D. Patrick, Inc. v. Ford Motor Co.

• Decision Date: 20 October 1993
• Docket Number: No. 92-2516,92-2516
• Parties: D. PATRICK, INC., an Indiana corporation, Plaintiff-Appellant, v. FORD MOTOR COMPANY, a Delaware corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 455

8 F.3d 455

27 Fed.R.Serv.3d 65

D. PATRICK, INC., an Indiana corporation, Plaintiff-Appellant, v. FORD MOTOR COMPANY, a Delaware corporation, Defendant-Appellee.

No. 92-2516.

United States Court of Appeals Seventh Circuit.

Argued Jan. 12, 1993.

Decided Oct. 20, 1993.

David A. Given, Alan L. McLaughlin, Baker & Daniels, Indianapolis, IN, and James J. Kaufman and Michael A. Green, Barefoot & Kaufman, Wilmington, NC, for plaintiff-appellant.

Evan E. Steger, Ice, Miller, Donadio & Ryan, Indianapolis, IN, for defendant-appellee.

Before EASTERBROOK and ROVNER, Circuit Judges, and ESCHBACH, Senior Circuit Judge.

ILANA DIAMOND ROVNER, Circuit Judge.

D. Patrick, Inc. ("Patrick"), operates a Ford Motor Company ("Ford") dealership in Evansville, Indiana. After Ford notified Patrick that it planned to open a second Evansville dealership, Patrick asked the district court to find Ford in contempt of a 1979 settlement agreement between Ford and Patrick's predecessor-in-interest. The court denied Patrick's motion for a preliminary injunction and dismissed the contempt claim. Patrick appeals, and we affirm.

I. FACTS

In 1978, Patrick's predecessor, Key Motors, Inc. ("Key"), sought to enjoin Ford from terminating its 1972 sales and service agreement. After the court entered a preliminary injunction, the parties settled the suit. The district court dismissed the case with prejudice on September 12, 1979, but retained jurisdiction "for the purposes of the enforcement of [the settlement] agreement and subject to the contempt powers of this court in the event of a violation thereof."

The settlement agreement permitted Key to open a branch dealership at a location in eastern Evansville. The agreement went on to provide that:

After a Market Representation Planning Study of the Evansville area has been conducted, the results of that study will be taken into consideration by Ford in determining whether Key's branch will continue and/or whether a second Ford dealership will be established in the Evansville area.... In the event, as a result of the Market Representation Study, Ford concludes ... that a second Ford dealership should be established in the Evansville area and that Key's branch must be closed, Key shall close its branch within two (2) years from the date of that determination, but such closing need not occur prior to three (3) years from the date of the settlement....

At the time the parties entered into this agreement, Key's dealership was located in downtown Evansville. Although the agreement permitted Key to open a branch location on Evansville's east side, Key elected not to do so immediately. In 1981, Ford conducted a Market Representation Planning ("MRP") study, which concluded that eastern Evansville was becoming the preferred market area. The study did not recommend a second dealership for the Evansville area "at this time," but suggested that Key relocate to the east side. Key declined to relocate, but did seek permission to open an east-side branch location as envisioned by the settlement agreement.

Ford approved Key's request in 1982, and the branch opened later that year. Unlike the downtown dealership, the branch location was a sales facility only and did not offer customer service and repairs. On July 28, 1982, Key merged with D. Patrick Imports, Inc., to form Patrick, which assumed control over both the downtown dealership and the east-side branch.

In 1985, Patrick moved the branch to another location on the east side of Evansville. In a January 21, 1987 letter retroactively approving the move, Ford stated:

This consent is given subject to the condition that such additional place of business will be discontinued if so requested upon 2 years' written notice by the Ford Division if a market study of the Evansville market determines the need for a second Ford dealership in the Evansville area.

Patrick's president, D. Patrick O'Daniel, testified at the preliminary injunction hearing that Patrick had not contested this condition.

Ford conducted another MRP study in 1987 and concluded that a second full-service dealership should be opened on Evansville's east side. Ford advised Patrick of its decision on March 16, 1988 and encouraged Patrick to relocate its full-service dealership to the east side. Had Patrick done so, Ford would have assigned the downtown area to a new dealer. Although Ford initially asked Patrick to respond to the offer by November 15, 1988, it extended the deadline to January 5, 1989 when Patrick asked for more time.

When Patrick had not accepted the offer by January 5, 1989, Ford decided to appoint a new dealer for the east side. In a letter dated March 19, 1989, Ford apprised Patrick of its decision and requested that Patrick close its east-side branch within two years.

In accordance with its sales and service agreement, Patrick appealed the decision to Ford's Dealer Policy Board. On November 28, 1989, the Board affirmed the company's decision to close Patrick's branch location in favor of a second full-service dealership. However, the Board agreed to delay the opening of the new dealership until January 1, 1992, allowing Patrick to keep its branch open for nearly one additional year.

On December 20, 1991, Patrick filed a five-count complaint under the docket number assigned to Key's 1978 suit, seeking to enjoin Ford from opening the second fullservice dealership. Count Two of that complaint alleged that Ford was in contempt of the 1979 settlement agreement. The other four counts asserted claims for breach of contract and estoppel, as well as alleged violations of the Federal Automobile Dealers' Day in Court Act, 15 U.S.C. §§ 1221-1225, and the Indiana Deceptive Franchise Practices Act, Ind.Code §§ 23-2-2.7-1 et seq., and Motor Vehicle Unfair Practices Act, 9-23-3-1 et seq. The district court determined that these additional counts should be pursued in a separate action, because they did not arise under the 1979 settlement agreement. Patrick does not appeal that determination, and therefore only the court's disposition of Count Two, the contempt claim, is at issue here.

Patrick argued that Ford had violated the 1979 settlement agreement by seeking to open a second full-service dealership in Evansville, even though the 1981 MRP study had concluded that a second dealership should not be opened. In other words, Patrick contended that the settlement agreement allowed for only one MRP study and that once Ford decided not to open a second dealership based on that study, it could not revisit the question.

Patrick moved for a preliminary injunction preventing Ford from opening a second dealership and closing Patrick's east-side branch. After an evidentiary hearing, the district court denied Patrick's motion and dismissed the contempt claim on its merits. The court found as a matter of law that the 1979 settlement agreement did not limit Ford to only one market planning study or one decision as to a second dealership, as Patrick contended. Instead, the court found that Ford had complied with the terms of the settlement agreement in all respects. ¹

II. ANALYSIS

A. Rendering a Final Judgment Based on the Preliminary Injunction Hearing

Patrick initially challenges the district court's dismissal of his contempt claim based solely on the evidence adduced at the preliminary injunction hearing, without prior notice that the court intended to render a final decision on the merits of the claim. Patrick correctly notes that "it is generally inappropriate for a federal court at the preliminary-injunction stage to give a final judgment on the merits." University of Texas v. Camenisch, 451 U.S. 390, 395, 101 S.Ct. 1830, 1834, 68 L.Ed.2d 175 (1981). Federal Rule of Civil Procedure 65(a)(2) does afford the district court discretion to consolidate the merits with the preliminary injunction hearing. "Before such an order may issue, however, the courts have commonly required that 'the parties should normally receive clear and unambiguous notice ... either before the hearing commences or at a time which will still afford the parties a full opportunity to present their respective cases.' " Id. (quoting Pughsley v. 3750 Lake Shore Drive Coop. Bldg., 463 F.2d 1055, 1057 (7th Cir.1972) (Stevens, J.)). See also Proimos v. Fair Automotive Repair, Inc., 808 F.2d 1273, 1277-78 (7th Cir.1987); Paris v. U.S. Dept. of Housing and Urban Dev., 713 F.2d 1341, 1345-46 (7th Cir.1983). Although the district court here did not advise the parties of its intent to reach the merits of the contempt claim, we nonetheless find no error in its decision to dispose of that claim without further hearing.

We begin with the observation that although Patrick initiated the proceeding below with a "complaint" purporting to state a cause of action for civil contempt, in fact, "there is no such thing as an independent cause of action for civil contempt." Blalock v. United States, 844 F.2d 1546, 1550 (11th Cir.1988) (per curiam). Instead, "[c]ivil contempt proceedings are considered to be a part of the action from which they stem" (4 Charles A. Wright and Arthur R. Miller, Federal Practice and Procedure, § 1017 at 71 (1987)), their purpose being to secure compliance with a prior court order (Blalock, 844 F.2d at 1550; Thompson v. Cleland, 782 F.2d 719, 721 (7th Cir.1986)). Although such proceedings are subject to the Federal Rules of Civil Procedure (In re Grand Jury Proceedings Empanelled May 1988, 894 F.2d 881, 882 (7th Cir.1989)), given their supplemental character, the court normally will proceed in a more summary fashion than it would on an ordinary complaint (11 Wright & Miller, § 2960 at 590; see also In re Grand Jury Matter, 906 F.2d 78, 85-86 (3d Cir.1990), cert. denied, 498 U.S. 980, 111 S.Ct. 509, 112 L.Ed.2d 521 (1990)). Due process may entitle the parties to discovery and an evidentiary hearing to the extent necessary to resolve relevant factual disputes. See United States v. City of Northlake, Ill., 942...