*2 fact, Eichler, Hans money. In Bavari- LUMBARD, Before MOORE owner of a 60 percent president an’s OAKES, Judges. Circuit franchise, had in the stolen and interest MOORE, P. Judge: LEONARD Circuit money. with At no time absconded America, BMW North Defendant Inc. transaction, however, did relevant (“BMW/NA”) appeals from a judgment of contact, any person, in tele- Cullen District the United States Court for the mail, with any representative phone, York, District of New Eastern Honorable BMW/NA. Neaher, Judge, R. Edward favor of commenced a civil subsequently Cullen Cullen, Jr., in W. Thomas Bavarian in New York against State suit interest, plus judgment from a Court, County. Nassau The suit Supreme court, that same denying defendant’s stayed petition after Eichler filed a to amend the judgment. motion BMW/NA bankruptcy. Cullen also filed criminal com- importer exclusive is the and distributor in Queens County with the District At- plaints passenger cars, United States of Attorney torney and the General of the products manufactured Bayerische York, but no of New indictments State Werke, appeal, AG. On Motoren addition, brought were issued.1 claims that the court erred in find- diversity grounds based on action ing breached a under New against actively to police York law the methods of operating as a franchised franchisee, operation of its Bavarian Auto dealer, with Eichler as its principal, BMW Sales, (“Bavarian”), Inc. and had negligent- assumed control over the when ly permitted to continue as a March, BMWof automobiles in distribution dealer. We BMW with BMW/NA operate as a fran- It continued owe a duty supervise it did not February until dealer BMW chised of Bavarian and to operation terminate the dealership ended.2 when the because of its allegedly precarious operating agree- to a standard condition. Pursuant we re- BMW/NA, Bavarian respon- with judgments of the ment verse the district court. February (1) indicted, however, 1979: from June 1 to De- 1. Eichler and Bavarian 31, 1976; August grand larceny from to Decem- cember for three counts of the second January 31, 1977; degree from 1 to Decem- on Eichler’s conduct toward cus- ber agreement February 5, Although no written than Cullen. On tomers other ber pleaded guilty attempted grand January August 1 to Eichler from was in effect larceny degree. February 16, 1979, January second in the 1 to 1977 or from duly operate as fran- during periods. and BMW/NA entered into three dealer chised June, agreements written franchise from tomer maintaining line of prearranged concerning the Bavarian sible institution to be used complaints ranged These credit purchase vehi- of BMW exclusively for of checks on accounts with issuance line Bavarian, permitted its cles. delays funds to in re- alleged insufficient August, Prior to lapse. of credit deposits. Although customer turn with the a line credit State by BMW/NA revealed that all investigation *3 Island. Long August On Bank been satisfactorily resolved BMW/NA that however, bank informed re-presenta- were covered on checks and all its with Ba- relationship terminated remained disturbed Ba- BMW/NA tion. Eichler had advised the varian failure to certain satisfy continued varian’s Bavar- arranged to handle he bank contract with requirements requirements re- personal from credit ian’s as submitting such fi- monthly difficulty, experienced BMW/NA sources. statements,3 and the increased num- nancial receiving however, payment for cars and which Bavarian had issued on of checks ber Bavarian on a C.O.D. certi- placed parts with insufficient funds.4 accounts basis, open rather account than check fied part of 1976. status, attempted the latter reassure BMW/NA Eichler viability, indicating 1977, BMW/NA received a letter June, actively negotiating with a was that he stating Discount Bank Israel from institutions to obtain a variety of had estab- June effective By however, mid-September, $200,000. From of credit. credit for line a line lished through August secure still able to part latter Discount paid funds, Bank had Israel BMW/NA met with Ei- credit eighty-seven pur- vehicles approximately to discuss future of the franchise. chler Bavarian even no formal chased reviewing file, the dealership’s After for most of effect of credit letter concluded that it would be diffi- BMW/NA also paid The bank BMW/NA period. this the Bavarian franchise at to terminate cult twenty-six vehicles between another time, adequate without written docu- 1977 and December 1977. September certifying dealer’s deficien- mentation Bank as Ba- Discount continued Israel The providing op- without cies facility through the summer credit varian’s correct those Ac- deficiencies. portunity paid for fif- The bank BMW/NA of 1978. granted Bavarian six- BMW/NA cordingly, January between automobiles ty-three deficiencies, all days to cure ty fall of August 1978. In the closely monitored the personnel BMW/NA however, the bank that the concluded during period. BMW/NA dealership experiencing financial diffi- operate as a BMW dealer and extend further decided culty and facility maintained the mini- service part decision was in bank’s credit. required by of vehicles number mum tax certain levies and other upon contract against filed the Bavarian legal actions unaware, how- request, original BMW/NA sixty- At Bavarian’s against levies filed Bavari- tax ever, any until November was extended day period Discount behind Israel reasons an or the following day, Eichler line to terminate Bavarian’s decision Bank’s ap- he had verbal BMW/NA informed of credit. for credit and that he proval from Citibank Although awaiting confirmation. which Ba- was the time at approximately At materialize, credit, did not BMW/NA be- commitment its line lost Citibank varian Corporation of cus- ad- receiving Capital (“Lloyd”) an increased number Lloyd gan During 1978, $40,000 monthly totalling finan- checks were two furnished during years oper- accounts the several to BMW/NA cial statements issued funds. with insufficient ated. accepted letter dated December deposits BMW/NA totalling vised from customers Bavarian had established a line 7,1978, that that he had approximately $400,000 exclusively money for BMW for his own purposes. of credit used this thereafter, later, Shortly Ei- days accepted automobiles. Three voluntary resignation. vehicles to the Bavarian letter of seven chler’s allocated pursuant drew funds dealership and credit. The cash drafts Lloyd letter of DISCUSSION refused, Lloyd informed were trial two alleged at theories of that the letter of credit had been liability: that Bavarian acted as The seven vehicles then withdrawn.5 agent pursuant to principles BMW/NA’s Bavarian and were reallocat- removed agency agency by estoppel; either actual nearby Moreover, BMW dealer. to a ed negligently permit- that BMW/NA Hanau, vice-president Friedrich *4 to continue as a Bavarian BMW dealer ted BMW/NA, Eichler, immediately wrote to knowledge of pre- Bavarian’s company’s position the setting that forth condition.6 financial The district carious continuing corrected its de- unless theory liability, first rejected the court an sixty days, within additional ficiencies prove to failed es- finding that Cullen the would serve a notice of intent to BMW/NA supporting theory elements a sential franchise. Eichler responded the terminate held, estoppel.7 The court agency by how- 28, 1978, indicating that he on December was liable ever, BMW/NA for dam- that accelerating his efforts to obtain a line was negligence theory, finding ages under credit, expressing his desire and to con- proving met “burden of that Cullen dealer. In early January, as BMW tinue a a legal rise to facts which Eichler advised BMW/NA BMW/NA, protection for the its part of to sell he his franchise to an- that desired customers, reasonably police to franchisee’s dealer. This prospective other automobile use of the BMW name and the authorized application submitted which purchaser operation of supervise the its franchise.” BMW/NA, early February, rejected for Inc., America, North BMW of No. Cullen satisfy failing BMW/NA’s to established (E.D.N.Y. op. at 12 slip Oct. 79 C a new dealership. for
standards BMW/NA, a imposing on 1981). In February BMW/NA officials court found that BMW/NA district Eichler to discuss the with future again met propensity of Bavarian’s apprised “was At this meeting, transactions,” unscrupulous business learned that America, Inc., officials Eichler had BMW/NA of North v. BMW signed agree- district agency had never formal court concluded that an actual paid Lloyd Lloyd never and had relationship ment with BMW/NA did not exist between prior required law to be submitted to found to Bavarian. It also no evidence agreement. the execution conspir- support of action for causes Cullen’s tort, prima acy facie commit fraud alleged plaint sep- com four 6. amended Cullen’s as well. those claims dismissed liability: (1) that arate theories agency by negligence issues agent pursuant acting for BMW/NA as estoppel tried. remained to be principles agency agency by actual or of either (2) negligent estoppel; that BMW/NA specifically pointed fail to Cullen’s The court permitting continue as a dealer prove his on Bavarian’s author reliance ure “to knowledge of Bavarian’s al- because it ity Cullen v. BMW of for BMW/NA.” to act condition; precarious legedly that America, Inc., op. slip 79 C at 8 No. North conspiracy into a with Ei- BMW/NA entered chler, 28, 1981) (emphasis original). Oct. (E.D.N.Y. did, defraud into in fact customers cross-appeal from the of this dismissal Cullen’s Eichler; doing with that business pursuant withdrawn for relief was claim prima conduct constituted facie BMW/NA’s stipulation 1982 and on dated March filed discovery, conclusion tort. At Accordingly, we need not March summary judgment dis- BMW/NA moved appeal. issue on address missing claims for of Cullen’s relief. The each
HOI (E.D.N.Y.1982), at 565-66 Eichler. F.Supp. may have result, “BMW/NA should have shaky that aware condition, knowledge that Bavarian reasonably might gave foreseen that alone intentionally cause reasonably caused no to anticipate some financial BMW/NA have engage Eichler would either in any as a customer result of that some harm ” activity or that he would . . Id. criminal abscond original negligence . . its fact, customer funds. no concluded where fran- thus court supervision BMW/NA would en- chisor, has a “reasonable such to foresee Eichler’s thievery. abled to reduce the risk foreseea- opportunity Moreover, even no- franchisee, id., caused but injury” ble had been subject that Bavarian tice franchisee or take terminate fails complaints, most customer action, the appropriate franchisor is other resolved, record does not demon- damages liable for negligent and suffered any dishonesty there was strate consumer. by the ultimate intent associated with these inci- Furthermore, we note conclude, however, dents. dis- We finding that court’s trict was an improperly court determined that operated owned and independently dealer- foreseeable, injury reasonably to eliminate any question sufficient ship is in finding thus erred BMW/NA liable control had no police failure to negligent methods in Bavarian, *5 interest did not par- independent of its operation franchisee hiring firing in the or ticipate officers to terminate employees, or dictate its practices. or sales precarious financial Bavarian’s condition. we conclude that not undertake to “The law does hold a knowledge it even chargeable with a who breach person condition, precarious financial was not lia- another, with possible all the duty toward his for damages ble to Cullen under a negli- wrongful consequences act.” Lowery since it could not have gence theory reason- Co., Telegraph Union 60 N.Y. v. Western Eichler’s activity. foreseen ably It 198, 201 is thus well-established foreseeability injury that is an principle Reversed. requisite of indispensable negligence, and negligence only exists when there is a OAKES, Judge (dissenting): Circuit likelihood of danger result reasonable believe, I as did the dissent because trial I complained of. Ward v. the act State of injury suffered judge, 583, Misc.2d York, 81 366 800 N.Y.S.2d New foreseeable; I also believe that Accordingly, an interven (N.Y.Ct.C1.1975). experienced majority fails trial act, criminal, ordinarily will ing tortious finding to effect judge’s the deference negligent defendant from liabili insulate it is entitled. to which subsequent act when the could not have ty reasonably anticipated defend diversity case we are course 543, Lubarsky, law, v. Tirado 49 Misc.2d to New York ant. to turn one required (N.Y.Civ.Ct.), aff’d, 54 questions duty 52 discuss 268 N.Y.S.2d cannot 527, foreseeability 276 without reference to (N.Y.App.Div. Palsgraf N.Y.S.2d 128 Misc.2d Railroad, 339, 344, 1966). Long Island 248 N.Y. v. 99, 100 (1928),where N.E. Cardozo stat 162 principles to the in Applying risk to be reasonably per ed that “[t]he action, we decline hold BMW/NA stant obeyed, to be defines ceived damages liable for since it negligent relation; it is risk imports to another or risk reasonably anticipated the range apprehen could within to others by Bavarian’s principal, Macpherson v. Buick committed Motor crimes See also sion.” 1102 382, 394, 1050, 111 N.E. 1054
Co., 217 N.Y. worthless checks inability and its to obtain (“foresight of the in consequences financing through regular established com- duty”). protected the creation channels. BMW/NA it- volves mercial by demanding receiving say York Court was to self certi- the New Edelman, 781, 785, any goods ordered by 40 fied checks v. N.Y.2d in Pulka But were left 393, dealer. consumers to fend 390 N.E.2d N.Y.S.2d 396 themselves, dealer, while the garage not liable for (1976) (parking pedes all the indicia of an ongoing armed with car), injury exiting caused trian pads location, from order BMW dealer should not be “[fjoreseeability confused vehicles, sign, solicit years later it duty,” four stated in accept deposits from customers. orders Co., Victory Paper Stock Havas v. “thievery” was sufficiently The dealer’s 381, 1136, N.E.2d N.Y.2d N.Y.S.2d to BMW/NA that it insisted foreseeable (1980) (independent employee trucker’s delivery. checks before Why certified injuries sustained while could recover thievery equally foreseeable was such employee helping defendant’s load waste BMW customers were concerned? insofar truck), that “whether onto de paper [the and, to the plaintiff owed if Moreover, fendant] as the York Ap- Court of whether, did, it, in the face of de indicated, cogently [the peals liability has so con- to act in a reasonably pru failed economic, cepts fendant] have broadened reflect largely on foreseeabil dent manner —turn social, developments. See, political e.g., at 402 N.E.2d ity.” 49 N.Y.2d v. Miehle Micallef N.Y.2d 571, 577, at 236. Palsgraf, quoted im 426 N.Y.S.2d 348 N.E.2d N.Y.S.2d court, thereafter mediately Codling Paglia, Havas 32 N.Y.2d (1976); 298 N.E.2d lives. N.Y.S.2d (1973). Allowing a defendant 467-68 opinion majority concludes that liability by conducting itself shield America, Inc., of North should exclusively through “indepen- operations for its dealer’s liable defalcation of held ignores the franchisees clear “trend dent” *6 money because that defalcation expand law ... the liability of the act, intervening tortious or crimi- was “an persons injured to ... third enterprise be- words, “no super- In other nal.” carried on in activities behalf of cause of would have by BMW/NA enabled it vision enterprise.” Hetherington, Trends in the thievery.” But to foresee dealer’s] [the Liability: Law and Enterprise the Unau- provides, as the common York law law New 76, Agent, (1966). 19 Stan.L.Rev. 76 thorized it provided, before that “the England Stone, Enterprise The Place of also See person conduct third [does] of Corporate in the Control Con- Liability finding ‘proximate if a cause’ preclude 1, duct, (1980). L.J. 76-77 More- 90 Yale intervening agency was itself a foresee- the was in a much over, posi- better Helmsley-Spear, Nalian v. able hazard.” Cullen to determine the fi- than was tion 507, Inc., 520-21, 451, 407 N.E.2d 50 N.Y.2d dealer; indeed, fides of the the bona nancial (1980); 614 429 N.Y.S.2d v. Scott the consumer has of an only real evidence (C.P. 1773) Shepherd, Eng.Rep. 96 526 financial integrity dealer’s is the automobile Ryal acts Willis and (“The intermediate the dealer the automo- given imprimatur original the purge tort in the de- will not trademarks, logos, ad- company bile itself — wrong But he who does the first fendant. (though cars here the vertising layouts, all the consequential dam- is answerable dealers), from other bought cars dealer ages.”). all, and, important of the con- most public sells vehicles to the dealership. Automobile of the tinuation dealerships. through It was well only advertising customarily empha- company service, passing reliability, integrity habit of this dealer’s aware of the sizes
1103 - Swint, can Liability -, dealers. here man-Standard v. company’s U.S. a meas- involving be defended as 72 fairly -, L.Ed.2d 66 102 S.Ct. also risk-spreading, seemingly being I do not think that Thus because (1982). ure with the finding saddle franchisor court’s of foreseeability fairer erroneous, involved an occa- in I would clearly of distribution affirm even “cost” than failure to saddle dealer’s some doubt the foreseeability I had on sional if who consumer relied light applicable But in unfortunate question. put cases, the franchise to down have very existence I do not even such a York New money. good doubt. that the Judge Neaher I if the entire issue restated Thus And and that thievery foreseeable rather than terms of fore- dealer’s terms intervening act it never- it was an the New York seeability, Ap- Court of respon- Edelman, absolve v. supra, BMW/NA of peals suggested did in Pulka theless terms, v. Shepherd question in Scott sibility; separate (sed may be a distinct the dealership squib was a existence I would refer very Hendrickson quaere), Hodkin, market. 276 N.Y. 11 crowded N.E.2d 899 in a a (1937) (holding hospital liable for permit- foreseeability is also a peculiarly But patient doctor to a quack treat on its ting As of fact. York Court question De v. New Ryss York premises); Central Havas, said in N.Y.2d at N.Y. N.E.2d Railroad at at N.E.2d N.Y.S.2d permits who (1937) (landowner per- third appropriate leave particularly [is] “[i]t under indicating hunt circumstances son finder also 2 of fact. See issue” reasonably prudent man that it is dan- to a James, The Torts & F. Law of Harper F. so liable to others injured to do gerous (“Reasonable foresee- 18.8, § Note, result); Liability of a Fran- very is the of the prototype of harm ability Franchisee, Acts of the S.Cal. chisor jury pass upon particu- must question clearly Here L.Rev. standard of conduct in the case larizing the the dealership have terminated could it.”). supposed I had that the reason before so in light do indeed 52(a), which tells us Fed.R.Civ.P. we instability and unscrupulousness, dealer’s findings with- court’s should a district deposit.1 dealer took Cullen’s before unless erro- clearly review appellate stand neous, give the district court as trier of is to range of determination as we the same
fact jury. Interestingly, only April last very Court not remind- Supreme gently *7 appeals that Rule 52 “does courts
ed the exceptions purport to exclude make
not categories findings factual
certain obligation Court court’s findings unless
accept a district particular, erroneous....
clearly [I]n findings of into ... fact divide
does Pull- ‘subsidiary’ and . .. facts.”
‘ultimate’ (1975). may say It district court I am amiss I would extremely Automobile author ma be no violation would confident there Act, disagree Day opinion 1221- jority U.S.C. with this con §§ in Court Dealers’ Sales, (1976), this case. David Ford Inc. v. Pierce termination either. See clusion Sales, (2d Leyland Cir.), McGeorge Motor F.2d 425 cert. Car Co. Motor R. Inc., Ford 1974), denied, (4th denied, Cir. cert. 83 S.Ct. 9 L.Ed.2d F.2d 371 U.S. 43 L.Ed.2d S.Ct. U.S.