Tunis Bros. Co., Inc. v. Ford Motor Co.
| Decision Date | 24 June 1985 |
| Docket Number | No. 84-1318,84-1318 |
| Citation | 763 F.2d 1482 |
| Parties | 1985-1 Trade Cases 66,633 TUNIS BROTHERS COMPANY, INC. de la Rigaudiere, Richard N. and Smith, David C., Appellants, v. FORD MOTOR COMPANY, Ford Motor Credit Company, Wenner Ford Tractor, Inc., Wenner, John S. Watson, John Crawford, Douglas N. Fraher, Eugene W. Hasel, E.S. Nickel, Hugh Harris, Kenneth E. and Wenzel, C.W., Appellees. |
| Court | U.S. Court of Appeals — Third Circuit |
Arnold R. Ginsburg (Argued), Haverford, Pa., for appellants.
Steven T. Stern (Argued), Braemer and Kessler, Philadelphia, Pa., for appellees Wenner Ford Tractor, Inc. & John S. Wenner.
Robert C. Heim (Argued), Jeffrey G. Weil, Robert A. Limbacher, Dechert, Price & Rhoads, Philadelphia, Pa., for appellees Ford Motor Co., Ford Motor Credit Co., John Watson, Douglas N. Crawford, Eugene W. Fraher, E.S. Hasel, Hugh Nickel & Kenneth E. Harris.
Before HUNTER and HIGGINBOTHAM, Circuit Judges, and DEBEVOISE, District Judge. *
The plaintiffs in this "distributor termination" case, a franchised tractor dealership and its new owners, appeal a final order of the district court granting summary judgment in favor of the defendant franchisor and other corporate and individual defendants on plaintiffs' federal antitrust claims. The appealed from order also dismissed plaintiffs' state common law breach of contract and tort claims without prejudice.
We reverse and remand for further proceedings.
The six-count complaint filed by plaintiffs Tunis Brothers Company, Inc. ("Tunis Brothers"), Richard N. de la Rigaudiere ("de la Rigaudiere") and David C. Smith ("Smith") 1 on December 15, 1982 and amended July 14, 1983, includes four counts alleging violations of section 1 of the Sherman Act, 15 U.S.C. Sec. 1 (1982) 2 by three corporate defendants and eight individual defendants. The remaining two counts allege state common law tort and contract claims against the defendants and invoke pendent jurisdiction. The plaintiffs claim injuries to their business and property in the amount of $7,724,357 and seek treble damages from the defendants in the amount of $23,173,071. Appendix ("App.") at 11-94.
Count I alleges, inter alia, that corporate defendants Ford Motor Company ("Ford"), Ford Credit Company ("Ford Credit"), Wenner Ford Tractor, Inc. ("Wenner Ford"), and individual defendant John S. Wenner ("Wenner") conspired to terminate the authorized Ford tractor dealership of plaintiff Tunis Brothers, a Pennsylvania corporation located in Kennett Square, Pennsylvania. Complaint p 66, App. at 35.
The business of Tunis Brothers had been established in 1934 by Richard M. Tunis and his brother Robert. In 1959, Tunis Brothers entered into an agreement with Ford 3 and became a franchised tractor dealership owned and operated by Richard Tunis and his wife Isabelle. From 1959 until April 1981 when its Ford dealership franchise was terminated, Tunis Brothers was an authorized dealer of Ford tractors and related equipment and it sold Ford tractors, Ford accessories and non-Ford products. 4 On March 13, 1981, 5 plaintiffs de la Rigaudiere and Smith purchased the business and became the sole directors and stockholders of Tunis Brothers Company, Inc.
Count I further alleges that the defendants conspired to prevent plaintiffs de la Rigaudiere and Smith, the new owners of Tunis Brothers, from operating in Kennett Square to eliminate or substantially decrease competition with defendant Wenner Ford Tractor, Inc. Complaint p 66, App. at 35-6.
Wenner Ford is a Delaware Corporation whose principal place of business prior to 1982 was Concordville, Pennsylvania, about 11 miles east of Kennett Square. Wenner Ford was the authorized Ford dealer of farm and industrial tractors, machinery, equipment and parts nearest Tunis Brothers. It is a Ford Dealer Development Company, established by Ford in November 1979, in which defendant Ford owns all of the voting stock and 79% of the equity stock. App. at 3522-37. Defendant John S. Wenner owned 21% of Wenner Ford's equity stock, app. at 3712-3883, and operated Wenner Ford as its president and chief executive officer pursuant to a Dealer Development Agreement and a Management Agreement. 6 App. at 3434, 3449.
It is alleged in Count 1 that, in addition to John S. Wenner, the other named individual defendants, employed by Ford in varying managerial capacities, participated in and aided and abetted the conspiracy. These individuals are: John Watson ("Watson"); Douglas N. Crawford ("Crawford"); Eugene W. Fraher ("Fraher"); E.S. Hasel ("Hasel"); Hugh Nickel ("Nickel"); Kenneth E. Harris ("Harris") and C.W. Wenzel ("Wenzel"). 7
It is further averred in Count 1 that the conspiracy and actions of the defendants were not only in unreasonable restraint of trade but were illegal per se because they were in furtherance of an illegal horizontal territorial restriction by Ford where Ford was in both a horizontal and a vertical relationship with Tunis Brothers, as both franchisor and competitor. Complaint p 74, App. at 38.
Count II alleges that the 1974 franchise agreement between Ford and Richard and Isabelle Tunis constituted a contract in unreasonable restraint of trade due to the existence of certain unlawful provisions. The individual defendants are alleged to have aided and abetted Ford in exercising its rights under the agreement in furtherance of illegal objectives. Complaint p 95, App. at 48.
Count III alleges, inter alia, that the franchise agreement and the conspiracy included "dirty business tricks and unfair business dealing ... in furtherance of defendants' illegal antitrust objectives and their unreasonable restraint of trade ..." Complaint p 97, App. at 49.
Count IV avers that the franchise agreement and the conspiracy, by eliminating Tunis Brothers as a competitor, eliminated intrabrand competition in the sale and service of Ford products. Because no inter-brand competition of any significance or consequence was promoted by such elimination of intrabrand competition, it is alleged that the anti-competitive effect constituted an unreasonable restraint of trade. Complaint p 100, 102; App. at 50, 51.
As to the state causes of action, Count V alleges tort liability under common law based on fraud and other tortious conduct. App. at 52-9. Count VI alleges contract liability on the part of the defendants at common law. App. at 60-5.
The defendants' answers and amended answers to the amended complaint deny all material allegations. 8
On November 30, 1983, the defendants filed motions for summary judgment pursuant to Rule 56 9 of the Federal Rules of Civil Procedure, with supporting memoranda, affidavits, depositions and exhibits. App. at 200-900. The major argument presented by defendants was that there were no genuine issues of material fact in dispute and, on the basis of the undisputed facts, the plaintiffs not only failed to show direct evidence of a conspiracy but also failed to present facts which would permit a reasonable inference of conspiracy. Moreover, defendants argued that plaintiffs presented no facts showing an adverse impact on competition. They also asserted that there were no facts supporting plaintiffs' breach of contract claim.
In reply, the plaintiffs filed memoranda, affidavits, depositions and exhibits in opposition to defendants' summary judgment motions. App. at 900-1375. They argued in a 141-page brief that the factual record fully supported the allegations in the complaint and that there were genuine issues of material fact in dispute. The district court heard oral argument on February 8, 1984. App. at 1375.
In its May 7, 1984 memorandum opinion, the district court found that the plaintiffs failed to establish a "... contract or conspiracy, in restraint of trade" under section 1 of the Sherman Act in two respects.
First, the district court held that plaintiffs did not satisfy their burden of producing sufficient evidence of a conspiracy to terminate Tunis Brothers and to prevent de la Rigaudiere and Smith from operating the dealership as a franchise in competition with Wenner Ford. According to the district court, "there is no evidence of a conspiracy under section 1 of the Sherman Act" and therefore, "there is no genuine issue of material fact and all defendants are entitled to judgment as a matter of law on Counts I, III, and IV". Tunis Brothers Co. v. Ford Motor Co., 587 F.Supp. 267, 274 (E.D.Pa.1984).
Second, the district court determined that the 1974 franchise agreement, which contained provisions preventing Tunis Brothers from transferring the franchise without the approval of Ford and which gave Ford the right to terminate the agreement, was not a contract in unreasonable restraint of trade violative of section 1 of the Sherman Act. The district court also determined that "there are no facts which show that Ford improperly used the franchise agreement to deny transfer of the Ford franchise to plaintiffs de la Rigaudiere and Smith." Tunis Brothers Co., 587 F.Supp. at 275. Summary judgment as to Count II was also granted.
Having dismissed all of the federal claims before trial, the district court then exercised its discretion and dismissed the pendent claims in Counts V and VI. 587 F.Supp. at 275.
The plaintiffs noticed this appeal on June 4, 1984.
Although Tunis Brothers, de la Rigaudiere and Smith challenge the district court's ruling as to the validity of the franchise agreement and the dismissal of the state claims, they have launched their major offensive against the district court's holding with respect to the entry of summary judgment on the conspiracy charge. 10 They strongly take issue with the district court's evaluation of the material facts and staunchly maintain...
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