McCarney v. Ford Motor Co.

• Decision Date: 22 September 1981
• Docket Number: No. 80-1555,80-1555
• Citation: 657 F.2d 230
• Parties: Robert P. McCARNEY and Elizabeth H. McCarney, Appellants, v. FORD MOTOR COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 230

657 F.2d 230

Robert P. McCARNEY and Elizabeth H. McCarney, Appellants, v. FORD MOTOR COMPANY, Appellee.

No. 80-1555.

United States Court of Appeals,

Eighth Circuit.

Submitted April 13, 1981.

Decided Aug. 27, 1981.

Rehearing and Rehearing En Banc Denied Sept. 22, 1981.

George M. Coburn, argued, Wayne H. Hoecker, John J. Yates, Kay M. Bushman, Gage, Tucker & Vom Baur, Washington, D.C., Gage & Tucker, Kansas City, Mo., Orell D. Schmitz, Schlosser & Schmitz, Bismarck, N.D., for appellants.

Peter Dorsey, argued, Dorsey, Windhorst, Hannaford, Whitney & Halladay, Henry Halladay, Edward J. Pluimer, Marianne E. Durkin, Minneapolis, Minn., Pearce, Anderson, Thames & Durick, Harry J. Pearce, Bismarck, N.D., for appellee Ford Motor Co.; William A. Zolbert, Dearborn, Mich., of counsel.

Before HEANEY, STEPHENSON and McMILLIAN, Circuit Judges.

STEPHENSON, Circuit Judge.

Appellants attempt to overcome a summary judgment granted by the district court ¹ on the grounds of res judicata and collateral estoppel. They contend that this action is not precluded by earlier litigation between the same parties. The case presents the difficult but narrow issue of whether a dismissal for lack of standing to invoke a particular statute can act as a bar to a later suit based upon the same factual allegations. We reverse the district court and remand for further proceedings.

I. FACTUAL BACKGROUND

This case arises out of a controversy concerning a Bismarck, North Dakota, automobile dealership, McCarney's Ford, Inc. Robert McCarney, the plaintiff in both suits, was the manager and, along with his wife Elizabeth, the principal stockholder of the corporation. The underlying factual allegation in both suits is that Ford Motor Company, through a campaign of harassment and unfair dealing, compelled the McCarneys to sell their dealership. McCarney asserts that this "forced sale" was the result of a series of actions by Ford Motor designed to terminate McCarney as a dealer. McCarney alleges that he sold his stock in the dealership at an unfavorable price under the threat of termination. ²

Robert and Elizabeth McCarney sold all of their stock in the dealership in November 1977, for.$3.2 million to Holms' Ford, Inc. After the sale the McCarneys no longer were employed by the dealership. In December 1978, Robert McCarney filed suit in federal district court relying upon 15 U.S.C. § 1221, et seq., known as the Automobile Dealers' Day in Court Act. The Dealers' Day in Court Act creates a cause of action on behalf of "automobile dealers." It allows recovery of damages and costs of the suit where it can be shown that the manufacturer did not act in good faith concerning the terms of the franchise agreement or in the termination of the franchise. 15 U.S.C. § 1222. This suit, which is referred to as McCarney I, relied upon the factual allegations summarized above.

In its answer defendant Ford Motor asserted a general denial and stated that the plaintiff lacked standing to assert a claim under the Dealers' Day in Court Act, among other defenses. The defendant filed motions to dismiss under Rules 12(b)(6) and 12(c), Fed.R.Civ.P. The district court, pursuant to rule 12(c), treated the motion as one for summary judgment. It then granted defendant's motion on the ground that McCarney, as an individual, lacked standing under the Dealers' Day in Court Act. The court indicated that the corporation, McCarney's Ford, Inc., was the proper party to invoke the statute. The court primarily relied upon Vincel v. White Motor Corp., 521 F.2d 1113 (2d Cir. 1975). The judgment was entered in the defendant's favor "with prejudice." This decision was not appealed.

In February 1980, Robert and Elizabeth McCarney filed the action which is presently before the court and is referred to as McCarney II. The complaint in McCarney II raised five theories of relief: (1) that the defendant had violated section one of the Sherman Act, 15 U.S.C. § 1, and sought treble damages under section four of the Clayton Act, 15 U.S.C. § 15; (2) that the defendant violated section 51-07-01.1 of the North Dakota Century Code which prohibits termination of a supply contract without good cause; (3) that the wrongful termination was a breach of the supply contract; (4) that the defendant violated its fiduciary duty to the McCarneys; and (5) that the defendant wrongfully interfered with plaintiffs' performance of their contracts of employment with McCarney's Ford, Inc. The district court granted defendant's motion for summary judgment "upon the grounds of res judicata and collateral estoppel." The district court did not discuss the precise application of these principles to the present case. This appeal followed.

II. ANALYSIS

It is uncontested that the factual allegations supporting the proposed theories of recovery in McCarney II are the same as those which were relied upon in McCarney I. It is the position of the plaintiffs-appellants that the doctrine of res judicata, or more precisely claim preclusion, does not apply to bar the claims in this case because the decision in McCarney I was not "on the merits." ³ See James & Hazard, Civil Procedure, §§ 11.3, 11.15 (1977). They submit that standing is not a substantive issue but is in the nature of subject matter jurisdiction, that is, it is an issue that a court considers as a precondition to reaching the merits. Specifically they argue that standing is one of the considerations in determining whether a case is a justiciable controversy.

Ford Motor argues that the plaintiffs have misconstrued the term standing. It argues that the district court's decision in McCarney I was not that the court lacked jurisdiction but that the complaint failed to state a claim upon which relief could be granted. ⁴ Interpreted in this way, McCarney I decided that the plaintiff had not stated a cause of action which, all agree, is a judgment "on the merits" of the substantive claim. See Federated Department Stores, Inc. v. Moitie, --- U.S. ----, ----, 101 S.Ct. 2424, 2428, n.3, 69 L.Ed.2d 103 (1981); Glick v. Ballentine Produce, Inc., 397 F.2d 590, 593 (8th Cir. 1968).

The Supreme Court has expressly delineated a distinction between the issue of standing and the merits of a particular lawsuit. Warth v. Seldin, 422 U.S. 490, 498, 500, 95 S.Ct. 2197, 2204, 2206, 45 L.Ed.2d 343 (1975) ("(S)tanding in no way depends on the merits of the plaintiff's contention that particular conduct is illegal"); Association of Data Processing Service Organizations, Inc. v. Camp, 397 U.S. 150, 153-54, 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970). This court has stated that standing is a "threshold inquiry" that "eschews evaluation on the merits." Coalition for the Environment v. Volpe, 504 F.2d 156, 168 (8th Cir. 1974). See Middlewest Motor Freight Bureau v. United States, 525 F.2d 681, 682 (8th Cir. 1975). Accord, Sherman v. British Leyland Motors, Ltd., 601 F.2d 429, 439-40 (9th Cir. 1979) (standing question is "akin to that of jurisdiction"). The commentators agree that standing is an analytical prerequisite to reaching the merits of a suit. E.g., 13 Wright, Miller & Cooper, Fed. Prac. & Pro., § 3531, at 175-76 (1975). ⁵

This line of authorities support the appellant's view that a dismissal based on standing is not "on the merits" and therefore will not act as a bar to a later suit. The Wright treatise classifies the issue of standing as a part of the concept of justiciability which includes the questions of advisory opinions, mootness and ripeness. 13 Wright, Miller & Cooper, supra, § 3529, at 146. A dismissal based on any of these concepts, which are quasi-jurisdictional, does not preclude a second action on the same claim if the justiciability problem can be overcome. Id., § 4436, at 344.

For example, the Second Circuit has held that "(i)t is well settled that the dismissal of a case because it is moot does not lay a basis for the application of the doctrine of res judicata." N. Sims Organ & Co. v. S.E.C., 293 F.2d 78, 82 (2d Cir. 1961), cert. denied, 368 U.S. 968, 82 S.Ct. 440, 7 L.Ed.2d 396 (1962). See also De Volld v. Bailar, 568 F.2d 1162, 1165-66 (5th Cir. 1978).

Although we are not aware of any reported decision which has considered the precise question presented here, a Fifth Circuit opinion has overtones which are relevant. See Continental Casualty Co. v. Canadian Universal Insurance Co., 605 F.2d 1340 (5th Cir. 1979), cert. denied, 445 U.S. 929, 100 S.Ct. 1317, 63 L.Ed.2d 762 (1980) (see also the companion case of Fenner v. Continental Diving Service, Inc., 543 F.2d 1113 (5th Cir. 1976)). In Continental Casualty, the court held that an earlier dismissal based on the ground that the parties had not presented a "live controversy" within the requirement of Article III that one of the parties did not have standing to present its claim, did not operate as a judgment on the merits. Continental Casualty Co. v. Canadian Universal Insurance Co., supra, 605 F.2d at 1343. The earlier dismissal on justiciability grounds had been expressly described as "for want of jurisdiction." It should be noted that the opinion in the prior suit took pains to state that while dismissing it did not intimate any views concerning the underlying merits. Fenner v. Continental Diving Service, Inc., supra, 543 F.2d at 1117. See also Knox v. American National Bank, 488 F.Supp. 259, 260 (E.D.Mo.1980), aff'd on other grounds sub nom. Knox v. Lichtenstein, 654 F.2d 19 (8th Cir. 1981); Warren Co. v. Neel, 284 F.Supp. 203, 210-11 (W.D.Ark.1968), aff'd per curiam sub nom. Kimbell Milling Co. v. Warren Co., Inc., 406 F.2d 775 (8th Cir. 1969).

Although none of these cases is directly on point, a consistent thread runs through them. The justiciability doctrine, for the purposes of claim preclusion, should be analyzed in the same way as subject matter jurisdiction. See 1B Moore, Fed. Prac., P 0.405(5), at 661 (1980). That is, a decision to dismiss based on any of the doctrines under the justiciability...