Sherman v. British Leyland Motors, Ltd.

• Decision Date: 24 July 1979
• Docket Number: Nos. 76-3172,76-3582,s. 76-3172
• Citation: 601 F.2d 429
• Parties: 1979-2 Trade Cases 62,784 Gary H. SHERMAN and Vincent Imports, Inc., doing business as European Motors, Plaintiffs-Appellants and Cross-Appellees. v. BRITISH LEYLAND MOTORS, LTD., Leyland Motor Sales, Inc., British Leyland Motors, Inc., British Motor Car Distributors, Ltd., and Peter Satori Company, Ltd., Defendants-Appellees and Cross-Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

Page 429

601 F.2d 429

1979-2 Trade Cases 62,784

Gary H. SHERMAN and Vincent Imports, Inc., doing business as European Motors, Plaintiffs-Appellants and Cross-Appellees. v. BRITISH LEYLAND MOTORS, LTD., Leyland Motor Sales, Inc. British Leyland Motors, Inc., British Motor Car Distributors, Ltd., and Peter Satori Company, Ltd. Defendants-Appellees and Cross-Appellants.

Nos. 76-3172, 76-3582.

United States Court of Appeals Ninth Circuit.

July 24, 1979.

David C. Phillips, Tuckman, Goldstein & Phillips, San Francisco, Cal., John R. Schoemer, Jr., Townley, Updike, Carter & Ridgers, New York City, for British Leyland.

Robert L. Gorman, Jeffrey J. Parish, Skornia & Rosenblum, San Francisco, Cal., for Sherman.

Appeal from the United States District Court for the Northern District of California.

Before BROWNING and CHOY, Circuit Judges, and CHRISTENSEN, ^* District Judge.

CHRISTENSEN, District Judge:

This is an action for alleged violations of the federal Automobile Dealers' Day in An alphabetized list and description of the parties in the margin ⁵ may prove useful, since relationships and distinctions among them will be important from the outset.

                Court Act, 1 and the antitrust laws, 2 and on pendent state claims.  3 The district court granted summary judgment in favor of the defendants on all claims.  Presented by plaintiffs' appeal is the broad issue typical for such rulings of whether the pleadings, affidavits and depositions before the district court established as a matter of law that plaintiffs' claims did not justify trial on the merits.  4 The answer, of course, depends upon resolution of ancillary issues.  Defendants' cross-appeal involves deposition costs which were disallowed by the trial court
                

FACTS OF RECORD

Among facts which affidavits, depositions and admissions before the district court tended to establish were:

In 1968 British Leyland took over through merger the business of the principal British automobile makers (excluding General Motors, Ford and Chrysler): British Motor Corporation, manufacturer of Austin, MG and Jaguar automobiles, and Leyland Motor Corporation, maker of Triumph, Rover and Land Rover. British Leyland thereupon became the parent of three separate United States marketing organizations: British Motor Holdings (U.S.A.), Inc., which marketed MG; Leyland Motor Corporation of North America, the importer of Triumph (and at that time Rover); and Jaguar Cars, Inc., importer of Jaguar. These three United States companies were consolidated into British Leyland Motors, Inc. (BLM), on October 1, 1968. BLM continued to operate through three separate divisions handling Jaguar and Triumph, Rover and Austin, and MG, respectively, until 1972, when BLM began actively to implement a program of consolidation of its wholesale distribution system by means of a "Rationalization Program". ⁶ Under that plan the wholesale distribution of all British Leyland automobiles in the United States was to be handled by a single organization for each territory either Leyland Motor Sales, Inc. (LMS), or some independent distributor.

Prior to the consummation of the program LMS, as the wholly-owned subsidiary of BLM, distributed Triumph automobiles, parts and accessories throughout California. Effective October 1, 1973, LMS' distribution rights for Triumph, together with Rover and Land Rover automobiles, were terminated and it no longer did business in southern California. British Motor Car Distributors, Ltd. (BMCD), another defendant-appellee, became the sole distributor of Triumph, along with MG and Jaguar, in a territory centered in southern California. LMS in exchange for its Triumph, Rover and Land Rover distribution rights in southern California became the exclusive distributor for all Leyland automobiles in northern California. This, of course, resulted in BMCD's becoming the Triumph distributor in the Pasadena area where Vincent's business was situated.

Vincent had been first franchised to sell the Triumph line on March 15, 1971, at a time when the plaintiff corporation was owned by one Vincent Santangelo. All corporate stock was transferred to Sherman on December 1, 1971. The latter applied to LMS for appointment as a Triumph dealer and received a one-year franchise which expired December 1, 1972. That franchise was renewed by LMS for a second year to expire on December 1, 1973. The franchise was in the form of a "Distributor-Dealer Agreement" which appointed Vincent "as an authorized dealer for new Triumph vehicles, replacement parts, equipment and accessories as offered for sale by the distributor." The agreement read in part:

16. Termination. (a) This Agreement shall be deemed canceled, without further action by the Distributor, in the event of the termination or cancellation of the Distributor's Distribution Agreement with British Leyland Motors Inc. or upon the withdrawal for any reason of the right of the Distributor to purchase the Vehicles and to resell the same within the area in which the Dealer is located. The Dealer acknowledges that all of his rights under this Agreement are subordinated to, and conditional upon the continuance of, the ability of the Distributor to supply the Dealer with the Products.

(b) Either party may in its full discretion and with or without any cause cancel this Agreement upon not less than 30 days' written notice to the other.

(c) The Distributor may at its option terminate this agreement for cause forthwith by giving the Dealer written notice of such termination. It is agreed that any of the following will give the Distributor cause to terminate this Agreement:

(1) The death, incapacity, removal, resignation or withdrawal from active participation with the Dealer for any reason of any of the persons listed in the Schedule as principals of dealership (Sherman was listed in that schedule as president and his wife Helga Sherman as vice-president of Vincent).

(2) Any sale, transfer, or change by operation of law or otherwise of any substantial interest in the direct or indirect management or ownership of the Dealer, except in the case where the persons referred to in (1) above remain in the active management and substantial ownership of the Dealer. . . .

24. Manufacturer and/or Importer Not a Party. Neither British Motor Corporation, Ltd., . . . nor affiliated companies of British Leyland Motor Corporation, Ltd., is a party to this Agreement, and none of them shall be deemed to have assumed any liability or obligation to the Dealer hereunder.

A "Distribution Agreement" dated October 1, 1973, between BLM and BMCD in implementation of the Rationalization Program provided in part that BMCD would become the sole distributor in southern California of not only the Austin and MG, but also of the Triumph, Rover, Land Rover and Jaguar lines, and that LMS would become the sole distributor of all of those automobiles in northern California. Paragraph 7 of that agreement read in part:

Dealer Organization. (a) It is acknowledged that neither party is the successor-in-interest of the other in the territory to be taken over. Neither party shall be deemed to assume any liability under any dealer agreement of the other, or upon any representation made by the outgoing distributor to any of its dealers which exceeds in scope or otherwise differs from the written dealership agreement. . . .

(b) Without the prior consent of the other party, neither BLM (nor LMS) nor the Distributor (BMCD) will renew or extend any dealer agreement now in force, nor will it appoint any new dealer or make any representations to any dealer as to its future status after transfer of distribution has been effected.

In an addendum "United States Distributor's Agreement" contemporaneously executed ⁷ it was stipulated that the distributor would have the sole right to appoint dealers authorized to sell the vehicles at retail ("Authorized Dealers") from places of business located within its area. There was another provision stating: "Nothing contained in this agreement shall limit or restrict the geographic territory within which, or the persons from whom, the Distributor or its Authorized Dealers may sell the Vehicles, parts and accessories."

By October 30, 1973, BMCD had taken over LMS' position as distributor of Triumph in the southern California area pursuant to these distribution agreements. On that date, BMCD sent a letter to Vincent and other Triumph dealers informing them that BMCD had been reviewing dealer candidates with the view to establishing a strong dealer network "for the sale of all Triumph's (sic) as well as the other British Leyland lines of cars in the Southern California territory." The recipients were advised that "we have not yet completed the screening process, and will not be able in all cases to announce final dealer appointments for several more weeks." The letter added:

In the interim, as an accommodation in these circumstances, we would be happy to process all orders for vehicles and for parts and accessories, to the extent of the available supply, on the same basis as we intend to follow once the dealership appointments have been made. The terms which we will honor are set out in the Please understand that the enclosed form of agreement is not intended to establish a new dealer arrangement with you, or to renew any agreement that has previously been outstanding. This accommodation is intended to apply only as transitional measure, effective for forty-five days from the date of this letter.

form of dealership agreement which is enclosed along with this letter, for your review. Unless informed by you that these terms are not acceptable, we shall accept your orders during the interim period on this basis.

We are proceeding as quickly as possible to review the candidacy of each potential dealer for the vehicles which we will be distributing and hope to be in a position to announce our appointments in the near future. Thank you for your continuing cooperation,...