Martin B. Glauser Dodge Co. v. Chrysler Corp.

• Decision Date: 20 August 1976
• Docket Number: Civ. A. No. 1077-70.
• Citation: 418 F. Supp. 1009
• Parties: MARTIN B. GLAUSER DODGE CO., Plaintiff, v. CHRYSLER CORPORATION et al., Defendants.
• Court: U.S. District Court — District of New Jersey

418 F. Supp. 1009

MARTIN B. GLAUSER DODGE CO., Plaintiff, v. CHRYSLER CORPORATION et al., Defendants.

Civ. A. No. 1077-70.

United States District Court, D. New Jersey.

August 20, 1976.

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Morris L. Chucas, Cherry Hill, N. J., for plaintiff.

Pelino, Wasserstrom, Chucas & Monteverde, Morris L. Chucas, by Tom P. Monteverde, Philadelphia, Pa., of counsel, for plaintiff.

Archer, Greiner & Read, by John P. Hauch, Jr., Haddonfield, N. J., for Chrysler Corp., Chrysler Motors Corp. and Chrysler Realty Corp., defendants.

Farr, Reifsteck, Wolf & Crabtree, by William E. Reifsteck, Haddon Heights, N. J., for Chrysler Financial Corp. and Chrysler Credit Corp., defendants.

Drinker, Biddle & Reath, by Robert S. Ryan, Michael O'S. Floyd, Philadelphia, Pa., of counsel, for all defendants.

ON MOTIONS FOR JUDGMENT NOTWITHSTANDING THE VERDICT OR NEW TRIAL.

OPINION

COHEN, Senior District Judge.

Defendants have moved for judgment notwithstanding the verdict or alternatively a new trial, following an adverse jury verdict in this private antitrust action brought pursuant to section 4 of the Clayton Act, 15 U.S.C. § 15.¹ The jury found that the defendants entered into a combination or conspiracy in unreasonable restraint of trade or commerce in violation of section 1 of the Sherman Act, 15 U.S.C. § 1,² causing injury to the plaintiff in the amount of 1.3 million dollars. This award was later trebled by the court to 3.9 million dollars. In support of these post-trial motions defendants assert three grounds. First, defendants contend that the plaintiff's theory of liability and method of computation of damages were invalid. Next, it is argued that the evidence insufficient to support a finding that any of the defendants violated section 1 of the Sherman Act. Finally, defendants maintain that trial errors and infirmities in the court's charge warrant a new trial. For the reasons discussed below, the motions will be denied.

The central question presented here is whether and to what extent an automobile manufacturer may subsidize its partially owned dealers without providing similar assistance to independent dealers. More specifically the issue is whether the defendants' implementation of a vertically integrated distribution system had the effect of reducing intrabrand competition so as to violate section 1 of the Sherman Act. On motion for judgment notwithstanding the verdict pursuant to Fed.R.Civ.P. 50(b) the court is required to accept the evidence and all reasonable inferences in the light most favorable to the plaintiff. Continental Ore Co. v. Union Carbide, 370 U.S. 690, 696, 82 S.Ct. 1404, 8 L.Ed.2d 777 (1962); Tennant v. Peoria & P.U. Ry., 321 U.S. 29, 35, 64 S.Ct. 409, 88 L.Ed. 520 (1944); Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338, 1344 (3rd Cir.1975); Denneny v. Siegel, 407 F.2d 433, 439 (3rd Cir.1969). Plaintiff, Martin B. Glauser Dodge Co. (Glauser Dodge) is a family owned New Jersey corporation which operated an automobile dealership in Vineland, New Jersey. Between February, 1964 and July, 1970 Glauser Dodge and its predecessor proprietorship owned by Martin B. Glauser sold and serviced new Dodge automobiles and trucks pursuant to a franchise agreement with Chrysler Motors; and in addition sold used cars.

Chrysler Motors Corporation is a wholly owned subsidiary of Chrysler Corporation engaged in distribution. Chrysler Credit Corporation, which is a wholly owned subsidiary of Chrysler Financial Corporation, extends wholesale credit to and purchases retail installment contracts from Chrysler dealers. Chrysler Financial Corporation, in turn, is a wholly owned subsidiary of Chrysler Corporation and is the source of capital for the entire Chrysler financial operation. Chrysler Realty, also a wholly owned subsidiary of Chrysler Corporation, acquires, develops, and administers property for Chrysler dealer sites.

In an attempt to increase its overall market penetration Chrysler Corporation developed a Dealer Enterprise (DE) program. The major tenets of this marketing program are revealed in what has been identified as the "Quinn Memorandum,"³ The program envisioned the resurrection of Chrysler's dealership system through the infusion of venture capital to be provided in large part by Chrysler itself. As the Quinn Memorandum points out, outside investors did not find automobile dealerships in general, and Chrysler Corporation in particular, sufficiently attractive to provide the necessary venture capital. The money provided was to be used in three general areas: capitalization, facilities, and launching costs. The following practices, inter alia, were recommended:⁴

1. Acquisition of existing facilities and leasing to operator;

2. Mortgage on existing facilities;

3. Sponsorship of capital loan program through finance companies whereby finance companies administer and Chrysler Corporation assumes partial financial responsibility;

4. Assumption of lease or guarantee of lease on existing facilities or facilities to be constructed; and

5. Use of contractual start up plan in relation to assumption of operating losses by Chrysler Corporation for a specified period. . . .

Under the Dealer Enterprise plan Chrysler supplied up to 75% of the capital needed to finance a new dealership. The 25% owner became manager of the dealership and could ultimately purchase the stock held by Chrysler out of his share of the profits. Until that time, however, Chrysler retained majority control. The program consistently produced net operating losses at the dealer level, but greater market penetration and the resulting increases in production permitted more efficient utilization of manufacturing facilities. Thus, as was explained by plaintiff's expert, Dr. Kuehn, the retail losses were offset by increased profits at the manufacturing level. This pattern of operating losses at the retail level, experienced by DE dealers nationally, was also reflected by the four Camden area Dodge DE dealers which were in competition with the plaintiff.

The essence of plaintiff's antitrust claim is that the Dealer Enterprise marketing program operated in a discriminatory fashion vis-a-vis private capital dealers. There was evidence adduced at trial to show that: (1) Cars were advertised and sold through DE dealers at prices which were lower than private capital dealers, such as the plaintiff, could afford to charge. (2) Superior physical facilities were provided to DE dealers on terms which were not available to competing private capital dealers. (3) DE dealers were permitted to sell retail installment contracts to Chrysler Credit Corporation on a without recourse basis, whereas plaintiff was required to guarantee to repurchase defaulted retail installment contracts of its customers. (4) DE dealers were permitted to operate in an out-of-trust condition when experiencing cash flow problems, whereas plaintiff's credit was immediately revoked when it was out of trust. (5) Restrictions on plaintiff's wholesale lines of credit, as well as its inability to sell its commercial retail paper without recourse, precluded plaintiff from participating in revenue-producing sales contests to the same degree as DE dealers. (6) Plaintiff did not receive the new vehicles it had ordered for its 1969 opening, even though an ample number of such vehicles were delivered to the DE dealers in the Camden area.

The jury returned the following verdict in response to special interrogatories:

1. Did any of the defendants enter into any combination or conspiracy in unreasonable restraint of trade or commerce? Yes or no.

ANSWER: Yes.

2. If your answer to question 1 is yes, then which defendants did combine or conspire?

ANSWER: Chrysler Corporation, Chrysler Motors Corporation, Chrysler Financial Corporation, Chrysler Credit Corporation, Chrysler Corporation.

3. If your answer to question number 1 is yes, then was the plaintiff, Glauser Dodge Co. injured as a proximate result of such combination or conspiracy?

ANSWER: Yes.

4. If your answers to questions 1 and 3 are yes, state the amount of damages?

ANSWER: 1.3 million dollars.

I. RESTRAINT OF TRADE

Defendants contend that the evidence at trial was legally insufficient to support a finding that any defendant combined or conspired in unreasonable restraint of trade or commerce in violation of section 1 of the Sherman Act. The plaintiff does not assert that the mere existence of Chrysler's Dealer Enterprise program constituted a violation of the Act. Rather, the "rule of reason," Standard Oil Co. v. U. S., 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619 (1911), must be applied in determining whether the implementation and operation of the Dealer Enterprise program, by the defendants in this case, had the effect of unreasonably discriminating in favor of the factory-controlled dealers to the detriment of competing private capital dealers resulting in an unreasonable restraint of trade or commerce.

A combination or conspiracy is, of course, an essential element of a section 1 violation. Defendants have argued that a corporation cannot combine or conspire with its subsidiaries.⁵ The Supreme Court has made clear, however, that

even commonly owned firms must compete against each other, if they hold themselves out as distinct entities. "The corporate interrelationships of the conspirators . . . are not determinative of the applicability of the Sherman Act."

U. S. v. Citizens and Southern National Bank, 422 U.S. 86, 116-117, 95 S.Ct. 2099, 45 L.Ed.2d 41 (1975), citing U. S. v. Yellow Cab Co., 332 U.S. 218, 227, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947). See Perma Life Mufflers, Inc. v. Int'l Parts Corp., 392 U.S. 134, 141-42, 88 S.Ct. 1981, 20 L.Ed.2d 982 (1968). The Court of Appeals for the Third Circuit has specifically held in Coleman Motor Co. v. Chrysler Corp., 525 F.2d 1338 (3rd Cir. 1975) that "although a party cannot combine or conspire with itself, a parent...