Sperau v. Ford Motor Co.

Citation674 So.2d 24
PartiesDee-Witt C. SPERAU, et al. v. FORD MOTOR COMPANY, et al. 1931473, 1931591 and 1931629.
Decision Date09 June 1995
CourtSupreme Court of Alabama

Lee H. Copeland of Copeland, Franco, Screws & Gill, John A. Taber of Taber & Dansby, H. Lewis Gillis of Thomas, Means & Gillis, Maston E. Martin, Jr. of Fazekas & Martin, Montgomery, for Sperau, et al.

Tabor R. Novak, Jr. and Clyde C. Owen, Jr. of Ball, Ball, Matthews & Novak, P.A., Montgomery, Andrew L. Frey and Evan M. Tager of Mayer, Brown & Platt, Washington, DC, for Ford Motor Co.

Tabor R. Novak, Jr. and Clyde C. Owen, Jr. of Ball, Ball, Matthews & Novak, P.A., Montgomery, for Ford Motor Credit Co.

Charles L. Robinson and William D. Jones III of Johnston, Barton, Proctor, Swedlaw & Naff, Birmingham, amicus curiae American Automobile Manufacturers Association, in support of Ford Motor Co., et al.

PER CURIAM.

This is a fraud case arising out of the purchase of a Ford Motor Company dealership in Selma, Alabama by Samuel R. Foster, II, an African-American minority dealer candidate in Ford Motor Company's Minority Dealer Program, and Dee-Witt C. Sperau, Foster's business partner. This Ford dealership was operated by these plaintiffs under the name of "River City Ford" from May 11, 1988, until the failure of the business in January, 1991.

Foster and Sperau filed a complaint against Ford Motor Company on May 15, 1991, alleging fraud, breach of contract, and violation of the Motor Vehicle Franchise Act, § 8-20-1 et seq., Code of Alabama 1975. Their complaint was first amended to contain a count for civil conspiracy, and again amended to name Sperau's wife, Diane, and Foster's wife, Chandra, as plaintiffs. The second amended complaint made claims for fraud, deceit and fraudulent suppression against Ford Motor Company, Ford Motor Credit Company and Gary L. Birdsong. 1 The basis of the Plaintiffs' claims were that Ford personnel represented to them that the sales and profit forecast and capitalization requirements provided to them were reasonable, and that the plaintiffs could rely on the numbers contained therein to make their decision to acquire the Ford dealership in Selma. The plaintiffs claimed that the representations were made in order to induce them to purchase the Ford dealership and with an intent to deceive them, based upon Ford Motor Company's knowledge that minority dealerships were less successful than the average dealership. It is the plaintiffs' contention that Ford Motor Company was under a duty, because of a confidential relationship and/or special circumstances, to disclose to them all material facts concerning the profitability, performance, and failure rates of minority dealers as reflected in the Equal Opportunity Progress Reports ("EOP Reports") to which only Ford Motor Company had access.

The defendants filed separate answers and motions to dismiss. In addition, Ford Motor Credit Company asserted a counterclaim against the plaintiffs, as guarantors on the debts of River City Ford. The plaintiffs answered, asserting affirmatively the defenses of estoppel, waiver, and unclean hands.

The first trial of the case commenced on March 29, 1993. The trial judge directed a mistrial in the case, based on the inability of the jury to reach a unanimous verdict. The defendants filed notice of appeal with the Supreme Court of Alabama; this Court struck the appeal. The defendants also sought a writ of mandamus on the basis of the trial court's rulings on their post trial motions. The petition for writ of mandamus was denied.

Prior to the second trial of the case, the trial court issued its order concerning various pretrial motions. 2 This order of February 14, 1994, dismissed all claims of plaintiffs Diane Sperau and Chandra Foster and dismissed the fraud claims of Sperau and Foster against Ford Motor Credit Company and Gary Birdsong.

The case then came on to be tried. On February 18, 1994, at the close of the plaintiffs' evidence, the trial court granted a directed verdict on the breach of contract claims of Foster and Sperau to Ford Motor Credit Company. The trial court also directed a verdict on plaintiffs' claims that Ford personnel had made misrepresentations regarding the rate of success and profitability of minority dealers. Finally, the trial court directed a verdict in favor of Ford Motor Credit Company and Gary Birdsong on all aspects of plaintiffs' fraud claim and in favor of all defendants on the conspiracy claim. The case went to the jury only on Foster and Sperau's fraud and suppression claims against Ford in connection with the capitalization and the sales and profits forecasts and Ford Motor Credit's contract claim against Foster, Dee-Witt Sperau, and Diane Sperau. The jury reached a verdict on February 23, 1994 as follows:

"We the jury, find for the plaintiffs on their claim of fraud and assess damages as follows:

                1. Compensatory damages
                     Economic loss                             $  992,000.00
                                                               -------------
                     Mental anguish for Samuel Foster, Jr.     $2,500,000.00
                                                               -------------
                     Mental anguish for Dee"Witt C. Sperau     $1,000,000.00
                                                               -------------
                2.  Punitive damages                           $6,000,000.00
                                                               -------------
                

It is our intention to assess total damages in the amount of $10,492,000.00."

In addition, the jury found for the defendant Ford Motor Credit Company against plaintiffs Dee-Witt Sperau, Samuel Foster and Diane Sperau on the counter-claim of Ford Motor Credit Company and assessed damages in the amount of $635,000.00. At the request of the defendants, the trial judge polled each of the jurors, and each juror affirmed that the verdict was his or her verdict.

Ford Motor Company filed numerous post-trial motions and the trial judge conducted an extensive Hammond hearing on April 28-29, 1994. 3 The trial judge heard oral argument and received evidence on Ford Motor Company's motion for a new trial, motion for JNOV, motion for remittitur of damages and motion for review of punitive damages award.

On June 29, 1994, the trial court issued its order affirming the jury's verdict and denying Ford Motor Company's post-trial motions, with the exception of the motion for a new trial. The trial judge granted a new trial conditioned upon the plaintiff's acceptance of a remittitur of the mental anguish award for Dee-Witt Sperau to $200,000 and for Samuel Foster to $500,000. This remittitur was accepted by the plaintiffs on July 1, 1994. The total amount of judgment as remitted was $7,692,000.

On the same day, the plaintiffs filed their notice of appeal to this Court, based upon the trial court's dismissal in favor of Ford Motor Company and against Diane Sperau and Chandra Foster on their fraud claim, and the trial court's granting of a directed verdict on plaintiff's contract claim in favor of Ford Motor Credit Company and against Dee-Witt Sperau and Samuel Foster. On August 12, 1994, Ford Motor Company filed its cross-appeal. On August 16, 1994, Plaintiffs Dee-Witt Sperau and Samuel Foster filed their cross-appeal, seeking reinstatement of the jury's entire award for mental anguish.

Factual Background

In the 1960's the Ford Motor Company initiated a Minority Dealer Program. At the time the program was initiated, there were over 5,000 Ford and Lincoln-Mercury dealers in the country, with only 20 to 30 being operated by African-Americans. The Minority Dealer Program is a part of a larger program called the Ford Dealer Development Program. By the 1980's, the program's primary emphasis had turned to efforts to recruit African-Americans to become franchised dealers. Ford provides these minority "private capital" dealers with benefits that include special training and assistance from consultants. These "private capital" minority dealers may also apply for "launch costs" for opening the dealership and to a special parts return, under which Ford pays them in full for any obsolete or otherwise unwanted parts that are in their inventory a year and a half after the acquisition of the dealership. 4 Ford also has a "Dealer Development" program that requires the candidate for a dealership to raise 20% of the capital requirement. Because many minority candidates have difficulty raising the 20%, Ford can reduce the requirement to as low as 10%.

Each year, Ford management presents Equal Opportunity Progress Reports ("EOP Reports") to Ford Motor Company's board of directors, as a means of describing progress in achieving stated goals of the Minority Dealer Program. The EOP Reports show that, historically, the average return on investment for African-American dealers is lower than the average return on investment for all Ford and Lincoln-Mercury dealers. Ford management, through these reports, gained knowledge of material facts, regarding the historic performance of African-American dealers participating in Ford's Minority Dealer Program, and of factors bearing on the success and failure of these dealers. This information was not otherwise available to African-American dealers, unless Ford chose to reveal it to them.

The October, 1984, EOP Report reflected that as of August, 1984, the return on guide investment for all Ford and Lincoln-Mercury dealers was 53%, a record high, while the return for African-American dealers was 25%. The October, 1985 EOP Report, expressed the concern that a higher percentage of African-American dealers (34%), were in a loss position compared to the total dealer body (16%) at a time of record dealer profits in a strong automotive industry. In December, 1984, Ford issued a "Blue Letter" in which a goal of 320 African-American dealers by year-end 1989 was set by the Executive Vice-President of Ford's North American Operations, Harold Pohling. In order to accomplish...

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