Summey v. Ford Motor Credit Co.

• Decision Date: 21 December 1976
• Docket Number: Civ. A. No. 76-814.
• Citation: 449 F. Supp. 132
• Parties: Ray SUMMEY and Helen Johnson, Individually and as representatives of a class of parties under Rule 23 of the Federal Rules of Civil Procedure, Plaintiffs, v. FORD MOTOR CREDIT COMPANY, Guy Motors, Inc., Ralph Hayes Motors, Country Ford, Inc., Roper Auto Sales, Inc., Julian Roper Ford, Inc., Auto Sales Company, Holder-Grant Ford, Inc., and John Foster Motors, Inc., Defendants.
• Court: U.S. District Court — District of South Carolina

449 F. Supp. 132

Ray SUMMEY and Helen Johnson, Individually and as representatives of a class of parties under Rule 23 of the Federal Rules of Civil Procedure, Plaintiffs, v. FORD MOTOR CREDIT COMPANY, Guy Motors, Inc., Ralph Hayes Motors, Country Ford, Inc., Roper Auto Sales, Inc., Julian Roper Ford, Inc., Auto Sales Company, Holder-Grant Ford, Inc., and John Foster Motors, Inc., Defendants.

Civ. A. No. 76-814.

United States District Court, D. South Carolina, Anderson Division.

December 21, 1976.

J. Kendall Few, Harold R. Lowery, Anderson, S. C., for plaintiffs.

Henry F. Floyd, G. Edward Welmaker, Pickens, S. C., for Holder-Grant Ford, Inc.

David W. Robinson, II, Columbia, S. C., for Ford Motor Credit Co.

Walter T. Cox, Jr., Anderson, S. C., for Guy Motors, Inc.

James R. Gilreath, Greenville, S. C., for Country Ford, Roper Auto Sales and Julian Roper Ford.

Lowell W. Ross, Walhalla, S. C., for Auto Sales, Inc.

H. Grady Kirven, Anderson, S. C., for Ralph Hayes Motors.

Felix L. Finley, Jr., Pickens, S. C., for John Foster Motors, Inc.

ORDER ON DEFENDANT FORD MOTOR CREDIT COMPANY'S MOTION TO DISMISS

HEMPHILL, District Judge.

The motion of Ford Motor Credit Company (hereinafter designated Ford) filed August 6, 1976, invites decision by this court. Ford insists that the complaint fails to state a claim upon which relief can be granted, thus seeking application of Rule 12(b)(6)¹, Federal Rules of Civil Procedure. This court, upon review of supporting memoranda filed by counsel, reviewing applicable decisions, and hearing oral arguments (November 14, 1976) finds that the motion should be granted. The reasons for the court's decision are set forth herein.

By complaint filed May 11, 1976, plaintiffs, individually and as representatives of a class², limited to citizens of the Anderson Division of the United States District Court for the District of South Carolina, alleged purchasers of an automobile from one or more of the named dealers, and financed with moving defendant, etc., seeks damages, and other relief from Ford and eight dealers of the geographical area involved for alleged "fraudulent and deceptive trade and collection practices carried on by the defendants . . . as a part of an illegal combination and conspiracy in restraint of trade and commerce in violation of § 5 of the Federal Trade Commission Act (15 U.S. C.A. § 45)³ and §§ 1 and 2 of the Sherman Anti Trust Act (15 U.S.C.A. §§ 1 and 2)."⁴ All of the defendants made timely responses. Subsequently, on motion of plaintiffs, not contested by defendants, all of the dealer defendants were dismissed but one John Foster Motors, Inc.⁵ Each had filed with the court a motion similar to that of Ford.

In their complaint plaintiffs allege an agreement, combination or conspiracy between Ford Motor Credit Company and the various Ford and Lincoln-Mercury automobile dealers under which (1) Ford agrees to finance substantially all of the vehicles sold by the dealers (¶ 8 of the complaint); (2) the dealers agree to pay off the balance of all contracts on all vehicles repossessed by Ford in exchange for a transfer of title from Ford to the dealer (¶ 8); (3) the dealers are then allowed to retain any surplus which may result from the sale of the repossessed vehicle (¶ 9); (4) to accomplish the retention of such surplus by the dealers Ford and the dealers have agreed to employ various deceptive trade practices (¶ 10); (5) that such agreement or combination constitutes (a) a conspiracy to employ deceptive trade and collection practices, (b) a conspiracy to fix prices, (c) a conspiracy to boycott, (d) a conspiracy to restrain trade, and (e) a conspiracy to monopolize the financing of motor vehicles (¶ 11). Plaintiffs further allege that as a result of such combination and conspiracy they have each been damaged in the loss of the surplus of the resale price of their repossessed vehicles over the amount of their debt and legitimate repossession costs.

Ford's motion to dismiss under Rule 12(b)(6) appears to be based upon the following grounds:

1. Plaintiffs have not alleged a federal cause of action but state only a cause of action for misrepresentation or conversion or one arising under the Uniform Commercial Code, which South Carolina has adopted.

2. No private federal claim exists for a violation of the Federal Trade Commission Act.

3. Plaintiffs cannot convert a common law business tort into a federal antitrust action by charging a conspiracy and adopting the language of monopoly and restraint of trade statutes or decisions.

4. Defendants alleged conduct was neither aimed at nor had the effect of restricting competition.

5. The five particulars of plaintiffs' restriction of competition allegations state no cause of action under the Sherman Antitrust Act.

6. Plaintiffs' allegations of price fixing are not ones of substance.

7. The conduct alleged in the complaint does not constitute a boycott "since no one in the marketplace could possibly be injured by such conduct."

8. Plaintiff's allegations of a conspiracy in restraint of trade are merely conclusory allegations which add nothing to the legal sufficiency of the complaint.

9. Plaintiffs' allegations charging a conspiracy to monopolize are conclusory and unsupported by any factual assertions.

In the hearing of the motion the court allowed plaintiffs to refer to the Answers of the dealers, despite pending motions by plaintiffs to dismiss the action as to the dealers. This was done to give the plaintiffs the consideration required of the court when such a motion is presented:

For the purposes of the motion to dismiss, the complaint is construed in the light most favorable to plaintiff and its allegations are taken as true.⁶

The court considered those matters which constituted "material" or "well pleaded" facts to draw the line as to what was fact and what constituted mere "legal conclusions." Counsel for plaintiffs admitted that either plaintiff, or any other purchaser from any of the dealers named, or any other Ford dealer could finance the purchase with a bank, other credit company, or, for that matter any person, firm, corporation of his/her choice. Additionally, after default and the return by Ford of any car, financed with it, to the dealer, the purchaser was notified and could repurchase the car as and if any person could. The defaulting purchaser was notified and given a chance to make any inquiry necessary. When questioned as to the antitrust effect on competition, plaintiff's counsel could not/did not name any competitor in the financing field or automobile dealership field affected. The class sought to be represented were persons in the Anderson Division (Anderson, Pickens and Oconee Counties of South Carolina) who had purchased (apparently voluntarily) cars from one of the eight dealers named, but later exonerated by plaintiffs. It thus appeared that plaintiffs claimed none of those effects known as horizontal⁷ effects of the alleged restraint, but insists the "vertical"⁸ effect is sufficient. The court does not agree. The complaint is insufficient.

Initially, this court is mindful of the ruling in Conley v. Gibson, 355 U.S. 41, 78 S.Ct. 99, 2 L.Ed.2d 80, 84, wherein the late Mr. Justice Black wrote:

In appraising the sufficiency of the complaint we follow, of course, the accepted rule that a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.

I. CAN PLAINTIFFS PURSUE THEIR COMPLAINT IN THIS COURT UNDER SECTION 5 OF THE FAIR TRADE COMMISSION ACT (15 U.S.C. § 45)?

It is well-settled that there is no private, federal claim for which this court can grant relief for violations of the Federal Trade Commission Act. Moore v. New York Cotton Exchange, 270 U.S. 593, 46 S.Ct. 367, 70 L.Ed. 750 (1926); Holloway v. Bristol-Myers Corp., 158 U.S.App.D.C. 207, 485 F.2d 986 (1973); Carlson v. Coca-Cola Co., 483 F.2d 279 (9th Cir., 1973). See also Nader v. Allegheny Airlines, 426 U.S. 290, 96 S.Ct. 1978, 1986 n. 10, 48 L.Ed.2d 643 (1976).

Section 5 of the FTC Act broadly declares that unfair methods of competition and unfair or deceptive acts or practices in commerce are "unlawful" and that whenever the Federal Trade Commission (FTC) has reason to believe that a person is using such a method or practice in commerce, and it appears to the Commission that a proceeding by it would be in the public interest, the Commission⁹ shall issue a complaint and proceed against such person. Section 5 was originally enacted in 1914 (38 Stat. 717, et seq.), and it did not take long for litigants to assert — as plaintiffs do here — that its broad language provides the basis for a private, federal cause of action. The United States Supreme Court emphatically rejected that claim in Moore v. New York Cotton Exchange, 270 U.S. 593, 46 S.Ct. 367, 70 L.Ed. 750 (1926), where, as here, the plaintiff attempted to tack a Section 5, FTC Act, claim onto an antitrust complaint. In affirming the dismissal of plaintiff's claim for failure to state a federal cause of action, the Court stated (270 U.S. at 60, 46 S.Ct. at 368, 70 L.Ed. at 754):

There is an attempt to allege unfair methods of competition which may be put aside at once, since relief in such cases under the Trade Commission Act (Comp.St. §§ 8836a-8836k) must be afforded in the first instance by the commission.

Since the Moore decision, two federal courts of appeals have recently and squarely reconsidered the question of whether a private party may bottom a federal court claim on an alleged violation of Section 5 of the FTC Act. In Carlson v. Coca-Cola Co., 483 F.2d 279 (9th Cir. 1973), the Ninth Circuit perfunctorily and categorically ruled that a private party could not maintain such a claim, citing Moore and many subsequent cases. Almost simultaneously, the United States Court of Appeals for the D. C. Circuit considered the...