RAC Motors, Inc. v. World-Wide Volkswagen Corp., Civ. No. 211-68.

• Decision Date: 03 June 1970
• Docket Number: Civ. No. 211-68.
• Citation: 314 F. Supp. 681
• Parties: R. A. C. MOTORS, INC., a New Jersey Corporation, Plymouth Realty Co., a New Jersey Corporation, Charles A. Abruscato, Grace Abruscato and Norman Abruscato, Plaintiffs, v. WORLD-WIDE VOLKSWAGEN CORP., a New York Corporation, Volkswagenwerk Aktiengesellschaft, a German Corporation, and Volkswagen of America, Inc., a New Jersey Corporation, Defendants.
• Court: U.S. District Court — District of New Jersey

314 F. Supp. 681

R. A. C. MOTORS, INC., a New Jersey Corporation, Plymouth Realty Co., a New Jersey Corporation, Charles A. Abruscato, Grace Abruscato and Norman Abruscato, Plaintiffs, v. WORLD-WIDE VOLKSWAGEN CORP., a New York Corporation, Volkswagenwerk Aktiengesellschaft, a German Corporation, and Volkswagen of America, Inc., a New Jersey Corporation, Defendants.

Civ. No. 211-68.

United States District Court, D. New Jersey, Civil Division.

June 3, 1970.

Krivit & Krivit, by Spencer N. Miller, Jersey City, N. J., for plaintiffs.

Cerreto & La Penna, Newark, N. J., for defendants World-Wide Volkswagen Corp.; Mervin Rosenman, New York City, by Simon J. Hauser, New York City, of counsel.

Crummy & O'Neill, Newark, N. J., for defendants Volkswagen of America, Inc., and Volkswagenwerk Aktiengesellschaft; Herzfeld & Rubin, by Herbert Rubin, New York City, of counsel.

OPINION

COOLAHAN, District Judge.

This is an action brought under the Automobile Dealers' Day in Court Act, 15 U.S.C. § 1221 et seq. Plaintiff R.A.C. Motors, Inc., (hereinafter "R.A.C.") is a New Jersey corporation doing business as a retail automobile dealer in West New York, New Jersey.¹ Defendant World-Wide Volkswagen Corp. (hereinafter "World-Wide") is the authorized wholesale distributor for Volkswagen automobiles in New Jersey. Beginning in 1960 and annually thereafter until 1967, R.A.C. held yearly Dealer Franchise Agreements with World-Wide for the sale of Volkswagens. In 1968 World-Wide notified R.A.C. that it would not renew R.A.C.'s Volkswagen franchise; R.A.C. then initiated this suit seeking damages allegedly sustained because its dealership was not renewed.

The plaintiffs applied for a preliminary injunction shortly after the commencement of this action. They sought to have the defendants enjoined from ceasing to supply R.A.C. with Volkswagens and Volkswagen parts. This application was denied after a two day trial at which a full evidentiary hearing was held. Subsequently, a motion by World-Wide to enjoin R.A.C. from displaying signs bearing the name, trademark or logo of Volkswagen, or to otherwise hold itself out as an authorized Volkswagen dealer, was granted. This matter is again before this court on defendants' motions for summary judgment.

The plaintiffs allege in their complaint that the defendants violated the Automobile Dealers' Day in Court Act by refusing to renew R.A.C.'s Volkswagen franchise because R.A.C. had also obtained a Volvo franchise. They contend that prior to the opening of R.A.C.'s Volvo franchise there existed a harmonious business relationship between R.A. C. and World-Wide. Approximately one year before this action was begun, another Volkswagen dealership was opened about four and one-half miles from R. A.C.'s place of business. The plaintiffs contend that R.A.C. obtained the Volvo franchise to compensate for the economic loss it suffered as a result of competition from the new Volkswagen dealer. Soon after the Volvo franchise was opened, plaintiffs allege that World-Wide began to purposely harass and intimidate R.A.C. with groundless complaints and exaggerated problems. The purpose of World-Wide's conduct, the plaintiffs claim, was to create a smoke-screen to hide World-Wide's true intentions: to get R.A.C. to either drop the Volvo franchise or to create a record against R.A.C. to justify the non-renewal of the franchise.

An abundance of evidence has been presented to this court by way of affidavits and depositions, and also by testimony produced during the two day trial on plaintiffs' application for a preliminary injunction. This evidence paints a picture far different from the one described by plaintiffs in their complaint. Plaintiffs claim that World-Wide engaged in "fault finding" over "picayune matters." One such matter involved the submission by R.A.C. of untrue sales reports. The evidence indicates that during the period from May through August, 1967, R.A.C. submitted to World-Wide forty-four reports of vehicle sales allegedly made by R.A.C. Subsequent investigation disclosed that the names and addresses of Volkswagen purchasers on forty-one of these reports were fictitious and that the signatures of these purchasers were forged. On three other reports the real name and address of the customer of the vehicle was given but the customer's signature was forged. In none of these forty-four cases were the vehicles sold by R.A.C. as the reports represented, but rather by other unauthorized Volkswagen automobile dealers.

The evidence also shows that R.A.C. submitted reports to World-Wide stating that it had performed a 300 mile free inspection on each of the forty-four vehicles referred to above. World-Wide reimbursed R.A.C. $5.85 for each of the forty-four inspections. Thus, R.A.C. received $257.40 for inspections which it now admits that it never performed.

The plaintiffs have advanced several arguments in an attempt to justify R. A.C.'s conduct. They claim that the fictitious names and addresses on the sales reports were unintentional mistakes. They also contend that since 300 mile inspections may have been performed by the (unauthorized) dealers who actually sold the forty-four vehicles, World-Wide was not being defrauded by the reimbursement to R.A.C. Needless to say, none of the plaintiffs' arguments are persuasive. R.A.C.'s conduct was designed to mislead World-Wide and clearly violated the franchise agreement.² Moreover, plaintiffs' conduct created a potential danger to the public. Information from the sales reports was transferred to IBM cards held by Volkswagen of America. In the event a defect was discovered in the Volkswagen, Volkswagen of America would be required under the Traffic and Motor Vehicle Safety Act, 15 U.S.C. § 1402, to give notice by certified mail to the customers whose names and addresses were on the IBM cards. Inasmuch as forty-one names and addresses submitted by R.A.C. were fictitious, the actual purchasers of these vehicles would never receive notification.

The Automobile Dealers' Day in Court Act grants a dealer the right to sue in a federal district court for damages by reason of an automobile manufacturer's failure to act in "good faith" in terminating or not renewing a franchise.³ The statute does not provide a new remedy for breach of contract but creates a new cause of action. An indispensable element of the statutory cause of action is not the lack of good faith in the ordinary sense but a lack of good faith in which "coercion, intimidation or threats" thereof are at least implicit. Globe Motors, Inc. v. Studebaker-Packard Corporation, 328 F.2d 645, 646 (3rd Cir. 1964).

The dealer has the burden of showing that it was a wrongful termination or non-renewal of the franchise. Milos...