Pearson v. Ford Motor Co.

• Decision Date: 30 September 1994
• Docket Number: No. 93-30031-RV.,93-30031-RV.
• Citation: 865 F. Supp. 1504
• Parties: Gary J. PEARSON, Plaintiff, v. FORD MOTOR CO.; Ford Motor Credit Co.; Ford Leasing Development Co.; Fort Walton Beach Lincoln-Mercury, Inc.; and Beal Parkway Lincoln-Mercury, Inc., Defendants.
• Court: U.S. District Court — Northern District of Florida

865 F. Supp. 1504

Gary J. PEARSON, Plaintiff, v. FORD MOTOR CO.; Ford Motor Credit Co.; Ford Leasing Development Co.; Fort Walton Beach Lincoln-Mercury, Inc.; and Beal Parkway Lincoln-Mercury, Inc., Defendants.

No. 93-30031-RV.

United States District Court, N.D. Florida, Pensacola Division.

September 30, 1994.

James W. Grimsley, Smith, Grimsley, Remington, Bauman, Petermann, Pinkerton & Saxer, Ft. Walton Beach, FL, Kenneth L. Funderburk, Pro Hac Vice, Funderburk, Day & Lane, Phenix City, AL, for plaintiff.

Patricia B. Cunningham, Pro Hac Vice, John H. Fleming, Ann G. Fort, Sutherland, Asbill & Brennan, Atlanta, GA, Bruce A. McDonald, McDonald, Fleming, Moorhead & Ferguson, Pensacola, FL, for Ford Motor Co., Ford Motor Credit Co., Ford Leasing Development Co., Ford Corporations from "A" through "Z", Ft. Walton Beach Lincoln-Mercury, Inc.

Thomas R. Jenkins, Jenkins & Matthews, Bruce A. McDonald, McDonald, Fleming, Moorhead & Ferguson, Pensacola, FL, for Beal Parkway Lincoln-Mercury, Inc.

ORDER

VINSON, District Judge.

Pending is the motion of defendants Ford Motor Co., Ford Leasing Development Co., and Fort Walton Beach Lincoln-Mercury, Inc. for summary judgment on all counts of the amended complaint. (doc. 73). Also pending is the plaintiff's cross motion for partial summary judgment on Counts I and X of the amended complaint. (doc. 71). The plaintiff seeks a declaration that he is an automobile dealer pursuant to the federal and Florida Automobile Dealers' Day in Court Acts. Defendant Ford Motor Credit Co. has moved for summary judgment on all counts of the amended complaint on the basis that it is not a proper party to this lawsuit. (doc. 77). Finally, also pending is defendant Beal Parkway Lincoln-Mercury Inc.'s motion for summary judgment on Count X of the amended complaint. (doc. 80). Because the motion filed jointly by defendants Ford Motor Co., Ford Leasing Development Co., and Fort Walton Beach Lincoln-Mercury, Inc. is dispositive, I need not consider the other motions.

I. BACKGROUND

Except as noted, the following facts are undisputed in the record. As part of its efforts to increase the number of minority owners, defendant Ford Motor Co. ("Ford") operates a dealer development plan ("DDP") in which it assists minorities in purchasing and operating dealerships. A corporate dealership is established, and the individual identified as a possible future minority owner/dealer is hired to operate the dealership. The potential minority dealer is given an opportunity to become a minority stockholder in the dealership, and is given the right to gradually purchase all of Ford's stock from the profits of the dealership. Thus, if the individual is successful in operating a Ford dealership, he can gradually become the owner of an automotive dealership with only a modest personal investment.

Ford recruited plaintiff Gary J. Pearson, a black man already employed by Ford, as a potential minority owner. Pearson and Ford entered an agreement for Pearson to participate in the DDP on July 12, 1983. Ford formed a corporation, defendant Fort Walton Beach Lincoln-Mercury, Inc. ("FWBLM"),¹ to own and operate the dealership. FWBLM was formally granted Lincoln-Mercury dealership rights on July 18, 1983. Pearson was not a party to this agreement.

Ford supplied $320,000.00 capitalization for the new dealership ($160,000 of which was long term notes), and Pearson was required to deposit $80,000, which was to be held in escrow for six months. During the initial six months, Pearson would operate the dealership as a salaried employee of FWBLM. At the conclusion of the initial period, Pearson had the option of converting his $80,000.00 deposit into common stock in FWBLM, or withdrawing from the endeavor and having his deposit returned.

On February 1, 1984, Pearson elected to continue in the DDP program. On that date he entered a dealer development agreement with Ford and a management agreement with FWBLM. Pursuant to the dealer development agreement, Ford received 1,600 shares of convertible preferred stock in FWBLM, and Pearson received 800 shares of common stock. The common stock had no voting rights as long as any preferred stock was outstanding.² The agreement provided that if the dealership was profitable, a portion of Pearson's share of the profits would be used to gradually purchase Ford's preferred stock in FWBLM and convert it into common stock. However, Pearson could purchase the stock only from the profits, not with any other funds. Under this plan, if (but only if) the dealership was profitable under his management, Pearson would eventually own the dealership. Ford had no obligation to provide any additional capitalization, but if it elected to do so, Ford would receive additional preferred stock (and long term notes) in proportion to any additional capital contributions.

The initial board of directors of FWBLM was composed of Pearson and three other directors chosen by Ford. The management agreement provided that Pearson was to serve as the president and operator of FWBLM. Pearson was the on-site manager and was responsible for the day-to-day operations of the dealership. Both the dealer development agreement and the management agreement were terminable at will by either party. Both agreements also stated that termination was likely if the dealership lost money to the point that Pearson's equity interest had no value.

The dealership was profitable in 1984, 1985, and 1986. Because these profits were used to purchase stock, Pearson owned 79% of the total stock in FWBLM by the end of 1986. However, in 1987 and the first quarter of 1988, the dealership lost money. As a result of these losses, offset by Ford's further capital contributions, Pearson's ownership interest had declined to 34% of the total stock by the end of 1988. The dealership continued to incur operating losses in 1989 and 1990.

For the first few years, the dealership was operated from a facility leased from the previous Lincoln-Mercury dealer. That lease was due to expire in 1988, and the decision was made to relocate the dealership. A site was chosen on Beal Parkway. Defendant Ford Leasing Development Co. ("Ford Leasing") purchased the land, constructed the buildings, and leased the site to FWBLM. Pearson requested that the lease include a provision granting FWBLM the option of purchasing the real estate from Ford Leasing. Ford refused, and on May 3, 1988, Pearson executed the lease on behalf of FWBLM, without the purchase option. Ford contends that Pearson readily agreed to the move; Pearson maintains that he opposed it, and that Ford deliberately chose a poor site so that the dealership would fail.

Apparently, the dealership was again profitable for the first six months it was at the new location. However, beginning in late 1988, it began to show losses. The losses increased dramatically in 1989 and 1990. Ford was required to provide the dealership with more than one million dollars in additional capitalization during the time Pearson operated it. Because of these losses, Pearson's common stock in FWBLM had no value as of the end of 1989 and until the time he was terminated. The board of directors of FWBLM voted on February 26, 1991, to terminate Pearson as president of FWBLM and operator/manager of the dealership.

Pearson commenced this suit alleging various illegalities in his termination as president of FWBLM. The amended complaint purports to state ten separate causes of action. Count I is based on the federal Automobile Dealers Day in Court Act; Count II alleges common law fraud; Count III alleges "interference with corporate governance — breach of contract;" Count IV alleges "interference with corporate governance — fraud;" Count V alleges breach of fiduciary duty, Count VI alleges breach of the duty of good faith; Count VII alleges conversion; Count VIII alleges trespass; Count IX seeks injunctive relief; and Count X purports to state a claim pursuant to the Florida Automobile Dealers Day in Court Act. Counts II, IV, V, VI, VII, and VIII demand punitive damages. Named as defendants are Ford, FWBLM, Ford Leasing Development Co., Ford Motor Credit, and Beal Parkway Lincoln-Mercury, Inc., the current dealer, who purchased the dealership from Ford in October 1991.

II. ANALYSIS

A. Summary Judgment Standard

A motion for summary judgment should be granted when "the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Rule 56(c), Fed.R.Civ.P. As the Supreme Court of the United States has instructed, "the plain language of Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265, 273 (1986); Everett v. Napper, 833 F.2d 1507, 1510 (11th Cir.1987).

However, summary judgment is improper "if a reasonable fact finder could draw more than one inference from the facts, and that inference creates a genuine issue of material fact." Cornelius v. Highland Lake, 880 F.2d 348, 351 (11th Cir.1989), cert. denied, 494 U.S. 1066, 110 S.Ct. 1784, 108 L.Ed.2d 785 (1990). An issue of fact is "material" if it might affect the outcome of the case under the governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202, 211 (1986). It is "genuine" if the record taken as a whole could lead a rational trier of fact to find for the non-moving party. Id. See also Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538, 552 (1986).

On summary judgment motion, the record...