Overseas Motors, Inc. v. Import Motors Limited, Inc.

Decision Date18 March 1974
Docket NumberCiv. A. No. 38155.
Citation375 F. Supp. 499
PartiesOVERSEAS MOTORS, INC., a Michigan corporation, Plaintiff, v. IMPORT MOTORS LIMITED, INC., a Michigan corporation, et al., Defendants.
CourtU.S. District Court — Western District of Michigan

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Wilfred L. Burke, Burke & Wilson, Detroit, Mich., for plaintiff.

George E. Bushnell, Jr., and Gregory L. Curtner, Miller, Canfield, Paddock & Stone, Detroit, Mich., for Volkswagenwerk Aktiengesellschaft and Volkswagen of America; Herbert Rubin, Herzfeld & Rubin, P. C., New York City, of counsel.

Bert Burgoyne, Travis Warren Hammond Ziegelman & Burgoyne, Detroit, Mich., for Audi NSU Auto Union; John A. Young, Graubard Moskovitz McGoldrick Dannett & Horowitz, New York City, of counsel.

Gordon J. Quist, Miller, Johnson, Snell & Cummiskey, Grand Rapids, Mich., for Import Motors.

MEMORANDUM OPINION GRANTING MOTION FOR A DIRECTED VERDICT AND DENYING MOTION FOR RECONSIDERATION AND A NEW TRIAL

FEIKENS, District Judge.

This action is brought by Overseas Motors, Inc. (Overseas) against Audi NSU Auto Union Aktiengesellschaft (ANAU), Volkswagenwerk Aktiengesellschaft (VWAG), Volkswagen of America (VWOA), and Import Motors Limited, Inc. (Import). Plaintiff alleges violations of Sections 1 and 2 of the Sherman Act, 15 U.S.C. §§ 1, 2 (Count I); Section 7 of the Clayton Act, 15 U.S.C. § 18 (Count II); and Section 2 of the Automobile Dealers' Day in Court Act, 15 U.S.C. § 1222 (Count III).

Background

Overseas is a Michigan corporation. Prior to July of 1968 it operated a Detroit area dealership specializing in NSU trademarked automobiles. After that date its business expanded to include the importation and distribution of NSU cars in a ten (later eleven) state area.

ANAU, a German corporation, is the successor to NSU Motorenwerke Aktiengesellschaft (NSU), manufacturer of NSU automobiles, and Auto Union Gmbh (Auto Union), manufacturer of Audi automobiles. The two companies merged in 1969. Since that time ANAU has continued to produce both lines of cars.

VWAG is a German corporation engaged in the manufacture of Volkswagen automobiles. VWOA, a New Jersey corporation, is a wholly owned subsidiary of VWAG; its sole function is the importation and distribution of Volkswagen, Porsche and Audi cars in the United States.

Import, a Michigan corporation, distributes Volkswagen, Porsche and Audi cars in the midwestern United States. Although a part of the Volkswagen distribution network, it is independently owned and operated.

Between June 17 and July 1 of 1968 Overseas entered into an importer contract with NSU. It provided, inter alia, that plaintiff was to have the exclusive right to import and distribute NSU automobiles in a ten state area; that any extension of the contract was reserved; that plaintiff was to deal only in NSU products; that the contract might be terminated at the end of any calendar year after 1969 upon three months notice by any party; that the contract was to be governed by and interpreted in accordance with German law; and that disputes were to be submitted to a court of arbitration sitting in Zurich, Switzerland.

To obtain its automobiles Overseas was required to submit a "firm order" to NSU which was binding on Overseas but not on NSU. "Within the frame of the production available" NSU would respond with a "confirmed order" which was binding on both parties, subject apparently to Overseas providing an adequate letter of credit.

After entering into this agreement, Overseas began building and supplying a dealer network of modest proportions. Then in March of 1969 NSU and Auto Union agreed to merge, the merger being completed in August of that year. Sometime between then and the summer of 1970 there began what plaintiff has referred to as a "pinching off" of its supply of automobiles. By the end of 1970 plaintiff was unable to obtain any cars from ANAU. Meanwhile, in December of 1969 Overseas had applied to Import for a retail Porsche-Audi franchise, but the application was never acted upon. In September of 1971, after the relationship between Overseas and ANAU had almost broken down, Overseas once again sought to obtain a Porsche-Audi franchise. This time Import approved the application and forwarded it to VWOA for final action which was never taken. Overseas eventually abandoned its efforts, secured a Fiat dealership, which it presently operates, and instituted this lawsuit.

The Arbitration

Shortly after the commencement of this action ANAU gave notice to Overseas of its intent to submit Overseas' grievances to arbitration, as provided for in the contract. Overseas objected to any such proceedings and moved this court for a stay of arbitration on the ground that only antitrust issues, which the arbitrators would not be competent to pass on, were involved. This motion was denied, and on November 24, 1972, ANAU filed a complaint with the court of arbitration in Zurich asking it to declare that ANAU had not breached its contract with Overseas and to determine the date upon which the contract had been or would be terminated. Overseas refused to participate. The court of arbitration proceeded, and in its decision of May 24, 1973, made findings of fact and law and handed down a judgment in favor of ANAU. An English translation of the arbitrators' opinion was completed on June 14 and made available to all parties. Trial in this case commenced on July 5.

Upon completion of opening statements, and prior to the offer of any testimony, defendants interposed an objection in limine to the admission of any evidence inconsistent with the findings and decision of the court of arbitration, based on the doctrine of collateral estoppel. Defendants subsequently extracted the following list of findings and conclusions from the arbitration opinion, and requested the court to limit the proofs and permissible inferences therefrom in this case in accordance with those findings and to so instruct the jury.

1. Overseas and NSU entered into an Importer Contract on June 17/July 1, 1968.
2. That Contract contained a valid arbitration clause.
3. The Arbitration Court had valid jurisdiction.
4. The legal relationship of the parties is governed by the law of the Federal Republic of Germany.
5. The Importer Contract by itself does not constitute an order for the delivery of specific cars and parts, but forms a skeleton agreement for orders within its terms.
6. An order from Overseas was only accepted by NSU when it had been confirmed in writing.
7. Under Sec. 1 of the Contract NSU had an obligation to accept such orders only "within the scope of the available manufacture," and an order did not come into existence merely by the request for delivery by Overseas.
8. ANAU has performed its obligations under the Importer Contract.
9. Those orders which were confirmed and not carried out by NSU or ANAU were due to Overseas' failure to open letters of credit in due time.
10. From the beginning of February, 1971 no cars at all, but only spare parts, were ordered by Overseas and Overseas did not submit any estimates of annual requirements for the years 1971 and 1972 although it was under an obligation to do so pursuant to Sec. 8 of the Importer Contract.
11. Overseas has no right to damages based on failure to deliver contractual goods NSU cars.
12. The Importer Contract referred exclusively to distribution of NSU cars and parts.
13. After the merger between NSU and Auto Union the definition of the contractual articles was defined in the letter of November 4, 1969 signed by Overseas and ANAU specifically to the effect that by "NSU automobiles" there was to be understood the following models: "NSU 1000 C, NSU 1200 C, NSU TT."
14. The "Prinz 4 L" and "RO-80" models although part of the NSU product line were not mentioned in the letter since the prerequisites for export of these cars into the United States did not exist.
15. The former NSU company could not dispose of distribution rights in the U.S.A. for the Audi product line either before or after the merger.
16. The Auto Union company at the time of the merger was bound with respect to the U.S. market to VWoA and had entrusted to VWoA the distribution of Audi cars and parts for all 50 states.
17. After the merger, the contractual obligations of NSU passed to ANAU without any change in the nature of the obligations.
18. Overseas has no claim for damages for non-delivery of Audi products.
19. The sales figures of NSU within the territory of Overseas were low.
20. The sale of NSU cars was made difficult by the fact of decreasing demand for the NSU product line, by the fact that the cars had to be manufactured with special equipment due to the exhaust and safety regulations in the U. S. so that prices for these cars were rather high as compared with mass production, by the fact of the currency and economic policy measures taken by the governments of the Federal Republic of Germany and of the United States during the years 1969 and 1970 (export levy, revaluation of the German Mark, import restrictions in the U.S.) which served to reduce exports from Germany to the U.S.
21. ANAU endeavored to avoid any hardness with respect to Overseas.
22. ANAU voluntarily abandoned its right under Sec. 12(1) of the Importer Contract to cancel the contract as of December 31, 1971 and instead continued the Contract until it became clear that the prerequisites for further importation of NSU cars into the United States no longer existed.
23. By letter of April 15, 1971, ANAU gave notice to Overseas of cancellation of the Importer Contract; cancellation to take effect December 31, 1973.
24. There is no question that ANAU improperly exercised the right of cancellation.
25. By letter of September 9, 1969, ANAU advised Overseas that Overseas was permitted to sell competitive cars, which permission was repeated by
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