Stamps v. Ford Motor Co.

• Decision Date: 28 October 1986
• Docket Number: 83-2075A and 83-2076A.,Civ. A. No. C81-1731A
• Citation: 650 F. Supp. 390
• Parties: Thomas P. STAMPS, Trustee for Allen-Russell Ford, Inc., of Atlanta, Plaintiff, v. FORD MOTOR COMPANY and Ford Motor Credit Company, Defendants. James H. ALLEN, Plaintiff, v. FORD MOTOR COMPANY and Ford Motor Credit Company, Defendants.
• Court: U.S. District Court — Northern District of Georgia

650 F. Supp. 390

Thomas P. STAMPS, Trustee for Allen-Russell Ford, Inc., of Atlanta, Plaintiff, v. FORD MOTOR COMPANY and Ford Motor Credit Company, Defendants.

James H. ALLEN, Plaintiff, v. FORD MOTOR COMPANY and Ford Motor Credit Company, Defendants.

Civ. A. Nos. C81-1731A, 83-2075A and 83-2076A.

United States District Court, N.D. Georgia, Atlanta Division.

October 28, 1986.

COPYRIGHT MATERIAL OMITTED

R. Jeffrey Morrison, Atlanta, Ga., for James H. Allen.

Robert D. Feagin, Gary A. Barnes, Gambrell, Clarke, Anderson & Stolz, Atlanta, Ga., for Thomas P. Stamps, Trustee.

D.R. Cumming, Jr., John H. Fleming, Thomas M. Byrne, Sutherland, Asbill & Brennan, Atlanta, Ga., for defendants.

ORDER

SHOOB, District Judge.

I. Background

The above-styled consolidated cases involve the breakdown of the relationship between defendant Ford Motor Company ("Ford") and one of its dealers, plaintiff Allen-Russell Ford, Inc. of Atlanta ("Allen-Russell").¹ Presently before the Court are defendants' motions for summary judgment, plaintiffs' motions for judgment on the pleadings and for partial summary judgment with respect to defendants' counterclaims, plaintiffs' motion to file a supplemental pleading, and various motions to strike. The following is a truncated version of the background underlying the parties' dispute but should suffice for present purposes.²

In 1975, Allen-Russell entered a dealership agreement with Ford. At that time, Allen-Russell was owned by Allen-Russell Enterprises, Inc., the stock of which was owned by James H. Allen ("Allen") and Ted Russell ("Russell"). By 1980, Allen-Russell Enterprises owned several automobile dealerships in Georgia, North Carolina, and Tennessee. Allen bore the primary responsibility for Allen-Russell.

From the outset of Allen-Russell's operations, defendant Ford Motor Credit Company ("FMC") financed Allen-Russell's wholesale vehicle purchases from Ford. Under the terms of the financing agreement in force between the parties, FMC had a purchase money security interest in the proceeds of any sale; thus, sale proceeds were held in trust by Allen-Russell for FMC. The financing agreement specifically stated that FMC had "the right in its sole discretion to determine the extent to which, the terms and conditions on which, and the period for which it will make advances to or on behalf of Allen-Russell or to extend credit to Allen-Russell." The financing agreement also provided that, to protect its collateral, FMC had the right to enter Allen-Russell's premises "from time to time and at all reasonable times...."

During the early years of its operation, Allen-Russell was extremely successful, but soaring interest rates and the resultant decline in sales soon caused trouble. A costly move to a new location exacerbated the dealership's difficulties. The first dispute between the parties occurred in January 1981, when FMC discovered that Allen-Russell had sold trucks worth $670,000 to Georgia Power Company without forwarding the proceeds to FMC. As a result of this "sale out of trust," FMC temporarily suspended credit to Allen-Russell. FMC also stationed an employee at Allen-Russell's premises to insure that FMC received lien discharge payment on any vehicle sold by the dealership. In addition, Richard Pollock ("Pollock"), an FMC employee, examined Allen-Russell's books. Pollock reported to FMC officials that the dealership's financial statements had been altered to present a favorable cash position and to conceal the sale out of trust to Georgia Power.

After Pollock reported the results of his audit, FMC and Allen-Russell began negotiating to reopen the credit arrangement. It was at this point that Allen-Russell's two principals decided to part ways. Each retained control of three dealerships, and Russell paid Allen $1,300,000. Allen retained the Allen-Russell Ford dealership, using the funds he received from Russell to satisfy the $670,000 obligation to FMC. Allen also retained the Colonial Lincoln-Mercury dealership ("Colonial"), which was located in Atlanta, and Royston Chrysler-Plymouth, Inc., d/b/a Carolina Dodge ("Carolina Dodge"), which was located in Charlotte, North Carolina.

After Allen paid the $670,000 to FMC, credit arrangements between the parties were reinstituted on an ad hoc basis. FMC maintains that, during the course of a credit review, it became suspicious of the manner in which Allen-Russell and its affiliated dealerships exchanged funds. Accordingly, FMC ordered a physical audit of Allen-Russell's inventory and required that Allen-Russell's lien discharge checks be certified.³ But Allen-Russell's bank refused to certify the dealership's checks.

On June 17, 1981, Allen met with FMC officials in Dearborn, Michigan. At this meeting, FMC officials expressed concern that Allen was perpetrating a check-kiting scheme. Allen denied this charge and maintained that he was merely employing intercorporate loans.⁴ Arguing that he would soon receive a loan from the National Bank of Georgia that would alleviate his problems, Allen persuaded FMC to reinstitute his standard credit arrangement. It was agreed that the alleged check-kiting scheme would stop and that Allen-Russell would permit a field credit review to verify that it had been stopped.

In August 1981, Mal Margerm of FMC performed the field credit review. He concluded that in each of June and July 1981, over $1,000,000 in checks had been exchanged between Allen-Russell and Carolina Dodge. Margerm also concluded that Allen-Russell had serious cash flow problems.

The parties dispute the details of Allen-Russell's cash management practices and the motives underlying those practices. Indeed, Allen vigorously denies any wrongdoing. Still, this much is clear — even if Allen-Russell was not involved in a check-kiting scheme, it could have appeared that way to an impartial observer. (As developed below, one of Allen-Russell's banks so concluded.) In addition, notwithstanding the issue whether Allen-Russell was technically guilty of check-kiting, the dealership's cash management techniques revealed severe fiscal instability.

In September 1981, FMC terminated permanently its relationship with Allen-Russell. Allen's bankers were also taking a close look at his dealerships' check transfers about this time. In fact, at one point First Atlanta Bank refused payment on over $800,000 worth of Allen-Russell's checks and thus caused a loss to North Carolina National Bank, which handled Carolina Dodge's account. First Atlanta also notified the Controller of the Currency, the United States Attorney, and the Federal Bureau of Investigation of the existence of an apparent check-kiting scheme. Allen-Russell filed for bankruptcy shortly thereafter, and several months later Ford formally terminated the dealership. With this background in place, the Court will turn to the pending motions, highlighting additional facts where necessary.

II. Discussion

A. FMC's and Ford's Motions for Summary Judgment

1) The Controlling Standard

Plaintiffs have advanced several theories of liability against Ford and FMC, including the following: (1) a claim under the Automobile Dealers' Day in Court Act ("ADDCA"), 15 U.S.C. §§ 1221 et seq.; (2) a claim under the Georgia Motor Vehicle Dealers' Day in Court Act ("Georgia Dealers' Act"), O.C.G.A. §§ 10-1-630 et seq.; (3) a claim under the Georgia Motor Vehicle Fair Practices Act ("Georgia Fair Practices Act"), O.C.G.A. § 10-1-662(a)(7); (4) contract claims; (5) claims under Giordano v. Stubbs, 228 Ga. 75, 184 S.E.2d 165 (1971), cert. denied, 405 U.S. 908, 92 S.Ct. 960, 30 L.Ed.2d 779 (1972); (6) a wrongful foreclosure claim; (7) a claim by Allen for intentional infliction of emotional distress; and (8) a claim for interference with contractual relations. Ford and FMC have moved for summary judgment as to each of these claims.

Before addressing the merits of defendants' motions, the Court will set forth the standard controlling practice under Rule 56, Fed.R.Civ.P. Recent Supreme Court opinions have colored the light in which courts of the Eleventh Circuit must view summary judgment practice. E.g., Anderson v. Liberty Lobby, Inc., ___ U.S. ___, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, ___ U.S. ___, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). This Circuit had long held that even where "the non-moving party has the burden of proof at trial, ... at summary judgment ... the moving party has the burden of showing that there is no genuine issue of material fact." United States v. One (1) 1944 Steel Hull Freighter, 697 F.2d 1030, 1031 (11th Cir.1983). Under this standard, it was widely accepted that to prevail at summary judgment the moving party was required to negate an essential element of the nonmoving party's claim. Id.

Anderson and Celotex have altered this standard. It is now clear that "the burden on the moving party may be discharged by `showing' — that is, pointing out ... — that there is an absence of evidence to support the nonmoving party's case." Celotex, 106 S.Ct. at 2554. Where such a showing demonstrates that there is no genuine issue of material fact and that, viewed in the light most favorable to the nonmoving party, the undisputed facts entitle the moving party to judgment as a matter of law, summary judgment is appropriate. Anderson, 106 S.Ct. at 2511. The nonmoving party cannot forestall summary judgment by resting on its pleadings or evidence that would be insufficient if presented at trial. As Justice White explained in Anderson,

Summary judgment should be granted where the evidence is such that it `would require a directed verdict for the moving party.' ... And we have noted that the `genuine issue' summary judgment standard is `very close' to the `reasonable jury' directed verdict standard: `The primary difference between the two motions is procedural; summary judgment motions are usually made before trial and decided on documentary evidence, while directed verdict

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