Ford Motor Co. v. Darling'S

• Citation: 2016 ME 171
• Decision Date: 29 November 2016
• Docket Number: Docket: BCD-14-433
• Parties: FORD MOTOR COMPANY v. DARLING'S et al.
• Court: Maine Supreme Court

2016 ME 171

FORD MOTOR COMPANY v. DARLING'S et al.

Docket: BCD-14-433

MAINE SUPREME JUDICIAL COURT

Argued: September 17, 2015

November 29, 2016

Reporter of Decisions

Panel: SAUFLEY, C.J., and MEAD, GORMAN, JABAR, and HJELM, JJ.

HJELM, J.

[¶1] This is the second appeal in a long-running dispute arising out of the franchise relationship between Ford Motor Company and Darling's, an automobile dealer located in Bangor. See Ford Motor Company v. Darling's (Ford I), 2014 ME 7, 86 A.3d 35. The relationship is subject to the Business Practices Between Motor Vehicle Manufacturers, Distributors, and Dealers Act (Dealers Act), 10 M.R.S. §§ 1171 to 1190-A (2015).¹ In Ford I, we affirmed the portion of a judgment entered in the Business and Consumer Docket (BCD) (Nivison, J.) that concluded that Ford violated the Dealers Act by failing to provide Darling's with proper notice of a franchise modification. We vacatedan award of damages that had been issued to Darling's by the Maine Motor Vehicle Franchise Board, however, because the Board does not have jurisdiction over that issue. Accordingly, we remanded the matter for a determination of damages by a jury.

[¶2] On remand, following a two-day jury trial, the court (Murphy, J.) entered a judgment awarding Darling's damages of $154,695.81 based on Ford's violation of the statutory notice provision. Darling's and the Maine Automobile Dealers Association (MADA) now appeal from that decision, arguing that the court erred by limiting Darling's damages claim to a 270-day period and by reducing those damages based on certain payments that Darling's received from Ford. Ford cross-appeals, arguing that if we remand this matter for a new trial, Ford should be entitled to present evidence that it had "good cause" to modify the franchise, which would either further limit or foreclose any recovery by Darling's.² We affirm the judgment in part but vacate in part and remand to the BCD for a new trial on the issue of damages.

I. BACKGROUND

[¶3] The following facts, set out in part in Ford I, 2014 ME 7, 86 A.3d 35, bear on the issues raised in this appeal.

[¶4] Ford Motor Company, a manufacturer/franchisor, sells automobiles through contractual agreements with dealers/franchisees such as Darling's. In 1989, Darling's and Ford entered into a service and sales agreement under which Darling's became an authorized Ford dealer and obtained the right to sell Ford vehicles and products.

[¶5] In 2000, Ford created the Blue Oval Certified (BOC) program, which provided a special certification to dealers that met customer approval standards and entitled those dealers to receive a 1.25% cash bonus on the retail price of each vehicle the dealer sold. Darling's became certified as a BOC dealer in 2001. In August 2004, Ford announced that it would discontinue the 1.25% payments effective April 1, 2005.³ After Ford stopped making BOC payments, it introduced new incentive programs including an "Accelerated Sales Challenge" (ASC).

[¶6] In response to Ford's actions, in December 2006 Darling's filed a twelve-count complaint with the Maine Motor Vehicle Franchise Board, see 10 M.R.S. § 1188(1), alleging that Ford had committed various violations of the Dealers Act. Darling's alleged, among other things, that Ford's termination of BOC payments constituted a modification of the franchise that substantially and adversely affected Darling's rights, obligations, investment or return on investment, and that Ford therefore violated 10 M.R.S. § 1174(3)(B) by failing to provide Darling's with proper notice of the modification. Because of Ford's statutory violation, Darling's sought damages equal to the loss of what it described in its complaint as contract-based BOC payments that Ford failed to make.

[¶7] In May 2008, the Board issued a decision concluding that Ford violated the Dealers Act because it had not given Darling's the type of notice of the decision that was statutorily required in order to discontinue the BOC payments. The Board imposed a civil penalty of $10,000 and awarded Darling's damages of $145,223.08. Those damages represented the amount of BOC payments that Darling's would have earned during a 270-day period beginning on April 1, 2005, when Ford stopped making the payments, less the amount that Darling's had earned through other incentive programs, including the ASC program, during that same period. The Board arrived at the 270-day damages period by combining the ninety-day period within which a dealer may file a protest with the Board after receiving notice of a manufacturer's proposed modification of the franchise with the subsequent 180-day period within which the Board must decide the matter. See 10 M.R.S. § 1174(3)(B).

[¶8] Pursuant to M.R. Civ. P. 80C, both Ford and Darling's filed separate petitions in the Superior Court for review of the Board's decision.⁴ Among other things, Ford sought modification and reversal of the Board's decision regarding the adequacy of Ford's notice to Darling's, and Darling's argued that the Board erred by limiting its recovery to damages incurred during the 270-day statutory period and also by offsetting those damages by the amount Darling's received through other sales incentive programs. The petitions were consolidated and transferred to the BCD. There, MADA sought and was granted intervenor status.

[¶9] In March 2011, a jury trial was held on the factual question of whether discontinuation of the BOC payments constituted a modification ofthe franchise that had a substantial and adverse effect on Darling's investment or return on investment, and the jury returned a verdict favorable to Darling's. By agreement of the parties, the court (Nivison, J.) did not submit the issue of damages to the jury but rather exercised its appellate jurisdiction and reviewed the administrative record to determine whether that record supported the Board's damages award. Based on the jury's verdict and the court's legal conclusion that Ford failed to provide notice to Darling's in a way that complied with section 1174(3)(B), the court issued orders affirming both the Board's award of one civil penalty pursuant to 10 M.R.S. § 1171-B(3) and the Board's damages award.

[¶10] On appeal by Darling's and MADA, and cross-appeal by Ford, we affirmed most aspects of the judgment, including the conclusions that Ford's termination of BOC payments was a franchise modification that triggered the ninety-day notice requirement under the Dealers Act, and that Ford did not satisfy that requirement. See Ford I, 2014 ME 7, ¶¶ 27, 31, 86 A.3d 35. We held, however, that pursuant to 10 M.R.S. § 1188, the Board lacks jurisdiction to award damages for violations of the Act. Id. ¶¶ 43, 46. We therefore vacated that portion of the judgment affirming the Board's award of damages and remanded the matter to the BCD for a determination of damages by a jury. Id. ¶¶ 3, 48.

[¶11] Despite the Board's finding, which we affirmed in Ford I, that Ford had not provided Darling's with effective notice of the franchise modification, Ford chose to not cure the problem. During the remand proceedings, Ford explained to the court that for "business reasons" it had not given Darling's statutorily sufficient notice so as to not invite similar challenges from other dealers. The consequence of Ford's continuing refusal to provide the required notice was that Darling's did not have an opportunity to file a protest, which would have triggered the Board's responsibility to determine whether there was good cause for the proposed franchise modification. See 10 M.R.S. § 1174(3)(B). Nonetheless, Ford argued that it should be entitled to present evidence of whether it had good cause to modify the franchise as a part of the trial on the issue of damages.

[¶12] In response, Darling's moved in limine for a court order precluding Ford from arguing that it had good cause to modify the franchise. The court granted Darling's motion, concluding that whether Ford had good cause for the termination was not relevant to the determination of damages because Ford had not satisfied the statutory prerequisite necessary to raise that issue—namely, providing Darling's with proper notice of the modification. The court further concluded that "[a]llowing Ford to adjudicate the question of 'good cause' absent compliance with section 1174(3)(B)'s notice requirement would run counter" to the purpose of the Dealers Act.

[¶13] Additionally, the court issued a pretrial ruling that, as a matter of law, Darling's damages arising from Ford's violation of the statutory notice provision are limited to the 270-day period following the discontinuation of BOC payments on April 1, 2005. The court also ruled that the jury would decide as a factual issue whether payments made under new sales incentive programs were a substitute for the discontinued payments under the BOC program, and that Ford was entitled to present evidence on that issue.

[¶14] A two-day jury trial was held in September 2014, where the parties stipulated that if the BOC payments had continued for the 270-day period beginning April 1, 2005, Darling's would have received the sum of $212,570.81 from Ford, and that during that same period, Darling's received incentive payments of $57,875 under the ASC program. The court instructed the jury that Ford's liability had already been established, but that Darling's had the burden of proving damages resulting from Ford's statutory violation. The court also instructed the jury on the issue of substitute payments as an offset to Ford's discontinuation of payments under the BOC program.

[¶15] The jury returned a verdict that determined gross damages, consistent with the parties' stipulation, equivalent to the amount of BOC payments that Ford did not pay Darling's for 270 days. The jury also found that during that period, Darling's received incentive payments of $57,875 under the ASC program, and that those payments were a substitute for the BOC payments. Based on the jury's...