Matter of Rick Michaels Ford, Inc., Bankruptcy No. 80 B 02734

• Decision Date: 17 December 1980
• Docket Number: 80 A 830.,Bankruptcy No. 80 B 02734
• Citation: 7 BR 763
• Parties: In the Matter of RICK MICHAELS FORD, INC., an Illinois corporation, Debtor. RICK MICHAELS FORD, INC., Plaintiff, v. FORD MOTOR COMPANY, a Delaware corporation, Defendant.
• Court: U.S. Bankruptcy Court — Northern District of Illinois

7 B.R. 763 (1980)

In the Matter of RICK MICHAELS FORD, INC., an Illinois corporation, Debtor RICK MICHAELS FORD, INC., Plaintiff, v. FORD MOTOR COMPANY, a Delaware corporation, Defendant.

Bankruptcy Nos. 80 B 02734, 80 A 830.

United States Bankruptcy Court, N.D. Illinois, E.D.

December 17, 1980.

Nicholas G. Dozoryst, II, Chicago, Ill., for plaintiff, Rick Michaels Ford, Inc.

Messrs. W. Donald McSweeney, Aaron J. Kramer, Richard M. Bendix, Jr., Chicago, Ill., Newell Blair, CRR Pub. Co., Washington, D.C., for defendant, Ford Motor Co.

OPINION AND ORDER

RICHARD L. MERRICK, Bankruptcy Judge.

This cause came on to be heard upon the motion of Ford Motor Company (hereinafter "Ford") to dismiss the complaint of Rick Michaels Ford, Inc. (hereinafter "Rick Michaels") for specific performance of a Ford SALES AND SERVICE AGREEMENT (hereinafter "the AGREEMENT"), for declaratory relief and other relief. Prior to its going out of business shortly after the filing of its Chapter 11 petition, Rick Michaels had been a dealer of Ford Motor vehicles and trucks in Arlington Heights, Illinois. At the time of its demise Rick Michaels had a substantial inventory of new automobiles (hereinafter "VEHICLES") and also parts (hereinafter "GENUINE PARTS"), both of which had been purchased from Ford.

Considerably over-simplified the AGREEMENT provided that upon termination of the franchise Ford would repurchase the VEHICLES and the GENUINE PARTS from Rick Michaels at a figure very close to cost (for purposes of convenience we shall adopt the figure used by counsel in their arguments of 98% of cost) provided that Rick Michaels execute a general release. Rick Michaels wishes to compel Ford to pay the 98% price without receiving a general release. While the issues were being briefed, Ford agreed to repurchase the VEHICLES at 98% of cost without receipt of the general release but also without prejudice to its contention that it had no obligation to do so and that it continued to have no obligation to repurchase the GENUINE PARTS without receipt of a general release. Consequently, the only issue remaining open is whether or not Ford may be compelled to purchase the inventory of GENUINE PARTS at 98% of cost without receipt of a general release.

In their arguments and discussions the attorneys talked as if there is only one feasible outlet for Rick Michaels' to dispose of its inventory of GENUINE PARTS in the event that Ford does not repurchase them. That outlet would be other Ford dealers who maintain their own inventories of GENUINE PARTS and have a continuing demand for them. It was suggested that the other Ford dealers would pay a price equal to about 25% of Rick Michaels' cost. Consequently, the loss to Rick Michaels if Ford does not repurchase the inventory at 98% of cost is the difference between 98% and 25%, or 73% of cost. Rick Michaels' cost of its inventory of GENUINE PARTS is not a part of the pleadings so that there is no way for the Court to determine whether or not 73% of X is a large figure in relation to other dollar amounts which are in dispute between the two parties.

Rick Michaels lists seven claims which it has against Ford which it would have to release if the contract provision should be upheld to require a release before the inventory can be forced back to Ford, all as alphabetical subsections to Paragraph 17 of the complaint:

(a) $14,238.66 representing a 1% rebate on 1980 cars sold;

(b) $7,616.37 representing an unpaid rebate of 5% for 1979 model cars not sold in current model year;

(c) $57,000 for warranty work and parts;

(d) Incentive program reimbursements of $6,000;

(e) This is an unliquidated claim for damages resulting from Ford\'s delivery of additional vehicles after being advised not to do so on January 13, 1980;

(f) This is an unliquidated claim for damages resulting from Ford\'s delivery of vehicles in large lots at a time when Rick Michaels could not absorb them;

(g) This is an unliquidated claim for damages resulting from Ford\'s refusal to let Rick Michaels sell to a dealer in Alaska 48 vehicles which it was unable to sell locally.

We presume that Rick Michaels added together items 17(a) through 17(d) for a total of $84,855.03 and added to that some estimate of the probable recovery under items 17(e) through 17(g). Thus it was in a position to place a rough dollar value on the worth of the release, both to itself and to Ford. Before getting into the specifics of the particular general release at issue in the instant case it may be observed as a thing of which a court might take judicial notice that usually when parties settle a dispute or a series of disputes, they settle all aspects of the disputes at one time; there is a single comprehensive settlement agreement with no loose ends.

The core of Rick Michaels' complaint is Paragraph 31, which reads as follows:

"31. The portion of the SALES & SERVICE AGREEMENT requiring the Plaintiff to give its general release to the Defendant prior to repurchase is manifestly unfair and oppressive, in that it allows the Defendant to engage in unfair practices toward the Plaintiff from which it will be released in order for the plaintiff to effectively liquidate its inventory of vehicles and GENUINE PARTS upon termination of its franchise."

For the purposes of this decision the Motion to Dismiss admits all facts properly pleaded but does not admit conclusions of law.¹ Paragraph 31 does not allege, nor does any other paragraph allege, what are the "unfair practices" in which Ford is engaged and from which Ford would be released. To bring the point home we will state a hypothetical situation. Suppose the complaint had stated that in the past there existed a particular model Ford automobile which was in very high demand and short supply; and that Ford would deliver that particular model only if the dealer also bought large quantities of GENUINE PARTS. We may presume that such tie-in sales would be against public policy, and that it also might be against public policy to require a release of potential causes of action based upon the tie-in sales before enforcing other aspects of the SALES AND SERVICE AGREEMENT.

That case is not before us. There is no allegation here that anything which Ford did or required Rick Michaels to do was against public policy. Paragraph 31 of the complaint speaks only of "unfair practices", which is a conclusion and does not make any specific allegations as to fact or deeds which might be "unfair" or unlawful. Thus the issue before this Court is on a broad general basis of what constitutes unfairness and what the consequences of it should be. Is it unfair that Ford's SERVICE AND SALES AGREEMENT is a printed form which the dealer may accept or reject but may not alter nor amend? Is it unfair that a giant worldwide corporation should be able to compel a small suburban Middle Western corporation to abide by all of the terms of a written contract? Questions of this nature may be considered abstractly or specifically, based upon logic and precedent. Usually the precedent requires reasoning by analogy, but in the instant case we have the benefit of a number of decisions which interpret a Ford SERVICE AND SALES AGREEMENT ___ earlier versions of the document which is before us in the instant case.

The first case to be considered is the Fabert Motors case², which is controlling to the extent that it is applicable because it is a Seventh Circuit case. One important difference between the Fabert Motors case and the instant case is that in the former case Fabert Motors already had signed the general release and had received somewhat in excess of $86,000 in payments from Ford respecting claims, some of what apparently were similar to the specific claims of $84,855.03 of Rick Michaels in the instant case.

In spite of having signed a general release Fabert Motors sued Ford on two grounds:

(a) violation of anti-trust laws for coercing Fabert Motors to take on an Edsel dealership in order to retain its Lincoln-Mercury dealership, and

(b) violation of the Automobile Dealers\' Franchise Act (15 U.S.C. §§ 1221-1225) on substantially the same grounds.

Treble damages and attorneys' fees in the amount of $1,100,000 were sought in the anti-trust count and damages of $300,000 under the Franchise Act count.

Another distinction between the Fabert Motors case and the instant case is that there it was alleged that the unlawful tie-in of the Edsel dealership constituted an illegal coercion which forced Fabert Motors to resign its Lincoln-Mercury dealership. In the instant case there is no allegation that Ford forced the termination of the AGREEMENT by Rick Michaels. The allegation respecting termination is contained in paragraph 7 of the complaint, quoted here in full:

"7. That on March 18, 1980, the Plaintiff resigned its Ford franchise SALES AND SERVICE AGREEMENT and related agreements with FORD MOTOR COMPANY."

Three Rivers Motor Company v. The Ford Motor Company³, is also a treble damage anti-trust suit by a dealer against the manufacturer focusing on the same general release requirement of a standard SALES AND SERVICE AGREEMENT substantially similar to that at issue in the instant case. Among other things, the opinion pointed out an interesting aspect of the development of the standard franchise agreement. Prior to 1967 Ford had the option to buy back the vehicles and inventory of parts; after 1967 the repurchase was compulsory if the dealer had executed a general release. The general release actually used in the Three Rivers case was extremely broad. The Court related⁴ that it was similar to one described by Judge Goodrich in a precedent case:⁵

"The document of release, which sounds as though it had been taken from an old form book, is as broad as all out of doors and typical of the wasteful use of words in the English language in which lawyers sometimes indulge."

We are not presently confronted with the language of a release because the cessation of...