Dahlberg Bros., Inc. v. Ford Motor Co., 39638

CourtSupreme Court of Minnesota (US)
Citation272 Minn. 264,137 N.W.2d 314
Docket NumberNo. 39638,39638
PartiesDAHLBERG BROTHERS, INC., Respondent, v. FORD MOTOR COMPANY, Appellant, Thomas F. Buchanan, Defendant.
Decision Date10 September 1965

Syllabus by the Court

1. In determining whether to reverse or affirm an order of the district court granting an injunction restraining termination of an automobile dealer's franchise pending decision on the merits of the dealer's claim that such termination is not justified, the appellate court considers five aspects of the situation:

(a) The nature and background of the relationship between the parties preexisting the dispute giving rise to the request for relief.

(b) The harm to be suffered by the plaintiff if the temporary restraint is denied as compared to that inflicted on the defendant if the injunction issues pending trial.

(c) The likelihood that one party or the other will prevail on the merits when the fact situation is viewed in light of established precedents fixing the limits of equitable relief.

(d) The aspects of the fact situation, if any, which permit or require consideration of public policy expressed in the statutes, State and Federal.

(e) The administrative burdens involved in judicial supervision and enforcement of the temporary decree.

2. So considered, an order of the district court granting a temporary injunction in this case is held to be within the limits of its discretion.

R. J. Leonard and John J. McGirl, Jr., St. Paul, for appellant.

Ryan, Kain, Mangan, Westphal & Kressel, Minneapolis, for respondent.

SHERAN, Justice.

The Ford Motor Company appeals from an order of the district court directing the issuance of a temporary injunction pending the determination of an action instituted against it by Dahlberg Brothers, Inc., in which Dahlberg seeks a judgment permanently enjoining the Ford Motor Company from terminating its franchise as a dealer.

The trial court's decision to enjoin temporarily the termination of the dealer's franchise was based upon verified pleadings and affidavits filed by the contending parties. Of necessity, the facts summarized are accepted only tentatively pending determination on the merits.

The Hopkins Motor Car Company was appointed the Ford dealer in Hopkins, Minnesota, in January 1921. In 1929 the name was changed to Dahlberg Brothers, Inc. There were several changes in ownership and organization of the dealership between 1921 and now, but majority ownership has always been in the Dahlberg family. We refer to the corporation as 'Dahlberg.' In recent years Mr. Earl Dahlberg has been the major owner and the principal executive officer. He owns 88.9 percent of the stock and has been president of the corporation since 1954. Mr. William C. Marsh has owned 11.1 percent of the stock since 1957 and since then has shared with Mr. Dahlberg responsibility for dealership operations.

Dahlberg has operated under a franchise for over 40 years. The agreement was changed from time to time. The one now in effect is dated April 1, 1957. The duration of this agreement, by its terms, is from execution until termination by either party under paragraph 17, which provides for termination by Ford for a number of stated reasons including failure by the dealer to provide satisfactory sales performance. It also provides for termination by either party 'at will' upon a stated period of notice.

By letter dated February 11, 1964, Ford sent Dahlberg a notice of Termination for cause in accordance with paragraph 17(a)(1) of the agreement. 1 This notice informed the dealer of its right to appeal the determination to Ford's dealer policy board in which event the running of the notice would be suspended. Dahlberg did appeal and its representatives met with Ford's policy board on March 16, 1964. By letter of April 14, 1964, the board informed Dahlberg of its decision to confirm the notice of termination, explaining in some detail its reasons. By the terms of the board's letter, termination was to be effective 90 days from its receipt, that is, July 14, 1964. On July 1, 1964, Dahlberg instituted the present action and obtained an ex parte temporary restraining order. On July 9, 1964, the trial court conducted a hearing on Dahlberg's motion for a temporary injunction. The motion was granted on July 14, 1964. The order to that effect was entered on July 24, 1964.

The Ford sales agreement grants the dealer the right to purchase new automobiles and Ford trucks and to represent itself as an authorized dealer of Ford in the resale of its products to the public. Ford agrees to fill the dealer's orders in return for the dealer's promise to fulfill certain standards of representation. These standards, set forth principally in paragraph 2 of the sales agreement, 2 are intended by Ford we are told, to accomplish two things: First, to assure as much as possible that the dealer will conduct its business in such a way as to reflect favorably upon Ford and its products. Second, to provide Ford with satisfactory competitive representation for its products.

The name 'Dahlberg Ford' is well known throughout the Hopkins business area and the firm has established a good business reputation. Plaintiff, with principal place of business at 1023 Excelsior Avenue West, Hopkins, Minnesota, has invested capital there in the amount of $190,000. It employs 65 persons of various skills.

Plaintiff avers:

'That in 1959, * * * plaintiff's average monthly automobile sales were 89 units, its percent of the Metropolitan Market was 8.55% And its profit before taxes was approximately $35,460.00. * * * plaintiff sold an average of 10 new trucks per month. At this time the defendant, Ford Motor Company, * * * had established the desired quota of sales of plaintiff to be 72 new automobile units per month, being 6.65% Of the Metropolitan Market and 8 new trucks per month, being 4.94% Of the Metropolitan Market.

'That in 1960, and 1961, the quota * * * was unchanged but plaintiff's sales and profit declined as did those of all Hopkins Car Dealers due to the change in the Minnesota Law as herein set forth. That in 1960 plaintiff sold 72 new automobile units per month which was 8.75% Of the Metropolitan Market and 8 new trucks per month which was substantially in excess of its market quota assigned it by defendant, but that in said year in doing so plaintiff sustained a loss in the approximate amount of $45,177.00. That in 1961 plaintiff sold 55 new automobile units per month which was 6.98% Of the Metropolitan Market and 7 new trucks per month which was approximately the percent of the Market Quota assigned it by defendant and that in said year in doing so plaintiff was able to make a small profit in the approximate amount of $4,535.00.

'That in 1962 plaintiff sold 54 new automobile units per month which was 6.2% Of the Metropolitan Market and 12 new truck sales per month which was 50% More trucks each month than the sales quota assigned to plaintiff prior to October 1, 1962, and that at this time plaintiff earned a profit in the approximate amount of $42,946.00.

'That in 1963, plaintiff sold 63 new automobile units per month for 6.62% Of the Metropolian Market and 14 new trucks per month for 6.41% Of the Metropolitan Market and that in doing so plaintiff was able to earn a profit of approximately $35,474.00.

'That in the month of January, 1964, plaintiff sold 46 new automobile and truck units compared to 40 in January, 1963; and that in February, 1964, plaintiff sold 62 new automobile and truck units compared to 45 new automobile and truck units in February, 1963.' 3

According to Dahlberg, a change occurred in its relationship with Ford beginning in the fall of 1962 in these significant respects:

(1) Between September 30, 1962, and April 1, 1963, a period of 6 months, plaintiff's quota of new cars that it was expected to sell was increased over 43% And its quota of new trucks was increased over 44%.

(2) On December 13, 1962, Ford determined that Dahlberg needed to invest an additional $50,000 in its business. In May of 1963, it determined that the needed investment was an additional $115,000. 4

(3) In 1963 Ford determined that plaintiff should increase the size of its facility to 140,000 square feet. A proposal by Dahlberg in June of 1963 to expand its location to 65,000 square feet, investing $250,000 to $300,000 to do so was vetoed. 5

(4) Between October 1, 1962, and February 11, 1964, a Ford representative told personnel inquiring about work for plaintiff that they could do better elsewhere causing them to become employed by other Ford agencies in the area. Ford has been seeking to replace Dahlberg at Hopkins with another dealer. 6

Plaintiff asserts that a number of factors peculiar to Hopkins, Minnesota, account for whatever business difficulties it may have experienced, 7 including:

(1) The adoption of L.1957, c. 386, preventing advertising for and making automobile sales on Sunday.

(2) The creation of a Ford franchise at Southdale within 5 miles of plaintiff.

(3) Establishment of a used car lot on September 20, 1963, by another authorized Ford dealer 'on the same street as plaintiff in close proximity to and in direct competition with plaintiff.'

(4) A peculiarity of the Hopkins automobile market in that 'all of the cars of certain leasing companies in the area are registered in Hopkins, though actually they are part and parcel of commercial ventures and leasing distributions, and are not straight consumer sales * * *.'

Dahlberg contends that the cancellation notice was not effectual to terminate the contract because not based on adequate grounds and because Ford failed to 'give the Dealer a reasonable opportunity to cure any failure by the Dealer to fulfill or perform any duty' as required by paragraph 17(c) of the franchise agreement prior to giving notice of termination. Ford's affidavits are to the effect that opportunity was given and rejected.

The decision of the dealer policy board...

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