Ron Tonkin Gran Turismo, Inc. v. Fiat Distributors, Inc.

• Citation: 637 F.2d 1376
• Decision Date: 02 March 1981
• Docket Number: No. 79-4003,79-4003
• Parties: 1980-81 Trade Cases 63,854 RON TONKIN GRAN TURISMO, INC., Plaintiff-Appellant, v. FIAT DISTRIBUTORS, INC., and Wakehouse Motors, Inc., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

Page 1376

637 F.2d 1376

1980-81 Trade Cases 63,854

RON TONKIN GRAN TURISMO, INC., Plaintiff-Appellant, v. FIAT DISTRIBUTORS, INC., and Wakehouse Motors, Inc.,

Defendants-Appellees.

No. 79-4003.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted Nov. 4, 1980.

Decided March 2, 1981.

Roger Tilbury, Portland, Or., argued for plaintiff-appellant; Carlton R. Reiter, Portland, Or., on brief.

James H. Clarke, Dezendorf, Spears, Lubersky, Campbell & Bledsoe, Andrew P. Kerr, Gilbertson, Brownstein, Sweeney, Kerr & Grim, Portland, Or., argued for defendants-appellees; John R. Gilbertson, Wayne Hilliard, Portland, Or., on brief.

Appeal from the United States District Court, District of Oregon.

Before VAN DUSEN, ^* KILKENNY and HUG, Circuit Judges.

KILKENNY, Circuit Judge:

Appellant, on November 26, 1975, brought this antitrust action against Fiat Distributors, Inc. (FDI) and Wakehouse Motors, Inc. (Wakehouse) alleging violations of Sherman Act §§ 1 and 2 and Clayton Act § 3. Appellant is a dealer in foreign cars in Portland. FDI is the United States distributor of Fiat automobiles and Wakehouse is the only Fiat dealer in the Portland area. ¹

This action was instituted after appellant's unsuccessful attempt to become the second Fiat dealer in the Portland area.

The case was referred to a magistrate who found that appellant's complaint included the following claims: (1) monopoly; (2) attempt to monopolize; (3) conspiracy to monopolize; (4) tying arrangements; (5) group refusal to deal; and (6) price fixing. Both appellees moved for summary judgment on all issues. On January 25, 1978, the magistrate, in his findings and recommendations, concluded that both appellees were entitled to summary judgment on all issues. Appellant filed objections to the magistrate's findings and recommendations and the district court judge, after a de novo review, entered an order on December 4, 1978, which affirmed the magistrate's findings and recommendations and dismissed the action. This appeal followed. We affirm.

FACTUAL AND PROCEDURAL BACKGROUND

This controversy centers upon the rejection of appellant's application for a Fiat dealership. After a period of preliminary discussion and preparation, ² a Fiat franchise application was signed on October 18, 1974. Appellant ordered cars and parts and gave Fiat a check for $32,493.95. The application clearly states that no binding agreement was created. The application, in order to be final, required home office approval. Appellant's check was returned on November 25, 1974. The application was not approved.

Appellant contends that the dealership arrangement would have been consummated but for the intervention of Wakehouse. ³ After learning of appellant's impending appointment, a representative of Wakehouse made a trip to Fiat's national headquarters on October 21, 1974. Appellant characterizes this visit as an attempt on the part of Wakehouse to protect its position as the sole Fiat dealer in the Portland area, and asserts that Wakehouse prevailed upon Fiat to reject the application for a new dealer. These facts allegedly support the existence of an agreement between FDI and Wakehouse to exclude a competitor of Wakehouse, and appellant maintains that this arrangement constitutes a per se violation of the antitrust laws.

Appellant maintains that the result of Wakehouse's exercise of "veto" power over the appointment of a new dealer has not been good "for Fiat, for customers, for competition in general, and certainly not for Ron Tonkin Gran Turismo." The negative impact on competition is premised upon appellant's assertion that Wakehouse has a monopoly in the relevant product and geographic market. The relevant market is defined as Fiat cars, parts, service and warranty work in the Portland area. Appellant's definition of the relevant market is based on its unsubstantiated belief that for a sizeable number of customers only a Fiat will do. Because Fiats, in appellant's opinion, constitute a separate market, Wakehouse's position as the sole dealer in the Portland area allows it an unrestrained power to exact exorbitant profits in its sales of Fiat cars, parts, service and warranty FDI contends that this litigation "is a bold attempt by an auto dealer to muscle his way into Fiat's dealer organization through abusive and meritless litigation." The evidence, in FDI's view, indicates that FDI, at the request of a local dealer with unsatisfactory sales, refrained from deciding whether to appoint an additional dealer while the existing dealer attempted to increase sales. FDI explains that it gave Wakehouse two 90-day probationary periods, ending in June, 1975, in which to increase sales. The possibility of an additional dealer was used to stimulate Wakehouse to improve its sales efforts. Wakehouse reached the targets FDI had set and the question of appointing appellant was dropped. FDI contends that this conduct by a small distributor at the behest of a single dealer in a market dominated by competitive brands does not violate Section 1, and that it was entitled to summary judgment.

work. Appellant continually claims that, as a result of this alleged monopoly position, Wakehouse's profit margins have been excessively high.

It is clear that FDI has a different conception of the relevant market. FDI maintains that the market is much broader than simply Fiat cars. FDI asserts that there are many competing types of automobiles. In fact, appellant acknowledges this on many occasions. FDI asserts that foreign cars constitute the principal competition. Fiat's share of the foreign car market in Portland was between 2.48%-3.51% from 1972-1974 and it rose to 5.2% in 1975. Its percentage of total car registration varied from .61%-1.87%.

In the course of the Fiat dealership application process, Fiat allegedly insisted that appellant divest itself of two competing lines of automobiles (Honda and Saab) before the franchise would be granted. Appellant maintains that it

"did so relying upon Fiat's assurance that the franchise would follow as a matter of course, but thereafter, Fiat acceded to the importuning of Wakehouse, and declined to ship the cars and to formally issue the Fiat franchise as it had promised. This ... is a violation of Section 1 of the Sherman Act and Section 3 of the Clayton Act because it is a tying arrangement and therefore a per se violation, and/or an offer of an exclusive dealing arrangement on the condition that Tonkin not use or deal in the goods and merchandise of a competitor of Fiat, and therefore, violates the rule of reason. In either event (either as a tying arrangement or an exclusive dealing arrangement) the Sherman and Clayton Acts have been transgressed." Appellant's brief at 5-6.

FDI's response to this argument is simply stated: "The baselessness of this litigation is illustrated by GT's charge that Fiat imposed upon it an unlawful 'tying' or exclusive dealing arrangement, based on a statement of a Fiat representative that he did not want Hondas and Saabs to be sold from the same location as Fiats." Aside from the legal obstacles to appellant's assertion of a colorable claim of an illegal tying or exclusive dealing arrangement, FDI notes several factual problems: (1) appellant could never secure permission from Honda or Saab to sell their cars from Tonkin's SW Morrison Street store (the location of the prospective Fiat dealership); (2) appellant did not "surrender" Honda, but transferred it to his Chevrolet agency; and (3) the Saab franchise was terminated because the distributor was understandably upset over appellant's miserable sales performance.

The magistrate's findings and recommendations, later adopted by the district judge after a de novo review, show that appellant had raised many factual issues, but concluded that they were immaterial, i. e., they could not prevent the appellees from prevailing at trial. Summary judgment was granted with respect to the Sherman Act § 2 counts and the propriety of this ruling has not been questioned on appeal. Some of the magistrate's observations with respect to those counts are, however, relevant to the issues at hand. The magistrate concluded that

"The relevant-product market is not Fiats; it is cars in general. The automobile The magistrate also rejected the Section 2 claims with respect to the "sub-markets", e. g., parts, largely because of the conclusion that it would be inappropriate to fragment the case. Concluding that it was the rejection of the application for the car dealership that was fundamentally at issue, the magistrate refused to give extended consideration to the so-called "sub-markets." The parts claim, and presumably service and warranty work as well, was considered to be so intertwined with the sale of Fiat cars that the court treated them as a unit.

market has always shown high cross-elasticity of demand. There is nothing so special about a Fiat that a prospective purchaser will refuse to buy a Datsun or Chevette, no matter what the price of a Fiat. Other courts have considered and rejected allegations similar to Tonkin's with respect to Cadillac, Mogul v. General Motors Corp., 391 F.Supp. 1305 (E.D.Pa.1975), aff'd., 527 F.2d 645 (3d Cir. 1976), and Dodge, Mt. Lebanon Motors, Inc. v. Chrysler Corp., 283 F.Supp. 453, 461 (W.D.Pa.1968), aff'd., 417 F.2d 622 (3d Cir. 1969). Plaintiff should not be allowed to go to trial on its unsupported allegation that, for 'a sizeable number of customers ... (o)nly a Fiat, or a Lancia, will do.' "

The magistrate also granted summary judgment with respect to appellant's tying arrangement allegation. The magistrate cited a number of factors which led him to conclude that appellant's allegation that FDI demanded that it divest itself of its Honda and Saab dealership did not remotely suggest the existence of a tying arrangement. Most simply, the magistrate concluded that "Plaintiff simply fails to show the existence of two separate products."

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