John Peterson Motors, Inc. v. General Motors Corp.

• Citation: 613 F. Supp. 887
• Decision Date: 12 July 1985
• Docket Number: Civ. No. 4-85-139.
• Parties: JOHN PETERSON MOTORS, INC., a Minnesota Corporation, and Donald John Peterson, a resident of the State of Minnesota, Plaintiffs, v. GENERAL MOTORS CORPORATION and General Motors Acceptance Corporation, Defendants.
• Court: U.S. District Court — District of Minnesota

613 F. Supp. 887

JOHN PETERSON MOTORS, INC., a Minnesota Corporation, and Donald John Peterson, a resident of the State of Minnesota, Plaintiffs, v. GENERAL MOTORS CORPORATION and General Motors Acceptance Corporation, Defendants.

Civ. No. 4-85-139.

United States District Court, D. Minnesota, Fourth Division.

July 12, 1985.

COPYRIGHT MATERIAL OMITTED

Ronald B. Sieloff, William A. Bierman, Michael Dittberner, Sieloff & Bierman, St. Paul, Minn., for plaintiff.

James S. Simonson, Gray, Plant, Mooty, Mooty & Bennett, Minneapolis, Minn., and William B. Slowey and Judith Cottier, Asst. General Counsel, General Motors Corp., Detroit, Mich., for defendant General Motors Corp.

Clay R. Moore and Robert S. Lee, Mackall, Crounse & Moore, Minneapolis, Minn., for defendant General Motors Acceptance Corp.

MEMORANDUM OPINION AND ORDER

DIANA E. MURPHY, District Judge.

Plaintiffs John Peterson Motors, Inc. (JPM) and Donald John Peterson, brought this action against defendants General Motors Corporation (GM) and General Motors Acceptance Corporation (GMAC), alleging violations of federal and state antitrust laws, the Automobile Dealers Suits Against Manufacturers Act (Dealers' Act), 15 U.S.C. §§ 1221-1225, the Racketeering Influenced and Corrupt Organization Act (RICO), 18 U.S.C. §§ 1961-1968, and various state laws, including the Minnesota Motor Vehicle Sale and Distribution Regulations Act (Minnesota Motor Vehicle Act), Minn.Stat. §§ 80E.01-80E.18, fraud, misrepresentation, breach of contract, promissory estoppel and tortious interference with business relationships. Plaintiffs seek treble damages under the antitrust laws, along with compensatory and punitive damages and injunctive relief. Jurisdiction is alleged under 15 U.S.C. §§ 15, 26 and 1222, 18 U.S.C. § 1964, 28 U.S.C. §§ 1331, 1332, and 1337, and pendent jurisdiction. The matter is now before the court upon the motion of plaintiffs for a preliminary injunction¹ and defendants' motions to dismiss several portions of the complaint for failure to state a claim upon which relief may be granted or for lack of standing, or in the alternative, an order requiring a more definite statement or partial summary judgment.

Background

JPM, a Minnesota corporation currently a debtor in a Chapter 11 bankruptcy proceeding,² is a GM franchised automobile dealership which sells and services new Oldsmobile, Cadillac, Buick, Pontiac, and Chevrolet motor vehicles. JPM also sells and services used motor vehicles. It is located in Lake City, Minnesota. Plaintiff Donald John Peterson (Peterson), a resident of Lake City, Minnesota, is the President, sole director, and sole shareholder of JPM. Defendant GM is a Delaware corporation engaged in the business of manufacturing and selling the motor vehicles listed above to franchised retail dealers. GMAC, a New York corporation, provides wholesale floor financing and retail financing of new and used motor vehicles.

JPM and GMAC have each submitted an extensive statement of facts and JPM has submitted many affidavits and depositions. GM has also submitted affidavits, but it asserts that the "vast differences" which exist between the parties as to the facts are largely immaterial under applicable law. Since GM's presentation concentrated mainly on the legal issues, the summary of the background to the litigation has been taken mostly from submissions of JPM and GMAC.

On October 24, 1980, JPM and GMAC entered into both wholesale floor planning and retail customer financing agreements. Shortly after, JPM entered into five year GM Sales and Service Agreements with the Cadillac, Buick, Oldsmobile, Pontiac, and Chevrolet motor divisions. From late October, 1980 until about February 28, 1983, JPM operated as a "conventional" dealer selling motor vehicles from purchased inventory for a negotiated price with the retail consumer. JPM states that at this time it became apparent that the economy in the local trade area could not support JPM's business and that sales had to be cultivated from other areas.

GMAC contends, on the other hand, that the reasons for JPM's poor financial condition in February, 1983 are attributable solely to internal conditions within the dealership. It states that in the period between December 1982 — January 1983, Peterson began a series of lengthy absences from the dealership. According to GMAC, in January of 1983, the financial situation became desperate and the dealership sold several vehicles and delayed payment to GMAC for up to two weeks, a condition referred to as being "out-of-trust,"³ and double-financed one vehicle. See, depo. of Dittrich, JPM's sales manager at that time, p. 67.

On February 28, 1983, JPM launched a new marketing concept commonly known as "$49 over". Traditionally, auto dealers advertise and sell motor vehicles based either on an offered price or on a discount from "sticker price", which is the manufacturer's suggested retail price. In most cases, the factory invoice price, which is the dealer's cost with some modifications, is not disclosed to the retail customer. The "$49 over" concept discloses the amount of factory invoice to any potential customer, and the dealer then adds $49 to that price. JPM states that this approach allows the dealer to quote prices over the phone on any motor vehicle in the GM product line, reduces dealer costs because little inventory is carried since all motor vehicles ordered from GM are "bona fide pre-sold customer orders," and enables the retail customer to buy a vehicle at a highly competitive price, without the "gimmicks, dickering, and high pressure" found at most retail car dealers. Aff. # 1 of Donald John Peterson, ¶ VII.

GM asserts that this "$49 over" plan conflicts sharply with its marketing strategy. GM believes that it is in its pro-competitive interest to establish a network of local businesses which can provide to potential customers convenient access to sales and service. GM asserts that the nature of cars and trucks as costly, complex, mobile products requires larger capital investment at the retail level, sophisticated pre- and post-sale servicing, promotion and consumer education. Accordingly, it states that the number, location, and size of the dealerships are determined by analysis of each marketing area, and that it allocates the vehicles produced at its factories among its dealers to accomplish its overall marketing strategy. GM asserts that JPM, with its "$49 over" strategy, takes a "free ride" on the full service dealer's service, promotion, and marketing expenditures.

Plaintiffs assert that prior to JPM's adoption of this new marketing strategy, its relationships with GM and GMAC were good. GMAC conducted monthly audits of the dealership inventory, as is commonly done in the auto business. No demands for recapitalization were made, although JPM admits that it was undercapitalized by GMAC standards. Plaintiffs state that JPM was never accused of being out-of-trust before it began the "$49 over" plan, and that GM delivered all cars ordered by JPM.

JPM asserts that its relationship with GM and GMAC changed drastically as soon as JPM implemented its "$49 over" concept. Peterson states that Al Connors, Assistant Zone Manager for Chevrolet, and Jack McKenna, Business Manager for Chevrolet, were "noticeably alarmed" when he first mentioned the "$49 over" program to them in late February 1983.

Plaintiffs have submitted several affidavits which state that Terry Dittrich, JPM's sales manager at that time, received a telephone call or calls from several GM agents around the time JPM began the "$49 over" program. According to plaintiffs, the Assistant Zone Manager for Chevrolet telephoned Dittrich and told him that JPM was in a lot of trouble, that GM did not like the "$49 over" program and that Dittrich "ought to get out while the getting was good." See Peterson aff. # 1; aff. of Carol A. Proud. Peterson states that GM told Dittrich that it needed Dittrich's assistance in closing JPM down and implied that Dittrich would get the franchise. Peterson aff. # 1, ¶ IX. Peterson also states that Roland Siembab, Assistant Branch Manager of GMAC, then called Dittrich and solicited financial information from him. Dittrich denied these assertions in his deposition. Peterson charges that GMAC was hoping to find JPM out-of-trust so it could cut off financing to it.

GMAC states that in early March, 1983, while conducting an audit of another dealer in Red Wing, Minnesota, the GMAC auditor, Donald Houck, heard a rumor that JPM was double-financing vehicles, i.e. using the same vehicle as collateral for more than one wholesale floor plan. GMAC asserts that Houck requested an inventory audit of JPM for March 9, 1983, and then met with Dittrich, who had quit JPM on February 29, 1983, approximately one day after the "$49 over" program went into effect, in Lake City. Dittrich told Houck, according to GMAC, that JPM was out-of-trust. Dittrich also said that JPM had taken back one vehicle from a customer who had financed the vehicle with GMAC, resold the vehicle to another customer, and subsequently made payments to GMAC on the customer's behalf. GMAC asserts that these are violations of the terms of the GMAC Retail Plan.

On March 9, 1983 GMAC came to JPM to undertake an audit. The parties' versions of the events and circumstances of the audit differ drastically. Peterson, in his first affidavit, claims that he was virtually held captive in his office and interrogated while agents of GMAC ransacked all of the dealership records. He states that Roland Siembab, Assistant Control Branch Manager for GMAC, announced upon arrival, "This is an official closing!" He states that GMAC employees were on the premises for seven hours and asked him many questions about the "$49 over" plan. Peterson also asserts that GMAC embarrassed him by taking him to the local bank and demanding certified checks for all cars sold. Peterson aff. # 1 at 6, 7.

GMAC, by contrast, states that the...