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SHELDON PONTIAC v. PONTIAC MOTOR DIV.

August 24, 1976

Sheldon Pontiac
v.
Pontiac Motor Division and General Motors Corp.


Lacey, D. J.


The opinion of the court was delivered by: LACEY

Sheldon Pontiac, Inc. (Sheldon Pontiac) is a corporation organized under the laws of the State of Delaware with its principal place of business at 250 George Street, New Brunswick, New Jersey. At that location, Sheldon Pontiac is engaged in the sale of both new and used automobiles. Pontiac Motor Division is part of General Motors Corporation (PMD), a corporation organized and existing under the laws of the State of Delaware.

 Sheldon Pontiac has brought this action charging PMD with a violation of Section 1 of the Sherman Act, 15 U.S.C. § 1. The complaint alleges that PMD, and others, have combined and conspired to restrain trade and commerce and that PMD has attempted to "prohibit such trade and commerce . . . ." Sheldon Pontiac does not allege a violation of Section 2 of the Sherman Act, 15 U.S.C. § 2. Specifically, the complaint charges that PMD and others have agreed to allocate geographic markets in retail automobile dealerships to eliminate and reduce competition in trade and commerce.

 Sheldon Pontiac operates under a Pontiac Dealer Sales and Service Agreement; a Primary Area of Responsibility Supplement (Uniform Agreement), dated November 1, 1970; and a letter modification of the Uniform Agreement, dated June 17, 1974. Section 5B of the Uniform Agreement provides:

 
Pontiac and Dealer recognize that Dealer is free to sell Motor Vehicles, Parts and Accessories to customers wherever they may be located. However, in order that Pontiac may establish and maintain an effective network of franchised Pontiac dealers for the sale and service of Pontiac motor vehicles, Dealer shall not, either directly or indirectly, establish any place or places of business for the conduct of any of its Dealership Operations except at the locations and for the purposes described in a current Statement of Dealership Premises that has been executed as provided in subsection A of this Section 5. While this Agreement shall be in effect, Pontiac shall not execute a Pontiac Dealer Sales and Service Agreement with any party under which such party will establish a new or additional principal Pontiac dealership operation within five (5) miles or less normal and direct driving distance from Dealer's principal Dealership Operations, unless Pontiac shall have notified Dealer thereof at least thirty (30) days prior to committing itself to the execution of such Pontiac Dealer Sales and Service Agreement. During such thirty (30) day period, Dealer may present to Pontiac any facts having a bearing in the matter. This provision, however, shall not apply to Pontiac's execution of a Pontiac Dealer Sales and Service Agreement with any party that will establish thereunder replacement dealership operations at dealership locations previously approved by Pontiac for franchised Pontiac dealership operations. (Emphasis added.)

 It is charged that PMD requires all its dealers to subscribe to the Uniform Agreement. Sheldon Pontiac further alleges that PMD arbitrarily and unreasonably enforces Section 5B of the Uniform Agreement to the extent that PMD routinely refuses to approve applications to open dealerships in certain areas where the new dealer would be within five miles from a dealer already located in the area.

 Sheldon Pontiac claims that PMD has invoked Section 5B of the Uniform Agreement to prevent Sheldon Pontiac from changing its present location, and thereby furthering the combination and conspiracy charged in the complaint. Specifically, it is claimed that in the autumn of 1969 Sheldon Pontiac sought to change its present location at 250 George Street, New Brunswick, to a different site on Route 18, East Brunswick. Sheldon Pontiac alleges that it desired to relocate to East Brunswick because potential customers were reluctant to come into New Brunswick in the evening; and that, as a result, Sheldon Pontiac was losing business at its New Brunswick location. It is claimed that pursuant to the terms of Section 5B Sheldon Pontiac notified PMD of its desire to change its location to Route 18, East Brunswick. This request was refused because, according to Sheldon Pontiac, the new location was not more than five miles away from Armstrong Pontiac, another dealer in the area.

 Sheldon Pontiac seeks certain declaratory and injunctive relief which would have the effect of permitting Sheldon Pontiac to change its location to Route 18 in East Brunswick. Treble damages and reasonable attorneys' fees are also requested. 15 U.S.C. § 15.

 Findings of Fact

 1. Sheldon Pontiac has been in business at its present location in New Brunswick for approximately 22 years as a Pontiac automobile dealer, providing for the retail sales of automobiles in addition to customer warranty and maintenance service. (Tr. 11-12; Jt. Ex. 1, at 12-13, para. 9). Sheldon H. Schiffman (Schiffman) the president and major stockholder of Sheldon Pontiac, has operated the business since its formation. (Tr. 11).

 2. Under the Pontiac Dealers Sales and Service Agreement, the Uniform Agreement (Jt. Ex. 1), and the letter modification of the Uniform Agreement (Jt. Ex. 2), Sheldon Pontiac operates its business as a franchise.

 3. As the Uniform Agreement provides, the franchisee is to conduct operations at 250 George Street, New Brunswick, and may not change its location without the consent of PMD. Sheldon Pontiac's "Primary Area of Responsibility" is defined in the Uniform Agreement as follows:

 
New York -- Northern New Jersey Section 16 in the State of New Jersey
 
In Middlesex County
 
All of Middlesex County, New Jersey except the communities of Dunellen, Piscataway and South Plainfield in Piscataway Township, and the communities of Avenel, Carteret and Colonia in Woodbridge Township; also the Borough of Middlesex.
 
In Somerset County
 
In Somerset County, New Jersey the Township of Franklin.

 4. Sheldon Pontiac is not restricted as to the geographical area in which it may sell automobiles, or as to the purchasers whom it may solicit for sale, but may sell to whomever it chooses, wherever located. (Tr. 169-70). Sheldon Pontiac has sold new Pontiac passenger cars outside its "Primary Area of Responsibility", in the counties of Northern and Western New Jersey, including Passaic, Bergen, Morris, Union, Essex, Warren, Hunterdon, and Mercer, as well as in Pennsylvania and New York. (Tr. 165-67). In selling in such other areas, Sheldon Pontiac does not seek, nor is it required to seek, clearance from other Pontiac dealers. (Tr. 169-70). Thus, there are no territorial or customer restrictions on Sheldon Pontiac; but there is a location restriction, as described in Section 5B of the Uniform Agreement.

 5. Sheldon Pontiac's competitors consist generally of all car dealers marketing cars within the Pontiac price range. (Tr. 161). Intra-brand competition in the area exists with Armstrong (now French) Pontiac in South River, New Jersey (Armstrong Pontiac), Perrine's, Reydel in Edison, and Panter in Perth Amboy. (Tr. 160). Examples of inter-brand competition include the manufacturers of Chevrolet, Ford, Chrysler, and Plymouth automobiles. (Tr. 161).

 6. Sheldon Pontiac and PMD do not compete with each other. (Tr. 164).

 7. Sheldon Pontiac applied to PMD in writing when seeking to relocate its dealership. (Tr. 173, 190; Exs. P-42, P-43).

 8. Approval of dealer's relocation applications must come initially from the Zone Manager in the area wherein the dealership is located, and then from Pontiac's Central Office, with concurrence of the Marketing Staff of General Motors Corporation. (Tr. 40-194, 195, 292).

 9. Plaintiff sought initially to relocate to Route 18, East Brunswick, New Jersey, at either of two sites, each approximately the same distance from Armstrong Pontiac in South River, New Jersey. (Tr. 246). One site is presently occupied by Loehmann's Shopping Center; and the other is known as Middlesex Sheet Metal Company (Middlesex). The latter is less than 5 miles from Armstrong. (Tr. 35, 38, 54, 57, 244-46; Ex. P-66).

 10. From 1965 until the summer of 1972, Sheldon Pontiac considered relocating its dealership to Route 1, Milltown Road, North Brunswick, New Jersey. In 1965 Sheldon Pontiac made written application therefor to PMD and on May 19, 1966 it obtained written approval. (Tr. 173-80). It arranged for an investment of $200,000, financing, and a sale-and-leaseback agreement with a Dr. Weisenfeld. (Tr. 183). It also made site improvements. (Tr. 179-80, 196). On March 16, 1971 it learned that a zoning variance it had sought had unacceptable restrictions (Tr. 187); however, its efforts continued. Meantime there were at least three negotiations for the sale of the Sheldon Pontiac dealership. (Tr. 206).

 11. Sheldon Pontiac applied for and was granted various extensions to complete its Route 1 relocation, the last to September 1972. (Tr. 182). As late as the summer of 1972, it had asked defendant to furnish further assurances to its financial agent that it was approved by PMD for operation at the new Route 1 location. (Tr. 188).

 12. At the same time Schiffman became interested in a Route 18 site in 1969; and he decided later to abandon the project on Route 1, Milltown Road, North Brunswick, because

 
Route 18 had suddenly emerged as the top commercial location in Middlesex County. And I had been offered a profit on the U.S. 1 property and I felt that Route 18 would be a better location for the sale of new and used cars.

 (Tr. 197, 6-10). For a time he worked on both as possible sites, although Schiffman told PMD's Zone Manager Lubot that Route 18 would be a better location because from the time he had purchased the U.S. 1 property, three new shopping centers had been built on Route 18, and there was talk about opening the road to the Jersey shore which would make it a main artery and double the ...


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