Speed Auto Sales, Inc. v. American Motors Corp.

• Decision Date: 01 October 1979
• Docket Number: No. 78 C 2823.,78 C 2823.
• Citation: 477 F. Supp. 1193
• Parties: SPEED AUTO SALES, INC., Plaintiff, v. AMERICAN MOTORS CORPORATION, American Motors Sales Corporation, and Jeep Corporation, Defendants.
• Court: U.S. District Court — Eastern District of New York

477 F. Supp. 1193

SPEED AUTO SALES, INC., Plaintiff, v. AMERICAN MOTORS CORPORATION, American Motors Sales Corporation, and Jeep Corporation, Defendants.

No. 78 C 2823.

United States District Court, E. D. New York.

October 1, 1979.

COPYRIGHT MATERIAL OMITTED

O'Rourke & Friedman, Brooklyn, by Michael J. O'Rourke, Brooklyn, for plaintiff.

Morgan, Lewis & Bockius, New York City, by Wallace J. Borker, James W. Harbison, Jr., Michael B. Evanoff, New York City, for defendants.

MEMORANDUM AND ORDER

NEAHER, District Judge.

Plaintiff, Speed Auto Sales, Inc. ("Speed"), operates an independent Jeep dealership pursuant to a franchise agreement with American Motors Sales Corporation ("AMC Sales"), a wholly owned subsidiary of American Motors Corporation ("AMC"). It claims that defendants have violated sections 1 and 2 of the Sherman Antitrust Act, 15 U.S.C. §§ 1, 2; section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45, the Dealer-Day-in-Court Act, 15 U.S.C. § 1221 et seq. ("DDICA"); New York General Business Law § 197 et seq.; and various State laws. Jurisdiction is alleged to arise under 28 U.S.C. § 1331, based on the asserted violations of the federal statutes. Diversity of citizenship is alleged as an alternative basis for subject matter jurisdiction.

Plaintiff seeks injunctive relief against further conduct purportedly in breach of plaintiff's franchise agreement and the antitrust laws, a direction that defendants continue to supply Jeep vehicles in accordance with plaintiff's needs, and money damages. The action is now before the court on plaintiff's motion for a preliminary injunction and defendants' cross-motion to dismiss the complaint for failure to state a claim upon which relief can be granted pursuant to Rule 12(b)(6), F.R.Civ.P. Plaintiff's motion for a temporary restraining order has previously been denied.

According to the complaint, AMC, after acquiring the Jeep Corporation, advised then-existing Jeep dealers that they would not be required to accept AMC franchises in addition to the Jeep franchises. In 1978, however, defendants' representatives approached plaintiff with a plan that Speed close its own Jeep sales and service center, move its operation two blocks away to premises then occupied by Kings Plaza AMC ("Kings Plaza"), a factory outlet for AMC vehicles which had never before sold Jeeps, and operate a dual Jeep-AMC dealership.

Plaintiff further alleges that defendants' agents represented that Kings Plaza had never earned money and, in fact, had incurred substantial losses in the previous year but that they would nonetheless "put Speed out of business" if it did not undertake operation of a dual franchise. Upon its rejection of the offer to take over the Kings Plaza point on these terms, plaintiff contends that defendants began to sell Jeeps at Kings Plaza at prices substantially below that which Speed was obliged to charge and have maintained an adequate supply of Jeeps to the Kings Plaza facility while failing to provide Speed directly with the number of vehicles it requires for sale.

Motion to Dismiss

The issue to be decided on this motion is not whether plaintiff will ultimately prevail in the action, but whether it is entitled to proceed with discovery and offer evidence in support of its claim. Green v. Hamilton Intern. Corp., 437 F.Supp. 723 (S.D.N.Y.1977). It is also the rule in this circuit that a complaint need only give notice to the opposing party by a short, plain statement for relief, in antitrust cases as in all cases under the Federal Rules. George C. Frey Ready-Mixed Con. v. Pine Hill C. M., 554 F.2d 551, 554 (2 Cir. 1977). See Nagler v. Admiral Corporation, 248 F.2d 319 (2d Cir. 1957). Thus, it is unnecessary to plead evidence or the facts upon which the claims are based. Bogosian v. Gulf Oil Corp., 561 F.2d 434, 446 (3 Cir. 1977), cert. denied, 434 U.S. 1086, 98 S.Ct. 1280, 55 L.Ed.2d 791 (1978). Dismissal is appropriate only where, after the court has taken all well-pleaded material allegations as true, it appears beyond doubt that plaintiff can prove no set of facts in support of his claim which would entitle him to relief. Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957). See Gumer v. Shearson, Hamill & Co., Inc., 516 F.2d 283, 286 (2 Cir. 1974).

(a) Antitrust Claims

To the extent that plaintiff seeks to press a claim under section 1 of the Sherman Act, the complaint fails to meet the minimum required under federal pleading rules and thus is dismissed. Section 1 forbids, and requires allegations of (1) a conspiracy, combination or contract that is (2) an undue restraint of trade. House of Materials, Inc. v. Simplicity Pattern Co., 298 F.2d 867, 870 (2 Cir. 1962); Diehl & Sons, Inc. v. International Harvester Co., 426 F.Supp. 110, 116 (E.D.N.Y.1976). The complaint simply fails to make such allegations.

Under the most favorable interpretation of the complaint, moreover, the existence of a co-conspirator could not be shown. Although a parent corporation and its subsidiary may in certain circumstances constitute independent co-conspirators for section 1 purposes, see Timken Roller Bearing Co. v. United States, 341 U.S. 593, 597, 71 S.Ct. 971, 95 L.Ed. 1199 (1951); Kiefer-Stewart Co. v. Seagram & Sons Co., 340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219 (1951); United States v. Yellow Cab Co., 332 U.S. 218, 67 S.Ct. 1560, 91 L.Ed. 2010 (1947); Diehl & Sons, Inc. v. International Harvester Co., supra, 426 F.Supp. at 116, there is no logical basis or foundation in the allegations of the complaint for a finding here of an anticompetitive conspiracy between AMC and its wholly-owned subsidiary AMC Sales to drive plaintiff out of the Jeep market. The fallacy in such a contention is that AMC could, apart from contractual obligations, unilaterally deprive Speed of AMC products and thereby increase its own share of the market without anti-trust significance. See Diehl & Sons, Inc. v. International Harvester Co., supra, 426 F.Supp. at 117. Further, plaintiff's vague allegation of a "tied product" adds little to the section 1 claim. First, plaintiff can hardly claim injury to its business or property from any alleged tie of continued supply of Jeeps to operation of the Kings Plaza point. Simply put, Speed resisted defendants' entreaties and continues to sell Jeeps supplied to it by defendants, notwithstanding its allegations of slow delivery, and thus can claim no injury. Second, plaintiff concedes, as it must, that it does not have an exclusive franchise to sell Jeeps in the area; there are other dealers as well. Read generously, the complaint alleges a prospective or constructive termination, and on such allegations, the court cannot conclude that defendants' lawful decision to place a competing dealership in the area runs afoul of the antitrust laws since "the purpose of the Sherman Act is to protect competition, not competitors." Checker Motors Corp. v. Chrysler Corp., 283 F.Supp. 876, 885 (S.D.N. Y.1968), aff'd, 405 F.2d 319 (2 Cir.), cert. denied, 394 U.S. 999, 89 S.Ct. 1595, 22 L.Ed.2d 777 (1969), cited in Diehl & Sons, Inc. v. International Harvester Co., supra, 426 F.Supp. at 119. See Kapiolani Motors, Ltd. v. General Motors Corporation, 300 F.Supp. 784 (D.Hawaii 1969). It is apparent then that plaintiff has not and indeed in the court's view, cannot plead a section 1 conspiracy or combination sufficient to withstand a motion to dismiss.

Plaintiff's section 2 monopoly claim fares little better. Its theory presumably is that AMC, through its competing sales branches, is attempting to monopolize and monopolizes the sale of Jeeps in the area (Amended Complaint ¶ 5). Although it is true, as plaintiff contends, that early dismissals are not favored in actions alleging violations of the antitrust laws, "bare bones statements of conspiracy or of injury under the antitrust laws without any supporting facts permits dismissal." Heart Disease Research Foundation v. General Motors Corp., 463 F.2d 98, 100 (2 Cir. 1972); Car-Freshner Corp. v. Auto Aid Mfg. Corp., 438 F.Supp. 82, 86 (N.D.N.Y.1977).

Even under the narrowest definition of the relevant geographic and product market—elements which must be satisfied to make out a violation of section 2 of the Sherman Act, Walker Process Equipment, Inc. v. Food Machine & Chemical Corp., 382 U.S. 172, 86 S.Ct. 347, 15 L.Ed.2d 247 (1965) —plaintiff's claim is not sustainable. Plaintiff is a franchisee selling defendants' products, and "every manufacturer has a natural and complete monopoly over his particular product, especially when sold under his own private brand or trade name." Schwing Motor Co. v. Hudson Sales Corp., 138 F.Supp. 899, 902 (D.Md.), aff'd, 239 F.2d 176 (4 Cir. 1956), cert. denied, 355 U.S. 823, 78 S.Ct. 30, 2 L.Ed.2d 38 (1957). The ultimate control of the distribution and sale of a product is also within the discretion of the manufacturer; it is the prerogative of the manufacturer to decide with whom it will deal, Oreck Corp. v. Whirlpool Corp., 579 F.2d 126, 133 (2 Cir. 1978), cert. denied, 439 U.S. 946, 99 S.Ct. 340, 58 L.Ed.2d 338, reh. denied, 439 U.S. 1104, 99 S.Ct. 883, 59 L.Ed.2d 65 (1979), and "a manufacturer may change its strategy, franchising new dealers or substituting new dealers for less productive old ones," Cernuto, Inc. v. United Cabinet Corp., 595 F.2d 164, 167 (3 Cir. 1979), without violating the provisions of the Sherman Act. Therefore, defendants' control of the sale of Jeeps, particularly in view of the non-exclusive franchise agreement between AMC and Speed, can have no anticompetitive effect. Nor do any acts of defendants constitute an attempt to monopolize.

Additionally, the court is of opinion that a finding of no anticompetitive effect from defendants' conduct is further supported by plaintiff's failure to point to any injury resulting therefrom and permits dismissal mindful as we are "lest the Sherman Act be invoked perversely in favor of those who seek protection...