Wallace Motor Sales, Inc. v. American Motors Sales Corp.
| Decision Date | 19 December 1985 |
| Docket Number | Nos. 85-1261,85-1283,s. 85-1261 |
| Citation | 780 F.2d 1049 |
| Parties | 19 Fed. R. Evid. Serv. 1210 WALLACE MOTOR SALES, INC., Ralph E. Wallace, Plaintiffs and Third-Party Defendants, Appellants, v. AMERICAN MOTORS SALES CORPORATION, Defendant, Appellee. WALLACE MOTOR SALES, INC., Plaintiff, Appellee, v. AMERICAN MOTORS SALES CORPORATION, Defendant, Appellant. |
| Court | U.S. Court of Appeals — First Circuit |
Daniel A. Laufer with whom Myers & Laufer, Concord, N.H., Barbara L. Moore and Cooley, Manion, Moore & Jones, P.C., Boston, Mass., were on brief for Wallace Motor Sales, Inc. and Ralph E. Wallace.
Allan J. Sullivan with whom Jeffrey N. Herman, Mark W. Pearlstein and Goodwin, Procter & Hoar, Boston, Mass., were on brief for American Motor Sales Corp.
Before BOWNES, Circuit Judge, WISDOM, * Senior Circuit Judge, and TORRUELLA, Circuit Judge.
These appeals arise out of an action brought by Wallace Motor Sales, Inc. (Wallace Motors) against American Motors Sales Corporation (AMC) for breach of contract and bad faith termination of Wallace Motors' automobile dealership franchise. AMC counterclaimed against Wallace Motors and its president and sole stockholder, Ralph E. Wallace (Wallace), for breach of the franchise agreement, misrepresentation, trademark infringement, restitution, debt and unfair practices. Wallace Motors' complaint contained five counts, one of which was dismissed before trial. Two were presented to the jury: the claim for bad faith termination of Wallace Motors' franchise under the Automobile Dealers Suits Against Manufacturers Act (Dealers Act), 15 U.S.C. Sec. 1221 et seq., and a claim for breach of contract based on AMC's failure to repurchase parts from Wallace Motors and to pay it for warranty work done and bonuses earned. The remaining two counts, brought under the Regulation of Business Practices Between Motor Vehicle Manufacturers, Distributors and Dealers Act, Mass.Gen.Laws Ann. ch. 93B, were decided solely by the court. 1
AMC's counterclaim contained eight counts, one of which was dismissed. The seven remaining counts consisted of: (1) a claim that Wallace Motors and Wallace defrauded AMC of $35,000; (2) a claim for restitution of the $35,000; (3) a claim for breach of the franchise agreement; (4) a claim for unfair trade name and trademark appropriation; (5) a claim for breach of the franchise contract with respect to unfair trademark and trade name appropriation; (6) a claim for conversion of a car shipped to Wallace Motors but never paid for; and (7) a claim under the Regulation of Business Practices for Consumer Protection Act, Mass.Gen.Laws Ann. ch. 93A, for damages due to unfair and deceptive acts committed by Wallace Motors and Wallace.
The jury found for Wallace Motors and against AMC in the amount of $100,000 for violation of 15 U.S.C. Sec. 1221, and $25,000 for breach of the franchise contract for failure to pay for warranty work done, bonuses earned, and the cost of parts not repurchased. As to the issues raised in AMC's counterclaim, the jury found against AMC on its claims of misrepresentation and restitution as well as on the general breach of contract claim. It found for AMC on the claim for the conversion of the unpaid car in the amount of $7,500, and on the trademark infringement and trademark contract claims in the amount of $1,000 for each claim. The jury awarded AMC a total of $9,500 in damages.
The district court's findings on the chapter 93A and B claims were the direct opposite of the jury's findings on the counts submitted to it. The court denied Wallace Motors' two chapter 93B claims and found in favor of AMC on its chapter 93A claim. AMC's subsequent motions for judgment n.o.v. and for a new trial were denied. Wallace Motors appeals from the trial court's adverse rulings on its two chapter 93B claims and AMC's chapter 93A judgment. AMC appeals all adverse rulings.
Wallace Motors' appeal raises two issues: whether it was deprived of its seventh amendment right to a jury trial when the district court made its own independent findings of fact on the chapter 93A and B claims; and whether chapter 93B precludes an automobile manufacturer from filing a claim under chapter 93A. AMC's appeal raises three issues: the degree of coercion which must be shown to establish a lack of good faith under the Dealers Act, 15 U.S.C. Sec. 1221; the kind of evidence required to establish injury under the Dealers Act; and the authentication and foundation requirements for admitting evidence under the business records exception to the hearsay rule, Fed.R.Evid. 803(6). AMC also claims that Wallace Motors is barred from challenging AMC's right to bring a chapter 93A claim because Wallace Motors did not raise that issue below.
The relationship between Wallace Motors and AMC dates back to 1970, the year Wallace Motors got its first franchise from AMC. That franchise authorized Wallace Motors to sell AMC automobiles, parts and accessories in the Wilmington, Massachusetts, area. In 1977 Wallace Motors obtained an additional franchise from AMC authorizing it to sell Jeep motor vehicles. On September 10, 1982, the parties entered into a new agreement which added a Renault franchise to Wallace Motors' dealership. The circumstances surrounding the negotiation and termination of that 1982 agreement are the genesis of this action.
AMC began franchising Renault dealers in 1979 when it entered into a joint marketing venture with Renault. Thereafter AMC adopted an unofficial marketing policy of combining Renault franchises with existing AMC and Jeep franchises, wherever possible. The dealers who had already been franchised by Renault were protected against having new Renault dealerships opened up in their area; an AMC/Jeep dealer could only obtain a Renault franchise by buying out an existing Renault dealer. AMC offered to provide funds to facilitate such purchases.
Sometime in 1980, Wallace Motors learned that the Pass and Weisz dealership, located in Wallace Motors' marketing area, was willing to sell a Renault franchise. Wallace Motors made a bid to buy the franchise for $50,000. Pass and Weisz accepted, and in early spring 1982, Wallace Motors asked AMC to approve the transfer and to provide $35,000 of the purchase price. AMC promised to approve the transfer and to supply the funds sought if Wallace Motors satisfied certain operational and financial qualifications. It also demanded that Wallace Motors upgrade its facilities and refurbish its premises.
From the start, the minimal financial qualifications posed a problem. AMC informed Wallace that Wallace Motors would have to obtain a $350,000 floor plan line of credit in order to achieve the established sales planning potential for the AMC/Jeep/Renault franchise in the Wilmington market. The $350,000 figure was far in excess of any credit facilities previously enjoyed by Wallace Motors. Indeed, Wallace Motors had not had a functioning line of credit since early 1981. Moreover, it had a record of poor sales performances for the preceding two years.
The evidence conflicts sharply over how this floor plan hurdle was overcome. Wallace testified that AMC representatives at AMC's Boston zone office assured him, as Wallace Motors' principal, that the $350,000 floor plan was merely a paper requirement and that Wallace Motors could qualify if it obtained a $100,000 floor plan. Wallace Motors did in fact obtain a $100,000 floor plan from the Century Bank and Trust in May 1982. Wallace testified that he went to the Boston zone office to sign a franchise application form and several related documents once the $100,000 floor plan was in place. Wallace maintained that he signed all these papers in blank on the understanding that AMC personnel would complete the details and forward the application package to AMC's head office. AMC gave a very different account of what happened. It flatly denied that Wallace was ever told that a $100,000 floor plan would suffice. AMC's evidence was that Wallace repeatedly represented that he had obtained a $350,000 floor plan, and that he assisted at every step of the application process, providing all the information from which the details were put together.
In any event, the completed application was sent to AMC's head office in Detroit sometime in May 1982, and formally approved later that month. AMC then notified all the Renault dealers of the proposed transfer as required by state law, Mass.Gen.Laws Ann. ch. 93B. One such dealership, Border Buick AMC Renault (Border Buick) promptly filed a protest and then a lawsuit under the statute, blocking the transfer of the franchise from Pass and Weisz to Wallace Motors. The suit was dropped on September 8, 1982, after Wallace Motors' agreed to give Border Buick the right of first refusal to Wallace Motors' franchise rights. That same day Wallace Motors received the promised $35,000 from AMC and closed the deal with Pass and Weisz.
The events leading up to the termination of the franchise began about two weeks later when Century Bank rejected an AMC draft for a car being shipped to Wallace Motors. The Bank claimed that the draft exceeded Wallace Motors' credit line. AMC's files contained documents showing a $350,000 floor plan in Wallace Motors' favor at the Century Bank but subsequent inquiry revealed that these documents had been forged and that no such floor plan existed. Wallace Motors disclaimed all responsibility for the forgeries. On October 8, 1982, AMC informed Wallace that it would give him ten days to obtain a $350,000 credit line. Wallace proved unable to meet this demand and on December 23, 1982, AMC notified Wallace that it would terminate all Wallace Motors' franchises as of February 24, 1983. AMC specified Wallace Motors' failure to maintain an adequate line of credit, the misrepresentations in Wallace Motors' application, and its poor sales performance as...
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