Kotula v. Ford Motor Company

• Decision Date: 19 November 1964
• Docket Number: No. 17684.,17684.
• Citation: 338 F.2d 732
• Parties: Matt M. KOTULA, d/b/a Albany Motor Sales, Appellant, v. FORD MOTOR COMPANY, a Delaware Corporation, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

338 F.2d 732 (1964)

Matt M. KOTULA, d/b/a Albany Motor Sales, Appellant, v. FORD MOTOR COMPANY, a Delaware Corporation, Appellee.

No. 17684.

United States Court of Appeals Eighth Circuit.

November 19, 1964.

Wayne G. Popham, of Erickson, Popham, Haik & Schnobrich, Minneapolis, Minn., made argument and filed brief for appellant; Robert A. Minish, Minneapolis, Minn., of the same firm was with Wayne G. Popham on the brief.

Richard J. Leonard, of Doherty, Rumble & Butler, St. Paul, Minn., made argument and filed brief for appellee; and Wright Tisdale and J. Michael Guenther, Dearborn, Mich., of the Ford Motor Co., Dearborn, Mich., were with Richard J. Leonard, on the brief.

Before MATTHES, BLACKMUN and RIDGE, Circuit Judges.

MATTHES, Circuit Judge.

Matt M. Kotula d/b/a Albany Motor Sales, instituted this action against Ford Motor Company, under 15 U.S.C.A. §§ 1221-1225, known as the Automobile Dealers' Franchise Act, and sometimes as Automobile Dealers' Day in Court Act, seeking damages for claimed wrongful termination of his franchise agreement with defendant Ford Motor Company. Plaintiff obtained a favorable jury verdict, but the Court entered an order granting defendant's motion for judgment under Rule 50(b) Fed.R.Civ.P., and granting defendant's alternative motion for new trial under Rule 50(c) (1), Fed. R.Civ.P.¹ From the judgment entered thereon, plaintiff has appealed. His basic contention is that the evidence supports the "finding that the defendant committed acts of coercion and intimidation".

We shall refer to the parties as they were designated in the trial court, except at times defendant will be referred to as Ford.

In brief, plaintiff predicated his cause of action on the theory that defendant failed to act in "good faith" in terminating and cancelling the franchise, and that such termination resulted from coercive conduct on the part of representatives of defendant. The evidence relied upon to establish coercion and intimidation will be detailed during the course of the opinion. The defense was that the termination did not result from failure to act in good faith. The trial court, Judge Nordbye, so found in granting judgment n. o. v. and concluded "that as a matter of law * * * the termination proceedings were in no way connected with any alleged coercive tactics on the part of defendant, and were in no way tinged with any elements of coercion, duress or intimidation".

Before proceeding to a review of the pertinent facts it is desirable to direct attention to the provisions of the Act and to the interpretation thereof by the Courts.

The Act, adopted in 1956, was designed to supplement the anti-trust laws of the United States "in order to balance the power now heavily weighted in favor of automobile manufacturers". See preamble to House Report 2850, U.S. Code Cong. and Adm.News, 84th Congress, Vol. 3, p. 4596. Under 15 U.S.C.A. § 1222, an automobile dealer may bring suit in the appropriate district court of the United States without respect to the amount in controversy for the purpose of recovering damages "by reason of the failure of * * * the automobile manufacturer * * * to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, cancelling, or not renewing the franchise with said dealer: * * *." (Emphasis supplied.)

The term "good faith" shall mean the duty of each party to any franchise, their officers, employees, or agents, "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: Provided, That recommendation, endorsement, exposition, persuasion, urging or argument shall not be deemed to constitute a lack of good faith", 15 U.S.C.A. § 1221. In Milos v. Ford Motor Company, 317 F.2d 712, 715 (3 Cir. 1963) and in Globe Motors, Inc. v. Studebaker-Packard Corporation, 328 F.2d 645, 646 (3 Cir. 1964) this pronouncement appears: "The critical term is `good faith' which is defined as `the duty of each party * * * 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'". In the Globe Motors case, the Court further stated at page 646, "The statute did not provide a new remedy for breach of contract but created a new cause of action. An indispensable element of the statutory cause of action is not the lack of good faith in the ordinary sense but a lack of good faith in which `coercion, intimidation or threats' thereof are at least implicit." The legislative history and other cases use slightly different language, but with the same meaning, stating that "good faith" must be determined in the "context" of coercion or intimidation or threats thereof. See House Report 2850, U.S.Code Cong. & Adm.News, Vol. 3, page 4603; Staten Island Motors, Inc. v. American Motors Sales Corp., 169 F.Supp. 378 (D.N.J. 1959); Woodard v. General Motors Corp., 298 F.2d 121, 127, 128 (5 Cir. 1962), cert. denied, 369 U.S. 887, 82 S. Ct. 1161, 8 L.Ed.2d 288 (1962), reh. denied, 370 U.S. 965, 82 S.Ct. 1584, 8 L.Ed. 834 (1962); Garvin v. American Motors Sales Corp., 318 F.2d 518, 519 (3 Cir. 1963); Pierce Ford Sales, Inc. v. Ford Motor Company, 299 F.2d 425, 430 (2 Cir. 1962), cert. denied, 371 U.S. 829, 83 S.Ct. 24, 9 L.Ed.2d 66 (1962); Augusta Rambler Sales, Inc. v. American Motors Sales Corp., 213 F.Supp. 889, 893, 894 (N.D.Ga.1963); Blenke Brothers Co. v. Ford Motor Company, 203 F. Supp. 670, 671 (N.D.Ind.1962); Leach v. Ford Motor Company, 189 F.Supp. 349, 351 (N.D.Cal.1960); see also Kessler, Automobile Dealer Franchises: Vertical Integration by Contract, 66 Yale L.J. 1135, 1177-1180 (1957); Kessler and Stern, Competition, Contract and Vertical Integration, 69 Yale L.J. 1, 104-107 (1959); Freed, A Study of Dealers' Suits Under the Automobile Dealers' Franchise Act, Univ. of Detroit L.J., Vol. 41, 245; Note, 70 Harv.L.R. 1239, 1246-50 (1959).

We now attend to the facts. The Mid-west Region of Ford is headquartered at Chicago, Illinois, and includes the Twin City District. This District with headquarters in Minneapolis, Minnesota, includes the State of Minnesota, and is subdivided into 18 Zones and approximately 325 dealers operate therein. The franchise under consideration is located in Zone "J".

Plaintiff became a Ford dealer in 1947 in an area which is made up of the Towns of Albany and Avon, Minnesota, and surrounding territory, having a population of approximately 4000 persons. Plaintiff's place of business was located in Albany where there were also Chevrolet and Plymouth dealers. The last franchise agreement between plaintiff and defendant being the one pertinent to this action was executed April 1, 1957, and was to continue in force and effect until terminated by either party under the provisions of Paragraph 17. Paragraph 17(a) (1) of the agreement, applicable here, authorized defendant to terminate the agreement for certain causes on notice to plaintiff not less than 90 days prior to effective date of notice; Paragraph 17(a) (6) provided that because the agreement was for an indefinite term it could be terminated by defendant at will at any time on notice to plaintiff not less than 120 days prior to effective date of notice. Under the agreement, plaintiff assumed and agreed to carry out and perform the duties, obligations and responsibilities which were defined in numerous paragraphs including 2(a) relating to sales and providing in pertinent part:

"The Dealer shall promote vigorously and aggressively the sales of VEHICLES at retail, * * * in the DEALER\'S LOCALITY, making use to the greatest reasonable extent of the Company\'s advertising and sales promotions and merchandising material * * *. Whether or not the Dealer shall have vigorously and aggressively promoted such sales in the DEALER\'S LOCALITY and shall have energetically and satisfactorily developed the potentiality for such sales and obtained a reasonable share thereof, shall be determined by reference to such reasonable criteria as the Company may develop from time to time including, without limitation, in the case of VEHICLES (1) the relationship of the Dealer\'s retail sales of VEHICLES to users located in the DEALER\'S LOCALITY to (a) the total registrations of VEHICLES in such locality, (b) the fair and reasonable retail sales objectives of VEHICLES established for the Dealer for such locality, and (c) the registrations of automobiles (or trucks) of other manufacturers selected by the Company and generally competitive with VEHICLES in price and product characteristics * * * and (2) comparison of each of the relationships referred to in the foregoing clause (1) with (a) similar relationships with respect to each of not less than three (3) other authorized Ford dealers of reasonably comparable size and located in the nearest areas of sales and service responsibility reasonably comparable to the DEALER\'S LOCALITY, and (b) similar relationships with respect to the average of all authorized Ford dealers as a group in one or more of the following areas: The Company\'s zone sales area in which the Dealer is located; the Company\'s district sales area in which the Dealer is located; the Company\'s regional sales area in which the Dealer is located; and the national sales area. * * *"

On or about May 26, 1961, the District Sales Manager informed plaintiff that he was sending plaintiff's file to the Regional Office with the recommendation that his franchise be terminated. The District Office compiled a file which purported to reflect meetings between plaintiff and Ford representatives and the efforts of the representatives to improve plaintiff's performance as a dealer, the negative results obtained, and the reasons for recommending termination. The file was submitted to the designated Ford officials in Chicago and in Detroit, as required by the...