Edward C. REA and 22 Ford Inc., a corporation v. FORD MOTOR COMPANY, a corporation, Appellant
No. 73-1190
United States Court of Appeals, Third Circuit
April 26, 1974
497 F.2d 577
Argued Jan. 7, 1974. Certiorari Denied Oct. 15, 1974. See 95 S.Ct. 126.
Robert A. Jarvis, Raymond W. Cromer, Eugene J. Reinbold, of Beck, Mc-
John A. Metz, Jr., and H. G. Beamer, III, of Metz, Cook, Hanna & Kelly, Pittsburgh, Pa., for Ford Dealers Alliance, Inc., amicus curiae.
Before VAN DUSEN, HUNTER and WEIS, Circuit Judges.
OPINION OF THE COURT
VAN DUSEN, Circuit Judge.
This is an appeal from a judgment of the United States District Court for the Western District of Pennsylvania. The judgment required Ford Motor Company ( Ford ) to pay damages to 22 Ford Inc. ( 22 Ford ), a corporate franchised Ford dealer, in the amount of $3,350,000. for injuries claimed to have been caused by violation of the Sherman Act,
Ford is the second largest manufacturer of automobiles in the United States. It manufactures approximately 25% of the automobiles sold in this country, a market share that has not changed significantly during the period relevant here. With one exception—sales to the United States Government—Ford sells no automobiles directly to ultimate customers but, rather, sells to franchised retail dealers who then resell the automobiles to the public. At the time of trial, approximately 97% of these retail outlets were independently owned and financed. A relatively small number of the remaining 3% of the re-1tail outlets were wholly-owned subsidiaries of Ford.1 The remainder were dealer development outlets in which Ford and private parties share the investment, and which are established in the expectation that the private participant will acquire full ownership of the outlet out of his share of its profits.2 22 Ford holds a Ford franchise in Monroeville, Pennsylvania, a suburb of Pittsburgh, which was originally given in February 1964 to Edward C. Rea, Inc. Thereafter the franchise was assigned to 22 Ford with Ford‘s permission.
The complaint in this case originally alleged seven causes of action. Prior to the trial, the district court granted Ford‘s motion for summary judgment on the causes of action that sought specific performance of the contract to convey real estate and to establish a lien on the real property involved. See Rea v. Ford Motor Co., 326 F.Supp. 627 (W.D.Pa. 1971), appeal dismissed (3d Cir. Nos. 71-1780/1, 1972). At the conclusion of the evidence, the district court directed a verdict for Ford on the claims alleged under the Robinson-Patman Act,
The district court denied Ford‘s post-trial motions for a directed verdict, or in the alternative, for a new trial, but held that the damages fixed by the jury were excessive and that a motion for a new trial would be granted unless 22 Ford filed a remittitur for all single damages in excess of $1,000,000. Rea v. Ford Motor Co., 355 F.Supp. 842 (W.D. Pa.1973). The plaintiffs filed such remittitur and the district court amended its judgment accordingly. This appeal by Ford involves the three causes of action upon which the district court entered judgment for plaintiffs: the oral contract for the conveyance of real estate, the Automobile Dealers’ Act, and the Sherman Act. We shall consider each seriatim.
I. ORAL CONTRACT FOR CONVEYANCE OF REAL ESTATE
In response to special interrogatories, the jury found that Ford had orally agreed to sell Rea the real estate in Monroeville upon which 22 Ford and4 its predecessor have conducted a Ford dealership since December 1964, that Ford failed to perform this contract, and that, as a result, Rea had been damaged in the amount of $29,683., this figure representing the cost to 22 Ford of acquiring and installing trade fixtures in the building used for the dealership. The jury found that there existed a binding oral contract between Rea and Ford, which was then owner of the land, under which Rea was to take title to the land (in his own name or in the name of a corporation formed by him) to lease the land to Ford, with a lease-back from Ford to 22 Ford, and that Ford breached such contract by failing to convey title to Rea. The jury therefore awarded to Rea as damages the cost of the improvements that he had to make in order to get the dealership service facility operating.4 Although there is sufficient evidence to support the jury‘s finding of Ford‘s breach of contract, Rea is not entitled to maintain suit at this time. Under Pennsylvania law, a person who enters and makes permanent improvements on the land of another in reliance on an oral contract for the sale of the land cannot recover for their value so long as he remains in uninterrupted enjoyment of the improvements. Naftzinger v. Roth, 93 Pa. 443 (1880).4a It is true that Rea, unlike the plaintiff in Naftzinger, is not legally entitled to possession of the land and improvements, for the present lessee is not Rea but 22 Ford. However, it is not necessary to pierce the corporate veil in order to apply the holding of Naftzinger to this case. Rea‘s contract with Ford, as found by
II. AUTOMOBILE DEALERS’ DAY IN COURT ACT CLAIM
In its pleadings and pre-trial statement, 22 Ford originally alleged that Ford had violated the Automobile Dealers’ Day in Court Act ( Automobile Dealers’ Act ) by refusing to enter into a particular real estate transaction with Rea and by competing with 22 Ford through company-owned dealerships. The district court directed a verdict for Ford on these claims at the close of plaintiffs’ case. At the same time, however, the court suggested sua sponte a new and different claim under the Automobile Dealers’ Act which 22 Ford thereafter embraced. The gist of that new claim was that sometime between February and August 1964 Ford violated the Act by threatening to cease shipping Ford cars to 22 Ford‘s predecessor as a Ford dealer in Monroeville, unless a separate corporation, in which Rea was the principal stockholder, resigned its franchise as an Oldsmobile dealer in a neighboring town.7 The evidence underlying that claim is as follows:
Edward C. Rea, Inc. was given a franchise as a Ford dealer in Monroeville in February 1964. The Ford Sales Agreement which established the terms and conditions of that franchise provides that the Dealer reserves the right to make purchases from others without obligation or liability of any kind to the Company, provided that the Dealer shall not be relieved of any duty, obligation, or responsibility assumed by the Dealer under this agreement. . . . At that time Rea was the principal stockholder in another company, then known as Rea Oldsmobile, Inc. ( Rea Olds ), which conducted an Oldsmobile dealership in Wilkinsburg. During the negotiations for the granting of the Ford franchise to Edward C. Rea, Inc., Rea represented to Ford that he would acquire the capital necessary for the operation of the Ford franchise at Monroeville by liquidating the assets of Rea Olds, and Ford required Rea to sign a letter stating his intention to give up the Oldsmobile dealership and to send a letter to Oldsmobile stating his intent to resign.
For a time in 1964 Edward C. Rea, Inc. operated in a temporary facility because a new Ford facility, whose preparation and use required a substantial
On the basis of this evidence, the jury found that Ford breached its duty to act in good faith in performing or in complying with any of the terms or provisions of the franchise, as required by Section 2 of the Automobile Dealers’ Act,
After careful consideration and recognizing the record on the issue of liability presents a close case, we have concluded that defendant is not entitled to either the entry of judgment in its favor or a new trial to determine the question of liability on this claim. Ford challenges the jury‘s finding that it violated the Automobile Dealers’ Act on several grounds.
First, Ford argues that since the protection of the Act is confined to the relations between the manufacturer and its dealer as supplier and distributor, respectively,9 22 Ford can recover only for damages sustained by it in its capacity as a Ford dealership as a result of Ford‘s failure to act in good faith with respect to the operations of that dealership. However, plaintiffs produced evidence to show that the coercive statements complained of here were intended to and did cause Rea Olds to surrender its Oldsmobile franchise, and the claimed damages are those suffered by Rea Olds by that surrender; there is no suggestion that Ford‘s threats were designed to control or coerce the conduct of Edward C. Rea, Inc., as a Ford dealer or that they resulted in any damage to the Monroeville Ford dealership. Furthermore, although Rea Olds, after surrendering its Oldsmobile franchise and liquidating its assets, changed its name to 22 Ford and succeeded to the Ford franchise of Edward C. Rea, Inc., those transactions cannot serve to give 22 Ford a cause of action for injuries predating its affiliation with Ford. Thus, Ford concludes, there is no basis under9
The district court held, in response to this argument, that this cause of action was included in the transfer of rights under the dealership agreement to 22 Ford in April 1966 and thus 22 Ford, as the successor to the rights of Edward C. Rea, Inc. under the franchise, was entitled to bring suit and recover damages. Rea v. Ford Motor Co., 355 F.Supp. at 862-863. This analysis, however, does not entirely meet the objection raised by Ford, since it assumes one of the points in issue—whether Edward C. Rea, Inc. could recover for the damages suffered by Rea Olds. Nevertheless, we find Ford‘s argument on this point does not justify its contention that it is entitled to judgment on this claim, for it is based on too narrow and technical an interpretation of who the dealer is under the facts of this case. Edward C. Rea was not only a signing party to the franchise agreement between Ford and Edward C. Rea, Inc., but was made essential to the operation of the dealership by its terms, which recited that Ford had entered into the agreement in reliance (i) upon the representation and agreement that . . . [Edward C. Rea] substantially participate(s) in the ownership of the Dealer . . . and (ii) upon the representation and agreement that . . . [Edward C. Rea] shall have full managerial authority for the operating management of the Dealer in the performance of this agreement. Rea, therefore, had a cause of action under the Automobile Dealers’ Act against Ford for any bad faith in coercing him, as President and principal stockholder of10 Rea Olds, to surrender the Oldsmobile franchise and to recover damages suffered by Rea Olds as a result of such surrender. See York Chrysler-Plymouth, Inc. v. Chrysler Credit Corp., 447 F.2d 786, 790-791 (5th Cir. 1971); Kavanaugh v. Ford Motor Co., 353 F.2d 710 (7th Cir. 1965).10
Second, Ford argues that even if 22 Ford‘s claim is a proper one under the Act, the record contains insufficient evidentiary support for the jury‘s finding of a violation. Ford accepts, as it must, the jury‘s finding, implicit in its verdict, that McClanathan, Ford‘s regional manager in the Pittsburgh area, made statements to Rea that could be construed as a threat to terminate the shipment of cars to Edward C. Rea, Inc., unless Rea had Rea Olds surrender its Oldsmobile franchise. Nevertheless, Ford contends that such a threat does not constitute a breach of its duty to act in good faith since its purpose was to force Rea to honor his earlier representations to Ford that he would obtain a substantial part of the capital required for the operation of the new Ford outlet by liquidating the assets of Rea Olds, and thereby to protect Ford‘s lawful interest in the capital requirements of Edward C. Rea, Inc.11
As defined by the Automobile Dealers’ Act, the term good faith means
. . . the duty of each party to any franchise, and all officers, employees, or agents thereof to act in a fair and equitable manner toward each other so as to guarantee the one party freedom from coercion, intimidation, or threats of coercion or in-
timidation from the other party: Provided, That recommendation, endorsement, exposition, persuasion, urging or argument shall not be deemed to constitute a lack of good faith.
A manufacturer does not breach its duty to act in good faith by terminating a franchise when a dealer has failed to fulfill a reasonable obligation or agreement made in connection with the operation of the dealership. See, e. g., Garvin v. American Motors Sales Corp., 318 F.2d 518 (3d Cir. 1963); Milos v. Ford Motor Co., 317 F.2d 712 (3d Cir.), cert. denied, 375 U.S. 896, 84 S.Ct. 172, 11 L.Ed.2d 125 (1963). And among those agreements which a manufacturer may in good faith require that a dealer carry out is the obligation to abide by reasonable net capital guidelines. See Globe Motors, Inc. v. Studebaker-Packard Corp., 328 F.2d 645 (3d Cir. 1964).
However, whether a manufacturer has acted with sufficient justi-12fication to constitute good faith in bringing pressure to bear on a dealer is a factual question the determination of which will depend on the circumstances arising in each particular case.1312 As the court stated in York Chrysler-Plymouth, Inc. v. Chrysler Credit Corp., supra at 791, assuming there is evidence supporting a finding of a lack of good faith, it is up to the jury to determine the redemption value of the facts indicating that the action could have been taken in good faith. We hold that the evidence in this case, as viewed most favorably to the plaintiffs, is sufficient to support the jury‘s finding that Ford breached its duty to act in good faith by threatening to stop supplying cars to Edward C. Rea, Inc., unless Rea Olds resigned its Oldsmobile franchise. See Rea v. Ford Motor Co., 355 F.Supp. at 857-861. The effect of that threat was to violate the dealer‘s right to purchase cars from other manufacturers, which right was not only guaranteed by the franchise agreement but apparently also of particular concern to Congress when it enacted the law.13 While there was also testimony that Ford‘s motive was to assure that its dealer met its capital guidelines by carrying out what it had earlier represented it would do, the credibility and weight to be given to that testimony in determining the issue of good faith were properly left to the jury.
Third, Ford argues that 22 Ford is not entitled to maintain this cause of action under the Act, since it did not give notice to the Chairman of the Company‘s Dealer Policy Board of
Finally, Ford argues that the introduction of a new theory of liability at the close of the plaintiffs’ case prejudiced Ford in its defense to the Dealers’ Act claim. In particular, Ford points out that the question of whether Edward C. Rea, Inc. would have had adequate capital to carry on the Ford franchise absent the liquidation of Rea Olds did not become relevant until that time.16 Thus, Ford contends, since it did not receive any pre-trial notice that this would be a decisive issue in the case, it was denied a fair opportunity to prepare and present a full showing that the liquidation of Rea Olds was necessary to provide Edward C. Rea, Inc. with sufficient capital to discharge its obligations as a Ford dealer.
After an examination of the record, we cannot say that it was an abuse of discretion for the district court to submit this claim to the jury in spite of the failure of plaintiffs to allege it prior to trial, or, in fact, until the end of their case, when it was suggested by the trial judge. See Rea v. Ford Motor Co., supra at 861-862. Ford had the opportunity to, and did in fact, introduce evidence tending to demonstrate that Ford reasonably believed that the assets of Rea Olds were Rea‘s sole source of capital for the operation of the Ford dealership.17 It is possible that with more advance notice, Ford could have adduced further evidence to establish
While we thus conclude that the jury‘s finding that Ford violated the Automobile Dealers’ Act should be sustained, we hold that its award of damages thereunder is excessive and must be set aside. The jury‘s award of $350,000. apparently represents a straight-line projection of Rea Olds’ estimated profits over the period from its termination of the GM franchise in September 1964 to the time of trial in May 1972, based upon a formula devised by Dr. Staelin, 22 Ford‘s expert. It has been held that an automobile dealer may recover damages for the loss of future profits resulting from the manufacturer‘s wrongful conduct under the franchise agreement. See American Motors Corp. v. Semke, 384 F.2d 192, 199-200 (10th Cir. 1967). However, the jury‘s award here failed to reflect the fact that in 1964 Rea Olds sold certain of its assets for $60,000. and that this cash and the remaining assets of the company were thereafter devoted to the operation of the Monroeville Ford franchise.19 To award 22 Ford recovery of anticipated profits from the Oldsmobile franchise without any deduction for the asset sale or for the fact that it benefited by having the retained cash and assets available for the operation of the new Ford franchise is to permit a double recovery. Cf. Gustafson v. General Motors Acceptance Corp., 470 F.2d 1057, 1061 (8th Cir. 1973). The award of damages in favor of plaintiffs for defendant‘s violation of the Dealers’ Act will, therefore, be vacated and the case remanded for a redetermination of such damages in light of this opinion.
III. SHERMAN ACT CLAIMS
As alleged in its complaint and developed at trial, 22 Ford‘s claims under the Sherman Act,
A. The Claim Based On Ford‘s Operation of Company-Owned Outlets
22 Ford claimed that in the Pittsburgh area Ford pursued a plan to operate its company-owned and dealer development stores in such a way as to impose an unreasonable restraint on interstate trade and for the purpose of driving independently owned Ford dealers out of the business of selling Ford automobiles. Although 22 Ford asserted
Triangle became a Ford-owned dealership in March 1961 when its independent operator fell into financial difficulty. It is undisputed that the dealership made rather modest profits in 1961, 1962, 1964 and 1968 and had losses, occasionally heavy losses, in other years until its closing in May 1969,22 and that Triangle received from Ford substantial capital contributions, as well as loans which were largely repaid.
In addition, Bernard Schroll, who had been president and manager of Triangle from 1962 to 1967, testified that local Ford employees persuaded him to make expenditures for advertising and sales personnel which in his opinion were excessive,23 and to sell as many cars as possible without regard to the dealership‘s profitability. Schroll also related several statements made to him by various Ford representatives purporting to show that Ford was prompted by a specific intent to drive independent Ford dealers like 22 Ford out of business and to monopolize the retail distribution of Ford cars.24
Finally, 22 Ford relied upon the opinion testimony of Richard Staelin, an assistant professor of marketing at Carnegie-Mellon University, to support its antitrust claims. Through the use of tables, Dr. Staelin showed that Triangle and other selected Ford and Lincoln-Mercury outlets operated at a loss in some years and attributed such losses to expenditures on market variables like advertising, rent, and sales personnel. On the basis of a theoretical mathematical model, Dr. Staelin concluded that it would be to Ford‘s economic advantage to operate company outlets at a loss because it could thereby increase its manufacturing profit by diverting sales from its competitors, such as General Motors and Chrysler. He therefore characterized those losses as a subsidy or discount given by Ford to its company-owned outlets. Dr. Staelin postulated that while such a policy would increase Ford‘s manufacturing profits by diverting sales from its competitors, it would also divert some sales from independent Ford dealers. However, he did not offer any evidence that in fact the operations of Triangle or other Ford company-owned stores had diverted any sales from Ford independent dealers and took the position that the effect of those operations on 22 Ford was not relevant to his testimony.
Dr. Staelin proceeded to estimate the damages on 22 Ford‘s antitrust claim by computing the average loss-per-car suffered by those company-owned Ford and Lincoln-Mercury outlets whose financial records he had used as the basis of his model. Dr. Staelin reasoned that 22 Ford was entitled to receive from Ford the same amount of subsidy for each car it had sold. Accordingly, he multi-
Ford has advanced a number of arguments why the verdict against it on this claim is erroneous and should be set aside. However, it is necessary for us to consider only one which we find meritorious and dispositive of this claim.
It is well established that a person seeking to recover treble damages under Section 4 of the Clayton Act,
The record here provides no rational support for a determination, even by way of inference, that Ford‘s operation of its company stores caused any injury to the business or property of 22 Ford. There was no evidence that Triangle or any other Ford Company outlet engaged in predatory price cutting,26 or that 22 Ford had been compelled to lower its prices because of such price cutting. Nor did 22 Ford attempt to prove that it had incurred greater operating expenses than it would have had to incur absent the operations of Triangle and other company outlets. There was no evidence that 22 Ford lost sales to Triangle because of the latter‘s prices, advertising, number of salesmen, or any other reason.27 Finally, 22 Ford made no claim and presented no evidence that it had lost profits because of the operations of Triangle or other company outlets. Indeed, 22 Ford‘s counsel expressly disavowed any such claim:
What our position is in this case is what 22 Ford did or did not do is not relevant because we are not asserting in our case that 22 Ford sustained a loss of profits . . . . [W]e haven‘t put any evidence in the record to indicate any particular loss sustained by 22 Ford. (N.T. 4312-13)
We conclude that there is insufficient evidence in this case that Ford‘s operation of its company-owned outlets caused any economic injury to 22 Ford and therefore that 22 Ford was not entitled to an award of damages for its alleged violations of the Sherman Act.28 This decision, however, in no way undermines the proposition that automobile manufacturers are subject to the28
strictures of the antitrust laws in the operation of their wholly-owned outlets, and where a violation of those laws causes injury to the business of a competitor, they will be liable for damages. See, for example, Mt. Lebanon Motors, Inc. v. Chrysler Corp., 283 F.Supp. 453 (W.D.Pa.1968).
B. The Price-Fixing Claim
22 Ford‘s claim for damages as a result of Ford‘s alleged violations of the Sherman Act also rested on the contention that Ford had conspired with Hertz and Avis to fix the price at which those rental companies would buy new cars from 22 Ford and other dealers. The evidence showed that for many years the two major car rental companies had bought new Fords, as well as cars of other makes, from dealers at a fixed price of $50. over the manufacturer‘s invoice price to the dealer less 1%. Such price uniformity, especially if at an artificial level not related to the supply and demand of a given commodity may be evidence from which an agreement or understanding, or some concerted action operating to restrain commerce, may be inferred. See Triangle Conduit & Cable Co. v. Federal Trade Commission, 168 F.2d 175 (7th Cir. 1948), aff‘d sub nom. Clayton Mark & Co. v. Federal Trade Commission, 336 U.S. 956, 69 S.Ct. 888, 93 L.Ed. 1110 (1949). Furthermore, after a careful review of the record, we believe that there is sufficient evidence to support an inference that Ford was a party to an agreement or understanding to
Because there will be a new trial on this claim, it is appropriate to comment on defendant‘s contention that there has been no proof of injury or amount of damages resulting from the alleged price-fixing agreement. On the issue of injury, 22 Ford again relied upon the opinion testimony of Dr. Staelin, who estimated that under competitive market conditions the price the auto rental companies would have had to pay per car was $76. higher than the formula price. Ford contends that this testimony fails to establish its alleged antitrust violation caused the alleged loss of revenue, see Deaktor v. Fox Grocery Co., 475 F.2d at 1115, arguing that it was necessary for 22 Ford to show that, absent the alleged price-fixing arrangements Avis and Hertz would have purchased new cars from 22 Ford at a higher price than the formula price. We find this to be an unduly restrictive view of causation under the facts of this case. The Supreme Court has held that a plaintiff‘s
burden of proving the fact of damage under § 4 of the Clayton Act is satisfied by its proof of some damage flowing from the unlawful conspiracy; inquiry beyond this minimum point goes only to the amount and not the fact of damage. It is enough that the illegality is shown to be a material cause of the injury; a plaintiff need not exhaust all possible alternative sources of injury in fulfilling his burden of proving compensable injury under § 4.
Zenith Radio Corp. v. Hazeltine Research, Inc., 395 U.S. 100, 114 n. 9, 89 S.Ct. 1562, 1571, 23 L.Ed.2d 129 (1969). The Court in Zenith went on to explain its view of causation as follows:
The Court has repeatedly held that in the absence of more precise proof, the factfinder may conclude as a matter of just and reasonable inference from the proof of defendants’ wrongful acts and their tendency to injure plaintiffs’ business, and from the evidence of the decline in prices, profits and values, not shown to be attributable to other causes, that defendants’ wrongful acts had caused damage to the plaintiffs. Bigelow v. RKO Pictures, Inc., supra [327 U.S. 251 (1946)] at 264, [66 S.Ct. (574), at 579, (90 L.Ed. 652)]. See also Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 377-379, [47 S.Ct. (400), 404-405 (71 L.Ed. 684)] (1927); Story Parchment Co. v. Paterson Parchment Paper Co., 282 U.S. 555, 561-566, [51 S.Ct. 248, 250-251, 75 L.Ed. 544] (1931).
Id. at 123-124. There is sufficient evidence that the price-fixing agreement between Ford, Hertz and Avis would tend to injure plaintiff‘s business and
We therefore conclude that there is sufficient evidence from which a fact finder could find that 22 Ford was injured in its business as a result of Ford‘s price-fixing agreement with Hertz and Avis and is entitled to recover treble damages under § 4 of the Clayton Act. As to defendant‘s contentions concerning proof of damages,32 we need only note that the Supreme Court of the United States has held that in cases where a wrongful act precludes
ascertainment of damages more precisely, by comparison of profits, prices and values as affected by the conspiracy, with what they would have been in its absence under freely competitive conditions . . . the jury may not render a verdict based on speculation or guesswork. But the jury may make a just and reasonable estimate of the damage based on relevant data, and render its verdict accordingly. In such circumstances juries are allowed to act upon probable and inferential, as well as direct and positive proof. Story Parchment Co. v. Paterson Co., supra, 561-564; Eastman Kodak Co. v. Southern Photo Co., supra, 377-379.
Bigelow v. RKO Radio Pictures, Inc., supra at 264.
For the foregoing reasons, the district court judgment of May 27, 1972 (filed May 30, 1972), as amended by orders of December 26, 1972 and January 16, 1973, will be vacated and the case will be remanded to the district court for the entry of an order, consistent with this opinion, granting (1) judg-
APPENDIX TO OPINION OF APRIL 26, 1974 in REA et al. v. FORD MOTOR COMPANY (3d Cir. No. 73-1190)
SPECIAL VERDICT
In accordance with instructions of the court, the jury hereby finds as follows:
(1) Was there a binding contract between plaintiff, Edward C. Rea, and defendant, Ford Motor Company, whereby Rea would acquire the title to so-called Balison tract of land in Monroeville, Allegheny County, Pennsylvania?
Answer: Yes .
(2) If your answer to the first question is yes , what were the terms of the contract?
(a) that Rea was to take title in his own name or in the name of a corporation formed by him and lease the same to defendant, Ford Motor Company, for a term of years with a lease-back from Ford Motor Company to 22 Ford, Inc., Rea‘s Dealership? (The so-called direct-lease plan.)
Answer: Yes .
(3) Do you find that the defendant, Ford Motor Company, breached its agreement as found by you in your answers to Questions 1 and 2?
Answer: Yes .
(4) If your answer to Number 3 is yes , what amount of damages do you award Edward C. Rea for such breach of contract?
Answer: $29,683.00 .
(5) Did the defendant breach its duty to act in good faith in performance or in complying with any of the terms of the franchise or sales agreement between 22 Ford, Inc. and Ford Motor Company as required by the Automobile Dealers Act?
Answer: Yes .
If your answer is yes , what amount of damages do you award plaintiff, 22 Ford, Inc., for this breach of duty?
Answer: $350,000.00 .
(6) Did defendant enter into any contract, combination or conspiracy which was in effect during the period since February 11, 1964, and which unreasonably restrained interstate trade or commerce in Ford motor vehicles at the retail level in the area covered by the Pittsburgh Sales Office of Ford Motor Company?
Answer: Yes .
(7) Did the defendant during the period from February 11, 1964, attempt to monopolize interstate trade or commerce in Ford motor vehicles at the retail level in the area covered by the Pittsburgh Sales Office of Ford Motor Company?
Answer: Yes .
(8) Did the defendant violate Section 3 of the Clayton Act making it unlawful to make a sale or contract for sale of goods or commodities on condition that the purchaser shall not use or deal in goods and commodities of a competitor, viz: Oldsmobile automobiles manufactured by General Motors Corporation where the effect was substantially to lessen competition or tend to create a monopoly in any line of commerce?
Answer: No .
(9) If your answer to either 6, 7 or 8 or any of them is Yes what damages
Answer: $1,750,000.00 .
(Signed by the Jury.)
May 25, 1972.
WEIS, Circuit Judge (concurring and dissenting):
I concur with the well reasoned opinion of the majority, except with respect to the entry of judgment in favor of the defendant on Count I. I would affirm the judgment in favor of Rea in the amount of $29,683.00.
Count I is a claim for damages resulting from the breach of an oral contract for the sale of realty. This phase of the litigation is based solely on Pennsylvania law and is in the federal courts only by reason of pendant jurisdiction.
Pennsylvania follows the general doctrine that the corporation is an entity separate and distinct from its stockholders. It is only when justice or public policy demands it and when the rights of innocent parties are not prejudiced thereby nor the theory of corporate entity made useless that the court will disregard the corporate identity. Fedun v. Mike‘s Cafe, Inc., 204 Pa.Super. 356, 362, 363, 204 A.2d 776, 780 (1964), aff‘d, 419 Pa. 607, 213 A.2d 638. None of these exceptions is presented here.
The contract was executed by Rea as an individual. It is he who has the cause of action for the breach as the jury found in answering special interrogatories. Although Rea holds a majority of the stock in 22 Ford, Inc., he is not the tenant. It is the corporation which holds the lease from Ford.
The rule for which Naftzinger v. Roth, 93 Pa. 443 (1880), is cited has relevancy only to a person in possession. It can be applied to this case only if the legal distinction between Rea and 22 Ford, Inc. is obliterated.
Ford was well aware that Rea did not intend to have the dealership-tenant be the landowner. The defendant was not misled in any fashion, has not shown any fraud, and is not now entitled to claim that the corporate veil should be pierced.
I find no error in the district court‘s disposition of Count I, and would affirm its judgment in favor of the plaintiff.
Notes
It imposes upon the factory the affirmative obligation to act in good faith in all dealings or transactions with its dealers. S. Rep. No. 2073, 84th Cong., 2d Sess. 4 (1956).
These bills impose upon any automobile manufacturer granting a franchise to an automobile dealer the duty of acting in good faith in his relationship with that dealer. Hearings on H.R. 11360 and S. 3879 Before the Anti-Trust Subcomm. of the House Comm. on the Judiciary 84th Cong., 2d Sess. 3 (1956) (Introductory Remarks Congressman Celler).
In the interests of maintaining harmonious relationships between the parties to this agreement, the Dealer shall report promptly in writing to the Chairman of the Company‘s Dealer Policy Board, or to such other person as may be designated by the Executive Committee of the Company from time to time, any act or failure to act on the part of the Company or any of its representatives, which the Dealer deems not to have been, or that the Dealer proposes to use in support of a claim that the Company has not acted, in good faith as to the Dealer. For the purposes of this subparagraph 2(g), the term good faith shall mean the Company and its representatives acting in a fair and equitable manner toward the Dealer so as to guarantee the Dealer freedom from coercion, intimidation, or threats of coercion or intimidation from the company.