Emich Motors Corp. v. General Motors Corp.

• Decision Date: 26 April 1950
• Docket Number: No. 9620-9686.,9620-9686.
• Citation: 181 F.2d 70
• Parties: EMICH MOTORS CORPORATION v. GENERAL MOTORS CORPORATION.
• Court: U.S. Court of Appeals — Seventh Circuit

181 F.2d 70 (1950)

EMICH MOTORS CORPORATION v. GENERAL MOTORS CORPORATION.

No. 9620-9686.

United States Court of Appeals Seventh Circuit.

March 3, 1950.

Rehearing Denied April 26, 1950.

COPYRIGHT MATERIAL OMITTED

Ferris E. Hurd, Chicago, Ill., Henry M. Hogan, Detroit, Mich., Henry F. Herbermann, New York City (Daniel Boone, Detroit, Mich., Thomas C. Strachan, Jr., Chicago, Ill., Charles R. Kaufman, Chicago, Ill., of counsel), for appellants.

Thomas Dodd Healy, Harold Stickler, A. Bradley Eben, Chicago, Ill., Martin S. Gerber, Chicago, Ill. (Irving Gordon, New York City, Edward Atlas, Chicago, Ill., Healy & Stickler, Chicago, Ill., of counsel), for appellees.

Before MAJOR, Chief Judge, and KERNER and SWAIM, Circuit Judges.

KERNER, Circuit Judge.

These are appeals from treble damage judgments and a judgment for costs in a suit brought by two closely related corporations for damages alleged to have been sustained as a result of violation by General Motors and General Motors Acceptance Corporation of the Sherman Anti-Trust Act, 15 U.S.C.A. § 1 et seq. The judgments for damages entered upon the verdicts of a jury, one for $1,050,000 in favor of Emich Motors Corporation, and the other in favor of U. S. Acceptance Corporation for $186,000, are for three times the amounts of the verdicts rendered. In addition, the District Court, after hearing further evidence without a jury, entered a supplemental judgment in favor of plaintiffs for costs and expenses in the amount of $257,358.10, of which $250,000 was for attorneys' fees. Both plaintiff corporations are owned by Fred Emich: one owned two franchises for dealerships for the distribution of Chevrolet automobiles; the other is a finance company, formerly named EMC Finance Company, organized to supply credit facilities for the purchase of new and used automobiles. We shall refer to plaintiffs as Emich Motors and the Finance Company.

The suit was based on a conspiracy which had been the subject of criminal prosecution under an indictment charging that defendants, with others, had combined to restrain interstate trade and commerce in Chevrolet and other automobiles manufactured by General Motors, for the purpose of controlling the financing of wholesale and retail purchases of such automobiles by compelling dealers to use the credit facilities of its subsidiary, the General Motors Acceptance Corporation. Defendants were found guilty as charged in the indictment, and this court affirmed that conviction. United States v. General Motors Corp., 7 Cir., 121 F.2d 376, certiorari denied, 314 U.S. 618, 62 S.Ct. 105, 86 L.Ed. 497. Plaintiffs here allege that they were injured by that conspiracy in that, in furtherance thereof, defendants cancelled the franchise contracts under which Emich Motors was engaged in business, thereby destroying the business of that corporation and that of the Finance Company which derived its business from furnishing credit facilities for the purchase and sale of new and used automobiles by that corporation.

Plaintiffs relied on § 4 of the Clayton Act for their right to recover for injuries arising out of the violation of the Sherman Act for which defendants had previously been convicted, and § 5 for aid in the presentation of their case. 15 U.S.C.A. §§ 15 and 16. They therefore attached to their complaint a copy of the indictment charging the conspiracy of which defendants had been found guilty. Defendants in their answer denied that the cancellation of the two franchises had been caused by Emich Motor's refusal to use GMAC or was connected with any conspiracy or illegality. They asserted, on the contrary, that the reason for the cancellation was the violation by Emich Motors of the terms of the franchises and a course of conduct relating to customer service and financing practices resulting in serious dissatisfaction on the part of Chevrolet purchasers and justifying termination of the franchises.

Inasmuch as various questions are raised on these appeals as to the availability and applicability of the earlier proceeding to this suit we deem it advisable first briefly to set forth the facts as to the criminal suit. Our outline of these facts is largely derived from the opinion of this court affirming the judgment of conviction. In essence, the indictment charged that defendants, with others, conspired to restrain unreasonably the interstate trade and commerce in Chevrolet and other automobiles manufactured by General Motors, for the purpose of controlling the financing essential to the wholesale purchase and retail sale of such cars, and that in furtherance of this purpose the conspirators devoted themselves to concerted action by which GMAC was imposed on dealers who were engaged in the purchase and sale of General Motors cars. The specific conduct charged in furtherance of the illegal purposes was: (1) Requiring dealers to promise to use GMAC exclusively as a condition to obtaining General Motors franchises; (2) making contracts for short periods and cancellable without cause, cancelling or threatening to cancel such contracts unless GMAC facilities were used; (3) discriminating against dealers not using GMAC by refusing to deliver cars when ordered, delaying shipment and shipping cars of different number, model, color or style; (4) compelling dealers to disclose how they financed their wholesale purchases and retail sales, examining and inspecting books and accounts in order to procure this information, and requiring dealers to justify their using other financing media; (5) giving special favors to dealers using the wholesale and retail facilities of GMAC; (6) granting special favors to GMAC which were denied to other discount companies; (7) giving dealers a rebate from the GMAC financing facilities; and (8) compelling dealers to refrain from using other finance companies by all other necessary, appropriate or effective means.

Included in the evidence introduced to sustain the charge of conspiracy to compel dealers to use GMAC financing was that of thirty-eight then dealers and ten ex-dealers, including Emich whose corporations are the plaintiffs here. Emich testified that he had been a Chevrolet dealer in Chicago from 1932 to 1936, and that because he owned his own finance company which he insisted upon using for his purchases and sales, he received unordered cars and trucks and experienced other difficulties in his business which he said he was told would cease if he would give GMAC his finance business. His franchises were cancelled in 1936, and he testified that upon his appeal to the president of General Motors for reinstatement he was told that the cancellation was for his failure to use GMAC and that it was the policy of General Motors to require dealers to use the facilities of that corporation, and if he would not agree to do so it would be useless for the president of General Motors to discuss reinstatement with the appropriate Chevrolet officials.

In instructing the jury, the court pointed out the limits within which the defendants might promote GMAC, and stated that they had a right to select any dealers they saw fit, determine upon what terms to sell their cars, expound the advantages of GMAC, and persuade dealers to use it. But the court added that they could not utilize existing and prospective contracts with dealers as "clubs or instruments of coercion" to compel acceptance of GMAC, and then stated that that was in effect the fact question of the case, whether the dealer could act as a free man, of his own free will. The court further stated, in response to defendants' request for a further instruction, that it correctly stated the law: "* * * if the jurors find that General Motors dealers have been restrained as a result of an agreement entered into among the defendants, effectuated by the acts alleged in the indictment, they should find the defendants not guilty, unless they also find that the interstate trade and commerce in General Motors automobiles which moves through the retail outlet which those dealers constitute * * * have been unduly restrained as a result thereof." Further portions of the instructions, not referred to in our earlier opinion but which become significant on these appeals, were to the effect that it was not necessary for the Government to prove all of the acts alleged; that, "It is essential that they prove this conspiracy, and if you believe that the evidence is sufficient to sustain that conclusion, then you have a right to find that there is a conspiracy, but it is not essential to that conclusion that each and every one of the acts charged in the indictment shall be proved," and that, "They have a perfect right to have a finance company and to recommend its use. They have a perfect right to cancel a contract from their dealer as long as they are not performing any unreasonable act."

The jury found all corporate defendants guilty as charged in the indictment, and acquitted all individual defendants.

In presenting the case here involved, plaintiffs relied upon the judgment of conviction in the criminal case. In addition they introduced the evidence of sixteen dealer witnesses who described their own experiences with defendants, and all of whom asserted that their own dealerships were either cancelled for failure to use GMAC or continued only upon their promise to use it. Emich himself testified as to the facts alleged to have led up to the cancellations and also as to damages suffered by both his corporations. Other witnesses testified as to the matter of damages alleged to have been suffered by plaintiffs. Plaintiffs also introduced a large number of documentary exhibits, most of which were obtained from defendants' files in response to discovery and other pre-trial proceedings. Inasmuch as no question is raised as to the sufficiency of the evidence to support the verdicts on which the judgments are based, we deem it unnecessary to set forth any of that evidence here.

The serious...