Southern Rambler Sales, Inc. v. American Motors Corp.

• Decision Date: 08 May 1967
• Docket Number: No. 23058.,23058.
• Citation: 375 F.2d 932
• Parties: SOUTHERN RAMBLER SALES, INC., Appellant, v. AMERICAN MOTORS CORPORATION and American Motors Sales Corporation, Appellees.
• Court: U.S. Court of Appeals — Fifth Circuit

375 F.2d 932 (1967)

SOUTHERN RAMBLER SALES, INC., Appellant, v. AMERICAN MOTORS CORPORATION and American Motors Sales Corporation, Appellees.

No. 23058.

United States Court of Appeals Fifth Circuit.

April 10, 1967.

Rehearing Denied May 8, 1967.

Gibson Tucker, Jr., Stewart J. Kepper, Tucker & Schonekas, New Orleans, La., for appellant.

Murphy Moss, Lemle & Kelleher, New Orleans, La., for appellees.

Before GEWIN and GOLDBERG, Circuit Judges, and SPEARS, District Judge.

GOLDBERG, Circuit Judge:

Southern Rambler Sales, Inc. (Rambler) was a New Orleans franchisee of American Motors Corporation and American Motors Sales Corporation (American) from January 1958 until July 1960, when at Rambler's request the franchise was terminated.

In its complaint, Rambler pleaded oral representations by American at the time of enfranchisement that the latter would grant no competing franchise in Rambler's area without first giving Rambler the right of refusal of these franchises and that competing franchises were granted without so advising Rambler. Rambler further pleaded that it was the victim of discriminatory delivery of automobiles in that American refused to allot to Rambler fast-selling popular models and instead loaded it with unsaleable models, thus weakening Rambler's economic position and forcing it to liquidate its business by piecemeal sales. According to Rambler, moreover, American should have cooperated with it in facilitating the sale by Rambler of its assets to a new American franchisee. Rambler sought in excess of $2,000,000 damages, which allegedly arose out of American's (1) general violations of the anti-trust laws, Section 1 of the Sherman Act, 15 U.S.C.A. § 1, and the Clayton Act, 15 U.S. C.A. §§ 12-27; (2) interference with the sale of Rambler's franchise dealership; (3) breach of the franchise contract; and (4) violation of the Automobile Dealers Day in Court Act, 15 U.S. C.A. §§ 1221-1225.

The deposition of Rambler's president had been taken on September 18, 1963. On April 2, 1965, American filed a motion to dismiss or, alternatively, for summary judgment with two supplementary affidavits. On April 28, 1965, the court granted summary judgment. Rambler thereafter filed a motion for new trial on May 10, 1965, and a motion for production of documents on May 21, 1965, both of which motions were denied.

The causes of action involving (1) anti-trust violations, (2) interference with sale of Rambler's dealership, and (3) breach of contract were abandoned because not pursued by proof or briefed on appeal. See Iob v. Los Angeles Brewing Company, 9 Cir. 1950, 183 F.2d 398, 401 and Sugg v. Hendrix, 5 Cir. 1946, 153 F.2d 240, 242-243, where, in an action by a truck driver against a construction company for injuries sustained when the driver ws caught between his tank truck and defendant's tractor, the court held the defense of failure to exercise reasonable care was abandoned because of lack of argument and evidence.

The only possible cause of action justiciably before us here involves 15 U.S. C.A. §§ 1221-1225, commonly known as the Automobile Dealers Day in Court Act. This case in part tests whether the Automobile Dealers Day in Court Act gives the dealers anything more than its name implies. More precisely, this suit is bottomed on the failure of American to act in "good faith" as that term is defined in the statute.¹

The Rambler and American franchise agreement gave to Rambler a nonexclusive franchise, afforded American wide latitude in vehicle allocation, and absolved it from responsibility for failure to deliver and for delays in filling orders.² Rambler's theory is that these contractual provisions are modified by the Automobile Dealers Day in Court Act to the end that contractual rights of American cannot be used to coerce or intimidate Rambler into its economic demise. However valid this theory may be, the beneficent balm of protection succoring automobile dealers under the Act has been sparingly and sparsely spread. We find no reported case in which a dealer has a court-approved judgment. The statute recognizes that a valid contract can be an engine of oppression, but two aspects of the Act's protection must be considered. First, oral understandings, such as the one sought to be proved by Rambler, which are in conflict with the written franchise agreements are not made enforceable by the Act. In Alfieri v. Willys Motors, Inc., E.D.Pa.1964, 227 F.Supp. 627, 629, an action under the Act where the dealer alleged, inter alia, that the written franchise agreement had been orally modified to provide an exclusive-dealing arrangement, it was pointed out:

"A study of the legislative history shows that the use by Congress of the word `written\' in defining the term `franchise\' was not inadvertent but resulted from a careful and deliberate consideration of the entire matter. U. S.Code Cong. and Adm.News 1956, pp. 4596, 4601.

`* * * The words "understanding or arrangement" have been deleted in order to safeguard against the possible inclusion of anti-competitive trade arrangements between the manufacturer and the dealer, such as arrangements which might limit the location of new dealers.\'

In view of this it is evident that one of the main objectives of the choice of language by the Legislature was to guard against such oral understandings or agreements upon which the plaintiff relies."

Here too, Rambler's allegation of such oral representations is not admissible.

Second, in each case arising under the Act, good faith or the lack of it must be determined in the context of "coercion, intimidation, or threats of coercion or intimidation from the other party." It is here that Rambler failed to carry its burden. The focal point of Rambler's complaint is found in its allegations that American, "acting in a coercive, unfair and inequitable manner," discriminated against Rambler with respect to allocation of vehicles thereby leading it to the forced sale of its business.³

The statute, it must be noted, does not afford Rambler a statutory right or formula for allocation or delivery of certain cars. In Augusta Rambler Sales, Inc. v. American Motors Sales Corp., N.D.Ga.1962, 213 F.Supp. 889, where a dealer complained under the Act of one of these same defendants' failure to deliver orders and of excessive shipments of automobiles of undesirable colors and models, the court held that nothing in the contract obligated American to furnish any number of cars at any particular time and that no prohibitive acts of coercion, intimidation, or threats were thus presented. Similarly, no unfair allocation under the Act is shown where a dealer receives more cars than its competitor during a period of production shortage, Globe Motors, Inc. v. Studebaker-Packard Corporation, 3 Cir. 1964, 328 F.2d 645, or where a dealer gets a higher percentage of the cars allotted in his area than he is thereafter expected to sell, Leach v. Ford Motor Co., N.D. Cal.1960, 189 F.Supp. 340. As pointed out in Bateman v. Ford Motor Company, E.D.Pa.1962, 204 F.Supp. 357, automobile dealers often cannot secure all the fast-moving models they desire, but sometimes receive harder to sell models.

Thus, there being no right to cars of certain color, body, or style, Rambler must demonstrate that degree of bad faith allocation which has coercive and intimidating effects. As the court said in Globe, supra, 328 F.2d at 648,

"The question for decision is not whether the appellant acted unfairly or inequitably in its business relations with the appellee; the narrow question is whether the appellant failed to act in `good faith\' as that term is defined by the Act.

"The charge that the appellant discriminated against the appellee and in favor of a competitor in the allocation of `Lark\' automobiles can be disposed of easily. The only evidence offered in support of the charge was completely lacking in probative value. Against this was the uncontradicted testimony that in each of the weeks, except one, embraced within the period during which there was a shortage of product, the appellee received more cars than did its competitor. If there was discrimination, it favored the appellee."

Finally, the right of a dealer under the Act to an exclusive dealership in his territory has been specifically rejected. In Globe, supra, establishment of a competitive dealership ten blocks away was held not to be failure to act in good faith; moreover, the legislative history of the Automobile Dealers Day in Court Act instructs us that such competitive dealerships were not to be considered evidence of bad faith.

"The bill does not freeze present channels or methods of automobile distribution and would not prohibit a manufacturer from appointing an additional dealer in a community provided that the establishment of the new dealer is not a device by the manufacturer to coerce or intimidate an existing dealer. The committee emphasizes that the bill does not afford the dealer the right to be free from competition from additional franchise dealers. Appointment of added dealers in an area is a normal competitive method for securing better distribution and curtailment of this right would be inconsistent with the antitrust objectives of this legislation. Under the bill, a manufacturer does not guarantee the dealer profitable operation or freedom from depletion of investment." H.R.Rep.No. 2850, 84th Cong.2d Sess. (1956), 3 U.S.Code Cong. & Adm.News, pp. 4596, 4603-4604 (1956).

This language was cited with approval in Garvin v. American Motors Corporation, 3 Cir. 1963, 318 F.2d 518, where a dealer attempted to prove a violation of the Act by the manufacturer's establishment of a competitive dealership in an area near him. As is also true with the case at bar, the court in Garvin pointed out that:

"* * * the record is completely devoid of any evidence to show that the new dealership was established as a device to coerce Garvin. In the absence of such a showing, plaintiff\'s

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