David R. McGeorge Car Co., Inc. v. Leyland Motor Sales, Inc., s. 73-2114

• Decision Date: 01 October 1974
• Docket Number: Nos. 73-2114,73-2115,s. 73-2114
• Citation: 504 F.2d 52
• Parties: 1974-2 Trade Cases 75,257 DAVID R. McGEORGE CAR CO., INC., Appellee, v. LEYLAND MOTOR SALES, INC., Appellant. DAVID R. McGEORGE CAR CO., INC., Appellant, v. LEYLAND MOTOR SALES, INC., Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 52

504 F.2d 52

1974-2 Trade Cases 75,257

DAVID R. McGEORGE CAR CO., INC., Appellee, v. LEYLAND MOTOR SALES, INC., Appellant.

DAVID R. McGEORGE CAR CO., INC., Appellant, v. LEYLAND MOTOR SALES, INC., Appellee.

Nos. 73-2114, 73-2115.

United States Court of Appeals, Fourth Circuit.

Argued Feb. 7, 1974.

Decided Oct. 1, 1974.

John R. Schoemer, Jr., New York City, (Douglas C. Fairhurst, Townley, Updike, Carter & Rodgers, New York City, and A. R. Bowles, II, Bowles & Boyd, Richmond, Va., on brief) for appellant in No. 73-2114 and for appellee in No. 73-2115.

Jerry S. Cohen, Washington, D.C., (Herbert E. Milstein, Michael D. Hausfeld, Washington, D.C., Douglas W. Conner and Conner & Conner, Richmond, Va., on brief), for appellee in No. 73-2114 and for appellant in No. 73-2115.

Before HAYNSWORTH, Chief Judge, and CRAVEN and FIELD, Circuit Judges.

FIELD, Circuit Judge:

David R. McGeorge Car Co., Inc., (McGeorge) brought this action against Leyland Motor Sales, Inc., (Leyland) and its parent corporation, British Leyland Motors, Inc., ¹ alleging that an arrangement in the sale of automobiles constituted bad faith dealing in violation of the Dealers Day in Court Act (DDICA), 15 U.S.C. 1222, and was also in violation of federal antitrust statutes. The district court awarded relief under the DDICA and the Robinson-Patman Act for Leyland's deliberate shortage of one line of automobiles to McGeorge in an attempt to coerce its acceptance of additional lines. However, the district court refused to grant relief under either the DDICA or the antitrust acts for British Leyland's refusal to renew McGeorge's dealership, after the latter had declined the additional lines of automobiles. Both parties have appealed.

David R. McGeorge Car Co., Inc., was founded in 1960 by David R. McGeorge who managed the company until an illness in February of 1970 when his son Robert assumed control. Throughout the 1960's McGeorge sold three lines of automobiles, Mercedes-Benz from 1960 on, Triumph from 1963 to mid-1970, and Toyota continuously from 1968. None of the cars was competitive with the other since Mercedes-Benz sold for approximately $6000, Triumph for $2800 and Toyota for $2000. McGeorge's dealership agreement for the sale of Triumphs, signed originally with the Standard Triumph Motor Company in 1963, was renewed for two years in July, 1968, with Leyland Motor Sales, Inc., the northeast regional distributor for British Leyland Motors, Inc., which had acquired the Standard Triumph Motor Company.

In addition to its acquisition of Triumph, in April of 1967 British Leyland purchased The Rover Company, Ltd., manufacturers of Land Rover, a crosscountry vehicle, and Rover, a luxury sedan in the Mercedes and BMW class. Shortly thereafter British Leyland initiated a policy designed to couple the high consumer appeal of Triumph with its newly acquired Rover, and Triumph dealers throughout the United States were presented with a proposal that in order to continue selling Triumphs they should begin selling Rovers and Land Rovers. At the time of the proposal, Triumphs, already in high demand, began experiencing shortages as a result of labor problems in England. British Leyland was then in the position of allocating an item in high demand and short supply among dealers who had been presented with British Leyland's offer of Rover and Land Rover. McGeorge declined the proposal based upon its assessment that Rover had little sales potential and the fact that Rover would compete with Mercedes-Benz which it was already selling.

In October 1969, Leyland Motor Sales, Inc., began cutting McGeorge's supply of Triumphs in an attempt to persuade it to reconsider the Rover and Land Rover proposal. Whereas the supply of Triumphs was off 10 to 20 percent nationally in 1969, McGeorge's supply was cut by 50 percent in that year and an additional 16 percent in 1970. Conversely, other Virginia Triumph dealers who had accepted Rover and Land Rover experienced only a 25 percent cutback in 1969 and increases of up to 93 percent in 1970. When in May of 1970 it became clear that McGeorge's rejection of Rover and Land Rover was final, Leyland Motor Sales, Inc., recommended to British Leyland that McGeorge's Triumph dealership not be renewed upon its normal expiration in July, 1970. The dealership was not renewed and in September of 1970 David R. McGeorge brought this action.

I

In awarding McGeorge relief under the Robinson-Patman Act the district court, relying on Centex-Winston Corp. v. Edward Hines Lumber Co., 447 F.2d 585 (7 Cir. 1971), held that Leyland's 'delivery' of a short supply of Triumphs to McGeorge was a discriminatory allocation of services proscribed by 2(e) of the Act ² which provides that

(e) It shall be unlawful for any person to discriminate in favor of one purchaser against another purchaser or purchasers of a commodity bought for resale, with or without processing by contracting to furnish or furnishing, or by contributing to the furnishing of, any services or facilities connected with the processing, handling, sale or offering for sale of such commodity so purchased upon terms not accorded to all purchasers on proportionally equal terms.

In Centex-Winston, the Seventh Circuit held that a wholesaler's delivery of lumber to a builder consistently later than contractually specified dates, while delivering lumber orders of the builder's competitors on time, was discrimination among purchasers in the furnishing of a service, i.e., delivery connected with the resale of a commodity.

We are unable to agree with the conclusion of the district court for even if we were to accept the Seventh Circuit's characterization of delivery as a 'service,' ³ factual distinctions in the present case render Centex-Winston inapposite. Unlike Centex-Winston in which the defendant contracted to deliver the commodities, the dealership agreement involved here required McGeorge to accept delivery of Triumphs at their point of arrival in Baltimore or engage independent transporters at its own risk. The record reveals that McGeorge frequently sent individual employees to Baltimore for the express purpose of driving new cars back to Richmond. The district court's reliance on Centex-Winston was thus misplaced. That Leyland was discriminating in the allocation of Triumphs, the commodity itself, as opposed to a service or facility connected with the resale of the commodity is obvious, and in our opinion places this case beyond the pale of Robinson-Patman. We conclude that Robinson-Patman was an improper basis for the judgment below.

II

We do agree with the district court that Leyland's conduct in 'shorting' McGeorge in the delivery of Triumphs in an attempt to compel it to accept the Rover and Land Rover lines constituted a lack of good faith on its part under the Dealers Day in Court Act. ⁴ The DDICA, which has been described as 'a fringe area of antitrust law * * * designed in part to supplement (those) laws,' ⁵ requires the manufacturer to act in good faith in carrying out the provisions of the franchise as well as in its termination, cancellation or non-renewal. Good faith, which is defined in Section 1(e) of the Act, ⁶ has been construed literally by the courts and must be determined in the context of actual or threatened coercion or intimidation, Lawrence Chrysler Plymouth, Inc. v. Chrysler Corp., 461 F.2d 608 (7 Cir. 1972); American Motor Sales Corporation v. Semke, 384 F.2d 192 settled that a manufacturer's coercive attempt to force unwanted automobiles attempt to force unwanted automobiles on a dealer constitutes bad faith dealing for purposes of the Act. American Motor Sales v. Semke, supra, and see House Report No. 2850, 84th Cong.2d Sess. 9, 3 U.S.Code Cong. & Admin.Mews, pp. 4596, 4603 (1956). ⁷ We think it reasonable to read into McGeorge's dealership agreement an implied provision that in the event of a strike or casualty occasioning a reduction in the number of Triumphs exported to this Country the manufacturer would treat its dealers ratably and equitably. The district court's finding of coercion in the cutback of Triumphs is fully supported by the evidence, and the DDICA gives McGeorge a remedy for the loss of profits suffered by it as a result of this discriminatory action taken by Leyland in an effort to compel McGeorge to make a concession which was not required of it under the terms of its dealership.

The more troublesome question on this aspect of this appeal is whether the district court was correct in holding that the non-renewal of McGeorge's dealership did not also constitute bad faith dealing under the Act. The district court concluded that Leyland's decision not to renew was made after the failure of the coercive measures and not as a continuing part thereof, and that although Leyland had acted in bad faith with respect to the shortages, the refusal to renew was based upon a rational business decision. We are inclined to agree with this conclusion. The evidence clearly demonstrates that it was in the best interests of Leyland to market its Triumph and Rover lines in the United States through dual dealerships and, indeed, that such dual dealerships were its only hope of improving the rather disappointing market performance of the Rovers. When McGeorge declined to accept such a dual dealership Leyland had a perfectly legitimate reason to refuse to renew its Triumph franchise. With no further contractual obligations to McGealer Leyland's decision to obtain a dealer who would carry out its marketing policy with respect to both Triumphs and Rovers was based on sound business considerations free from the 'coercion or intimidation' proscribed by the Act.

The plaintiff contends, however, that Leyland's conduct in its efforts to coerce McGeorge in the 1969-70 period fatally infected its 1970 decision to transfer the dual line to another dealer. To accept this charge of continuing bad faith, however, would permanently preclude Leyland...