Dechert, Price & Rhoads, Princeton, NJ, for Navistar Financial Corporation.
John Vena Fiorella, Archer & Greiner, P.C., Haddonfield, NJ, for Harco National Insurance Company.
This matter comes before the Court on the motions of defendants, Navistar International Transportation Company ("NITC"), Navistar Financial Corporation ("NFC") and Harco National Insurance Company ("Harco"), for summary judgment pursuant to FED. R.CIV.P. 56. Also before the Court is the motion by plaintiff Coast Cities Truck Sales, Inc. ("Coast Cities") for summary judgment on Count VI of the Second Amended Complaint. Additionally, counterclaim plaintiffs NFC and Harco seek summary judgment on Counts I and II of the Counterclaims, against counterclaim defendants Coast Cities Leasing, Inc., Douglas M. Gallagher, Arlene Gallagher, Thomas Gallagher and Dorothy A. Gallagher. For the reasons set forth in this Memorandum Opinion, the Court will grant defendants' motions for summary judgment against Counts I, II, III, IV, V, VII and VIII of the Second Amended Complaint, and will grant summary judgment in favor of counterclaim plaintiffs NFC and Harco on Counts I and II of the Counterclaims. As to Count VI of the Second Amended Complaint, which alleges that NITC violated the New Jersey Franchise Practices Act, the Court will deny the parties' cross-motions for summary judgment, and will abstain from adjudication of this matter pursuant to Railroad Comm'n of Texas v. Pullman Co., 312 U.S. 496, 61 S.Ct. 643, 85 L.Ed. 971 (1941).
Plaintiff Coast Cities has been a dealer of medium- and heavy-duty trucks for over thirty years, primarily serving central New Jersey. Defendant NITC assembles and sells medium-duty and heavy-duty trucks, sold under the "International" trademark, on a nationwide level. Defendant NFC is a wholly owned subsidiary of NITC that provides wholesale financing to NITC dealers and retail financing to retail purchasers of NITC dealers. Harco National Insurance Company is a wholly owned subsidiary of NFC that provides commercial insurance to truck dealers, and casualty and liability insurance to motor vehicle owners and operators.
Coast Cities was an authorized dealer of International trucks from 1962 to 1992. From 1980 to 1988, Coast Cities enjoyed tremendous success from its sales of new and used trucks, parts and warranty services. Its revenues climbed from $4.003 million in 1980, to $20.765 million in 1988. Between 1988 and 1991, however, the company's sales revenues sharply declined, falling to $6.614 million in 1991. The dropoff in revenue seemed to stem exclusively from the decline in truck sales, which declined dramatically from $18.587 million in 1988 to $7.968 million in 1990, rather than from parts and service sales, which increased from $2.177 million in 1988 to $2.367 million in 1990.
On November 9, 1987, NITC and Coast Cities entered into a Dealer Sales/Maintenance Agreement ("Dealer Agreement"). The Dealer Agreement provided that Coast Cities would continue as an authorized dealer of International trucks, and that Coast Cities in turn would pay for goods sold to it by NITC, in accordance with certain credit terms set by NITC and NFC. See Dealer Agreement, attached as Exh. C to Certification of Ronald J. Smith ("Smith Certif."), at 9. See also Retail Financing Agreement, attached as Exh. D to Affidavit of Robert D. Bradley ("Bradley Aff."). The Dealer Agreement also stated that NITC could terminate the agreement or place Coast Cities on cash-on-delivery ("C.O.D.") status if Coast Cities "defaulted in the payment of any obligations owing to Navistar or to any affiliate of Navistar, or upon demand fails to account for the proceeds of the sale of goods for which it is indebted to Navistar or to any affiliate of Navistar...." Id. at 16. Pursuant to the Dealer Agreement, NFC maintained an Open Account, which is a running balance of credits and debits between NITC/NFC/Harco and each International dealer. Items such as accounts payments by the dealer to NITC, payments by NITC for parts and labor, payments for warranty work, and parts returns by the dealer would be posted as credits. Debits consisted of charges for goods and services purchased by the dealer from NITC. The balance due on the Open Account is payable to NFC every month.1 Pursuant to the Dealer Agreement, NITC may elect to place a dealer on C.O.D. status if payment on a balance is not made by the end of the succeeding month. Id. C.O.D. status means that the dealer loses all credit privileges and that all purchases from NITC must be for cash.
Coast Cities' problems with falling revenues began to manifest in 1989. On July 21, 1989, NFC informed Coast Cities that the payable balance on its Open Account was $186,991.06, and warned that it would place Coast Cities on C.O.D. status unless the balance was completely satisfied by August 4, 1989. Smith Certif.Exh. A. On November 15, 1989, NFC advised Coast Cities that the latter had been placed on C.O.D. status, because two checks Coast Cities submitted to NFC, for a total of $59,208.88, had been returned for insufficient funds. Coast Cities was removed from C.O.D. status on February 27, 1990. Affidavit of Robert D. Bradley ("Bradley Aff.") ¶ 15. On May 9, 1990, NFC again placed Coast Cities on C.O.D. status, until May 17, 1990. Id. ¶ 16. On July 2, 1990, NFC again placed Coast Cities on C.O.D. status, until July 18, 1990. Id. ¶ 17. On February 25, 1991, NFC again placed Coast Cities on C.O.D. status because of an Open Account balance of $218,448.75 and because two checks remitted by Coast Cities, in the amount of $80,000.00, had been returned for insufficient funds. See Exh. C to Bradley Aff. On April 29, 1991, Coast Cities' financier, Associates Commercial Corporation ("Associates"), advised NITC that a federal tax lien had been imposed against the dealership, and that Associates consequently had suspended wholesale and retail financing for Coast Cities. Smith Certif.Exh. B.
As of May 20, 1991, Coast Cities' Open Account balance was $196,712.86. On that date, NITC told Coast Cities that the latter's indebtedness to NFC constituted a breach of the Dealer Agreement, and gave Coast Cities thirty days within which to cure the breach. NITC also advised Coast Cities that failure to cure the breach would result in termination of the Dealer Agreement. On June 10, 1991, Coast Cities requested from NITC an additional 120 to 180 days to cure the breach. Ultimately, the parties agreed to extend the cure period to October 20, 1991.
However, Coast Cities' fiscal problems worsened. On October 22, 1991, NFC informed Coast Cities that its Open Account balance was approximately $300,000.00, and that NFC intended to pursue legal action. Coast Cities responded that it had retained an accounting firm to determine its business viability and that a formal report would be completed by November 25, 1991. NITC then agreed to extend the cure period, contingent upon Coast Cities submitting monthly financial and operating statements and a specific business plan by December 1, 1991. Smith Certif.Exh. K.
On January 13, 1992, NITC was advised that another tax lien had been filed against Coast Cities, and that Associates had again suspended Coast Cities' floor plan financing. Id. Exh. M. As of February 21, 1992, Coast Cities had not responded to NITC's January 3, 1992 request to discuss particulars of the business plan. Consequently, NITC notified Coast Cities that it was terminating the Dealer Agreement, effective April 27, 1992. Id. Exh. N. NITC asserts that the termination was due to Coast Cities' Open Account balance of $122,803.59, and miscellaneous debts totalling approximately $31,100.32. Id. See also Bradley Aff. ¶ 22.
Coast Cities sought to enjoin termination of the Dealer Agreement by filing a Complaint before this Court on February 25, 1992, and an application for injunctive relief on April 10, 1992. See Exh. P to Affidavit of Ezra D. Rosenberg ("Rosenberg Aff."), at 2-8 to 2-13; 2-25 to 3-5. The parties agreed to suspend actual termination of the Dealer Agreement pending the Court's decision on Coast Cities' application. Id. at 3-12 to 3-22. On May 14, 1992, the Court denied Coast Cities' application for injunctive relief. Id. at 24-20 to 25-25. The Dealer Agreement was therefore terminated. Coast Cities then filed for protection under Chapter 11 of the Bankruptcy Code, and brought an adversary action against NITC, again seeking injunctive relief to revive the Dealer Agreement. Specifically, Coast Cities sought declaratory judgment that the Dealer Agreement was an existing executory contract under 11 U.S.C. § 365, or in the alternative, recovery of the Dealer Agreement under 11 U.S.C. § 548 as a "fraudulent transfer."
The bankruptcy court issued temporary restraints and a preliminary injunction against NITC on July 6, 1992 and September 2, 1992, which essentially compelled NITC to continue to perform under the Dealer Agreement. However, this Court reversed the decision of the bankruptcy court on December 2, 1992. See In re Coast Cities...
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