LJ Dreiling Motor Co. v. Peugeot Motors, Civ. A. No. 81-C-911.

• Decision Date: 08 January 1985
• Docket Number: Civ. A. No. 81-C-911.
• Citation: 605 F. Supp. 597
• Parties: L.J. DREILING MOTOR COMPANY, Plaintiff, v. PEUGEOT MOTORS OF AMERICA, INC., et al., Defendants.
• Court: U.S. District Court — District of Colorado

605 F. Supp. 597

L.J. DREILING MOTOR COMPANY, Plaintiff, v. PEUGEOT MOTORS OF AMERICA, INC., et al., Defendants.

Civ. A. No. 81-C-911.

United States District Court, D. Colorado.

January 8, 1985.

Richard B. Podoll, Podoll & Podoll, P.C. and Hugh A. Burns, Burns & Figa, P.C., Denver, Colo., for plaintiff L.J. Dreiling Motor Co. Philip E. Johnson, Mosley, Wells & Johnson, P.C., Denver, Colo., for defendant Peugeot Motors of America, Inc.

John B. Moorhead, Baker & Hostetler, Denver, Colo., for defendant Chrysler Corp.

MEMORANDUM OPINION AND ORDER

CARRIGAN, District Judge.

This action was commenced by the L.J. Dreiling Motor Company, Inc. ("Dreiling") against the Peugeot Corporate Family ("Peugeot")¹ and Chrysler Corporation ("Chrysler") for damages allegedly resulting from Dreiling's termination as a Peugeot franchisee. The original complaint, filed June 5, 1981, has gone through several transformations. The Fourth Verified Amended Complaint (hereafter "Complaint"), filed February 17, 1983, is currently at issue. In this Complaint, the plaintiff asserts four claims for relief: 1) contracts, combinations or conspiracies among the defendants unreasonably restraining trade in violation of section 1 of the Sherman Act, 15 U.S.C. § 1; 2) an unlawful merger and acquisition between Chrysler and Peugeot, S.A. ("PSA") in violation of section 2 of the Sherman Act, 15 U.S.C. § 2, and section 7 of the Clayton Act, 15 U.S.C. § 18; 3) breach of contract by Peugeot Motors of America, Inc. ("PMA"); and 4) interference with contractual relations by Chrysler.

PMA has moved for summary judgment on the three claims asserted against it.² Chrysler has moved for judgment on the pleadings or, in the alternative, for summary judgment on the three claims asserted against it. Dreiling has moved for partial summary judgment on the issue whether the conduct of Lou Bartlett, a former employee, can be imputed to it; this issue relates to the breach of contract claim.

Following extensive discovery, the parties filed comprehensive briefs and presented their respective positions through oral argument.

1. Facts and Claims.

The L.J. Dreiling Motor Company was an authorized Peugeot dealership from May 1975 to June 1981. In 1981, the company also operated Renault and International Harvester dealerships. Peugeot Motors of America terminated the franchise on the asserted ground that Dreiling had submitted approximately $32,000 worth of fraudulent warranty claims in violation of the dealership agreement. Dreiling admits that its service manager, Lou Bartlett, submitted these claims but denies that Lloyd J. Dreiling, its president, or Steven J. Dreiling, its secretary-treasurer, had knowledge of or participated in submitting them.

In 1978, Chrysler acquired fifteen percent of PSA's stock. On February 5, 1980, Chrysler and Peugeot executed a "Memorandum of Intent" providing for industrial cooperation in the development and manufacture of a new small car, commercial cooperation in the distribution of Peugeots in the United States and Canada, and a short term loan of $100,000,000 to Chrysler Corporation. On May 30, 1980, Chrysler and Peugeot entered into an Agreement formalizing and elaborating upon certain aspects of the Memorandum of Intent. Chrysler agreed to furnish consulting services and market representation assistance to Peugeot in furtherance of Peugeot's goal to expand its sales in the United States market. Chrysler also indicated a willingness to assist Peugeot in various functional aspects of importation and distribution of Peugeot products and to furnish technical, engineering and design assistance to Peugeot. These matters, however, were subject to further negotiation and subsequent agreements. Peugeot agreed to pay Chrysler, for its consulting services, an annual fee of $300,000 plus five percent of the net dealer invoice price of each vehicle sold by Peugeot to Chrysler dealers who would become Peugeot dealers during the term of the agreement.

Dreiling asserts that its termination as a Peugeot franchisee on June 21, 1981 was part of a nationwide scheme between Peugeot and Chrysler systematically to terminate existing Peugeot dealers and replace them with Chrysler dealers. Dreiling asserts that this scheme was effectuated in its particular case by PMA's creation of a pretext for termination. According to Dreiling, PMA either engineered, or participated in, submission of the fraudulent warranty claims upon which PMA based its termination of Dreiling's dealership.

PMA, on the other hand, asserts that it lawfully terminated Dreiling because Dreiling had breached its dealership agreement by submitting the fraudulent warranty claims. Peugeot and Chrysler admit that Chrysler agreed to assist Peugeot to expand its sales in the United States market through Chrysler's dealer network. They assert, however, that neither the purpose nor the effect of the agreement was the systematic replacement of existing Peugeot dealers with Chrysler-Peugeot dealers. Rather, Peugeot was to evaluate existing Peugeot dealers on a dealer by dealer basis and similarly evaluate Chrysler dealers recommended by Chrysler for Peugeot franchises. Chrysler denies that it played any part in Dreiling's termination.

2. Propriety of Summary Judgment in Antitrust Litigation.

In Perington Wholesale, Inc. v. Burger King Corp., 554 F.Supp. 708, 710 (D.Colo. 1982), Judge Matsch addressed the propriety of summary judgment in antitrust litigation:

"It is axiomatic that summary judgments in antitrust litigation are to be used sparingly and are seldom justified .... However, `the mere allegations of a contract, a combination, or a conspiracy, for the purpose of restraining trade or commerce, and resulting damages, once rebutted, will not withstand summary judgment.' ... Where the court has permitted extensive discovery, and where the requirements of Rule 56 are satisfied, the court may properly grant the motion in an antitrust setting .... `Indeed, the very nature of antitrust litigation would encourage summary disposition of such cases when permissible. Not only do antitrust laws often encompass a great deal of expensive and time consuming discovery and trial work, but also ... the statutory private antitrust remedy of treble damages affords a special temptation for the institution of vexatious litigation .... If a trial would serve no useful purpose, summary judgment is proper.'" (citations omitted)

Discovery has been extensive. Plaintiffs served hundreds of written interrogatories and requests for production of documents on Peugeot. Seventeen depositions have been taken, ten by Dreiling and seven by Peugeot. At the preliminary injunction hearing on June 26, 1981, ten witnesses testified for about six hours. Numerous affidavits and exhibits have been submitted by both sides in support of various motions. While one would not measure the worth of the Mona Lisa by the weight of the paint, it merits notice that the court file in this case is approximately fifteen inches thick, and this does not include most of the documents produced by discovery.

On May 4, 1983, Peugeot moved for a protective order staying further discovery, in particular the plaintiff's third request for production of documents and twelve noticed depositions of persons at the national levels of Chrysler and Peugeot, including the president of Chrysler Corporation, the president of Peugeot Motors of America, the president of Peugeot, S.A., and the chairman of the board of Peugeot, S.A. The motion for protective order was granted pending resolution of the summary judgment motions. All of the proposed discovery appears to have been directed to elucidation of the scope and contours of the alleged agreement between Chrysler and Peugeot to replace existing Peugeot dealers with Chrysler dealers. Virtually all of the discovery so far completed concerns this issue. Although Dreiling had not yet conducted any analysis of the alleged agreement's effect on competition, none of the additional proposed discovery appears to be directed to that issue.³

As will be demonstrated below, the plaintiff's antitrust claims ultimately must fail because it has not shown, nor even attempted to show, that the alleged agreement has affected competition in a way that constitutes an unreasonable restraint of trade or tends to create a monopoly. I conclude, therefore, as a preliminary matter, that the discovery completed to date has been extensive and that Dreiling is not significantly prejudiced by the decision of these summary judgment motions before completion of the additional proposed discovery. Thus it is appropriate to consider the merits of the summary judgment motions.

3. Section 1 of the Sherman Act.

Section 1 of the Sherman Act, 15 U.S.C. § 1, prohibits "every contract, combination ..., or conspiracy, in restraint of trade or commerce." Peugeot and Chrysler undeniably entered into an agreement, though the scope of the agreement is in dispute. Obviously, an agreement alone does not violate the Sherman Act. Section 1 of the Sherman Act is violated only if the purpose or effect of the agreement is to restrain trade.

A restraint of trade is either per se illegal or is to be judged under the rule of reason. The Supreme Court explained in Continental T.V., Inc. v. GTE Sylvania Inc., 433 U.S. 36, 49, 97 S.Ct. 2549, 2557, 53 L.Ed.2d 568 (1977):

"Since the early years of this century a judicial gloss on this statutory language has established the `rule of reason' as the prevailing standard of analysis. Standard Oil Co. v. United States, 221 U.S. 1 31 S.Ct. 502, 55 L.Ed. 619 (1911). Under this rule, the factfinder weighs all of the circumstances of a case in deciding whether a restrictive practice should be prohibited as imposing an unreasonable restraint on competition. Per se rules of illegality are appropriate only when they relate to conduct that is manifestly anti-competitive. As the Court explained in Northern Pac. R. Co.

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