Dahl Auto. Onalaska Inc. v. Ford Motor Co., 20-cv-932-jdp

• Docket Number: 20-cv-932-jdp
• Decision Date: 28 February 2022
• Citation: 588 F.Supp.3d 929
• Parties: DAHL AUTOMOTIVE ONALASKA INC. dba Dahl Lincoln, Garbo Motor Sales, Inc. dba Garbo Lincoln, Griffin Ford Lincoln Fort Atkinson, Inc., Jim Olson Ford Lincoln, LLC, Kayser Ford, Inc., dba Kayser Lincoln, Kunes Country Ford-Lincoln, Inc., Lidtke Motors, Inc., the Motor Company, Inc. dba Lincoln of Marinette, Uptown Motors, Inc., V & H Automotive, Inc., Y & D Corp. dba Dorsch Lincoln, Plaintiffs, v. FORD MOTOR COMPANY dba Lincoln Motor Company, Defendant.
• Court: U.S. District Court — Western District of Wisconsin

588 F.Supp.3d 929

DAHL AUTOMOTIVE ONALASKA INC. dba Dahl Lincoln, Garbo Motor Sales, Inc. dba Garbo Lincoln, Griffin Ford Lincoln Fort Atkinson, Inc., Jim Olson Ford Lincoln, LLC, Kayser Ford, Inc., dba Kayser Lincoln, Kunes Country Ford-Lincoln, Inc., Lidtke Motors, Inc., the Motor Company, Inc. dba Lincoln of Marinette, Uptown Motors, Inc., V & H Automotive, Inc., Y & D Corp. dba Dorsch Lincoln, Plaintiffs,

v.FORD MOTOR COMPANY dba Lincoln Motor Company, Defendant.

20-cv-932-jdp

United States District Court, W.D. Wisconsin.

Signed February 28, 2022

Filed March 1, 2022

Sarah Horner, Barry Blonien, Paul R. Norman, Boardman & Clark LLP, Madison, WI, for PlaintiffDahl Automotive Onalaska Inc.

Barry Blonien, Paul R. Norman, Boardman & Clark LLP, Madison, WI, for PlaintiffsGarbo Motor Sales, Inc., Griffin Ford Lincoln Fort Atkinson, Inc., Jim Olson Ford Lincoln, LLC, Kayser Ford, Inc., Kunes Country Ford-Lincoln, Inc., Litdke Motors, Inc., The Motor Company, Inc., Uptown Motors, Inc., V & H Automotive, Inc., Y & D Corp.

Robert Hugh Ellis, Dykema Gossett PLLC, Detroit, MI, for Defendant.

OPINION and ORDER

JAMES D. PETERSON, District Judge

Plaintiffs are 11 Wisconsin dealers of Lincoln Ford vehicles.They are suing Ford Motor Company for violating the Robinson-Patman Act, several provisions of Wisconsin's motor vehicle dealer law, and the Uniform Commercial Code.Although plaintiffs are relying on multiple legal authorities, all of their claims arise out of the same conduct.Specifically, plaintiffs are challenging the legality of what Ford calls the Brand Exclusivity Standard, under which Ford pays its Lincoln dealers a percentage of the manufacturers suggested retail price for each vehicle sold if the dealer agrees to build (or already has) a showroom devoted exclusively to Lincoln vehicles.

Plaintiffs aren't contending that it is per se illegal to offer dealers incentives for building an exclusive showroom.But plaintiffs say that the structure of the incentive unfairly favors large dealers over small ones like them.Specifically, plaintiffs say that large dealers sell more cars and therefore can use the incentive to recoup the costs of the showroom much faster than plaintiffs.

According to plaintiffs, it would take them so long to break even on the investment that it doesn't make financial sense to build a new showroom, especially because Ford could withdraw the incentive at any time, leaving them with millions of dollars of sunk costs.But if they don't participate in the program, they won't receive the incentive payments, which they believe puts them at a competitive disadvantage with dealers who can then use the payments to offer lower prices.So plaintiffs say that they are in a Catch 22: they either incur costs that they cannot afford or they allow themselves to be undersold by their competitors.Plaintiffs contend that both federal and state law prohibits Ford from forcing them to choose between two highly undesirable options.

Three motions are before the court: plaintiffs’ motion for leave to amend their complaint and both sides’ motions for summary judgment.Dkt. 31;Dkt. 33;Dkt. 45.The court will grant plaintiffs’ motion for leave to amend, grant Ford's motion for summary judgment, and denyplaintiffs’ motion for summary judgment.

Plaintiffs seek to amend their complaint to add two claims and voluntarily dismiss 7 of the 11 plaintiffs.Ford objects to the new claims, but Ford hasn't identified any unfair prejudice, and both sides included the new claims in their summary judgment motions, so the court will consider them.

On the merits, all of plaintiffs’ claims fail.The court will assume for the purpose of the summary judgment motions that it isn't economically feasible for plaintiffs to construct a new showroom, even with the incentive payments from Ford.But it's undisputed that the exclusivity standard is optional, so dealers are free to continue operating without building an exclusive showroom if they don't believe it is commercially reasonable for them to do so.Plaintiffs contend that the choice is illusory because declining to comply with the standard will mean that they forfeit the incentive payments that other dealers will receive, allowing those other dealers to use the payments to offer lower prices.But this argument is based on an assumption that those other dealers are receiving payments without incurring costs.It's undisputed that exclusive showrooms require a multimillion-dollar investment and that it would take several years of incentive payments for even plaintiffs’ largest competitor to receive a return on its investment.Plaintiffs have adduced no evidence that the exclusivity standard is harming them now or will do so in the foreseeable future.

Most of plaintiffs’ claims are based on a premise that exclusivity standard puts them at a competitive disadvantage.They have failed to show that a reasonable jury could rule in their favor on that issue, so defendants are entitled to summary judgment.Plaintiffs’ remaining claims fail for other reasons, which the court will discuss below.

BACKGROUND

The background facts aren't disputed.

The four plaintiffs remaining in the proposed amended complaint are Lincoln Ford dealers in Sturgeon Bay (Jim Olson Ford Lincoln, LLC), Delavan (Kunes County Ford-Lincoln, Inc.), Beaver Dam (Lidtke Motors, Inc.), and Green Bay (Y & D Corp, which does business as Dorsch Lincoln).Each of the plaintiffs is challenging the validity of Ford's "Brand Exclusivity Standard," which is part of the Lincoln Commitment Program that Ford began implementing in 2020.Under the current version of the program, a dealer receives a payment for each Lincoln vehicle it sells if it meets the standard.The per-vehicle payment is equal to 2.75 percent of the manufacturer's suggested retail price for a base vehicle, plus options.To satisfy the standard, a dealer must construct a showroom devoted exclusively to Lincoln vehicles, unless the dealer already has such a showroom.The new showroom must also meet design standards established by Ford.Ford believes that an exclusive showroom will help to increase Lincoln sales.

The required size of the showroom varies based on the dealership's expected annual sales of Lincoln vehicles.If a dealer is expected to have fewer than 100 annual sales, a two-car showroom would suffice.Dkt. 54(McDermottDep. 32:21–27).Ford estimates that the cost of such a showroom is between $2 and $2.5 million.Id.at 39:6–20.A dealership with 100 to 400 expected annual sales would need a four-car showroom at an estimated cost of $3 to $4 million.A dealership with more than 400 annual expected sales would need a six-car showroom at an estimated cost of $7 million.The estimated amounts identified by Ford do not include the cost of purchasing additional land or operating an additional showroom.

The commitment program includes more than just the exclusivity standard.Dealers can earn other payments as well.There is a 1.5 percent payment for providing certain services, such as car washes and loaner vehicles.There is another 1.5 percent payment for "improv[ing] the Certified Pre-Owned shopping experience."Dkt. 81, ¶ 42.Plaintiffs receive payments under those aspects of the program.

The commitment program is offered to dealers on one-year terms.So Ford can discontinue the payments provided under the program at the end of any term, regardless of whether a dealer has received a return on its investment at that point.

With the exception of Lidtke, plaintiffs have showrooms that combine Lincoln vehicles with other Ford vehicles.None of the plaintiffs are receiving incentive payments for complying with the exclusivity standard.¹

Three of the plaintiffs have annual Lincoln sales of fewer than 100 vehicles.Dorsch's annual sales "sometimes exceed 100."Dkt. 76, ¶ 45.According to plaintiffs’ expert, it would take Dorsch between 12 and 20 years to pay for the construction of a new showroom (depending on whether Dorsch was required to build a two-car or four-car showroom), assuming that Dorsch continued receiving 2.75 percent payments for each vehicle sold during that time.It would take Kunes more than 33 years; it would take Lidtke 39 years; and it would take Olson more than 170 years.Gordie Boucher, a Lincoln dealer near Milwaukee that sold 325 Lincolns in 2020, could use incentive payments to pay for the construction of a four-car showroom in less than seven years, according to estimates of plaintiffs’ expert.

There are two Lincoln dealers in Wisconsin who are receiving the 2.75 percent payment for complying with the exclusivity standard: Gordie Boucher Lincoln in West Allis and Bergstrom Ford-Lincoln in Neenah.

The court has jurisdiction over plaintiffs’ federal claims under 28 U.S.C. § 1331 and over the state-law claims under both 28 U.S.C. § 1367and§ 1332.Plaintiffs are citizens of Wisconsin, Ford is a citizen of Delaware and Michigan, and plaintiffs have plausibly alleged that the amount in controversy is more than $75,000.

I.MOTION FOR LEAVE TO AMEND

Eight days before dispositive motions were due, plaintiffs moved for leave to file a second amended complaint.Dkt. 31.The proposed complaint is narrower than the operative pleading in some respects and broader in others.CompareDkt. 31-1withDkt. 23.It is narrower because it removes the claims of the following seven plaintiffs: Dahl Automotive Onalaska Inc., Garbo Motor Sales, Inc., Griffin Ford Lincoln Fort Atkinson, Inc., Kayser Ford, Inc., The Motor Company, Inc., Uptown Motors, Inc., and V&H Automotive, Inc.The proposed complaint also removes a request for damages on plaintiffs’ claim under 15 U.S.C. § 13(a).Ford doesn't object to these changes.And the parties agree that the dismissal of Dahl, Garbo, Griffin, Motor Company, and V&H shall be with prejudice; the dismissal of Kayser and Uptown shall be without prejudice.Dkt. 94.

The proposed complaint is broader because it seeks to add a claim for injunctive...