Fray Chevrolet Sales, Inc. v. General Motors Corp.

• Decision Date: 11 June 1976
• Docket Number: No. 75-1527,75-1527
• Citation: 536 F.2d 683
• Parties: 1976-1 Trade Cases 60,925 FRAY CHEVROLET SALES, INC., a Michigan Corporation, and Donald E. Fray, Plaintiffs-Appellants, v. GENERAL MOTORS CORPORATION, et al., Defendants-Appellees.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 683

536 F.2d 683

1976-1 Trade Cases 60,925

FRAY CHEVROLET SALES, INC., a Michigan Corporation, and Donald E. Fray, Plaintiffs-Appellants, v. GENERAL MOTORS CORPORATION, et al., Defendants-Appellees.

No. 75-1527.

United States Court of Appeals Sixth Circuit.

Argued Dec. 16, 1975.

Decided June 11, 1976.

Rene J. Ortlieb, Guy H. Hill, Flint, Mich., for plaintiffs-appellants.

William W. Wumkes, Flint, Mich., for GM.

Allison K. Thomas, Lansing, Mich., for Andrews.

Before PHILLIPS, Chief Judge, and PECK and MILLER, ^* Circuit judges.

JOHN W. PECK, Circuit Judge.

Plaintiffs-appellants, formerly the corporate Chevrolet franchisee at Mason, Michigan, and the franchisee's sole shareholder, claimed in their district court complaint that defendant-appellee General Motors' refusal to approve the transfer of the franchise to one Joslin violated the Automobile Dealers' Day in Court Act, 15 U.S.C. §§ 1221-1225. ¹ They also claimed GM conspired with defendants-appellees Andrews Chevrolet Sales, Inc., and Andrews to prevent the transfer to Joslin, thereby violating the Sherman Antitrust Act, 15 U.S.C. § 1.

Appellants charged that GM refused to approve the transfer to Joslin, not because he was unqualified, ² but because GM had "promised" the franchise to Andrews, purportedly for GM's intracorporate reasons. ³ By GM's refusal to approve the transfer to Joslin, appellants claim that they lost the benefits of a favorable lease and of a sale of their dealership properties (to wit, accessories, gas, parts, tires, shop equipment, fixtures) to Joslin for $137,000, the transactions being "subjected to (Joslin's) approval" by GM. Joslin and appellants failing to consummate the sale because the dealership properties were substantially less valuable to one lacking a GM franchise, appellants thereafter sold their dealership properties for $82,000 to Andrews, the "approved" transferee.

The district court, after some discovery procedures, granted appellee's motion for summary judgment, reasoning that there was no day-in-court claim because, rather than being terminated, Fray Chevrolet voluntarily terminated its franchise and because Fray Chevrolet could have sold its dealership properties anyway to Joslin, and that there was no antitrust claim because, inter alia, there was no proof of public injury, the claimed conspiracy not "reasonably calculated to prejudice the public interests by unreasonably suppressing the free flow of trade or commerce . . . ." We affirm.

The day-in-court statute imposes upon GM a duty "to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise . . . ." (emphasis supplied) 15 U.S.C. § 1222. Even if the district court was correct in finding no statutory termination, its view being that those terminations must be manufacturer-initiated, compare Salco Corp. v. General Motors Corp., 517 F.2d 567, 571 (10th Cir. 1975), and Pinney & Topliff v. Chrysler Corp., 176 F.Supp. 801 (S.D.Calif.1959), with Hanley v. Chrysler Motors Corp., 433 F.2d 708 (10th Cir. 1970), and American Motors Sales Co. v. Semke, 384 F.2d 192, 195 (10th Cir. 1967), the statutory good faith duty still applies because, in approving or refusing to approve the transfer, GM "perform(s) . . . with (a) term . . . or provision . . . of the franchise," see Hanley, supra, TomSullivan Porsche Audi Co. v. SCU Industries, Inc., 342 F.Supp. 738, 741 (E.D.Mich.1972), to wit, Section 25 of the Additional Provisions applicable to Chevrolet Dealer Selling Agreement, which provides:

"Dealer shall not transfer or assign nor attempt to transfer or assign this Agreement or any right or obligation hereunder without the prior written consent of Chevrolet executed by the General Sales Manager or an Assistant General Sales Manager of Chevrolet."

Thus, the statutory duty of good faith applies to GM's refusal to approve or approval of the transfer. But dismissal was proper because there was "no genuine issue . . . (of) material fact" concerning the lack of statutory good faith. Fed.R.Civ.P. 56(c). Good faith is restrictively defined in 15 U.S.C. § 1221(e) as meaning

"the duty of each party to any franchise . . . to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party . . . ."

In the absence of coercion, intimidation, or threats thereof, there can be no recovery through the day-in-court statute, see, e. g., Salco, supra, 517 F.2d at 573; Lawrence Chrysler Plymouth, Inc. v. Chrysler Corp., 461 F.2d 608, 610 (7th Cir. 1972); Kotula v. Ford Motor Co., 338 F.2d 732, 734 (8th Cir. 1964), cert. denied, 380 U.S. 979, 85 S.Ct. 1333, 14 L.Ed.2d 273 (1965); Milos v. Ford Motor Co., 317 F.2d 712, 715-16 (3rd Cir.), cert. denied, 375 U.S. 896, 84 S.Ct. 172, 11 L.Ed.2d 125 (1963); Woodard v. General Motors Corp., 298 F.2d 121 (5th Cir.), cert denied, 369 U.S. 887, 82 S.Ct. 1161, 8 L.Ed.2d 288 (1962); Kaiser v. General Motors Corp., 396 F.Supp. 33 (E.D.Pa.1975); Cecil Corley Motor Co. v. General Motors Corp., 380 F.Supp. 819, 843-48 (M.D.Tenn.1974), even if the manufacturer otherwise acted "in 'bad faith' as that term is normally used." Overseas Motors, Inc. v. Import Motors Ltd., 519 F.2d 119, 125 (6th Cir.), cert. denied, 423 U.S. 987, 96 S.Ct. 395, 46 L.Ed.2d 304 (1975). Accord, Daigle-McInnis v. American Motors Sales Corp., 1974-2 CCH Trade Cas. P 75,195 (M.D.La.1974); Berry Bros. Buick, Inc. v. General Motors Corp., 257 F.Supp. 542, 546 (E.D.Pa.1966), aff'd, 377 F.2d 552 (3rd Cir. 1967).

"(T)he act of dealer designation in and of itself cannot be treated as a coercive act, even though Chevrolet's appointment of McClintock made it difficult for Frank Chevrolet to sell its assets to another person or to secure its desired price from McClintock. . . . "

Frank Chevrolet v. General Motors Corp., 304 F.Supp. 307, 316 (N.D.Ohio 1968), aff'd, 419 F.2d 1054 (6th Cir. 1969). See Pierce Ford Sales, Inc. v. Ford Motor Co., 299 F.2d 425, 430 (2d Cir.), cert. denied, 371 U.S. 829, 83 S.Ct. 24, 9 L.Ed.2d 66 (1962); but see Semke, supra, 384 F.2d at 198.

Coercion or intimidation must include "a wrongful demand which will result in sanctions if not complied with." Ship & Shore Motors, Inc. v. British Leyland Motors, Inc., 74-1 CCH Trade Cas. P 75,102 (D.N.J.1974). See, e. g., Randy's Studebaker Sales, Inc. v. Nissan Motor Co., 533 F.2d 510 (10th Cir. 1976) (reduce price competition and make certain capital expenditures or risk curtailed supply of automobiles), David R. McGeorge Co. v. Leyland Motor Sales, Inc., 504 F.2d 52 (4th Cir.), cert. denied, 420 U.S. 992, 95 S.Ct. 1430, 43 L.Ed.2d 674 (1974) (order certain unwanted models or risk being refused other models), Semke, supra, 384 F.2d at 196-97 (order certain unwanted models or risk being refused other models), Don Richards Lincoln Mercury Jeep, Inc. v. American Motors Corp., 1976 CCH Trade Cas. P 60,796 (D.Utah 1976) (relocate and carry "full line" or be terminated), De Filippo v. Ford Motor Co., 378 F.Supp. 456 (E.D.Pa.1974), rev'd on other grounds, 516 F.2d 1313 (3rd Cir. 1975) (sign general waiver or be terminated). But appellants fail to claim that GM warned them to transfer the franchise or risk termination; there was no "either-or" attempt at coercion or intimidation. That appellants "mere(ly) . . . felt (themselves) coerced is not sufficient." Ship & Shore, supra, citing General Motors Corp. v. Mac Company, 247 F.Supp. 723, 726 (D.Colo.1965).

Likewise, we sustain the district court's dismissal of the antitrust claim because "(t)he substitution of one distributor (Andrews) for another (Fray) . . . does not eliminate or materially diminish the existing competition . . . and, in our opinion, is not an unreasonable restraint of trade." Ace Beer Distributors, Inc. v. Kohn, Inc., 318 F.2d 283, 287 (6th Cir.), cert. denied, 375 U.S. 922, 84 S.Ct. 267, 11 L.Ed.2d 166 (1963). Accord, Dreibus v. Wilson, 529 F.2d 170, 172-74 (9th Cir. 1975); Burdett Sound, Inc. v. Altec Corp., 515 F.2d 1245 (5th Cir. 1975); Daigle-McInnis, supra, 1974-2 CCH Trade Cas. P 75,195; B & B Oil & Chemical Co. v. Franklin Oil Corp., 293 F.Supp. 1313, 1317 (E.D.Mich.1968) (granting summary judgment...