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

April 11, 1963

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: WORTENDYKE

Plaintiff, Reliable Volkswagen Sales & Service Company, Inc. (hereinafter Reliable) is a corporation of the State of Connecticut, with its principal place of business in the City of Bridgeport. It is engaged in the retail sales of various types of motor vehicles, and parts thereof, of foreign manufacture. Plaintiff was incorporated on January 24, 1956, the date of filing of the certificate of incorporation, for the purpose of engaging 'in the manufacture, sale and distribution of automobiles, motor cars, motor trucks and other mechanically propelled vehicles * * * more particularly that automobile known as VOLKSWAGEN,' and 'to engage in the repair and servicing of automobiles, motor cars, motor trucks and other mechanically propelled vehicles and more particularly the repair and servicing of that certain automobile known as VOLKSWAGEN.' On May 16, 1956, the Connecticut Department of Motor Vehicles approved a license for the sale of Volkswagens by one of plaintiff's officers, Lawrence Oliver, d/b/a Reliable Volkswagen Sales Inc. A letter dated January 13, 1956, from World-Wide Automobile Corp. certifying Reliable Motor Sales Incorporated as a dealer was submitted to the Dealers and Repairers Section (presumably of the Connecticut Department of Motor Vehicles). *fn1" The letter referred to concluded with: 'This letter of authorization in no way constitutes a franchise agreement between the above-named dealer and World-Wide Automobiles Corporation.'

The defendant Volkswagenwerk G.m.b.H. (hereinafter VW), is a corporation of the German Federal Republic, engaged in the manufacture of Volkswagen automobiles and parts for the same, at Wolfsburg, West Germany. VW originally imported its products into the United States of America for sale therein; but later effected such importation through a subsidiary, which it caused to be organized under the laws of the State of New York, known as Volkswagen United States, Inc. (hereinafter VUS). More recently, VW caused to be organized, under the laws of the State of New Jersey, another subsidiary corporation known as Volkswagen of America, Inc. (hereinafter VOA), having a principal place of business at Englewood Cliffs, New Jersey, which the complaint alleges, supervised the distribution of Volkswagen automobiles and parts in the United States, in behalf of VW. Volkswagen automobiles and parts for the same are sold in commerce between West Germany and the United States of America, and among the several States of the latter.

 The defendant World-Wide Automobile Corp. (hereinafter W-W), a New York State corporation, with a place of business in Long Island City, handles the distribution, within the State of New York, New Jersey and Connecticut, of Volkswagen vehicles and parts manufactured by VW and imported and sold by and through VOA and VUS.

 The defendants Fifth Avenue Motors, Inc. and Queensboro Motors Corp., both New York corporations, are retail dealers handling VW products in Manhattan and Long Island City, New York, and they obtain their merchandise through W-W.

 The individual defendants, Dillon and Stanton, are officers and directors of W-W, Fifth Avenue and Queensboro.

 Count 3 of the complaint alleges that in or about April 1954 'plaintiff and defendant World-Wide entered into an agreement whereby plaintiff was designated as the duly authorized retail dealer in the City of Bridgeport, State of Connecticut, of Volkswagen automobiles, trucks, accessories and parts, to be supplied and furnished to plaintiff by defendant World-Wide.' (Emphasis supplied.) The third count further recites that plaintiff received vehicles from defendants from January 1, 1955 to January 1, 1957, and that on or about January 1st, 1956 the defendants agreed to sell to plaintiff a minimum of 30 Volkswagenwerk manufactured products per month on the condition that plaintiff enlarge, expand and rebuild his show-room and allied facilities. Plaintiff charges that by reason of the foregoing it was an automobile dealer within the terms of the Act and that the 'agreement of franchise' heretofore alleged 'purported to and did fix the legal rights and liabilities of the respective parties thereto in regard to the distribution, sale and servicing of motor vehicles and parts * * *.' Finally, this cause of action states that defendants, acting in an unfair manner, cancelled and refused to carry out the contracts and agreement pursuant to which defendants had appointed and constituted plaintiff an authorized dealer, by reason of which plaintiff suffered damage.

 The narrow question here presented to the Court by stipulation of all of the parties, is whether or not a 'franchise' existed within the definition set forth in the Act; it being agreed that, if none is found, the third cause of action must fall. *fn2" The statute, 15 U.S.C. § 1221, itself defines the word as follows: '(b) The term 'franchise' shall mean the written agreement or contract between any automobile manufacturer engaged in commerce and any automobile dealer which purports to fix the legal rights and liabilities of the parties to such agreement or contract.'

 If a definition of a word used is given in a statute the statutory definition is controlling. Otherwise the word will be given its common ordinary meaning. Von Weise v. Commissioner, etc., 8 Cir., 1934, 69 F.2d 439, cert. den. 292 U.S. 655, 54 S. Ct. 866, 78 L. Ed. 1504; Western Union Telegraph Co. v. Lenroot, 1944, 323 U.S. 490, 65 S. Ct. 335, 89 L. Ed. 414; National Labor Relations Board v. Coca-Cola Bottling Co., 1956, 350 U.S. 264, 76 S. Ct. 383, 100 L. Ed. 285; Addison v. Holly Hill Co., 1944, 322 U.S. 607, 64 S. Ct. 1215, 88 L. Ed. 1488.

 It is conceded by plaintiff that it never entered into a franchise agreement of a formal nature, similar to those generally in use in the automobile industry in this country. In describing such an agreement, Professor Kessler states in Automobile Dealer Franchises: Vertical Integration by Contract, 66 Yale Law Journal 1135, 1138/9, 1957, 'The franchise is embodied in a detailed, standardized contract presented by the manufacturer to the dealer. The master contract is frequently accompanied by printed addenda concerning such matters as capital requirements and succession. Modern franchise contracts show great similarity; the absence of complete uniformity may be ascribed to the competition for dealers among the five remaining manufacturers. This high degree of standardization is best illustrated by the 'entire agreement' clauses.'

 In determining whether a franchise existed, Reliable poses two questions for the Court's determination, viz.: '(1) Is the 'written agreement or contract' contemplated by the statute restricted solely to a single, formal writing, or may the series of writings, read together, satisfy the statutory requirement? and (2), Do the writings submitted by plaintiff, when read together, 'fix the legal rights and liabilities of the parties'?' A further question suggests itself to the Court, i.e. whether defendant W-W is an automobile manufacturer as defined in the Act. 15 U.S.C. 1221(a) defines 'automobile manufacturer' as any corporation 'engaged in the manufacturing or assembling of passenger cars, trucks, or station wagons, including any * * * corporation which acts for and is under the control of such manufacturer or assembler in connection with the distribution of said automotive vehicles.' By the express terms of the exclusive distribution agreement between VW and W-W, the latter transacts all business resulting from the distribution in its own name and for its own account; and it is not authorized to legally represent VW, or make any commitments on behalf half of VW. From this it appears that W-W might well be held to be outside of the statutory definition of 'automobile manufacturer.' Because, however, this point has not been briefed by counsel, and against the possibility that there may be other facts in the case not presently disclosed to the Court, I do not decide this question; decision thereon not being essential to the determination of the question now before the Court.

 Section 1(e) of the original Bill which passed the Senate in 1956 (S. 3879, 84th Cong. 2d Sess. (1956)) defined a 'franchise' as including any 'understanding or arrangement between any automobile manufacturer and any automobile dealer.' It may well be that under this broad language plaintiff would be able to spell out such an arrangement. Certainly the documents submitted establish, as mentioned above, that the plaintiff was a dealer in Volkswagen automobiles and parts for a certain period of time. Were this a common law action, the plaintiff might be able to establish, by proper evidence, either a contract or an estoppel to deny a contract upon which it could rely. However, we are here dealing with a statutory cause of action, and as such the plaintiff must show compliance with the prerequisites to the maintenance thereof, established therein. A sine qua non to recovery is proof of a written contract which 'purports to fix the legal rights and liabilities of the parties * * *.' The broader language referred to and included in the original Senate Bill was subsequently deleted from the legislation as enacted.

 Section 1 of the Restatement of Contracts defines a contract as 'a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.' Section 3 of the same Restatement defines 'agreement' as having a broader meaning than 'contract.' It states: 'An ...


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