Rental Car of NH v. Westinghouse Elec. Corp.

• Decision Date: 20 June 1980
• Docket Number: Civ. A. No. 71-2393-M.
• Citation: Rental Car of NH v. Westinghouse Elec. Corp., 496 F. Supp. 373 (D. Mass. 1980)
• Parties: RENTAL CAR OF NEW HAMPSHIRE, INC., Chalet Management Company of America, Inc., Charles Le Baron, Le Baron Car Rent, Inc., Ivan Arnold Perkins, Felton Pervier and Rita Pervier, his wife, William C. Kichton and William J. Price, Individually and as Co-Partners doing business under the firm name and style of Econo-Car of Lynn, Poster Car Rental, Inc., Stephen B. Poster, and Dorothy M. Poster, on behalf of themselves and all others similarly situated, Plaintiffs, v. WESTINGHOUSE ELECTRIC CORPORATION, Econo-Car International, Inc., Americar, Inc., Distributor Auto Rentals, Inc., Franchise Realty Corp., Econo-Car Overseas, Inc., Three Ninety Nine Auto Rental of Boston, Inc., Defendants.
• Court: U.S. District Court — District of Massachusetts

496 F. Supp. 373

RENTAL CAR OF NEW HAMPSHIRE, INC., Chalet Management Company of America, Inc., Charles Le Baron, Le Baron Car Rent, Inc., Ivan Arnold Perkins, Felton Pervier and Rita Pervier, his wife, William C. Kichton and William J. Price, Individually and as Co-Partners doing business under the firm name and style of Econo-Car of Lynn, Poster Car Rental, Inc., Stephen B. Poster, and Dorothy M. Poster, on behalf of themselves and all others similarly situated, Plaintiffs, v. WESTINGHOUSE ELECTRIC CORPORATION, Econo-Car International, Inc., Americar, Inc., Distributor Auto Rentals, Inc., Franchise Realty Corp., Econo-Car Overseas, Inc., Three Ninety Nine Auto Rental of Boston, Inc., Defendants.

Civ. A. No. 71-2393-M.

United States District Court, D. Massachusetts.

June 20, 1980.

COPYRIGHT MATERIAL OMITTED

Harold Brown, Brown, Prifti, Leighton & Cohen, Boston, Mass., Leon J. Greenspan, Greenspan & Jaffe, White Plains, N.Y., David Berger, Warren D. Mulloy, Herbert B. Newberg, Howard L. Schambelan, David Berger, P. A., Philadelphia, Pa., for plaintiffs.

John R. Hally, Michael Liston, Nutter, McClennan & Fish, Boston, Mass., for defendants Westinghouse Elec. Corp. and Econo-Car International, Inc.

John M. Kahn, Gael Mahony, Hill & Barlow, Boston, Mass., for defendants Americar, Inc., Distributor Auto Rentals, Inc., Franchise Realty Corp., Econo-Car Overseas, Inc., and Three Ninety Nine Auto Rental of Boston, Inc.

MEMORANDUM AND ORDER

FRANK J. MURRAY, Senior District Judge.

In this antitrust action brought by certain franchisees and former franchisees of the Econo-Car auto rental chain, to vindicate alleged violations of Section 1 of the Sherman Act (15 U.S.C. § 1) and Section 3 of the Clayton Act (15 U.S.C. § 14), the plaintiffs have moved for class action certification under Fed.R.Civ.P. 23(a) and (b). The named plaintiffs include current and former franchisees of the Econo-Car auto rental chain. The principal defendants are the national franchisor, Econo-Car International, Inc. and its parent corporation, Westinghouse Electric Corporation. Plaintiffs seek class action certification also against four other defendants alleged to have participated in the antitrust violations. The purported class of which plaintiffs seek certification is described as all Econo-Car dealers throughout the United States who are alleged to number in excess of two hundred. Defendants suggest that, as of March 3, 1972, there were 178 current franchisees, 70 past franchisees who voluntarily terminated, and 52 other past franchisees. The court proceeds on the assumption that the class intended in the motion for certification includes both present and former franchisees.

The alleged violations of Section 1 of the Sherman Act, in restraint of trade, are:

(1) that defendants forced the franchisees, as a condition of obtaining and retaining the franchise, to purchase all their auto insurance requirements from the franchisor;

(2) that defendants forced the franchisees, as a condition of obtaining the franchise, to purchase their original fleets of autos from designated sources;

(3) that defendants conspired to fix prices for fleet sales of autos to franchisees.

The alleged violations of Section 3 of the Clayton Act are that defendants conspired to fix prices for fleet sales of autos to franchisees. The complaint also alleges a state law claim, under the pendent jurisdiction of the court, that defendants breached a fiduciary duty owed to franchisees by accepting kickbacks from the fleet auto manufacturers in connection with fleet purchases by franchisees. Thus it appears the plaintiffs will seek to prove that certain provisions of franchise license agreements constituted insurance and auto purchase tieins that violated the antitrust laws, that defendants conspired to fix the prices franchisees would pay for autos destined for franchisees' rental fleets, and that the franchisor breached fiduciary obligations that arose from the franchise agreements and from extra-contractual representations and solicitations.

The burden is on the plaintiffs to show that the prerequisites of Rule 23(a) (numerosity, common questions of law or fact, typicality of claims, and fair and adequate representation of class by plaintiffs) are satisfied, and in addition that the claims fall within one of the categories of Rule 23(b). Hehir v. Shell Oil Co., 72 F.R.D. 18, 20 (D.Mass.1976). The principal challenges raised by defendants against the motion for certification are that individual questions and not common questions predominate, and that plaintiffs and their attorneys cannot adequately represent the interests of the class.

a. Numerosity

Whether the present and past franchisees are regarded as properly one class or two sub-classes plaintiffs have asserted with the degree of particularity required by Rule 23(a) that a certain number of prospective class members exist. Courts have found classes of as few as thirteen, Dale Electronics, Inc. v. R.C.L. Electronics, Inc., 53 F.R.D. 531 (D.N.H.1971), and twenty-five, Philadelphia Electric Co. v. Anaconda American Brass Co., 43 F.R.D. 452 (E.D.Pa. 1968), to be proper, where attending circumstances tend toward superiority of the class action. Though the numerosity requirement of Rule 23(a) does not depend upon mere numbers, plaintiffs have met that requirement of the Rule here because of the commonality of certain questions and the superiority of the class action in that context.

b. Typicality of Claims

The typicality requirement of Rule 23(a) has been equated with other elements of Rule 23, some courts equating it with the Rule 23(a)(2) requirement of common questions, see, e. g., Rakes v. Coleman, 318 F.Supp. 181, 190 (E.D.Va.1970), others seeing it as the equivalent of the Rule 23(a)(3) requirement that the named plaintiffs fairly and adequately represent the absentee class members. See, e. g., Robertson v. National Basketball Ass'n, 389 F.Supp. 867, 898 (S.D.N.Y.1975), aff'd, 556 F.2d 682, 684-86 (2d Cir.1977); 3B Moore's Federal Practice ¶ 23.06-2, at 23-185 to 23-190 (2d ed. 1980). See also Sommers v. Abraham Lincoln Federal Savings and Loan Association, 66 F.R.D. 581, 586-87 (E.D.Pa.1975); Ungar v. Dunkin' Donuts of America, Inc., 68 F.R.D. 65, 136 (E.D.Pa.1975), rev'd on other grounds, 531 F.2d 1211 (3rd Cir.), cert. denied, 429 U.S. 823, 97 S.Ct. 74, 50 L.Ed.2d 84 (1976).

Separately construed, typicality has been said to require that "the claims of the representatives of the class be co-extensive with the claims of the members of the class", that is, "the representative parties need prove . . . precisely what the absentees must prove to recover". Minnesota v. United States Steel Corp., 44 F.R.D. 559, 566, 567 (D.Minn.1968). In Mersay v. First Republic Corporation of America, 43 F.R.D. 465 (S.D.N.Y.1968), the court, noting that a typical representative must not have interests directly in conflict with members of the class, allowed a plaintiff, barred from recovery by his status as an "insider", to represent a class of defrauded stockholders in a securities case. Here, both existing and former franchisees must prove the same facts to recover for antitrust violations, and both have an interest in preventing such antitrust abuses. Thus the named plaintiffs are typical, although some of them no longer have franchises.

c. Common Questions of Law or Fact

Rule 23(a)(2) requires a showing by plaintiffs of "questions of law or fact common to the class", and Rule 23(b)(3) provides for class certification where such questions "predominate over any questions affecting only individual members". A principal challenge of defendants to certification is aimed at this requirement, and plaintiffs' claims must be examined separately.

(1) Sherman Act: Insurance Tie-in

Section 1 of the Sherman Act makes unlawful combinations or contracts in restraint of trade. 15 U.S.C. § 1. A tying arrangement may be considered to be in restraint of trade and has been defined as "an agreement by one party to sell one product but only on the condition that the buyer also purchases a different ... product, or at least agrees that he will not purchase that product from any other supplier". Northern Pacific Railway Co. v. United States, 356 U.S. 1, 5-6, 78 S.Ct. 514, 518, 2 L.Ed.2d 545 (1958). The question whether a tying arrangement, in any particular instance, will be deemed so unreasonable as to constitute a per se violation of the antitrust laws depends upon the market power the seller possesses over the tying product and the effect of the tie-in on interstate commerce in the tied product. Id. at 5-6, 78 S.Ct. 518. It is only when the seller has sufficient economic power over the tying product to restrain a "not insubstantial amount" of interstate commerce in the product sought to be tied that the arrangement will be held to be per se illegal. Id.; International Salt Co. v. United States, 332 U.S. 392, 396, 68 S.Ct. 12, 15, 92 L.Ed. 20 (1947). "The vice of tying arrangements lies in the use of economic power in one market to restrict competition on the merits in another . . .." Northern Pacific Railway Co. v. United States, supra at 11, 78 S.Ct. at 521. Thus the three elements of a per se tying violation of Section 1 of the Sherman Act are (1) the conditional sale of two distinct products, (2) economic power over the tying product, and (3) the effect upon a "not insubstantial" amount of interstate commerce. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 449 (3rd Cir. 1977), cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978).

Plaintiffs' claim that the franchisor imposed on all franchisees a condition of the use of the franchisor's trademark by requiring franchisees to execute the uniform standard franchise agreement (which provided for the purchase of the franchisee's insurance requirements from franchisor), makes a showing of a tie-in on the face of the agreement. A trademark or franchise license may be a "tying...