General Motors Corporation v. Blevins
| Decision Date | 07 August 1956 |
| Docket Number | Civ. A. No. 5189. |
| Parties | GENERAL MOTORS CORPORATION, a Corporation, Plaintiff, v. Earl BLEVINS, as Director of Revenue and as Motor Vehicle Administrator of the State of Colorado, David Walker, as Supervisor of the Motor Vehicle Dealers' Administrator of the State of Colorado, Duke W. Dunbar, as Attorney General of the State of Colorado, and Edwin C. Johnson, Governor of the State of Colorado, Defendants. |
| Court | U.S. District Court — District of Colorado |
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Hodges, Silverstein, Hodges & Harrington, Denver, Colo., for plaintiff.
Duke W. Dunbar, Atty. Gen. of Colorado, Max D. Melville, and Fred M. Winner, Sp. Assts. to the Atty. Gen., for defendants.
Before PICKETT, Circuit Judge, and KNOUS and BREITENSTEIN, District Judges.
This is an action by General Motors Corporation against certain officials of the State of Colorado for a declaratory judgment and injunctive relief. The complaint alleges that a 1955 Act1 of the Colorado General Assembly violates various provisions of the federal and state constitutions.2
A summary of the pleadings is essential to an understanding of the issues. After the requisite jurisdictional averments the complaint states that General Motors, a Delaware corporation, is engaged in the manufacture and sale of motor vehicles and of parts, accessories and tools therefor. These are all manufactured outside of Colorado and are shipped into Colorado for sale by a distributor and automobile dealers with whom General Motors has written agreements. The shipments are in interstate commerce. General Motors operates through various divisions known as Buick Motor Division, Oldsmobile Division, Pontiac Motor Division, Chevrolet Motor Division, General Motors Truck and Coach Division, and Cadillac Motor Car Division. Each of these divisions, except Cadillac, has agreements for the sale of the products of the division with Colorado automobile dealers. These are known as Direct Dealer Selling Agreements. A copy of a typical agreement is attached to the complaint. The Cadillac Division has a distributor which sells Cadillac products at retail and also distributes them to Colorado automobile dealers with whom the distributor has written agreements. General Motors maintains factory representatives and factory branches in Colorado to make and promote sales of its products.
The Direct Dealer Selling Agreements in existence at the effective date of the law3 all bore a termination date of October 31, 1955, and provided that they might be terminated earlier under stated conditions. Provisions of the agreements which are particularly stressed relate to payment by the dealers for advertising, to the right of General Motors to select the mode of transportation of motor vehicles purchased by the dealers, and to the non-liability of General Motors for failure or delay in filling orders.
The 1955 law amended an existing statute relating to motor vehicle dealers. Among other things, the new act requires manufacturers, distributors, and their branches and representatives to secure licenses and give bonds. The cancellation of contracts between a manufacturer and dealer without an approving court order is forbidden. It is made a criminal offense for a manufacturer to induce or coerce a dealer to order or accept delivery of named items, to refuse to deliver a motor vehicle within sixty days if that motor vehicle is publicly advertised for immediate delivery, to induce or coerce a dealer to enter into an unfair agreement, to cancel an agreement unfairly and without just provocation, to deny the right of a dealer to designate the method of transportation to be used in the delivery of ordered motor vehicles, to induce or compel a dealer to make payments for advertisement or promotional activities, and to do certain other things which, so far as pertinent, will be noted later. When a manufacturer is found liable in damages to any licensee, the amount of damages "so determined shall be trebled and shall be recoverable by the licensee so damaged."
The complaint further alleges that the 1955 Act declares it unlawful for General Motors to exercise certain rights and privileges reserved to it under its Direct Dealer Selling Agreements. Such rights include the right to terminate, the right to collect payments for advertising, and the right to direct the mode of delivery of ordered motor vehicles. It is asserted that the business of selling new motor vehicles is highly competitive and that, if General Motors is to continue to operate in a profitable and economical manner, it is essential that "it be legally entitled to solicit, urge, and induce the purchase of its products by its dealers through active and vigorous sales promotion."
Various constitutional violations are charged. Among these are:
1. The Act violates the commerce clause because it is burdensome and discriminatory.
2. It is an ex post facto law.
3. It impairs the obligations of contracts.
4. It denies the equal protection of the laws.
5. It deprives General Motors of its liberty to contract and of its property without due process of law.
6. It violates the principle of separation of powers.
It is charged that the defendants, all Colorado residents, threaten to enforce the law, to compel obedience by General Motors, and to subject General Motors and its employees to fine and imprisonment for violation of the law. Enforcement of the Act, it is alleged, will result in irreparable damage to General Motors. The complaint states that the Act is not necessary, reasonable, or appropriate for the protection of the public and is an effort to "regulate wholly private business transactions with which the public is not concerned."
The prayer is for an injunction to restrain the defendants from enforcing any provision of the law against the plaintiff and for a declaratory judgment declaring the law to be void in its entirety because of unconstitutionality.
By consent, a preliminary injunction was entered on November 15, 1955.
The original answer contains a motion to dismiss because of insufficiency of facts and alleges four defenses. The first defense consists of admissions and denials of allegations of the complaint. The second asserts the coercion of its dealers by General Motors and avers that the public welfare requires the curtailment of unfair and unreasonable sales practices and that the law was enacted under the police powers of the state.
The third defense is that the dealers' contracts and other agreements and practices between General Motors and its franchised dealers are agreements and practices in restraint of trade and commerce in violation of the Clayton and Sherman Acts4 and are not entitled to the protection of the United States and Colorado Constitutions.
The fourth defense is that the relief sought is in furtherance of an illegal conspiracy in restraint of interstate trade and commerce and that General Motors may not invoke the equitable power of the Court to further such conspiracy.
On motion of General Motors the third and fourth defenses were stricken.
The amended answer withdraws the first and second defenses and realleges the fourth defense as stated in the original answer.
The third defense is completely rewritten. It states that General Motors is the largest manufacturer of motor vehicles in the world and annually ships into Colorado to Colorado motor vehicle dealers $100,000,000 worth of motor vehicles, parts, and accessories. All sales of General Motors motor vehicles in Colorado are made to franchised dealers with the intent of resale to the public. There is a public interest in the dealer agreements insofar as they may restrain trade or commerce, discriminate in price or quality, or violate Colorado laws. More than thirty per cent of all new motor vehicles sold in Colorado in 1955 were manufactured by General Motors.
It is charged that the dealer agreements lack mutuality, are unilateral in favor of General Motors, are not supported by consideration, and, as used by General Motors, constitute a restraint of interstate trade and commerce.
Defendants assert that General Motors, its officers, employees, and others have conspired and are conspiring to utilize the dealer agreements to require the franchised dealers to act in concert with General Motors to restrain and monopolize trade and commerce in various respects with the effect of lessening and suppressing competition.
On motion, the third and fourth defenses of the amended answer were stricken.
The defendants then withdrew all pending motions and elected to stand on their amended third defense and realleged fourth defense as set forth in the amended answer.
The Court set the case for trial. General Motors, before the trial date, filed a motion for default and a default judgment, or in the alternative for judgment on the pleadings.
On May 18, 1956, the matter came on for trial. General Motors introduced evidence in support of its complaint. No evidence was offered by the defendants.
When this Court sustained the motions to strike, it did not state its reasons. A proper disposition of the case makes it desirable to do so at this time.
The basic theory of the third and fourth defenses is that General Motors, by the use of its Direct Dealer Selling Agreements, has participated and is participating in a conspiracy to restrain and monopolize trade and commerce by the suppression of competition. It is said that a part of such illegal conspiracy is the prosecution of this action to uphold the dealer contracts and the present practices of General Motors in spite of the provisions of the 1955 law. Defendants argue that the motions to strike admit all facts alleged in the stricken defenses and, hence, there is an admission that General Motors has been and now is participating in an illegal conspiracy. It is urged...
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