Leach v. Ford Motor Co.

• Decision Date: 01 November 1960
• Docket Number: Civ. No. 37927.
• Court: U.S. District Court — Northern District of California
• Parties: Raleigh R. LEACH et al., Plaintiffs, v. FORD MOTOR CO., a corporation, et al., Defendants.

189 F. Supp. 349

Raleigh R. LEACH et al., Plaintiffs, v. FORD MOTOR CO., a corporation, et al., Defendants.

Civ. No. 37927.

United States District Court N. D. California, S. D.

November 1, 1960.

COPYRIGHT MATERIAL OMITTED

Julian Caplan, San Francisco, Cal., Clifton Hildebrand, Hildebrand, Bills & McLeod, Oakland, Cal., for plaintiff.

Pillsbury, Madison & Sutro, San Francisco, Cal., for defendant.

SWEIGERT, District Judge.

In this case the defendant Ford Motor Company has made a motion to dismiss under two rules of this Court, Rule 41 (b) and Rule 50(a), 28 U.S.C.A. The Court has had this motion under submission since the completion of the plaintiff's presentation of its case.

The Automobile Dealers' Franchise Act, under which this case is brought, 15 U.S.C.A. §§ 1221-1225, provides in substance, Sec. 1222, that an automobile dealer may bring suit against any automobile manufacturer engaged in commerce in any district court of the United States for the failure of the automobile manufacturer from and after the passage of the Act, which was the year 1956, to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating the franchise of the dealer.

Section 1221 defines good faith as the duty of each party to the franchise to act in a fair and equitable manner toward each other so as to guarantee the other party freedom from coercion, intimidation, or threats of coercion and intimidation.

This section of the law, however, explicitly provides that recommendation, endorsement, exposition, persuasion, urging and argument shall not be deemed to constitute a lack of good faith.

In the consideration of these motions, and of the evidence before the Court, the Court has read the comparatively few cases that have come before the courts under the Act: Staten Island Motors, Inc. v. American Motors Sales Corp., D.C.N.J.1959, 169 F.Supp. 378, Pinney & Topliff v. Chrysler Corp., D.C.S.D. Cal.1959, 176 F.Supp. 801; General Motors Corp. v. Blevins, D.C., 144 F.Supp. 381; Blenke Bros. Motors, Inc. v. Chrysler Corp., D.C.Ill.1960, 189 F.Supp. 420.

In each case arising under this Act good faith must be determined in a context of coercion or intimidation, Staten Island Motors v. American Motors Sales, above cited; and Pinney v. Chrysler Corporation, above cited.

It is likewise true, however, that in evry case arising under this Act, which is primarily grounded on bad faith, any coercion or threats of coercion must be determined in a context of bad faith.

A basic allegation of Leach Company, the plaintiff in this action, is that in 1947, one Mieger, a Ford Company representative, had inquired of Leach Company concerning a partnership, which was refused, and that thereafter in the years 1946 to 1952, the so-called "sellers market", Leach Company was made a victim of unfair and discriminatory allotment of hard-to-get new cars.

Although all of this allegedly occurred many years prior to 1956, the effective year of the Automobile Dealers' Franchise Act, Leach Company was permitted to introduce evidence thereof to show a possible motivation for alleged acts of coercion by Ford Company in the years 1957 and 1958 and the eventual termination of the Leach Company franchise; also to substantiate, if possible, the allegation of Leach Company that discrimination against it in allotment of new cars in the earlier period precluded its accumulation of a sufficiently large "customer list" for valuable use in the later so-called "buyers market" from 1953 on.

Plaintiff, however, has failed to introduce any evidence sufficient to raise a reasonable inference that the so-called Mieger incident of 1947 to 1949 had any connection with the alleged acts of coercion by Ford Motor Company nearly 10 years later, nor has Leach Company introduced any evidence sufficient to support its allegation that it was in fact discriminated against in the years 1946 to 1952 with respect to the allotment of new cars.

The only evidence in this latter connection is that some other dealers in the area were allotted more cars than Leach Company, a fact which is not disputed by Ford Company. The evidence does show, however, without conflict, that Leach Company, in each of the years 1946 to 1952 received, not a smaller but a higher percentage of the cars allotted to East Bay Metropolitan Area dealers than it was thereafter expected to sell under market potentials assigned to it for the years 1954-1958. There is no evidence that would support a reasonable inference that, in relation to the situations of other dealers in the area, the allotments of new cars to Leach Company in 1946-1952 were in any respect discriminatory. On the contrary, statistical charts received in evidence, pursuant to stipulation of the parties, indicate that the allotments to Leach Company were fairly related to those of other dealers according to the historic basis of actual sales by dealers in the last pre-war year, 1941.

In any event, a finding that Leach Company was a victim of any substantial discrimination in this respect in the years 1946-1952, would have to rest upon nothing more than speculation.

A basic allegation, therefore, on which Leach Company seeks to show bad faith and explain its admitted failure to measure up to its assigned market potentials, in the so-called "buyers market" years— 1954, 1955, 1956, 1957 and 1958—falls for lack of evidence.

There is no evidence in this case to support a reasonable inference that the market potentials assigned by Ford Company to Leach Company during these years 1954-1958, as its expected share of the so-called East Bay multiple point area were unreasonable, unrealistic or coercive.

The evidence fails to show that any specific complaint was ever made by Leach Company concerning them. The statistical evidence shows that, on a population basis, the market potential of Leach Company was fairly related to those of other dealers in the area. When Leach Company claimed that its immediate trade area had deteriorated as a source for sales of new Ford cars by asserting in general terms what it considered to be an influx of low income groups, Ford Company had a test made of the area and found, according to stipulated evidence, that over 600 Fords had actually been sold in the immediate trade area of Leach Company within the test period and that Leach Company had made only 19% of such sales.

Further, the evidence is uncontradicted that in early 1957, when the Leach market potential of 4.57% (that is, of an estimated 8,750 sales in the area for the year) indicated a market potential of 400 cars a year (about 33 per month), Leach Company was asking Ford Company for 35 to 40 cars per month which, if averaged, would work out to 420 to 480 cars a year—more than its assigned market potential.

Assignment of a market potential in the course of honest business judgment by a manufacturer to a dealer as a measure of expected performance within an area is not inherently unfair or arbitrary. A market potential is not a requirement that a dealer sell a given number of cars in any event. Rather, it is a percentage factor of one dealer's share of sales by many dealers in an area. Although it is based at the beginning of any year upon "expected" sales during that year, it is subject to correction during the year by reference to "actual" sales made by all dealers in the area. Only if the percentage factor for any one dealer is out of line could he be prejudiced by the so-called market potential formula.

As already pointed out, there is no evidence here which would support a reasonable inference that the percentage factor of expected sales in the multiple point area assigned to Leach Company by Ford Company as a reasonable measure of its performance of its share of sales, was unreasonable,...