Sink v. Ford Motor Co., Civ. A. No. 80-70008.

• Decision Date: 07 October 1982
• Docket Number: Civ. A. No. 80-70008.
• Citation: 549 F. Supp. 245
• Parties: George W. SINK and Sink Ford, Inc., a Michigan corporation, Plaintiffs, v. FORD MOTOR COMPANY, a Delaware corporation, Defendant.
• Court: U.S. District Court — Western District of Michigan

549 F. Supp. 245

George W. SINK and Sink Ford, Inc., a Michigan corporation, Plaintiffs, v. FORD MOTOR COMPANY, a Delaware corporation, Defendant.

Civ. A. No. 80-70008.

United States District Court, E.D. Michigan, S.D.

October 7, 1982.

Grady Avant, Jr., Detroit, Mich., for plaintiffs.

William A. Zolbert, Dearborn, Mich., for defendant.

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

PHILIP PRATT, District Judge.

This cause of action, arising chiefly under the Dealer's Day in Court Act (DDCA), 15 U.S.C. §§ 1221-1225 is before this Court on defendant Ford Motor Company's Motion for Summary Judgment dismissing plaintiff Sink Ford, Inc.'s three count complaint. Plaintiff seeks recovery under the DDCA, Count I, under the Michigan Consumer Protection Act, Count II, and under Michigan's common-law of misrepresentation, Count III. Both Counts II and III are before the Court only because of pendent jurisdiction. For the reasons detailed below, defendant's motion for summary judgment is granted as follows: Count I is dismissed with prejudice and the pendent state law claims in Counts II and III are dismissed without prejudice.

I. FACTS

There is no genuine issue as to the material facts on which defendant's motion for summary judgment is based. George Sink,¹ President of Sink Ford, Inc., was not a neophyte to the general business world, or automobile retailing specifically, when he, in partnership with his son, Jonathan, became a Ford Dealer in May of 1976.

After service with the Air Force, and a year's study in accounting and business administration at Southland College of Commerce, George Sink worked as credit manager for one firm, an independent distributor of appliances, and in the credit and accounts receivable department of another firm.

In 1955, Mr. Sink worked in both sales and the office for a LaPorte, Indiana auto dealer, subsequently co-managed a Studebaker dealership for one year, and worked in both sales and sale management for Delberg Olds & Cadillac in Niles, Michigan. In 1969 George Sink in 50% partnership with another formed Sink Motors, Inc., a Datsun dealership which he was managing at the time he was approached by Joseph Pichler, a Market Representative Manager with defendant Ford Motor Company. Sink had developed the Datsun dealership into a somewhat profitable concern, but a falling out with his partner, Goldy, who had provided half of the capital (but none of the management expertise) coupled with Sink's own prediction that import sales would be in decline due to price increases, left Sink an eager prospect to take over the Ford dealership in Berrien Springs.

George Sink was first contacted in the fall of 1975 concerning the availability of Lew Evan's Ford by Mr. Pichler, whose primary job was the recruitment of individuals with both automotive experience and adequate financial resources to buy in and operate a dealership for Ford. The particular dealership that Pichler offered Sink had been in decline as had the previous dealership on that site. Pichler assured Sink that the failures were due to bad management, not any inherent problems with the location. During the discussions, Sink stressed his concern that cars be available so he could sell them — citing non-availability as one of the factors that limited the growth of his Datsun dealership. Pichler promised Sink that Ford could deliver all the cars that Sink Motors could sell.

Defendant Ford, through Pichler, prepared and gave George Sink Dealership Investment Requirement and Profit and Sales Forecast forms in March, 1976.² These set forth financial and sales details relating to past sales experience of the dealership relative to comparable dealerships in that region as well as the expected potential for future sales. The figures covered sales of both new and used cars, as well as the volume of the parts and service departments. In setting forth the forecast for parts and service, Pichler misadded some figures, so that the amount of $117,747 was added in twice erroneously, placing the total expected selling gross for parts and service at $336,420 rather than $218,673. To the extent that this was crucial to other calculations, those amounts were also incorrect.

In addition, this figure was based on defendant's estimate that there were 2,300 Ford "Units in Operation," that were potential parts and service customers, including all Fords up to eight years of age. Subsequently, and unrelated to Sink's becoming a dealer, defendant, at the national level, changed the definition of "Units in Operation" to cover only those cars six years old or less. This change interacted with the erroneous addition to reduce greatly plaintiff's profit potential, although plaintiff focuses on Pichler's miscalculation.

Defendant's miscalculation, though apparent on the face of the document, was not discovered by either George Sink, his son, or anyone at Ford Motor Company until October of 1978, when because of the dealer's poor performance, Sink was called in for a profit and sales conference, given revised forecast figures and suggestions to improve operations, and requested to invest more capital.

Notwithstanding the patent errors in defendant's forecast, Sink entered into a dealership contract around June of 1976, having invested some $85,000 garnered from the sale of his Datsun Dealership (including good will) and $25,000 from his son Jonathan who was made Vice President of the renamed corporation; Sink Ford, Inc. Sink also secured inventory financing (known as the "floor plan") from Inter-City Bank after he had been refused such financing by Ford Motor Credit Corporation.³ At the time of entering into the dealership contract, Sink signed a form that indicated he did not rely on Ford's forecasts but his own independent assessment and judgment (G. Sink Deposition Ex. 13), and executed another form to the effect that he realized an additional input of capital could be required to bring his investment up to some $120,000. (G. Sink Deposition Ex. 18).

Sink commenced operation of the dealership near the close-out of the model year which severely limited the availability of inventory from the factory. The assets of Lew Evan's Ford, which plaintiff had purchased included eight models whose relative undesirability was evidenced by the fact that the units remained unsold. Throughout Sink Ford, Inc.'s history, the dealership was plagued with inventory problems stemming from undercapitalization in that as new stock arrived which may have enhanced plaintiff's inventory mix, it had to be refused because the inventory financing was all allocated to previously delivered, less desirable models which weren't moving, as well as a poor mix of merchandise delivered by Ford,⁴ and alleged delay by defendant in reimbursing Sink Ford, Inc. for service performed under warranty.

The financing problem was compounded by the disarray of plaintiff's books and records, due in part to his accountant's illness, and the substitute's inability to organize the office. Throughout George Sink's deposition it is clear that part of plaintiff's problems were due to poor recordkeeping and Sink's inability to control the operations because basic figures were not available. The lack of documentation was noted as one area which needed correction in the October 1978 Profit and Sales Conference, and has also rendered documenting plaintiff's charges of unordered shipments more difficult.

The management problems proved insurmountable, the demands for additional investment unmeetable and ultimately, in October 1978, even before the Profit and Sales Conference, George Sink sought to resign the dealership and simply sell used cars and service. His resignation was not accepted by Ford until August 24, 1979, although the shipment of new cars had stopped earlier because the bank had cut off Sink Ford's credit.

II. COUNT I — THE DEALER'S DAY IN COURT ACT

In order to avoid summary judgment on defendant's motion plaintiff has sought to raise genuine issues of material fact concerning the intentions of Ford in miscalculating the October 1975 forecast, the representation of Pichler concerning the availability of cars, misallocation of automobiles shipped for sale, delay in reimbursing for warranty service, Ford's refusal to accept Sink's resignation, and Ford's initial approval of the dealership at the outset, in light of defendant's awareness of Sink's undercapitalization.

In evaluating defendant Ford Motor Company's prayer for summary judgment under the Dealer's Day in Court Act, the Court must determine whether any of defendant's alleged acts of conduct are those the DDCA is intended to redress. Construing the evidence in plaintiff's favor and allowing all favorable inferences as the Court is required to do in reviewing defendant's motion for summary judgment, Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970), the Court finds that plaintiff has alleged the following wrongful conduct on the part of Ford Motor Company.

1. Misrepresentation by inaccurate adding of figures on the Profit and Sales Forecast.

2. Failure to provide cars as ordered by Sink Ford, Inc.

3. Delivery of cars that plaintiff did not order.

4. Enticing George Sink into a dealership though defendant knew or should have known that Sink lacked adequate capital.

5. Requesting investment of additional capital beyond the investor's means.

6. Slow performance on parts repurchase and warranty obligations.

7. Refusal to accept George Sink's resignation so that he could mitigate expenses.

Whether defendant's actions rise to the level of wrongful conduct — that which lacks good faith — must be measured against the special, relatively narrow, definition of good faith under Section 1 of the Dealer's Day in Court Act:

(e) The term "good faith" shall mean the duty of each party to any franchise, and all officers, employees, or agents thereof to act in a fair and

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