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De Filippo v. Ford Motor Co.

decided: May 8, 1975.

ARMEN DE FILIPPO AND SHELDON FLEISHMAN T/A A & S, A PARTNERSHIP
v.
FORD MOTOR COMPANY, A DELAWARE CORPORATION, PRESIDENTIAL FORD, INC., A DELAWARE CORPORATION FORD LEASING DEVELOPMENT CO., A DELAWARE CORPORATION, FORD MOTOR COMPANY, APPELLANT, ARMEN DE FILIPPO AND SHELDON FLEISHMAN T/A A & S, A PARTNERSHIP, APPELLANTS V. FORD MOTOR COMPANY, A DELAWARE CORPORATION, PRESIDENTIAL FORD, INC., A DELAWARE CORPORATION FORD LEASING DEVELOPMENT CO., A DELAWARE CORPORATION



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA. (District Court Civil Action No. 70-1003).

Aldisert, Gibbons and Garth, Circuit Judges.

Author: Aldisert

Opinion OF THE COURT

ALDISERT, Circuit Judge.

Cross appeals from a judgment entered after a jury's answers to special interrogatories require us to decide whether the district court erred (1) in applying a principle of per se unreasonableness to conduct of Ford Motor Company and certain Philadelphia area Ford dealers allegedly in violation of § 1 of the Sherman Act and (2) in applying the Pennsylvania Statute of Frauds to defeat plaintiffs' recovery for breach of contract. We reverse the district court's resolution of the Sherman Act issue and affirm its action in interpreting the Uniform Commercial Code's Statute of Frauds.

Ford appeals from a judgment of $2,250,000 plus attorneys' fees of $384,357 entered for plaintiffs on a count charging that Ford and its Philadelphia dealers engaged in a concerted refusal to deal with plaintiffs, which constituted a per se violation of § 1 of the Sherman Act.*fn1 Plaintiffs Armen De Filippo and Sheldon Fleishman appeal from the entry of judgment for defendant as a matter of law on the count alleging breach of contract by Ford for the sale of a Ford dealership known as Presidential Motors.

I.

Plaintiffs became Ford dealers at Chestnut Motors, Inc. in West Philadelphia in 1969. Less than nine months later part of the facilities, leased from the previous dealer, was destroyed by fire. Thereupon plaintiffs and Ford discussed the possibility of plaintiffs' acquiring another dealership in the city. On December 18, 1969, plaintiffs signed an instrument, found by the jury to be a contract, according to which they were to purchase the assets, less realty, of Presidential Motors. The real estate was to be leased by plaintiffs from Ford. The instrument also contemplated that plaintiffs would be credited with the value of their interest at Chestnut undiminished by the fire;*fn2 that no risk capital would be invested by plaintiffs for an original period of three (3) months, after which they would put in twenty per cent (20%) of the capital; and that plaintiffs would defer payment of fifty per cent (50%) of the first year's rent and twenty-five per cent (25%) of the second year's rent until the fourth and fifth years of the dealership.

When news of the proposal reached other Philadelphia area Ford dealers, they protested to Ford the delayed investment and deferred rent provisions. Ford's legal department advised Ford that the deferred rent provision was unacceptable unless also offered to other dealers, obviously fearing a conflict with the Robinson-Patman Act.*fn3 Thereafter Ford's representatives discussed the possibility of deferred rent plans with other dealers. Ford even considered the purchase and lease-back of dealer-owned real estate so that the deferred rents could be offered to all dealers. Significantly, it is clear from the record that any implementation of the plans was contingent upon acceptance of plaintiffs' proposal.

Further problems, however, were posed by dealers who did not wish to sell to and lease back from Ford, and by dealers who believed that they might be injured as a result of the delayed investment feature of the Presidential proposal. Ultimately, therefore, the vice-president and general manager of Ford travelled to Philadelphia, announced to the Philadelphia dealers that Ford would not consummate the Presidential proposal with plaintiffs, and instructed the Philadelphia sales manager that he had no objection to plaintiffs' assuming the Presidential dealership without the delayed investment and deferred rental terms. Plaintiffs made no response to an offer to discuss such a deal. They then filed this lawsuit, including a Sherman Act count, a count for breach of contract, and a count asserting a violation of the Automobile Dealers' Day in Court Act.*fn4

After the jury answered special interrogatories, the court entered judgment for plaintiffs on the Sherman Act count. Based on the jury's responses, the court also entered an initial judgment for plaintiffs on the contract claim. However, it thereafter "molded" a verdict for Ford, ruling as a matter of law that the lack of Ford's signature rendered the instrument unenforceable against Ford for noncompliance with the Statute of Frauds provision of the U.C.C. relating to sale of goods.*fn5 The jury found a violation of the Dealers' Day in Court Act, but also found plaintiffs sustained no damages therefrom.*fn6

II.

In order to apply the provisions of the Sherman Act to the facts as found by the jury, it is first necessary to consider the teachings of the Supreme Court. On its face § 1 of the Sherman Act prohibits "every contract, combination . . . or conspiracy, in restraint of trade or commerce among the several States." The necessity for some sort of narrowing interpretation of this language was pointed out by Mr. Justice Brandeis in Chicago Board of Trade v. United States, 246 U.S. 231, 238, 62 L. Ed. 683, 38 S. Ct. 242 (1918), where he observed that " every agreement concerning trade, every regulation of trade, restrains." (Emphasis added). As the Court has explained through Mr. Justice Black, the result has been that "the courts have construed [§ 1] as precluding only those contracts or combinations which 'unreasonably' restrain competition." Northern Pacific Ry. v. United States, 356 U.S. 1, 5, 2 L. Ed. 2d 545, 78 S. Ct. 514 (1958).

In certain situations the Court has presumed the required "unreasonableness"; that is, the Court has determined that the situations constitute per se violations of § 1. As explained by Mr. Justice Black:

There are certain agreements or practices which because of their pernicious effect on competition and lack of any redeeming virtue are conclusively presumed to be unreasonable and therefore illegal without elaborate inquiry as to the precise harm they have caused or the business excuse for their use. . . . Among the practices which the courts have heretofore deemed to be unlawful in and of themselves are price fixing, United States v. Socony-Vacuum Oil Co., 310 U.S. 150, 210, 84 L. Ed. 1129, 60 S. Ct. 811; division of markets, United States v. Addyston Pipe & Steel Co., 85 F. 271, aff'd, 175 U.S. 211, 44 L. Ed. 136, 20 S. Ct. 96; group boycotts, Fashion Originators' Guild v. Federal Trade Comm'n, 312 U.S. 457, 85 L. Ed. 949, 61 S. Ct. 703; and tying arrangements, International Salt Co. v. United States, 332 U.S. 392, 92 L. Ed. 20, 68 S. Ct. 12.

Ibid.

Addressing the specific type of activity upon which plaintiffs relied to bring this case within the ambit of per se unreasonableness, the Court teaches:

Group boycotts, or concerted refusals by traders to deal with other traders, have long been held to be in the forbidden category.*fn5 They have not

*fn5 See, e.g., Eastern States Lumber Assn. v. United States, 234 U.S. 600, 58 L. Ed. 1490, 34 S. Ct. 951; Binderup v. Pathe Exchange, Inc., 263 U.S. 291, 68 L. Ed. 308, 44 S. Ct. 96; Fashion Originators' Guild v. Federal Trade Comm'n, 312 U.S. 457, 85 L. Ed. 949, 61 S. Ct. 703; Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211, 214, 95 L. Ed. 219, 71 S. Ct. 259; Times-Picayune Publishing Co. v. United States, 345 U.S. 594, 625, 97 L. Ed. 1277, 73 S. Ct. 872; Northern Pacific R. Co. v. United States, 356 U.S. 1, 5, 2 L. Ed. 2d 545, 78 S. Ct. 514.

been saved by allegations that they were reasonable in the specific circumstances, nor by a failure to show that they "fixed or regulated prices, parcelled out or limited production, or brought about a deterioration in quality." Fashion Originators' Guild v. Federal Trade Comm'n, 312 U.S. 457, 466, 467-468, 85 L. Ed. 949, 61 S. Ct. 703. Cf. United States v. Trenton Potteries Co., 273 U.S. 392, 71 L. Ed. 700, 47 S. Ct. 377. Even when they operated to lower prices or temporarily to stimulate competition they were banned. For, as this Court said in Kiefer-Stewart Co. v. Seagram & Sons, 340 U.S. 211, 213, 95 L. Ed. 219, 71 S. Ct. 259, "such agreements, no less than those to fix minimum prices, cripple the freedom of traders and thereby restrain their ability to sell in accordance with their own judgment." Cf. United States v. Patten, 226 U.S. 525, 542, 57 L. Ed. 333, 33 S. Ct. 141.

Klor's, Inc. v. Broadway-Hale Stores, Inc., 359 U.S. 207, 212, 3 L. Ed. 2d 741, 79 S. Ct. 705 (1959).

The inquiry in any case seeking to apply this rule of per se unreasonableness must be whether or not the activities of defendants properly fall within the "group boycott" categorization. The necessity for careful delineation of the boundaries of this per se category was aptly expressed in Worthen Bank & Trust Co. v. National Bank Americard, Inc., 485 F.2d 119, 125 (8th Cir. 1973), cert. denied, 415 U.S. 918, 39 L. Ed. 2d 473, 94 S. Ct. 1417 (1974):

The term "group boycott" . . . is in reality a very broad label for divergent types of concerted activity. To outlaw certain types of business conduct merely by attaching the "group boycott" and "per se" labels obviously invites the chance that certain types of reasonable concerted activity will be proscribed.

Accordingly, we have reviewed the case law employing the group boycott concept.

In Fashion Originators' Guild of America, Inc. v. Federal Trade Comm'n, 312 U.S. 457, 85 L. Ed. 949, 61 S. Ct. 703 (1941), the members of a large association of textile and garment manufacturers refused to sell to certain retailers. The clear purpose of the combination was the "intentional destruction of one type of manufacture and sale which competed with Guild members." Ibid. at 467. In addition, the Court noted the "many respects" in which the activities of the Guild ran afoul of the policies of the antitrust laws, including their "tendency to monopoly." Ibid. at 465, 467.

In the early case of Binderup v. Pathe Exchange, Inc., 263 U.S. 291, 68 L. Ed. 308, 44 S. Ct. 96 (1923), a national organization of motion picture film distributors, deciding not to sell to an exhibitor, "put an end to his participation in that business." Ibid. at 311.

Klor's, supra, also involved exclusion of a dealer from the market. In that case manufacturers and distributors of electrical appliances allegedly had conspired with a major retailer, Broadway-Hale, either not to sell to Klor's or to sell to it only at discriminatory prices, and had taken from Klor's "its freedom to buy appliances in an open competitive market and drive[n] it out of business as a dealer in the defendants' products." 359 U.S. at 213. The Court further emphasized that the group activity alleged was "not a case of a single trader refusing to deal with another, nor even of a manufacturer and a dealer ...


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