Randy's Studebaker Sales, Inc. v. Nissan Motor Corp. in U.S.A.

• Decision Date: 04 May 1976
• Docket Number: No. 75-1348,75-1348
• Parties: 1976-1 Trade Cases 60,803, 1 Fed. R. Evid. Serv. 1133 RANDY'S STUDEBAKER SALES, INC., d/b/a Randy's Datsun Sales, Plaintiff-Appellee, v. NISSAN MOTOR CORPORATION IN U.S.A., Defendant-Appellant.
• Court: U.S. Court of Appeals — Tenth Circuit

Page 510

533 F.2d 510

1976-1 Trade Cases 60,803, 1 Fed. R. Evid. Serv. 1133

RANDY'S STUDEBAKER SALES, INC., d/b/a Randy's Datsun Sales, Plaintiff-Appellee, v. NISSAN MOTOR CORPORATION IN U.S.A., Defendant-Appellant.

No. 75-1348.

United States Court of Appeals, Tenth Circuit.

Argued Jan. 28, 1976.

Decided April 2, 1976.

Rehearing Denied May 4, 1976.

Daniel L. Berman of Berman & Giauque, Salt Lake City, Utah (Douglas J. Parry of Berman & Giauque, and Lowell V. Summerhays, Salt Lake City, Utah, on the brief), for plaintiff-appellee.

Merlin O. Baker of Ray, Quinney & Nebeker, Salt Lake City, Utah (Jonathan A. Dibble of Ray, Quinney & Nebeker, Salt Lake City, Utah, and Lillick, McHose & Charles, Los Angeles, Cal., on the brief), for defendant-appellant.

Before HOLLOWAY, BARRETT and DOYLE, Circuit Judges.

DOYLE, Circuit Judge.

The appellant has appealed from a judgment entered against it on a jury verdict in the amount of $600,000 in favor of Randy's Studebaker Sales, Inc., d/b/a Randy's Datsun Sales. Violations of Sections 1 and 2 of the Sherman Antitrust Act and violations of the Automobile Dealer Franchise Act, 15 U.S.C. Sections 1221-25 were alleged. In essence Nissan Motor Corporation was charged with conspiring with Datsun dealers to eliminate competition in the retail distribution of new Datsun automobiles and to eliminate particularly the competition of the plaintiff as a Datsun dealer in the Salt Lake market. The jury found in favor of the defendant under the Sherman Antitrust Act. The damage award was given in the claim under the Automobile Dealers Franchise Act.

Randy's theories under the Automobile Dealer's Act were, first, that Nissan had failed to act in good faith in performing or complying with the obligations of an automobile manufacturer under the dealership agreement in that it had discriminated against the plaintiff in the distribution and allocation of automobiles and, secondly, that the Nissan Company had failed to act in good faith in refusing to renew plaintiff-appellee's Dealer Sales and Service Agreement; that Nissan was motivated by its desire to eliminate Randy's from competition; third, that Nissan failed to act in good faith in that it coerced Randy's through threats and other conduct in an effort to compel abandonment of its facilities and market area and relocation in a new, smaller market, thereby removing Randy's from the competitive scene.

The cause has been here before. On the prior occasion, Nissan had appealed the preliminary injunction decree which had enjoined defendant from terminating the dealership of plaintiff and from failing to provide as many automobiles as Nissan provided to the other dealers in Salt Lake. The injunction against failure to provide an equal number of cars was modified by this court so as to maintain the status quo. Otherwise, it was affirmed.

The underlying controversy has had a considerable history dating back to a time soon after the initial grant of the franchise by Nissan, the distributor for Datsun vehicles, parts and accessories in the continental United States. The first written franchise was given to Randy's in June 1966. Thereafter, this agreement was renewed periodically. During the period in question an effort was made by Nissan to move Randy's to larger facilities at a different location, but this never came about. Conflicting evidence was presented as to the willingness of Randy's to move. There was also evidence that Nissan had thwarted a proposed move by installing a new dealer in a proposed location. The only substantial change in Randy's facilities occurred in 1972 with the addition of a parts area.

The problem from the standpoint of Randy's was a shortage of vehicles during most of the period of the franchise. Its evidence was that it sold virtually every new Datsun that was delivered. There were two additional dealerships installed in Salt Lake City, Clines in 1968, and Schettler-Williams in 1970. The result was that Randy's had less automobiles to sell. Randy's testimony established that his method of competing with the other two Datsun dealers was by price competition. The other dealers complained to Nissan, and the latter warned Randy's to keep its gross margins and thus the retail price high.

Geographically, the other two dealers were relatively close to Randy's, and soon after their installation Nissan started a campaign to persuade Randy's to move out to the suburbs. Randy's was unwilling to go to the place suggested, Bountiful, Utah, for the reason that a previous Datsun dealer had gone bankrupt there in 1968. According to Randy's evidence, there was a willingness on its part to move to Granger, Utah, but that did not materialize.

In 1972 Randy's was informed about a new means of allocating cars to the Salt Lake City market. This was based on dealers' "planning potential" an estimate based on the percentage of the market which a dealer could be expected to penetrate. Since Datsuns were in short supply, so it was argued, the "planning potential" was an important factor in the allocation of cars. Randy's maintained that its "planning potential" was arbitrarily arrived at that it had no relation to the number of cars that it was able to service. The sum total of the program, according to the evidence on Randy's part, was that the supply of new Datsuns to Randy's was diminished and the supply of the other two Salt Lake dealers was increased. The number of cars allocated to Randy's in 1972 was insufficient to allow it to break even using its traditional pricing policies.

The final franchise agreement between these parties expired on April 23, 1973. On that occasion Nissan notified Randy's that its franchise was not to be renewed. Instead, it conditioned a renewal on Randy's acquisition or construction of larger facilities, on its hiring additional workers, increasing working capital and increasing sales performance. November 30, 1973 was the deadline for accomplishing these objectives, but on August 17, 1973, Randy's filed the present lawsuit claiming violation of the Sherman Act, 15 U.S.C. Sections 1, 2, and the Automobile Dealer Franchise Act, supra. The allegation in the complaint was that the termination had occurred because Randy's had refused to follow Nissan's resale price maintenance policies and had failed to conform to Nissan's competitive price maintenance policies.

The district court granted a preliminary injunction on December 11, 1973. This directed Nissan to supply Randy's with at least as many cars as were supplied to other Datsun dealers in the market area. Nissan appealed the order to this court and obtained the modification mentioned, that is, an allocation of cars equal to the number that had been furnished rather than an increased quota. ¹ The cause was tried and judgment was entered in favor of Randy's on March 26, 1975, on the count of violation of the Automobile Dealer Franchise Act, supra.

On this appeal Nissan advances the following points (among others):

1. That the Automobile Dealer Franchise Act does not apply to the facts in this case.

2. That an incorrect measure of damages has been adopted and awarded.

3. That it was error to receive in evidence certain ad hoc surveys.

4. That it was error for the court to take judicial notice of the preliminary injunction.

Being of the opinion that none of these contentions are meritorious, we affirm.

I.

The Franchise Act gives to an automobile dealer a federal cause of action against an automobile manufacturer who fails to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, cancelling, or not renewing the franchise. See 15 U.S.C. Section 1222.

Good faith is defined as the duty of a dealer and a manufacturer "to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or intimidation from the other party." 15 U.S.C. Section 1221. One proviso excludes "recommendation, endorsement, persuasion, urging, or argument" as constituting a lack of good faith. Id. Also, the cases have considered mere arbitrariness by a manufacturer as not giving rise to a claim under the Act. ²

It would appear then that the manufacturer's action in order to lack good faith must be unfair and inequitable in addition to being for the purpose of "coercion" or "intimidation." The problem becomes difficult in the individual case because the standards are not clear for determining whether the conduct involved qualifies as unfair and inequitable and as being coercion or intimidation. The distinction between illicit pressure and simple recommendation, endorsement, persuasion, urging, etc., is equally difficult. Legislative history does not provide clarification. House Report No. 2850, 84th Cong., 2d Sess. (1956), 1956 U.S.Code Cong. & Admin.News, pp. 4596, 4603, says

Manufacturer coercion or intimidation or threats thereof is actionable by the dealer where it relates to performing or complying with any of the terms or provisions of the franchise, or where it relates to the termination, cancellation, or nonrenewal of the dealer's franchise.

The Report goes on to say:

Thus, where a dealer's resistance to manufacturer pressure is related to cancellation or nonrenewal of his franchise a cause of action would arise.

However, the Report is quick to explain that the manufacturer is not prohibited from terminating or refusing to renew the franchise of a dealer who is not providing the manufacturer with adequate representation and, further, that the Act does not prevent a manufacturer from cancelling or not renewing an ineffective or undesirable dealer's franchise. Also, appointment of added dealers according to the House Report is a normal competitive method for securing a better distribution. Hence, curtailment of this "would be inconsistent with the antitrust objectives of this legislation." 1956 USCCAN, pp. 4603-04.

The ...