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RELIABLE VOLKSWAGEN SALES & SERV. CO. v. WORLD-WID

February 24, 1960

RELIABLE VOLKSWAGEN SALES AND SERVICE COMPANY, Inc., Plaintiff,
v.
WORLD-WIDE AUTOMOBILE CORP., Fifth Avenue Motors, Inc., Queensboro Motors Corp., Volkswagen of America, Inc., Volkswagen United States, Inc., Volkswagenwerk G.m.b.H., Charles J. Dillon and Arthur Stanton, Defendants



The opinion of the court was delivered by: FORMAN

This is an action by Reliable Volkswagen Sales and Service Company, Inc., a corporation of the State of Connecticut, against World-Wide Automobile Corp., Fifth Avenue Motors, Inc., Queensboro Motors Corp., Volkwagen of America, Inc., Volkswagen United States, Inc., Volkswagenwerk G.m.b.H., Charles J. Dillon and Arthur Stanton. The corporate defendants will be referred to respectively as World-Wide, Fifth Avenue, Queensboro, VOA, VUS and VW. Pursuant to a letter from plaintiff's attorney dated February 4, 1959, only VOA and VW have been served with summons and complaint. It appears from the brief of VOA and VW that plaintiff has filed an identical complaint in the United States District Court for the Southern District of New York where it has caused process to issue against the other six defendants.

The complaint alleges nine causes of action, all of which are derived from substantially the same facts. The first cause of action alleges that the defendants breached a contract entered into with the plaintiff, pursuant to which defendants were to sell to plaintiff a minimum of 30 VW vehicles a month provided plaintiff improved its premises in accordance with plans furnished by the defendants.

The second cause of action is based on fraud and alleges that Messrs. 'Dillon and Stanton * * * as agents and representatives of VOA, VUS and VW represented to the plaintiff that it would receive a minimum of 30 VW vehicles a month under the terms set forth in the first cause of action, knowing such representations to be false and intending to induce the plaintiff to rely thereon which it did.'

 The third cause of action alleges that the defendants have violated 15 U.S.C.A. §§ 1221-1225, the Automobile Dealer Franchise Act, by refusing to execute an alleged franchise agreement between the plaintiff and the defendants VOA, VUS, VW, World-Wide and Messrs. Stanton and Dillon, without good faith and in an unfair manner.

 The fourth cause of action is brought under the Robinson-Patman Act, 15 U.S.C.A. § 13(a). It alleges that from June 1, 1954, to September 30, 1957, defendant World-Wide not only sold to defendants Queensboro and Fifth Avenue VW products at 'lower and discriminatory prices' than those available to the plaintiff but made such products available in larger quantities to the latter defendants.

 The fifth cause of action is the same as the fourth except that it charges defendants Queensboro and Fifth Avenue with having violated the Robinson-Patman Act in that they purchased VW products from World-Wide at what they knew to be discriminatory prices.

 The sixth cause of action, laid under Sections 1 and 2 of the Sherman Act, 15 U.S.C.A. §§ 1 and 2, alleges that the defendants conspired to create a monopoly 'in the retail sale' of VW products within the tri-state area of Connecticut, New Jersey and New York in the defendants World-Wide, Fifth Avenue and Queensboro pursuant to which the defendants restricted and eliminated retail VW dealers therein, specifically the plaintiff in September 1957.

 The seventh cause of action alleges that all the defendants, except Fifth Avenue and Queensboro, agreed that no VW distributor would handle other foreign competitive products and would require their dealers to follow suit, in violation of Section 3 of the Clayton Act, 15 U.S.C.A. § 14, to which the plaintiff would not agree with the result that in September 1957 the defendants ceased selling to the plaintiff.

 The eighth cause of action alleges that all the defendants except Fifth Avenue and Queensboro agreed that VW distributors would sell VW products only to franchised VW dealers located within the exclusive territories assigned to such distributors, and that as a result thereof the plaintiff was unable to procure VW products following the termination of its dealership in September 1957 in violation of Section 1 of the Sherman Act.

 The complaint alleges that jurisdiction for the first and second causes of action is based on diversity of citizenship under 28 U.S.C. § 1441, and that jurisdiction for the remaining causes of action is found in the applicable statutes.

 With regard to the first and second causes of action VOA and VW move to dismiss for failure to state a claim upon which relief can be granted under Rule 12(b) or for summary judgment under Rule 56, Federal Rules of Civil Procedure, 28 U.S.C. *fn1" Both sides have presented affidavits on the motion.

 In the moving affidavit Mr. J. Stuart Perkins, Sales and Organization Manager of VOA, deposes that

 'There is no paper writing in existence even purporting to have been signed by or on behalf of (VOA), nor was there any oral agreement on its behalf containing any undertaking to furnish the plaintiff any specific number of automobiles, nor did (VOA) ever agree to sell or deliver a single automobile to plaintiff.'

 Mr. Manuel Hinke, Export Manager for VW, has filed an affidavit on behalf of that defendant in which he makes a similar averment.

 In the opposing affidavit Mr. Salvatore Bochino, plaintiff's treasurer.

 '* * * freely (concedes) that plaintiff had no formally prepared and executed written franchise agreement with the defendants.'

 Mr. Bochino further deposes, however, that

 'it is undisputed that plaintiff was a franchised dealer and was continuously so recognized by defendants. There is an abundance of documentary evidence attesting to such fact.'

 Mr. Bochino also relates that a Mr. Barths, General Manager of North American distribution for VW in Germany, told him in January 1957, that he would receive 30 vehicles a month and that he, Barths, would so inform VOA and World-Wide.

 In Lawlor v. National Screen Service Corporation, 3 Cir., 1956, 238 F.2d 59, at page 65, judgment vacated on other grounds 1957, 352 U.S. 992, the court said:

 '* * * It is well-settled that summary judgment may be granted only if the pleadings, depositions, admissions and affidavits '* * * show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' Fed.R.Civ.P. 56(c), 28 U.S.C.; See F.A.R. Liquidating Corp. v. Brownell, 3 Cir., 1954, 209 F.2d 375. Any doubt as to the existence of a genuine issue of fact is to be resolved against the moving party. Sarnoff v. Ciaglia, 3 Cir., 1947, 165 F.2d 167, 168. Further, documents filed in support of a motion for summary judgment are to be used for determining whether issues of fact exist and not to decide the fact issues themselves. Frederick Hart & Co. v. Recordgraph Corp., 3 Cir., 1948, 169 F.2d 580.'

 This view has been reaffirmed in Krieger v. Ownership Corporation, 3 Cir., 1959, 270 F.2d 265.

 The pleadings and affidavits herein clearly raise questions of fact. Therefore, as to these causes of action the motion under Rules 12(b) and 56 must be denied.

 An alternate motion for a more definite statement under Rule 12(e) *fn2" as to the second cause of action will be denied pending the completion of discovery proceedings by VOA and VW.

 The third cause of action, which alleges a violation of the Automobile Dealer Franchise Act, presents a problem somewhat similar to that found in the first two causes of action in that the Act authorizes an automobile dealer to bring an action against an automobile manufacturer, '* * * by reason of the failure of said automobile manufacturer from and after August 8, 1956 to act in good faith in performing or complying with any of the terms or provisions of the franchise, or in terminating, canceling, or not renewing the franchise with said dealer * * *.' (Emphasis added.) At the outset we are met with the same fact question as heretofore, i.e., was there a franchise agreement or contract in existence between the plaintiff and the defendants herein. The reasoning applied in ruling on the motion addressed to the first two causes of action dictates a similar denial of defendants' motion as directed to this, the third cause of action pending the determination of that question. For this reason defendants' legal contentions, viz., that the Act is inapplicable and unconstitutional are not reached. The motion to dismiss for failure to state a claim or for summary judgment is denied.

 As to the fourth and fifth causes of action the defendants move to dismiss for failure to state a claim upon which relief can be granted on the ground that neither cause of action alleges '* * * anything with respect to the defendants (VOA) or VW * * *.' The allegations referred to specifically charge World-Wide, Fifth Avenue and Queensboro with having violated the Robinson-Patman Act. They do not so charge VOA or VW directly. However, paragraphs 22, 27 and 28 of the first cause of action, incorporated by reference in these causes of action, allege:

 '22. That at all of the times hereinafter mentioned, defendant World-Wide acted and acts for and carries out the orders, directives, and sales and operational policies dictated and promulgated by defendants Volkswagenwerk, VUS and VOA, and said defendants, World-Wide, is otherwise directly or indirectly under the domination and control of defendants Volkswagenwerk, VOA and VUS.'

 '27. That at all times hereinafter mentioned, certain officers, directors, agents and employees of defendant World-Wide were and are officers, directors, agents and employees of defendants Fifth Avenue and Queensboro.'

 '28. That at all of the times hereinafter mentioned, defendants Charles J. Dillon and Arthur Stanton were and still are officers and directors of defendants World-Wide, Fifth Avenue and Queensboro.'

 Whether or not these allegations state a claim against these defendants will depend on the resolution of whether defendant World-Wide did in fact act for VOA and VW. The moving affidavits deny any such relationship. The complaint asserts it. The motion as addressed to these causes of action must, therefore, be denied.

 The sixth cause of action charges that the defendants conspired to create a monopoly in the defendants World-Wide, Fifth Avenue and Queensboro in the Connecticut, New Jersey, New York area and to eliminate competition therein pursuant to which they restricted and eliminated retail VW dealers in these states specifically the plaintiff in September 1957 in violation of Sections 1 and 2 of the Sherman Act. *fn3" VOA and VW move for dismissal of this cause of action for failure to state a claim upon which relief can be granted or for summary judgment. They rely on Schwing Motor Co. v. Hudson Sales Co., D.C.Md.1956, 138 F.Supp. 899, affirmed per curiam 4 Cir., 1956, 239 F.2d 176, and Packard Motor Car Co. v. Webster Motor Car Co., 1957, 100 U.S.App.D.C. 161, 243 F.2d 418, in which Schwing was cited with approval.

 Two suits for treble damages are reported in the Schwing case. In one, Schwing Motor Company, a Maryland corporation, doing business in Baltimore, filed its complaint against Hudson Sales Corporation, a Michigan corporation, said to be the sales department of the Hudson Motor Car Company, also a Michigan corporation, its manager, the dealer representative, Bankert Hudson, Inc., a Maryland corporation, and its president. Belair Road Hudson, Inc., also a Maryland corporation in business in Baltimore, filed the other complaint against the same defendants. Both complaints alleged violations of 15 U.S.C.A. §§ 1 and 15, and were based upon the manufacturer's termination of plaintiffs' dealerships in favor of granting an exclusive franchise to Bankert Hudson, Inc., a dealer which had entered the .baltimore area in 1951. *fn4"

 Schwing's franchise had been renewed from 1945 to 1952; Belair Hudson from 1947 to 1952. They expired in September 1952 and were not renewed.

 Defendants moved to dismiss the complaints on the ground that they did not state claims upon which relief could be granted. The issue was stated in ...


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